Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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 Capital Markets

<div>
<p>Trip.com raised around US$1.2bn in its secondary listing in Hong Kong.</p>
<p>We have covered the background of the deal in our earlier notes:</p>
<ul>
<li>
<a href="https://www.smartkarma.com/insights/trip-com-secondary-listing-probably-needs-to-correct" target="_blank" rel="noopener">Trip.com Secondary Listing - Probably Needs to Correct,</a> and</li>
<li><a href="https://www.smartkarma.com/insights/trip-com-secondary-listing-quick-take-doing-the-bare-minimum-needs-some-more-correction" target="_blank" rel="noopener">Trip.com Secondary Listing Quick Take - Doing the Bare Minimum - Needs Some More Correction.</a></li>
</ul>
</div><div><p>In this note, we'll talk about the updates since then.</p></div>


Trip.com raised around US$1.2bn in its secondary listing in Hong Kong.
We have covered the background of the deal in our earlier notes:


Trip.com Secondary Listing - Probably Needs to Correct, and
Trip.com Secondary Listing Quick Take - Doing the Bare Minimum - Needs Some More Correction.

In this note, we'll talk about the updates since then.

Trip.com Secondary Trading Note - Delivered a Good Correction but Seems to Be Widely Distributed

China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>HKEx is rising as a global trading venue as secondary-listing Chinese companies are moving to swap their US ADRs to Hong Kong shares. Since <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> pioneered the secondary listing scheme in Hong Kong in 2018, the share fungibility has opened the door for swapping its US ADR to Hong Kong. We estimated that 20% of outstanding shares of Alibaba have been moved to Hong Kong.</li>
<li>Some top institutional investors, such as Temasek, Baillie Gifford, and Matthews Asia, are among the major shareholders that have swapped stakes in <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> US ADRs. This has reflected some strategic consideration to  avoid US sanction and delisting of Chinese tech companies. We expect this trend will likely accelerate in the future. For current 13 dual-listing Chinese ADRs, we expect 30% of total trading volume will be shifted to Hong Kong from US in next 2 years. This is a significant jump from around 18% of trading volume at Hong Kong now. Dual-listing Chinese ADRs at Hong Kong will likely accelerate as well. </li>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>  serves as the only offshore gateway to China capital market. HKEx has consistently enjoyed the superior margin and profitability, given that it can charge higher trading fee rates than other bourses. We forecast Securities ADT of HK$240bn in FY 21 (Hong Kong and Stock Connect Northbound). Given the acceleration of US ADRs conversion, there is risk to the upside of the Securities ADT forecast. We continue to favor <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and reiterate HKEx TP HKD 550. </li>
</ul>


HKEx is rising as a global trading venue as secondary-listing Chinese companies are moving to swap their US ADRs to Hong Kong shares. Since Alibaba Group (BABA US) pioneered the secondary listing scheme in Hong Kong in 2018, the share fungibility has opened the door for swapping its US ADR to Hong Kong. We estimated that 20% of outstanding shares of Alibaba have been moved to Hong Kong.
Some top institutional investors, such as Temasek, Baillie Gifford, and Matthews Asia, are among the major shareholders that have swapped stakes in Alibaba Group (BABA US) US ADRs. This has reflected some strategic consideration to  avoid US sanction and delisting of Chinese tech companies. We expect this trend will likely accelerate in the future. For current 13 dual-listing Chinese ADRs, we expect 30% of total trading volume will be shifted to Hong Kong from US in next 2 years. This is a significant jump from around 18% of trading volume at Hong Kong now. Dual-listing Chinese ADRs at Hong Kong will likely accelerate as well. 

HKEX (388 HK)  serves as the only offshore gateway to China capital market. HKEx has consistently enjoyed the superior margin and profitability, given that it can charge higher trading fee rates than other bourses. We forecast Securities ADT of HK$240bn in FY 21 (Hong Kong and Stock Connect Northbound). Given the acceleration of US ADRs conversion, there is risk to the upside of the Securities ADT forecast. We continue to favor HKEX (388 HK) and reiterate HKEx TP HKD 550. 


