Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Capital Markets

Kerry Express Thailand / Equity Capital Markets

In an updated filing, <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> indicated it could sell as many as 300 mn new shares in its planned IPO. Many media reports have suggested the company hopes to raise about US$300 mn in the offering, suggesting KEX will come to market at around 30 baht per share.In this note, we try to answer the following questions regarding KEX's valuation:<ul>
<li>What are the most useful 'comps' for KEX? </li>
<li>What are some appropriate valuation multiples to use in comparing KEX to peers?</li>
<li>How does KEX's valuation at 30 baht per share compare to the peer group we've identified?</li>
<li>What factors could support either a premium or discount valuation for KEX versus peers?</li>
</ul>At 30 baht per share (which implies market capitalization of US$1.7 bn), KEX would not be overvalued relative to peers, in our view, and there are reasons KEX could eventually demand a premium valuation relative to other express companies.

In an updated filing, Kerry Express Thailand (KEX TB) indicated it could sell as many as 300 mn new shares in its planned IPO. Many media reports have suggested the company hopes to raise about US$300 mn in the offering, suggesting KEX will come to market at around 30 baht per share.In this note, we try to answer the following questions regarding KEX's valuation:
What are the most useful 'comps' for KEX? 
What are some appropriate valuation multiples to use in comparing KEX to peers?
How does KEX's valuation at 30 baht per share compare to the peer group we've identified?
What factors could support either a premium or discount valuation for KEX versus peers?
At 30 baht per share (which implies market capitalization of US$1.7 bn), KEX would not be overvalued relative to peers, in our view, and there are reasons KEX could eventually demand a premium valuation relative to other express companies.

Kerry Express Thailand (KEX) IPO: Approach to Valuation

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.

<a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> is the leading express delivery company in Thailand. It is backed by <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> (63.0% shareholder) and <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a> (23.0% shareholder). Kerry Express has kicked off pre-marketing for a Thai IPO to raise around $300 million, according to IFR.  <div class="content-highlight">The timing of the IPO is not ideal as the weak consumer confidence in Thailand exacerbated by the lingering impact of the COVID-19 pandemic has wrecked Kerry Express’ topline in 3Q20. To its credit, Kerry Express has navigated poor market conditions by improving margin and remaining cash generative in 3Q20. Overall, while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. </div>

Kerry Express Thailand (KEX TB) is the leading express delivery company in Thailand. It is backed by Kerry Logistics Network (636 HK) (63.0% shareholder) and VGI PCL (VGI TB) (23.0% shareholder). Kerry Express has kicked off pre-marketing for a Thai IPO to raise around $300 million, according to IFR.  The timing of the IPO is not ideal as the weak consumer confidence in Thailand exacerbated by the lingering impact of the COVID-19 pandemic has wrecked Kerry Express’ topline in 3Q20. To its credit, Kerry Express has navigated poor market conditions by improving margin and remaining cash generative in 3Q20. Overall, while the 3Q20 results are not ideal, we think that revenue decline is a short-term market-specific issue, and Kerry Express remains well-placed to ride an eventual recovery in Thai consumer confidence. 

Kerry Express IPO Initiation: A Recovery Play?

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Thematic (Sector/Industry)

Back in April of this year, China's President Xi Jinping <a href="http://paper.people.com.cn/rmrb/html/2020-04/16/nw.D110000renmrb_20200416_1-09.htm" target="_blank" rel="noopener">mentioned</a> taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the <a href="http://cpc.people.com.cn/n1/2020/0515/c64094-31709627.html?mc_cid=28966ada58&amp;mc_eid=902fe70bde" target="_blank" rel="noopener">14 May</a> under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July <a href="https://web.archive.org/web/20200811045300/http://www.xinhuanet.com/politics/leaders/2020-07/21/c_1126267575.htm" target="_blank" rel="noopener">speech</a> to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping <a href="https://news.cgtn.com/news/2020-09-14/Xi-attends-China-Germany-EU-leaders-meeting-via-video-link-TMA0kfp5lK/index.html" target="_blank" rel="noopener">reiterated</a> that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

Back in April of this year, China's President Xi Jinping mentioned taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the 14 May under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July speech to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping reiterated that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

China's Dual Circulation: Hedged Integration

Equity Bottom-Up

The express sector's big news is that <a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US) </a>is seeking an IPO in Hong Kong, as many large Chinese tech companies have done in recent months. We understand the rationale for this move, but still dislike the company's deteriorating fundamentals and rich valuation. 
In August, express sector volume growth remained firm (+36.5% YoY), but revenue growth slowed (+17.9%, slowest since March) as average unit pricing tumbled. We believe the current price war will continue in the medium-term, eating into express companies' margins and cash flow.
Outside of China, <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> has filed IPO documents. We believe this offering is worth watching, as KEX may be the only public 'pure play' on eCommerce logistics in SE Asia. A successful IPO should also boost sentiment toward <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a>.
Conclusion: Owning independent market leader <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> against short positions in any of the listed express companies aligned with <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> has been a winning strategy in 2020, and we see no reason to change course in the near-term.

