Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

Equity Bottom-Up

<ul>
<li>The stock price has fallen below the first trading day after IPO.</li>
<li>The new property policy looks harsh but not fatal.</li>
<li>Most municipal governments use price cap, but it is easily bypassed.</li>
<li>The policy aims at existing home transaction, but not new home sales or home rental.</li>
<li>It is ironic that Anjuke, which is significantly larger than BEKE, criticized BEKE for monopoly.</li>
</ul>


The stock price has fallen below the first trading day after IPO.
The new property policy looks harsh but not fatal.
Most municipal governments use price cap, but it is easily bypassed.
The policy aims at existing home transaction, but not new home sales or home rental.
It is ironic that Anjuke, which is significantly larger than BEKE, criticized BEKE for monopoly.


KE (BEKE): New Policy Not Fatal at All, Time to Accumulate

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>Beijing and Shanghai laid out long waited stimulus policies on property market, include 1) lower property down payments ratio;2) lower mortgage loan rate;</li>
<li>3) lower recognition standard for ordinary home. The key is to encourage households to add leverage.</li>
<li>We treat the financial stimulus as one-off positive shock to the home transaction markets in the two cities,  especially benefiting 1Q24 sales for Beike due to...</li>
</ul>


Beijing and Shanghai laid out long waited stimulus policies on property market, include 1) lower property down payments ratio;2) lower mortgage loan rate;
3) lower recognition standard for ordinary home. The key is to encourage households to add leverage.
We treat the financial stimulus as one-off positive shock to the home transaction markets in the two cities,  especially benefiting 1Q24 sales for Beike due to...


[KE Holdings Inc. (BEKE US, BUY, TP US$24.5) TP Change]: Policy Stimulus Drive up near Term Sales

<ul>
<li>KE Holdings’ (Beike) C3Q23 revenue was 7.7%/11.6% higher than our est./cons., non-GAAP net income beat our est./cons. by 35%/119%. Existing home sales and non-transaction biz drove the bottom line beat.</li>
<li>We expect Beike C4Q23 to grow 20% YoY, 33% in existing home and 5% in new home, supported by gradual recovery of home transaction and Beike’s market share gain;</li>
<li>We reiterate BUY rating and raised TP by US$0.5 to US$24.5/ADS, also taking into account of progress in home renovation and rental management.</li>
</ul>


KE Holdings’ (Beike) C3Q23 revenue was 7.7%/11.6% higher than our est./cons., non-GAAP net income beat our est./cons. by 35%/119%. Existing home sales and non-transaction biz drove the bottom line beat.
We expect Beike C4Q23 to grow 20% YoY, 33% in existing home and 5% in new home, supported by gradual recovery of home transaction and Beike’s market share gain;
We reiterate BUY rating and raised TP by US$0.5 to US$24.5/ADS, also taking into account of progress in home renovation and rental management.


[KE Holdings (BEKE US,BUY,TP US$24.5)TP Change]:Steady Recovery with Catalysts for Market Share Gain

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Beike reported (8 Nov) 3Q23 financial results: total revenue was up 1.2% YoY to RMB17.8bn in 3Q23, 12% higher than both our forecast and Bloomberg consensus estimates, mainly due to better-than-feared GTV generation from both existing home transactions (EHT) and new home transactions (NHT) aided by the relaxation of policy restrictions, and stronger-than-expected revenue growth in home renovation business.</li><li>Non-GAAP net income was RMB2.1bn, better than our forecast/consensus estimate of RMB875mn/988mn, thanks to better-thanexpected revenue generation and stringent-than-expected cost saving.</li><li>Based on a prudent estimation, management guided 4Q23 revenue to be between RMB18.0bn and RMB18.5bn, implying growth of 7.5-10.5% YoY and 1-4% QoQ.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Beike reported (8 Nov) 3Q23 financial results: total revenue was up 1.2% YoY to RMB17.8bn in 3Q23, 12% higher than both our forecast and Bloomberg consensus estimates, mainly due to better-than-feared GTV generation from both existing home transactions (EHT) and new home transactions (NHT) aided by the relaxation of policy restrictions, and stronger-than-expected revenue growth in home renovation business.Non-GAAP net income was RMB2.1bn, better than our forecast/consensus estimate of RMB875mn/988mn, thanks to better-thanexpected revenue generation and stringent-than-expected cost saving.Based on a prudent estimation, management guided 4Q23 revenue to be between RMB18.0bn and RMB18.5bn, implying growth of 7.5-10.5% YoY and 1-4% QoQ.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Ke Holdings (BEKE US) – Expecting a Sequential Recovery in 4Q

<ul><li>According to Beijing Daily, Beijing Lianjia has lowered commission rate for existing home transactions (EHT) in Beijing, from previous nominal rate of 2.7% to 2.0%, and will start to charge 1.0% each on both home sellers and buyers, instead of only from the buyer side.</li><li>In the prudent scenario, we estimate a 1.5/6.3% negative impact on Ke Holdings (Beike)’s group-level contribution profit (CP) in 2023/2024E.</li><li>However, we expect limited long-term impact on Beike’s earnings from the adjustment of commission rate, as: 1) current commission rate for EHT in Beijing could be lower than 2.7%; 2) Lianjia in cities other than Beijing may have limited room to cut rates given actual rates could be lower than 2%. Maintain BUY with SOTP-based TP unchanged at US$24.5.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

According to Beijing Daily, Beijing Lianjia has lowered commission rate for existing home transactions (EHT) in Beijing, from previous nominal rate of 2.7% to 2.0%, and will start to charge 1.0% each on both home sellers and buyers, instead of only from the buyer side.In the prudent scenario, we estimate a 1.5/6.3% negative impact on Ke Holdings (Beike)’s group-level contribution profit (CP) in 2023/2024E.However, we expect limited long-term impact on Beike’s earnings from the adjustment of commission rate, as: 1) current commission rate for EHT in Beijing could be lower than 2.7%; 2) Lianjia in cities other than Beijing may have limited room to cut rates given actual rates could be lower than 2%. Maintain BUY with SOTP-based TP unchanged at US$24.5.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China

China Merchants Shekou Industrial Zone Holdings Co., Ltd. operates as a park integrated developer. The Company conducts land and real estate development and management, community development, and other services. China Merchants Shekou Industrial Zone Holdings provides services in China.

