Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Smoore International Holdings / Event-Driven

Hang Seng Indexes should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.With the major capping changes scheduled to be completed at the June rebalance tomorrow, there could be up to 8 inclusions at the September review while still keeping the one-way index turnover lower than 5%. The actual number of inclusions could be lower to spread the turnover over the next few reviews.We see <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a>, <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> as higher probability inclusions in the index, while there is a lower probability of <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a> and <a href="https://www.smartkarma.com/entities/xinyi-glass-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11940:1" rel="noopener">Xinyi Glass Holdings (868 HK)</a> being included in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.<a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> could be added to increase the coverage of Group 5 where Utilities are a part. This is less of a priority though with the market cap coverage of the group in excess of 60% as compared to the other groups that are much lower.There may not be any deletions at the current time. If the Index Committee decides to delete stocks, the two names most at risk are <a href="https://www.smartkarma.com/entities/china-life-insurance-co-ltd-9f877d22-7cf7-4b00-b525-cec71139f369" target="_blank" data-smartkarma-citation="entities:5794:1" rel="noopener">China Life Insurance Co H (2628 HK)</a> and <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a>.These changes will increase the market cap coverage of the index from 60.1% to 64.3% and the turnover coverage from 53.75% to 57.75%. One-way index turnover is estimated at 4.79% and would result in a one-way trade of HK$9.2bn.

Hang Seng Indexes should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).With the major capping changes scheduled to be completed at the June rebalance tomorrow, there could be up to 8 inclusions at the September review while still keeping the one-way index turnover lower than 5%. The actual number of inclusions could be lower to spread the turnover over the next few reviews.We see JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK), Smoore International (6969 HK), Fosun International (656 HK) and Evergrande Property Services (6666 HK) as higher probability inclusions in the index, while there is a lower probability of JD.com Inc. (9618 HK), Nongfu Spring (9633 HK) and Xinyi Glass Holdings (868 HK) being included in the Hong Kong Hang Seng Index (HSI INDEX).China Gas Holdings (384 HK) could be added to increase the coverage of Group 5 where Utilities are a part. This is less of a priority though with the market cap coverage of the group in excess of 60% as compared to the other groups that are much lower.There may not be any deletions at the current time. If the Index Committee decides to delete stocks, the two names most at risk are China Life Insurance Co H (2628 HK) and Hengan Intl Group (1044 HK).These changes will increase the market cap coverage of the index from 60.1% to 64.3% and the turnover coverage from 53.75% to 57.75%. One-way index turnover is estimated at 4.79% and would result in a one-way trade of HK$9.2bn.

HSI Index Rebalance Preview: Potential Inclusions in September

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Headline Developments It’s a big edition this week, so settle in! Elon Musk’s Boring Company (private) broke ground this week, shooting Tesla (TSLA) passengers through a high-speed tunnel under Las Vegas.  The loop comprises 2.7km of tunnels, built 30 feet under the Las Vegas Convention Center.

Headline Developments It’s a big edition this week, so settle in! Elon Musk’s Boring Company (private) broke ground this week, shooting Tesla (TSLA) passengers through a high-speed tunnel under Las Vegas.  The loop comprises 2.7km of tunnels, built 30 feet under the Las Vegas Convention Center.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Full Truck Alliance   / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a>, known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is seeking to raise $1.5 billion through an NYSE listing, according to press reports. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. FTA joins peer <a href="https://www.smartkarma.com/entities/foru-worldwide-inc" target="_blank" data-smartkarma-citation="entities:33314:1" rel="noopener">ForU Worldwide (FOYO US)</a> which also recently filed for a $500 million Nasdaq IPO. Confusingly, ForU notes that it is the largest technology-driven road freight transportation platform in China as measured by revenue in 2020, according to CIC. However, comparing FTA and ForU based on reported revenue is an apples-to-oranges comparison due to differing revenue recognition policies. In <a href="https://www.smartkarma.com/insights/foru-worldwide-ipo-initiation-not-foru" target="_blank" data-smartkarma-citation="insights:51888" rel="noopener">ForU Worldwide IPO Initiation: Not ForU</a>, we opined that ForU faces several challenges and the financials on a normalised basis appears to be middling at best.    <div class="content-highlight">At first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. In an environment where sentiment on high-growth stocks and in particular Chinese US tech listings is weak, IPO hopefuls should not provide ready ammunition to the bears. Consequently, we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   </div>