The express sector's big news is that ZTO Express (ZTO US) is seeking an IPO in Hong Kong, as many large Chinese tech companies have done in recent months. We understand the rationale for this move, but still dislike the company's deteriorating fundamentals and rich valuation. 
In August, express sector volume growth remained firm (+36.5% YoY), but revenue growth slowed (+17.9%, slowest since March) as average unit pricing tumbled. We believe the current price war will continue in the medium-term, eating into express companies' margins and cash flow.
Outside of China, Kerry Express Thailand (KEX TB) has filed IPO documents. We believe this offering is worth watching, as KEX may be the only public 'pure play' on eCommerce logistics in SE Asia. A successful IPO should also boost sentiment toward Kerry Logistics Network (636 HK).
Conclusion: Owning independent market leader S.F. Holding (002352 CH) against short positions in any of the listed express companies aligned with Alibaba Group (BABA US) has been a winning strategy in 2020, and we see no reason to change course in the near-term. 

TRACKING TRAFFIC/Chinese Express: ZTO HK Listing | August Pricing Still Weak | KEX IPO in Bangkok

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Jul 3rd.
In the past 7 days, the top 3 companies that repurchased the most shares from the market were <a href="https://www.smartkarma.com/entities/igg-inc" target="_blank" data-smartkarma-citation="entities:15506:1" rel="noopener">IGG Inc (799 HK)</a> (HKD 39.6 million worth of buybacks), <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> (HKD 16.0 million worth of buybacks), <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> (HKD 9.3 million worth of buybacks).
In the past 30 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 1,249.1 million worth of buybacks), Avichina Industry &amp; Technology Company Limited (2357 HK) (HKD 118.0 million worth of buybacks), Igg Inc (799 HK) (HKD 89.9 million worth of buybacks).
In the past 90 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 3,203.4 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 499.5 million worth of buybacks), Yanzhou Coal Mining Company Limited (1171 HK) (HKD 310.2 million worth of buybacks).
In the past 365 days, the top 3 companies that repurchased the most shares from the market were Hsbc Holdings Plc (5 HK) (HKD 7,813.7 million worth of buybacks), Link Reit (823 HK) (HKD 4,156.7 million worth of buybacks), China Evergrande Group (3333 HK) (HKD 3,203.4 million worth of buybacks).

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Jul 3rd.
In the past 7 days, the top 3 companies that repurchased the most shares from the market were IGG Inc (799 HK) (HKD 39.6 million worth of buybacks), Fosun International (656 HK) (HKD 16.0 million worth of buybacks), Kerry Logistics Network (636 HK) (HKD 9.3 million worth of buybacks).
In the past 30 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 1,249.1 million worth of buybacks), Avichina Industry &amp; Technology Company Limited (2357 HK) (HKD 118.0 million worth of buybacks), Igg Inc (799 HK) (HKD 89.9 million worth of buybacks).
In the past 90 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 3,203.4 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 499.5 million worth of buybacks), Yanzhou Coal Mining Company Limited (1171 HK) (HKD 310.2 million worth of buybacks).
In the past 365 days, the top 3 companies that repurchased the most shares from the market were Hsbc Holdings Plc (5 HK) (HKD 7,813.7 million worth of buybacks), Link Reit (823 HK) (HKD 4,156.7 million worth of buybacks), China Evergrande Group (3333 HK) (HKD 3,203.4 million worth of buybacks).

Hong Kong Buybacks League Table: IGG, Fosun Intl, Kerry Logistics

Hong Kong

Kerry Logistics Network Limited provides logistics services in Asia and internationally. The Company offers integrated logistics services, as well as leases warehousing space in Hong Kong and provides international freight forwarding services.

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Kerry Logistics Network (636 HK)

Kerry Express Thailand (KEX) IPO: Approach to Valuation

What's the right valuation approach to Kerry Express (KEX), which hopes to complete its IPO in Thailand in the coming weeks?

Tracking Traffic

Kerry Express IPO Initiation: A Recovery Play?

Kerry Express has kicked off pre-marketing to raise around $300 million. The 3Q20 revenue decline is a short-term market-specific issue, and Kerry...

Arun George

China's Dual Circulation: Hedged Integration

Back in April, Xi Jinping

David Blennerhassett

TRACKING TRAFFIC/Chinese Express: ZTO HK Listing | August Pricing Still Weak | KEX IPO in Bangkok

Big news is ZTO Express (ZTO US) launching

Tracking Traffic

Hong Kong Buybacks League Table: IGG, Fosun Intl, Kerry Logistics

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top...

Ke Yan, CFA, FRM

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52-week Range

Market Cap (USDm)

P/E

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