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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p><a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> has <a href="http://www.iporesults.hkex.com.hk/listedco/listconews/sehk/2020/1118/9516503/2020111800032.pdf" target="_blank" rel="noopener">announced</a> that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.</p><p>Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.</p><p><a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> trackers will receive shares in <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> by virtue of their holding of <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>. We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.</p><p>Index arb traders will need to adjust their index compositions since the traded price of <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> will be used in the calculation of the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> level and will result in the index moving 1.5bps higher.</p>

Sunac Services (1516 HK) has announced that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.Hang Seng China Enterprises Index (HSCEI INDEX) trackers will receive shares in Sunac Services (1516 HK) by virtue of their holding of Sunac China Holdings (1918 HK). We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.Index arb traders will need to adjust their index compositions since the traded price of Sunac Services (1516 HK) will be used in the calculation of the Hang Seng China Enterprises Index (HSCEI INDEX) level and will result in the index moving 1.5bps higher.

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

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

Sunac Services Holdings / Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> is a Chinese property management company. Sunac is the fastest-growing large-scale property management service provider in China, according to China Index Academy. At the proposed IPO price range of HK$10.55-12.65 per share, Sunac will have a market cap of HK$31,650-37,950 million ($4.1-4.9 billion). At the mid-point of the IPO price range, Sunac will raise net proceeds of HK$7,810.0 million ($1 billion).</p>
<p>Four cornerstone investors will subscribe for $370 million worth of the offer shares (35.83% of the offer shares at the IPO mid-point). The cornerstone investors are <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, IDG Capital, Hillhouse Capital and Snow Lake Capital. </p>
</div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/sunac-services-ipo-initiation-next-in-line" target="_blank" rel="noopener">our initiation note</a>, we stated that Sunac’s fundamentals over the track record period are attractive. In <a href="https://www.smartkarma.com/insights/sunac-services-ipo-phip-data-points" target="_blank" rel="noopener">our PHIP update note</a>, we noted that the PHIP data points support our view that Sunac is a well-run property management company. However, the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. </p></div></div>


Sunac Services (1516 HK) is a Chinese property management company. Sunac is the fastest-growing large-scale property management service provider in China, according to China Index Academy. At the proposed IPO price range of HK$10.55-12.65 per share, Sunac will have a market cap of HK$31,650-37,950 million ($4.1-4.9 billion). At the mid-point of the IPO price range, Sunac will raise net proceeds of HK$7,810.0 million ($1 billion).
Four cornerstone investors will subscribe for $370 million worth of the offer shares (35.83% of the offer shares at the IPO mid-point). The cornerstone investors are Tencent Holdings (700 HK), IDG Capital, Hillhouse Capital and Snow Lake Capital. 
In our initiation note, we stated that Sunac’s fundamentals over the track record period are attractive. In our PHIP update note, we noted that the PHIP data points support our view that Sunac is a well-run property management company. However, the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>The IPO for <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services Holdings (1516 HK)</a> ("SSH"), the latest property management service company to seek listing, is open for applications. The Offer Price is expected to be announced on the 18 November, with the commencement of trading in the shares on the 19 November.</p>
</div>
<div>
<p>SSH is the spin-off of <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>, who will own 72% in SSH after the IPO, down from 100% prior to a recent capitalisation.</p>
</div>
<div>
<p>As with <a href="https://www.smartkarma.com/entities/kwg-living-group" target="_blank" data-smartkarma-citation="entities:29231:1" rel="noopener">KWG Living Group (3913 HK)</a>, and <a href="https://www.smartkarma.com/entities/shimao-services-holdings-limited" target="_blank" data-smartkarma-citation="entities:29199:1" rel="noopener">Shimao Services Holdings (873 HK)</a>, SSH's punchy implied PER is, to some degree, supported by its strong growth (and absolute size), although on a FY20E (LTM) metric, SSH's valuation is only surpassed by <a href="https://www.smartkarma.com/entities/ever-sunshine-lifestyle-services-group-limited" target="_blank" data-smartkarma-citation="entities:28932:1" rel="noopener">Ever Sunshine Lifestyle Services (1995 HK)</a>.</p>
</div>
<div>
<p>Sunac China, on the other hand, is expensive when de-consolidating out the implied market cap of SSH.</p>
</div>
<div>
<p>More below the fold. </p>
</div>


The IPO for Sunac Services Holdings (1516 HK) ("SSH"), the latest property management service company to seek listing, is open for applications. The Offer Price is expected to be announced on the 18 November, with the commencement of trading in the shares on the 19 November.


