Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>SK Bioscience announced an excellent IPO book building results on 8 March. The IPO price has been confirmed at 65,000 won per share, which is at the top of the IPO price range. At the IPO price of 65,000 won, the company's initial market cap will be 5.0 trillion won.</li>
<li>The total demand ratio of the SK Bioscience IPO was 1,275.5 to 1, which is very high. Of these institutional investors, 96.7% of them thought that the value of the company should be 65,000 won or more. Our base case valuation for the company is a market cap of 11.5 trillion won or <strong>149,000 won</strong> per share, which would represent a 129% upside from the IPO price of 65,000 won. </li>
<li>Despite the numerous positives about the SK Bioscience IPO, the biggest near-term and long-term problem of SK Bioscience is whether or not the COVID-19 vaccines of AstraZeneca, NovaVax, and other major global vaccine developers are safe or not.  Since 26 February (when COVID-19 vaccinations started in Korea), there have been <a href="https://blog.naver.com/jijisjungle/222264180891" target="_blank" rel="noopener">11 people</a> that have died in Korea after taking the AstraZeneca COVID-19 vaccines (death rate of 0.003%). For now, the Korean authorities have ruled out any association that may link the deaths of these 11 people with the COVID-19 vaccines.</li>
</ul>


SK Bioscience announced an excellent IPO book building results on 8 March. The IPO price has been confirmed at 65,000 won per share, which is at the top of the IPO price range. At the IPO price of 65,000 won, the company's initial market cap will be 5.0 trillion won.
The total demand ratio of the SK Bioscience IPO was 1,275.5 to 1, which is very high. Of these institutional investors, 96.7% of them thought that the value of the company should be 65,000 won or more. Our base case valuation for the company is a market cap of 11.5 trillion won or 149,000 won per share, which would represent a 129% upside from the IPO price of 65,000 won. 
Despite the numerous positives about the SK Bioscience IPO, the biggest near-term and long-term problem of SK Bioscience is whether or not the COVID-19 vaccines of AstraZeneca, NovaVax, and other major global vaccine developers are safe or not.  Since 26 February (when COVID-19 vaccinations started in Korea), there have been 11 people that have died in Korea after taking the AstraZeneca COVID-19 vaccines (death rate of 0.003%). For now, the Korean authorities have ruled out any association that may link the deaths of these 11 people with the COVID-19 vaccines.


Trading Strategy of SK Bioscience IPO Post Pricing

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<p><strong>1. Industry viewpoints:</strong> </p><ul>
<li>For a long time, the National Healthcare Security Administration has explicitly mentioned to include the traditional Chinese medicines into volume-based purchase (VBP) and the related policy is now in process.</li>
<li>Vaccine is a hot topic in 2020, so it deserves further discussion.</li>
<li>In terms of future trend, the IVD industry will undergo profound changes in the next five years.</li>
</ul><p><strong>2. Company news:</strong></p><p style="text-align: start;">News about the new agreement and the progress of new drugs from <a href="https://www.smartkarma.com/entities/ascentage-pharma-group-inter" target="_blank" data-smartkarma-citation="entities:27824:1" rel="noopener">Ascentage Pharma Group Corp (6855 HK)</a>, <a href="https://www.smartkarma.com/entities/cspc-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:229:1" rel="noopener">CSPC Pharmaceutical Group (1093 HK)</a>, <a href="https://www.smartkarma.com/entities/ascletis-pharma-inc" target="_blank" data-smartkarma-citation="entities:27265:1" rel="noopener">Ascletis Pharma Inc (1672 HK)</a>, and <a href="https://www.smartkarma.com/entities/antengene-corporation-limited" target="_blank" data-smartkarma-citation="entities:29705:1" rel="noopener">Antengene (6996 HK).</a></p><p><strong>3. Market review:</strong></p><p style="text-align: start;">Last week, stock price for healthcare sector in A share increased 5.98%, while CSI 300 increased 1.71% over the same period of time.</p><p><strong>4. Risk Disclosure:</strong></p><p style="text-align: start;">Policy risk, R&amp;D risk, Company risk and COVID-19 risk.</p>

