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

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine. Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively.  We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion. In this insight, we will highlight inflows into <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, as well as outflows from  <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>.

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.  Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively.   We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.   In this insight, we will highlight inflows into Li Ning Co Ltd (2331 HK), Meituan (3690 HK), as well as outflows from  Tencent (700 HK).

Founder of Antler Capital

Stanley Tsai, CFA

Macroeconomics

Industrial profits round out the macro data releases for the month. Overall, the numbers are in line with expectations, but if we look past the impact of commodity price dislocations, earnings outlook is decidedly less sanguine (Exhibit 1).
Headline industrial earnings reinforce the trends in PPI we saw earlier in the month. The 20% two-year CAGR in May was driven mainly by higher factory gate prices. Unit sales growth remained anemic and reflects weaker-than-expected infrastructure capex, exports and consumer spending. 
The upstream resource extraction industry continued to benefit from the commodities boom. Profitability gains from price hikes have more than offset low transaction volumes. This significant distortion has prompted Beijing's recent interventions. We believe margins may have topped out for the upstream producers and we will be looking at progressively tougher comps ahead.
The midstream refiners and equipment manufacturers vary in their ability to pass on price hikes to their customers. Earnings growth slowed for ferrous metals and accelerated for non-ferrous metals for this reason. In any case, margins have risen to a recent high for the sector as a whole and are set to narrow. Equipment producers have led the retreat thus far.
The logical pecking order going forward would seem to be downstream &gt; midstream &gt; upstream. We believe there is a strong case for cyclicals and discretionaries as input prices ease. And more earnings upgrades may be in the works following in Li Ning <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">(2331 HK)</a>'s footsteps. CPI still looks benign for the time being, but we would keep an eye out for a rebound in food prices. The recent recovery in pork prices - coupled with an unusually dry season globally - could make for a nasty surprise.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 100%;">Exhibit 1: Monthly Industrial Profits by Sector | % ∆ y/y </td>
</tr>
<tr>
<td style="width: 100%;">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/821/original/image_984775689201624923389813.png?1624923389" class="editor-image img-responsive" data-smartkarma-image-id="215821"></figure>
Note: Growth rates = 2Y CAGR
Source: National Bureau of Statistics, Our analysis
</td>
</tr>
</tbody>
</table>
Related Insights
<ul>
<li><a href="https://www.smartkarma.com/insights/china-financials-silver-linings-playbook" target="_blank" data-smartkarma-citation="insights:53013" rel="noopener">China Financials: Silver Linings Playbook</a></li>
<li>
<a href="https://www.smartkarma.com/insights/china-properties-like-clockwork-real-estate-investments-haven-t-skipped-a-beat" target="_blank" data-smartkarma-citation="insights:53590" rel="noopener">China Properties: Like Clockwork, Real Estate Investments Haven't Skipped a Beat</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-macro-ppi-peaks-while-cpi-eases-tightening-fears" target="_blank" data-smartkarma-citation="insights:52778" rel="noopener">China Macro: PPI Peaks, while CPI Eases Tightening Fears</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-macro-consumers-remain-on-the-sidelines-as-their-home-equity-grows" target="_blank" data-smartkarma-citation="insights:53210" rel="noopener">China Macro: Consumers Remain on the Sidelines, as Their Home Equity Grows</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-macro-exports-disappoint-but-it-s-still-early-in-the-game" target="_blank" data-smartkarma-citation="insights:52728" rel="noopener">China Macro: Exports Disappoint, but It's Still Early in the Game</a> </li>
</ul>

Industrial profits round out the macro data releases for the month. Overall, the numbers are in line with expectations, but if we look past the impact of commodity price dislocations, earnings outlook is decidedly less sanguine (Exhibit 1).
Headline industrial earnings reinforce the trends in PPI we saw earlier in the month. The 20% two-year CAGR in May was driven mainly by higher factory gate prices. Unit sales growth remained anemic and reflects weaker-than-expected infrastructure capex, exports and consumer spending. 
The upstream resource extraction industry continued to benefit from the commodities boom. Profitability gains from price hikes have more than offset low transaction volumes. This significant distortion has prompted Beijing's recent interventions. We believe margins may have topped out for the upstream producers and we will be looking at progressively tougher comps ahead.
The midstream refiners and equipment manufacturers vary in their ability to pass on price hikes to their customers. Earnings growth slowed for ferrous metals and accelerated for non-ferrous metals for this reason. In any case, margins have risen to a recent high for the sector as a whole and are set to narrow. Equipment producers have led the retreat thus far.
The logical pecking order going forward would seem to be downstream &gt; midstream &gt; upstream. We believe there is a strong case for cyclicals and discretionaries as input prices ease. And more earnings upgrades may be in the works following in Li Ning (2331 HK)'s footsteps. CPI still looks benign for the time being, but we would keep an eye out for a rebound in food prices. The recent recovery in pork prices - coupled with an unusually dry season globally - could make for a nasty surprise.