Hong Kong Market: Conversion of US ADRs Will Boost HKEx as Global Trading Venue

Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

<p style="text-align: left;">The recent fall in price of many so called “China concept shares” of US listed Chinese companies, has largely been triggered by the passing of the "Holding Foreign Company Accountability Act" (HFCAA).</p><p style="text-align: left;">A flock of US listed Chinese companies have since decided to relist in HKSE due to a few reasons:</p><ol>
<li>The HFCAA causing conflicting compliance requirements with Chinese regulations.</li>
<li>Fear among investors of forced delisting in the US.</li>
<li>HKEX deregulation allowing more Chinese companies to be listed.</li>
<li>The valuation in HK is in sync with the U.S. stock market.</li>
<li>HK attracting more Chinese funds to operate in HKEX.</li>
</ol>

The recent fall in price of many so called “China concept shares” of US listed Chinese companies, has largely been triggered by the passing of the "Holding Foreign Company Accountability Act" (HFCAA).A flock of US listed Chinese companies have since decided to relist in HKSE due to a few reasons:
The HFCAA causing conflicting compliance requirements with Chinese regulations.
Fear among investors of forced delisting in the US.
HKEX deregulation allowing more Chinese companies to be listed.
The valuation in HK is in sync with the U.S. stock market.
HK attracting more Chinese funds to operate in HKEX.


Exit the Dragon – the Mass Exodus of US Listed Chinese Companies

<div>
<p>Trip.com plans to raise around US$1.2bn in its secondary listing in Hong Kong. We have looked at the background of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/trip-com-secondary-listing-probably-needs-to-correct" target="_blank" rel="noopener">Trip.com Secondary Listing - Probably Needs to Correct</a>.</p>
</div>
<div>
<p>In this note, we’ll take a look at the final deal terms and talk about the impact of the raising.</p>
</div>


Trip.com plans to raise around US$1.2bn in its secondary listing in Hong Kong. We have looked at the background of the deal in our earlier note, Trip.com Secondary Listing - Probably Needs to Correct.


In this note, we’ll take a look at the final deal terms and talk about the impact of the raising.


Trip.com Secondary Listing Quick Take - Doing the Bare Minimum - Needs Some More Correction

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.

<div><p><a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> has launched a $1.4 billion secondary listing in Hong Kong by offering 31.6 million ordinary shares. Bookbuilding is scheduled to run until the pricing on 13 April. The net proceeds will be used to fund the expansion of its travel offerings, improve user experience and invest in technology. </p></div><div><p>In <a href="https://www.smartkarma.com/insights/trip-com-secondary-listing-no-heads-in-the-clouds" target="_blank" data-smartkarma-citation="insights:49965" rel="noopener">Trip.com Secondary Listing: No Heads in the Clouds</a>, we outlined our views on Trip.com’s fundamentals and valuation. Trip.com is a play on the expected reopening and recovery of travel in 2021 due to the global rollout of vaccines. In combination with the potential valuation upside to the last close price (based on SoTP), we concluded that the equity story is attractive. </p></div><div><div>
<p>In this note, we will look at Trip.com’s potential HK-ADS premium/(discount). As per the norm, Trip.com will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. However, market conditions remain volatile and Chinese tech names are losing their shine due to the US delisting threat and the trend of investors rotating out of tech stocks. The NASDAQ Golden Dragon China Index is down -18% since March 2021. Trip.com shares are up 15% YTD but down -2% since March 2021.  </p>
<div class="content-highlight"><p>Due to the weakening market sentiment on Chinese tech names, Trip.com will likely price its H-shares at a wider discount than the median of past secondary listings. Trip.com pricing its H-shares at a discount of 3-4% to its ADSs will be reasonable, in our view.</p></div>
</div></div>