1. Industry viewpoints: 
For a long time, the National Healthcare Security Administration has explicitly mentioned to include the traditional Chinese medicines into volume-based purchase (VBP) and the related policy is now in process.
Vaccine is a hot topic in 2020, so it deserves further discussion.
In terms of future trend, the IVD industry will undergo profound changes in the next five years.
2. Company news:News about the new agreement and the progress of new drugs from Ascentage Pharma Group Corp (6855 HK), CSPC Pharmaceutical Group (1093 HK), Ascletis Pharma Inc (1672 HK), and Antengene (6996 HK).3. Market review:Last week, stock price for healthcare sector in A share increased 5.98%, while CSI 300 increased 1.71% over the same period of time.4. Risk Disclosure:Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

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

<div>The vaccine announcement by <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a> and <a href="https://www.smartkarma.com/entities/moderna-inc" target="_blank" data-smartkarma-citation="entities:28744:1" rel="noopener">Moderna Inc (MRNA US), </a>
</div>
<div>the laggard Singapore equities market all of a sudden leaped to joy and pushed travel-related names up, playing catch up with the rest of the world.</div>
<div></div>
<div>
<a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a> and <a href="https://www.smartkarma.com/entities/sats-ltd" target="_blank" data-smartkarma-citation="entities:19962:1" rel="noopener">SATS Ltd (SATS SP)</a> are the go-to stock for Singapore’s reopening air travel that started with the travel bubble with Hong Kong and other low-risk countries to follow. <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a>  is the key beneficiary to the reopening of the Singapore economy, through the switching of work-from-home to work-in-office (higher ridership in the MRTs and buses that contributes to 60% of the company’s revenues), and also from the reopening of the restaurants and malls that increases mobility in the country. The low or non-existent community COVID-19 cases also help to boost the confidence in Comfort Delgro.</div>
<div></div>
<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/615/original/image_5285658631606463283499.png?1606463282" class="editor-image img-responsive" data-smartkarma-image-id="174615"></figure>
<div class="content-remarks">
<p>source: Capital IQ</p>
</div>
<p>The trade is to buy ComfortDelgro as it has less risk to the increase in pandemic and less exposure to the cross border travel unlike Singapore Airlines and SATS (whose valuations have run ahead despite the ongoing concern of the industry) that has most of their revenues exposed to the risk of the cross border travel.</p>
</div>

The vaccine announcement by Pfizer Inc (PFE US) and Moderna Inc (MRNA US), 

the laggard Singapore equities market all of a sudden leaped to joy and pushed travel-related names up, playing catch up with the rest of the world.


Singapore Airlines (SIA SP) and SATS Ltd (SATS SP) are the go-to stock for Singapore’s reopening air travel that started with the travel bubble with Hong Kong and other low-risk countries to follow. Comfortdelgro Corp (CD SP)  is the key beneficiary to the reopening of the Singapore economy, through the switching of work-from-home to work-in-office (higher ridership in the MRTs and buses that contributes to 60% of the company’s revenues), and also from the reopening of the restaurants and malls that increases mobility in the country. The low or non-existent community COVID-19 cases also help to boost the confidence in Comfort Delgro.




source: Capital IQ

The trade is to buy ComfortDelgro as it has less risk to the increase in pandemic and less exposure to the cross border travel unlike Singapore Airlines and SATS (whose valuations have run ahead despite the ongoing concern of the industry) that has most of their revenues exposed to the risk of the cross border travel.


2021 High Conviction: Singapore Travel Names in Bumpy Recovery

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Bottom-Up

<p style="text-align: justify;">Previous week EU finally approved new contract with the German biotech company CureVac to purchase 225 million doses of COVID-19 vaccine and option to buy additional 180 million doses next year. CureVac plans to initiate global Phase 2b/3 clinical trials as soon as possible and is going to expand its manufacturing capacities to 300 million doses in 2021 and 600 million doses in 2022. New integrated European vaccine manufacturing network will be built in collaboration with several partners. We believe, that one of them is American EV and clean energy company Tesla, working with CureVac on vaccine RNA printer (version 3 is under development). We see further upside for CureVac shares and expect positive Phase 2a and Phase 2b/3 data of its vaccine candidate CVnCoV together with 90%+ efficacy and opportunity to sell ~100 million doses of COVID-19 vaccine for emergency use in the European Union this year.  </p>