Exhibit 1: Monthly Industrial Profits by Sector | % ∆ y/y 




Note: Growth rates = 2Y CAGR
Source: National Bureau of Statistics, Our analysis




Related Insights

China Financials: Silver Linings Playbook

China Properties: Like Clockwork, Real Estate Investments Haven't Skipped a Beat 

China Macro: PPI Peaks, while CPI Eases Tightening Fears 

China Macro: Consumers Remain on the Sidelines, as Their Home Equity Grows 

China Macro: Exports Disappoint, but It's Still Early in the Game 


China Macro: Profits Flowing Gently Down the Stream

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Last Friday, the company announced a profit alert with revenue grew 60% and NPAT RMB 1.8 billion or 163% higher YoY citing improvement in operating margin. This could come not only from a discipline operating expenses management but also an improved product mix; margin from online sales is higher than from retail. There will be some sellers today to book some profit from yesterday's gain but long-term investors should hold on to this as the nationalistic pattern may last longer than the first half of 2021 especially when the US is still making taking a hard stand on the Xinjiang issue, now moving from the cotton to solar panel, therefore, driving a higher revenue to <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> .<div class="content-highlight">Li Ning's valuation and share price may sound expensive but the appeal of an online focus business with higher profitability and leaner capital structure compared to its peers warrant some premium. </div>

Last Friday, the company announced a profit alert with revenue grew 60% and NPAT RMB 1.8 billion or 163% higher YoY citing improvement in operating margin. This could come not only from a discipline operating expenses management but also an improved product mix; margin from online sales is higher than from retail. There will be some sellers today to book some profit from yesterday's gain but long-term investors should hold on to this as the nationalistic pattern may last longer than the first half of 2021 especially when the US is still making taking a hard stand on the Xinjiang issue, now moving from the cotton to solar panel, therefore, driving a higher revenue to Li Ning Co Ltd (2331 HK) .Li Ning's valuation and share price may sound expensive but the appeal of an online focus business with higher profitability and leaner capital structure compared to its peers warrant some premium. 

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, GlobalFoundries, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart Inc (139480 KS)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Saudi Aramco (ARAMCO AB), Hyundai Motor Co (005380 KS), GlobalFoundries, Samsung Electronics (005930 KS), E Mart Inc (139480 KS)

Global Emerging Markets Weekly: 25 June 2021

HK/China Equity Long-Short

Osbert Tang, CFA

We view the FY21 (Year end Mar) result of <a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang Group Co (3818 HK)</a> positively, despite a dividend payout ratio which is lower than expected. As we wrote in <a href="https://www.smartkarma.com/insights/china-dongxiang-3818-hk-what-can-we-expect-from-the-final-result" target="_blank" data-smartkarma-citation="insights:53174" rel="noopener">China Dongxiang (3818 HK): What Can We Expect from the Final Result?</a>, its sportswear business in China has recorded good turnaround, with gross profit soared 46.3% YoY and 27.9% HoH. Meanwhile, its investment business also registered an income of Rmb2.1bn for full-year, or Rmb759.7m for 2H21, up 88.7% YoY.Going forward, we expect CNDX's strategy to bring about further improvement in its sportswear business in China. It has also disclosed more names of listed equity that it hold both directly and indirectly and they are all of good quality, in our view. The stock is trading on 47% discount to book value which made up of 14% of net cash, 73% of investment portfolio and 13% of other net assets. Frankly, we think such valuation is too depressed and believe there is more upside room even after a 52% rally in share price YTD.

We view the FY21 (Year end Mar) result of China Dongxiang Group Co (3818 HK) positively, despite a dividend payout ratio which is lower than expected. As we wrote in China Dongxiang (3818 HK): What Can We Expect from the Final Result?, its sportswear business in China has recorded good turnaround, with gross profit soared 46.3% YoY and 27.9% HoH. Meanwhile, its investment business also registered an income of Rmb2.1bn for full-year, or Rmb759.7m for 2H21, up 88.7% YoY.Going forward, we expect CNDX's strategy to bring about further improvement in its sportswear business in China. It has also disclosed more names of listed equity that it hold both directly and indirectly and they are all of good quality, in our view. The stock is trading on 47% discount to book value which made up of 14% of net cash, 73% of investment portfolio and 13% of other net assets. Frankly, we think such valuation is too depressed and believe there is more upside room even after a 52% rally in share price YTD.

China Dongxiang (3818 HK): Lower-Than-Expected Dividends but Still A Marvelous FY21

China

HLA CORP., Ltd. manufactures and markets apparel, woolen fabrics, woolen yarns, and textile raw materials, as well as provides dyeing and processing services. Heilan Home distributes their product globally.