Full Truck Alliance (YMM US), known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is seeking to raise $1.5 billion through an NYSE listing, according to press reports. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and Tencent (700 HK). FTA joins peer ForU Worldwide (FOYO US) which also recently filed for a $500 million Nasdaq IPO. Confusingly, ForU notes that it is the largest technology-driven road freight transportation platform in China as measured by revenue in 2020, according to CIC. However, comparing FTA and ForU based on reported revenue is an apples-to-oranges comparison due to differing revenue recognition policies. In ForU Worldwide IPO Initiation: Not ForU, we opined that ForU faces several challenges and the financials on a normalised basis appears to be middling at best.    At first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. In an environment where sentiment on high-growth stocks and in particular Chinese US tech listings is weak, IPO hopefuls should not provide ready ammunition to the bears. Consequently, we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   

Full Truck Alliance IPO Initiation: A Less than Perfect Delivery

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<a href="https://www.smartkarma.com/entities/foru-worldwide-inc" target="_blank" data-smartkarma-citation="entities:33314:1" rel="noopener">ForU Worldwide (FOYO US)</a> is the largest technology-driven road freight transportation platform in China based on revenues in 2020 (Source: CIC). The company offers its freight services in China and its client base includes <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a>  and Jiangsu JD (represents around 23% of its transportation revenue in FY20), and the company is also backed by JD Logistics (2618 HK) who owns 6.3% of the company’s outstanding shares.
The company has filed for an IPO to list its shares in the US and has set a placeholder indication to raise about US$100m. According to news media outlets, the company is looking to raise about US$500m through the IPO.

ForU Worldwide (FOYO US) is the largest technology-driven road freight transportation platform in China based on revenues in 2020 (Source: CIC). The company offers its freight services in China and its client base includes JD Logistics (2618 HK)  and Jiangsu JD (represents around 23% of its transportation revenue in FY20), and the company is also backed by JD Logistics (2618 HK) who owns 6.3% of the company’s outstanding shares.
The company has filed for an IPO to list its shares in the US and has set a placeholder indication to raise about US$100m. According to news media outlets, the company is looking to raise about US$500m through the IPO.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> (FTU),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing. It is backed by Softbank and Sequoia.Full Truck Alliance (FTA) was formed in 2017 via a merger of Yunmanman and Huochebang, which had been operational since 2013 and 2011, respectively. It is the largest digital freight platform in China and the world, as per CIC. In 2020, 71.7m orders were fulfilled on the platform, with a gross transaction value (GTV) of RMB173.8bn (US$26.6bn), by 2.8m truckers. It had 1.3m active shippers in Dec 2020. Approximately 20% of all China’s heavy-duty and medium-duty truckers fulfilled shipping orders on its platform in 2020, according to CIC.FTA is the leader in its category and appears to be well ahead of other competitors, as per CIC. The company has been working on various means of monetising its user base. While 2020 wasn’t a great year for revenue growth, the company did manage to turn a profit and was cash flow positive as well.

Full Truck Alliance (YMM US) (FTU),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing. It is backed by Softbank and Sequoia.Full Truck Alliance (FTA) was formed in 2017 via a merger of Yunmanman and Huochebang, which had been operational since 2013 and 2011, respectively. It is the largest digital freight platform in China and the world, as per CIC. In 2020, 71.7m orders were fulfilled on the platform, with a gross transaction value (GTV) of RMB173.8bn (US$26.6bn), by 2.8m truckers. It had 1.3m active shippers in Dec 2020. Approximately 20% of all China’s heavy-duty and medium-duty truckers fulfilled shipping orders on its platform in 2020, according to CIC.FTA is the leader in its category and appears to be well ahead of other competitors, as per CIC. The company has been working on various means of monetising its user base. While 2020 wasn’t a great year for revenue growth, the company did manage to turn a profit and was cash flow positive as well. 

Full Truck Alliance Pre-IPO - The Positives - Category Leader

China

JD Logistics, Inc. offers logistics services. The Company provides cargo transportation, cargo distribution, warehousing, and other services. JD Logistics is located in China.

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JD Logistics (2618 HK)

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Full Truck Alliance, China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing. It is...

Sumeet Singh

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