Previous week EU finally approved new contract with the German biotech company CureVac to purchase 225 million doses of COVID-19 vaccine and option to buy additional 180 million doses next year. CureVac plans to initiate global Phase 2b/3 clinical trials as soon as possible and is going to expand its manufacturing capacities to 300 million doses in 2021 and 600 million doses in 2022. New integrated European vaccine manufacturing network will be built in collaboration with several partners. We believe, that one of them is American EV and clean energy company Tesla, working with CureVac on vaccine RNA printer (version 3 is under development). We see further upside for CureVac shares and expect positive Phase 2a and Phase 2b/3 data of its vaccine candidate CVnCoV together with 90%+ efficacy and opportunity to sell ~100 million doses of COVID-19 vaccine for emergency use in the European Union this year.  

CureVac Stock May Surge Another 20-30% Under New Bull-Case Scenario

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

<p style="text-align: justify;">Credit risk markets remained decoupled between the US and Asia as spreads on US Caa-rated entities continued to defy gravity. The risk-on wave continued to swell through US risk asses on additional positive vaccine news. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, spreads on the US Caa-rated complex tightened to inside Asia’s HY index for the first time since 2014. Is it time to sell the Caa bull market?  </p><p style="text-align: justify;">Treasury Secretary Mnuchin’s decision to cancel several underutilized emergency Fed programs at the end of the year may raise expectations for the Fed to expand its asset purchase program or target its purchases more directly along the Treasury curve at its December meeting. We are set-up for disappointment.  </p><p style="text-align: justify;">Against this background, Asia’s HY Additional Tier 1 underperformed Subordinated and Senior Unsecured securities as near-term global growth concerns outweighed vaccine progress. Most of the underperforming bond were issued over the last three months. This suggests these may have been issued at the top of the market, in spread terms. Amongst Additional Tier 1 bonds, Hong Kong-headquartered banks led advances. <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia's (23 HK)</a> announcement that it would call its 5.5% coupon December-callable AT1 bond aided sentiment. We first recommended that investors overweight this security in mid-February within <a href="https://www.smartkarma.com/insights/bank-of-east-asia-overweight-short-call-at1-on-refinancing-ability" target="_blank" data-smartkarma-citation="insights:36787" rel="noopener">Bank of East Asia: Overweight Short-Call AT1 on Refinancing Ability</a> and recently re-iterated this call within <a href="https://www.smartkarma.com/insights/bank-of-east-asia-buy-the-inefficient-capital-securities" target="_blank" data-smartkarma-citation="insights:42753" rel="noopener">Bank of East Asia: Buy the Inefficient Capital Securities</a>. Victory lap over.</p><p style="text-align: justify;">Concurrently, Turkish HY Senior Unsecured bank bonds again materially outperformed their global peers following delivery of a more orthodox monetary policy regime. Nonetheless, Turkish bank bonds continue to trade wide of similarly rated entities in other emerging markets.  Given the starting point for a potential Turkish bank bond rally, we anticipate a virus versus vaccine market immunity in Turkish-bank bonds returns over the near term.  <strong> </strong></p><p style="text-align: justify;">Over US$13 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. Amongst higher-yield issued securities, the UK Co-operative Bank’s Caa1 rated bond makes India’s <a href="https://www.smartkarma.com/entities/iifl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20197:1" rel="noopener">IIFL Finance's (IIFL IN)</a> US$-bond look cheap in comparison. However, unlike India where every bank rescue requires a liability moratorium, the Co-operative Bank resolution three years ago was not damaging to the financial system. India’s rescue of <a href="https://www.smartkarma.com/entities/lakshmi-vilas-bank-ltd" target="_blank" data-smartkarma-citation="entities:17552:1" rel="noopener">Lakshmi Vilas Bank (LVB IN)</a> this week is no exception. For our views on this please see: <a href="https://www.smartkarma.com/insights/lakshmi-vilas-bank-dbs-rescue-is-a-wasted-option" target="_blank" data-smartkarma-citation="insights:45471" rel="noopener">Lakshmi Vilas Bank: DBS Rescue Is a Wasted Option</a>.</p><p style="text-align: justify;">US$-debt issuance should be slowed by the upcoming US holiday on Thursday. We could see a short-lived resurgence in early December and then drift sideways until heavy issuance re-emerges in January.</p><p style="text-align: justify;"><strong>Market Outlook: </strong>Over the near term, tension between longer-term optimism from vaccine driven economies and the shorter-term reality of increasing Coronavirus lockdowns are likely to weigh on the market in the coming weeks. Positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets.</p>