Trip.com (TCOM US) has launched a $1.4 billion secondary listing in Hong Kong by offering 31.6 million ordinary shares. Bookbuilding is scheduled to run until the pricing on 13 April. The net proceeds will be used to fund the expansion of its travel offerings, improve user experience and invest in technology. In Trip.com Secondary Listing: No Heads in the Clouds, we outlined our views on Trip.com’s fundamentals and valuation. Trip.com is a play on the expected reopening and recovery of travel in 2021 due to the global rollout of vaccines. In combination with the potential valuation upside to the last close price (based on SoTP), we concluded that the equity story is attractive. 
In this note, we will look at Trip.com’s potential HK-ADS premium/(discount). As per the norm, Trip.com will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. However, market conditions remain volatile and Chinese tech names are losing their shine due to the US delisting threat and the trend of investors rotating out of tech stocks. The NASDAQ Golden Dragon China Index is down -18% since March 2021. Trip.com shares are up 15% YTD but down -2% since March 2021.  
Due to the weakening market sentiment on Chinese tech names, Trip.com will likely price its H-shares at a wider discount than the median of past secondary listings. Trip.com pricing its H-shares at a discount of 3-4% to its ADSs will be reasonable, in our view.


Trip.com Secondary Listing: HK-ADS Premium/​​(Discount) Views

China

NetEase, Inc. operates as an leading internet technology company providing online services including content, community, communication, and commerce. The Company develops and operates online games, electronic commerce, internet media, innovative business, and other businesses. NetEase expands its businesses to Japan, North American, and other other international markets.

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NetEase (9999 HK)

Trip.com Secondary Trading Note - Delivered a Good Correction but Seems to Be Widely Distributed

Trip.com raised around US$1.2bn in its secondary listing in Hong Kong. In this note, we'll talk about the trading dynamics.

Sumeet Singh

Hong Kong Market: Conversion of US ADRs Will Boost HKEx as Global Trading Venue

We expect 30% of total dual-list China ADR trading volume will be shifted to Hong Kong from US in next 2 years, a significant jump from current...

Roger Xie

Exit the Dragon – the Mass Exodus of US Listed Chinese Companies

Is US-China financial decoupling affecting the US stock market? What's the future of US listed Chinese companies l? How can investors in China...

Evelyn Zhang

Trip.com Secondary Listing Quick Take - Doing the Bare Minimum - Needs Some More Correction

Trip.com plans to raise around US$1.2bn in its secondary listing in Hong Kong. In this note, we’ll take a look at the final deal terms and talk...

Sumeet Singh

Trip.com Secondary Listing: HK-ADS Premium/(Discount) Views

Trip.com has launched a $1.4 bn secondary listing in Hong Kong. In the context of the weakening market sentiment, Trip.com pricing its H-shares at...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Trip.com Secondary Trading Note - Delivered a Good Correction but Seems to Be Widely Distributed

Trip.com raised around US$1.2bn in its secondary listing in Hong Kong. In this note, we'll talk about the trading dynamics.

Sumeet Singh

Hong Kong Market: Conversion of US ADRs Will Boost HKEx as Global Trading Venue

We expect 30% of total dual-list China ADR trading volume will be shifted to Hong Kong from US in next 2 years, a significant jump from current...

Roger Xie

Exit the Dragon – the Mass Exodus of US Listed Chinese Companies

Is US-China financial decoupling affecting the US stock market? What's the future of US listed Chinese companies l? How can investors in China...

Evelyn Zhang

Trip.com Secondary Listing Quick Take - Doing the Bare Minimum - Needs Some More Correction

Trip.com plans to raise around US$1.2bn in its secondary listing in Hong Kong. In this note, we’ll take a look at the final deal terms and talk...

Sumeet Singh

Trip.com Secondary Listing: HK-ADS Premium/​​(Discount) Views

Trip.com has launched a $1.4 bn secondary listing in Hong Kong. In the context of the weakening market sentiment, Trip.com pricing its H-shares at...

Arun George

Trip.com Secondary Listing: HK-ADS Premium/(Discount) Views