China Merchants Shekou Industr (001979 CH)

China Vanke Co., Ltd. operates real estate development businesses.  The Company provides housing renovation, housing loans, real estate brokerage, and other businesses. China Vanke also operates logistics, material supply, and other businesses.

Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. operates in land development, property management, and infrastructure facilities construction within the Lujiazui Finance and Trade Zone.  The Company also undertakes building and renovation projects.

Shanghai Lujiazui Finance & Trade Zone (600663 CH)

Seazen Holdings Co., Ltd. operates as a real estate development company. The Company develops residential buildings, office buildings, commercial buildings, infrastructure facilities, and more. Seazen Holdings also provides market research, information consulting, and other services.

Yuexiu Property Company Ltd., through its subsidiaries, develops, manages and invests in properties. The Company also invests in a Real Estate Investment Trusts.

Country Garden Services Holdings Company Limited provides real estate development services. The Company develops residential apartments, multi-functional complex buildings, government and public facilities, industrial parks, highway service stations, and schools. Country Garden Services Holdings serves clients in China.

Poly Property Services Co., Ltd. provides property services. The Company offers property management, property projects pre-consultation, post-delivery evaluation and analysis, professional equipment and facilities maintenance, housekeeping, and other services. Poly Property Services provides services in China.

Shoucheng Holdings Limited operates as an investment management company. The Company provides car parking asset operation and management and urban renewal oriented fund management services. Shoucheng Holdings mainly conducts businesses in Hong Kong.

Red Star Macalline Group Corporation Ltd. operates home decoration and furniture stores. The Company engages in leasing floor areas, providing consultation and management services, sales of merchandise, strategy consultation, home design consultation, and construction service. Red Star Macalline Group Corporation conducts businesses in China.

Midea Real Estate Holding Limited operates as a holding company. The Company, through its subsidiaries, provides property management, property sales, property development, and other services.

Fastighets AB Balder owns and manages commercial and residential properties in Sweden.  The Company maintains and rents apartments, offices, shops, banks, hotels and warehouses.  Balder manages the properties through regional offices.

Swire Pacific Limited operates as a holding company. The Company, through its subsidiaries, focuses on real estate, aviation, beverage, industrial, marine services, trading, and industrial businesses. Swire Pacific operates worldwide.

Wharf Real Estate Investment Company Limited provides real estate investment services. The Company develops, invests, and operates residential and commercial properties. Wharf Real Estate Investment operates business in Hong Kong.

Central Pattana Public Company Limited and its subsidiaries develop properties including shopping centers, condominiums, and office, for sale and rental.  The Company's projects include Central Plaza Lardprao, Central Plaza Ram-indra,  Central Plaza Pinklao, Central Festival Center Pattaya, and Central Plaza Ratchada.

Deutsche Wohnen SE operates as a holding company. The Company, through its subsidiaries, focuses on developing and managing residential and commercial properties. Deutsche Wohnen owns and manages residential and nursing facilities for elderly people. Deutsche Wohnen offers property and lease agreement management, ambulant nursing, and assisted living services in Germany.

Vinhomes Joint Stock Company offers real estate services. The Company provides sale and leasing of residential complexes and apartments, as well as professional and personalized services, community building activities, and other facilities. Vinhomes serves customers in Vietnam.

Sun Hung Kai Properties Limited develops and invests in properties. The Company operates and manages hotels, properties, car parking, and transportation infrastructures. Sun Hung Kai Properties serves customers in Hong Kong.

The Howard Hughes Corporation develops real estate. The Company manages master planned communities, shopping malls, and mixed-use developments throughout the United States.

CBRE Group, Inc. provides real estate services. The Company offers property management, valuation, real estate investment, and advisory services. CBRE Group operates offices, data centers, multi-family, hotels, gaming, and retail sectors. CBRE Group serves customers globally.

Aroundtown SA operates as a real estate company. The Company manages and invests in commercial and residential real estate assets from strong fundamentals and growth prospects. Aroundtown serves customers in Europe.

KE Holdings Inc. operates as an integrated online and offline platform for housing transactions and services. The Company offers existing and new home sales, home rentals, home renovation, real estate financial solutions, and other services. KE Holdings conducts businesses in China.

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KE Holdings (BEKE US)

KE (BEKE): New Policy Not Fatal at All, Time to Accumulate

Most municipal governments use price cap, but it is easily bypassed. The policy aims at existing home transaction, but not new home sales or home...

Ming Lu

[KE Holdings Inc. (BEKE US, BUY, TP US$24.5) TP Change]: Policy Stimulus Drive up near Term Sales

Beijing and Shanghai introduce stimulus policies to boost property market, including lower down payments, mortgage rates, and recognition...

Blue Lotus Research Institute