Credit risk markets remained decoupled between the US and Asia as spreads on US Caa-rated entities continued to defy gravity. The risk-on wave continued to swell through US risk asses on additional positive vaccine news. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, spreads on the US Caa-rated complex tightened to inside Asia’s HY index for the first time since 2014. Is it time to sell the Caa bull market?  Treasury Secretary Mnuchin’s decision to cancel several underutilized emergency Fed programs at the end of the year may raise expectations for the Fed to expand its asset purchase program or target its purchases more directly along the Treasury curve at its December meeting. We are set-up for disappointment.  Against this background, Asia’s HY Additional Tier 1 underperformed Subordinated and Senior Unsecured securities as near-term global growth concerns outweighed vaccine progress. Most of the underperforming bond were issued over the last three months. This suggests these may have been issued at the top of the market, in spread terms. Amongst Additional Tier 1 bonds, Hong Kong-headquartered banks led advances. Bank of East Asia's (23 HK) announcement that it would call its 5.5% coupon December-callable AT1 bond aided sentiment. We first recommended that investors overweight this security in mid-February within Bank of East Asia: Overweight Short-Call AT1 on Refinancing Ability and recently re-iterated this call within Bank of East Asia: Buy the Inefficient Capital Securities. Victory lap over.Concurrently, Turkish HY Senior Unsecured bank bonds again materially outperformed their global peers following delivery of a more orthodox monetary policy regime. Nonetheless, Turkish bank bonds continue to trade wide of similarly rated entities in other emerging markets.  Given the starting point for a potential Turkish bank bond rally, we anticipate a virus versus vaccine market immunity in Turkish-bank bonds returns over the near term.   Over US$13 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. Amongst higher-yield issued securities, the UK Co-operative Bank’s Caa1 rated bond makes India’s IIFL Finance's (IIFL IN) US$-bond look cheap in comparison. However, unlike India where every bank rescue requires a liability moratorium, the Co-operative Bank resolution three years ago was not damaging to the financial system. India’s rescue of Lakshmi Vilas Bank (LVB IN) this week is no exception. For our views on this please see: Lakshmi Vilas Bank: DBS Rescue Is a Wasted Option.US$-debt issuance should be slowed by the upcoming US holiday on Thursday. We could see a short-lived resurgence in early December and then drift sideways until heavy issuance re-emerges in January.Market Outlook: Over the near term, tension between longer-term optimism from vaccine driven economies and the shorter-term reality of increasing Coronavirus lockdowns are likely to weigh on the market in the coming weeks. Positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets.

Bank Credit Weekly: Virus Vs. Vaccine: Time to Sell the Caa-Bull?

United States

Moderna, Inc. operates as a biotechnology company. The Company focuses on the discovery and development of messenger RNA therapeutics and vaccines. Moderna develops mRNA medicines for infectious, immuno-oncology, and cardiovascular diseases.

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Moderna (MRNA US)

Trading Strategy of SK Bioscience IPO Post Pricing

The IPO price of SK Bioscience was confirmed at 65,000 won per share, which is at the top of the IPO price range. The total demand ratio of the SK...

Douglas Kim

China Healthcare Weekly (Dec.4)

This article summarized the updated news in China volume-based purchase policy, industry viewpoints, company news, and capital market review for...

Xinyao (Criss) Wang

2021 High Conviction: Singapore Travel Names in Bumpy Recovery

Long ComfortDelgro as it has less risk to the increase in pandemic unlike Singapore Airlines and SATS (whose valuations have run ahead despite the...

Henry Soediarko

CureVac Stock May Surge Another 20-30% Under New Bull-Case Scenario

We see further upside potential for CureVac shares as the probability of success is increasing for its vaccine candidate CVnCoV and key mRNA-based...

Andrei Zakharov

Bank Credit Weekly: Virus Vs. Vaccine: Time to Sell the Caa-Bull?

Is it time to sell the Caa-bull market? Some AT1 bonds seem to be at a market top. We are set-up for disappointment. Nonetheless, we anticipate...

Hank Calenti, CFA

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