Fujian Funeng Co., Ltd. manufactures a variety of textile including flannelette, cotton yarn, polyurethane synthetic leather, needling fabric, and water-jet bonding fabric.

Zhejiang Weixing Industrial Development Co., Ltd. manufactures buttons, zips, and other apparel accessories. The Company also provides electroplating services.

Lao Feng Xiang Co., Ltd. processes and sells gold and jewelry products.  Through its subsidiaries, the Company manufactures and sells wooden, mechanical and cosmetic pencils, as well as manufactures and sells pencil making machinery and paints, and general trading.

Zhejiang Semir Garment Company Limited designs, develops, outsources production, markets and distributes apparels.  The Company's main operation is casual wear and children's apparels.

Xtep International Holdings Ltd. designs, manufactures, and markets sportwear. The Company produces footwear, apparel, and accessories.

Sichuan Zhenjing Corporation Limited manufactures and distributes leather products. The Company produces and sells leather cases, leather car seats, decoration leather, and other products. Sichuan Zhenjing markets its products throughout China.

Biem.L.Fdlkk Garment Co., Ltd. is an apparel designer. The Company designs, markets, and distributes a variety of golf apparels. Biem.L.Fdlkk Garment serves customers throughout China.

Billion Industrial Holdings Ltd. manufactures polyester filament yarn.  The Company produces drawn textured yarn and fully drawn yarn, which are used in apparel, footwear and home furnishings.

Lancy Co., Ltd. manufactures apparel products. The Company produces coats, dresses, shirts, jackets, and other products. Lancy also produces shoes, bags, baby products, cosmetics, toys, and other products.

Capri Holdings Limited retails apparel. The Company offers fashion luxury women's and men's accessories, footwear, apparel, watches, jewelry, eyewear, and fragrance products, as well as provides delivery services. Capri Holdings serves customers worldwide.

Page Industries Limited develops, produces, and distributes branded underwear for men, women, and children in India and Sri Lanka.

Bosideng International Holdings Limited develops down apparel products in the Peoples Republic of China. The Company's products include down jackets, vests, and pants which it offers through retail outlets located in multiple cities.

Bosideng International Holdings (3998 HK)

KPR Mill Limited manufactures apparel products. The Company's products include carded and combed cotton and knitted fabrics.

Samsonite International SA designs, manufactures, and distributes luggage. The Company's products include suitcases, garment bags, casual bags, business cases, clothing, shoes, and accessories. Samsonite also licenses their trademarks for use on products such as travel accessories, leather goods, handbags, clothing, and furniture.

Eclat Textile Co., Ltd. weaves, dyes, and sells fabrics, garments, yarns, and other textile materials.  The Company distributes its products in the local and overseas markets.

VF Corporation is an international apparel company. The Company owns a broad portfolio of brands in the jeanswear, outerwear, packs, footwear, sportswear and occupational apparel categories. VF Corp's products are marketed to consumers shopping in specialty stores, upscale and traditional department stores, national chains and mass merchants.

Columbia Sportswear Company designs, manufactures, markets, and distributes active outdoor apparel.  The Company's products include outerwear, sportswear, rugged footwear, and related accessories.  Columbia's products are sold to specialty and department store retailers in the United States and other countries.

Feng Tay Enterprise Co., Ltd. manufactures and markets athletic footwear products.  The Company's products include sneakers and roller blades. Its headquarters, primarily for product development and human resources functions, is located at Yunlin Science and Industrial Park in Taiwan, while its factories are spread throughout China, Vietnam, Indonesia and India.

Aditya Birla Fashion and Retail Ltd provides a wide range of mid-priced garments for men. The Company's collection includes internationally styled formal, elite, casual, party, and wedding apparel.

Aditya Birla Fashion and Retail Ltd (ABFRL IN)

Li Ning Company Limited researches, designs, manufactures, distributes, and retails sports footwear, apparel and accessories for sport and leisure use.

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Li Ning (2331 HK)

Hong Kong Connect Flows: Li Ning Inflows

We will highlight weekly Hong Kong Connect inflows into Li Ning Company Limited (2331 HK), Meituan (3690 HK), and outflows from Tencent Holdings...

Ke Yan, CFA, FRM

China Macro: Profits Flowing Gently Down the Stream

Last month’s industrial profits were in line, but if we look past the impact of commodity price dislocations, earnings outlook is decidedly less...

Stanley Tsai, CFA

Li Ning (2331): Marching On

Li Ning's valuation and share price may sound expensive but the appeal of an online focus business with higher profitability and leaner capital...

Henry Soediarko

Global Emerging Markets Weekly: 25 June 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

China Dongxiang (3818 HK): Lower-Than-Expected Dividends but Still A Marvelous FY21

China Dongxiang has delivered impressive FY21 result with good recovery in sportswear and surge in investment income. At 47% discount to book...

Osbert Tang, CFA

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