SSH is the spin-off of Sunac China Holdings (1918 HK), who will own 72% in SSH after the IPO, down from 100% prior to a recent capitalisation.


As with KWG Living Group (3913 HK), and Shimao Services Holdings (873 HK), SSH's punchy implied PER is, to some degree, supported by its strong growth (and absolute size), although on a FY20E (LTM) metric, SSH's valuation is only surpassed by Ever Sunshine Lifestyle Services (1995 HK).


Sunac China, on the other hand, is expensive when de-consolidating out the implied market cap of SSH.


More below the fold. 


Sunac Services (1516 HK): Lofty Metrics In A Congested Space

Jinke Smart Services / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/jinke-smart-services" target="_blank" data-smartkarma-citation="entities:29214:1" rel="noopener">Jinke Smart Services (9666 HK)</a> is a Chinese property management company which is a subsidiary of <a href="https://www.smartkarma.com/entities/jinke-property-group-co-ltd" target="_blank" data-smartkarma-citation="entities:13291:1" rel="noopener">Jinke Property Group (000656 CH)</a>. At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/jinke-smart-services-ipo-initiation-street-smart" target="_blank" rel="noopener">our initiation note</a>, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. </p></div></div></div>

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. In our initiation note, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. 

Jinke Smart Services IPO: Valuation Insights

Jinke Property Group / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/jinke-smart-services" target="_blank" data-smartkarma-citation="entities:29214:1" rel="noopener">Jinke Smart Services (9666 HK)</a> is a Chinese property management company which is a subsidiary of <a href="https://www.smartkarma.com/entities/jinke-property-group-co-ltd" target="_blank" data-smartkarma-citation="entities:13291:1" rel="noopener">Jinke Property Group (000656 CH)</a>. From 2015 to 2020, Jinke was ranked first among the Top 100 property management companies as measured by overall strengths in the Southwestern China Region, according to China Index Academy. Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. </p><div class="content-highlight"><p>Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs seems to have turned as recent IPOs of <a href="https://www.smartkarma.com/entities/kwg-living-group" target="_blank" data-smartkarma-citation="entities:29231:1" rel="noopener">KWG Living Group (3913 HK)</a> and <a href="https://www.smartkarma.com/entities/shimao-services-holdings-limited" target="_blank" data-smartkarma-citation="entities:29199:1" rel="noopener">Shimao Services Holdings (873 HK)</a> are trading 20% and 5% below their IPO prices, respectively. The poor post-IPO performance despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Overall, on a fundamental view, we believe that Jinke is attractive.</p></div>

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). From 2015 to 2020, Jinke was ranked first among the Top 100 property management companies as measured by overall strengths in the Southwestern China Region, according to China Index Academy. Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs seems to have turned as recent IPOs of KWG Living Group (3913 HK) and Shimao Services Holdings (873 HK) are trading 20% and 5% below their IPO prices, respectively. The poor post-IPO performance despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Overall, on a fundamental view, we believe that Jinke is attractive.

Jinke Smart Services IPO Initiation: Street Smart

China

KWG Living Group is the property management services arm of KWG Group

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KWG Living Group (3913 HK)

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

Sunac Services has issued shares at HKD 11.6 and starts to trade tomorrow. HSCEI trackers will receive 1.1m shares of Sunac Services that they will...

Brian Freitas

Sunac Services IPO: Valuation Insights

Sunac is seeking to raise net proceeds of HK$7,810.0 million ($1 billion). We label this insight bearish as we would participate at most at the low...

Arun George

Sunac Services (1516 HK): Lofty Metrics In A Congested Space

SSH is not cheap, regardless of its top four market cap status. The recent share price performance of recent listings - and the sector as a whole -...

David Blennerhassett

Jinke Smart Services IPO: Valuation Insights

Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on...

Arun George

Jinke Smart Services IPO Initiation: Street Smart

Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. On a...

Arun George

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