Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Postal Savings Bank of China C / Equity Bottom-Up

<p><strong><em>*Blowout 3<strong>Q21 Results:</strong> </em></strong>Established in 2007, Postal Savings Bank of China (1658.HK) [PSB], mainland China’s youngest large commercial bank, reported 3Q21 bottom-line results of CNY 23.5 bn – increasing CNY 3.7 bn (18.6%) linked quarter. Much of the improvement at PSB is due to credit leverage, as loss provisions declined CNY 9.3 bn (54.3%); and</p><p><strong>*<em>Credit Quality Continues Its Positive Turn, But Reserves More Than Adequate: </em></strong>Net new NPLs did increase CNY 7.8 bn or 61.0% annualized versus CNY 14.9 bn or 116.6% at 2Q21. Despite the increase in net new NPLs, it would appear that PSB’s reserves would remain excessive to the tune of CNY 100 bn or about a year of pre-tax profits – begging the question of why not reverse loss reserves?</p>

*Blowout 3Q21 Results: Established in 2007, Postal Savings Bank of China (1658.HK) [PSB], mainland China’s youngest large commercial bank, reported 3Q21 bottom-line results of CNY 23.5 bn – increasing CNY 3.7 bn (18.6%) linked quarter. Much of the improvement at PSB is due to credit leverage, as loss provisions declined CNY 9.3 bn (54.3%); and*Credit Quality Continues Its Positive Turn, But Reserves More Than Adequate: Net new NPLs did increase CNY 7.8 bn or 61.0% annualized versus CNY 14.9 bn or 116.6% at 2Q21. Despite the increase in net new NPLs, it would appear that PSB’s reserves would remain excessive to the tune of CNY 100 bn or about a year of pre-tax profits – begging the question of why not reverse loss reserves?

Postal Savings Bank of China – Reserve Reversals Expected

<p>*<strong><em>Weak Results in Investment and P&amp;C: </em></strong>Ping An Insurance (2318.HK) [Ping An] reported 3Q21 results of CNY 23.6 bn, declining CNY 7.1 bn (23.2%) linked quarter.  Much of the struggle this quarter remained Ping An’s investment portfolio – likely a long-term thematic, where the net investment yield plummet 30 bp to 4.4%. Excluding Ping An Bank (000001.CH) [PAB] whose results were completely managed, all other business units disappointed linked quarter; and</p><p><strong><em>*Concerns Increase At Bank And With Expansion Plans: </em></strong> PAB reported 3Q21 results of CNY 11.7 bn. Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An clearly pulled on its bank lever. By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming that the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.<strong>  </strong></p>

*Weak Results in Investment and P&amp;C: Ping An Insurance (2318.HK) [Ping An] reported 3Q21 results of CNY 23.6 bn, declining CNY 7.1 bn (23.2%) linked quarter.  Much of the struggle this quarter remained Ping An’s investment portfolio – likely a long-term thematic, where the net investment yield plummet 30 bp to 4.4%. Excluding Ping An Bank (000001.CH) [PAB] whose results were completely managed, all other business units disappointed linked quarter; and*Concerns Increase At Bank And With Expansion Plans:  PAB reported 3Q21 results of CNY 11.7 bn. Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An clearly pulled on its bank lever. By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming that the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.  

Ping An Insurance – Another Abysmal Result

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

Beijing Airdoc Technology / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/beijing-airdoc-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:33524:1" rel="noopener">Beijing Airdoc Technology (2251 HK)</a><span> is a global market leader and pioneer in providing AI-empowered retina-based early detection, auxiliary diagnosis and health risk assessment solutions. The core product is Airdoc-AIFUNDUS which is an AI-based Software-as-a-Medical Device (SaMD) that uses deep learning algorithms to accurately detect and diagnose chronic diseases from retinal images. Airdoc-AIFUNDUS (1.0), the first version of the core product, was commercialised at the start of 2021. </span></p></div><div><p>At the proposed IPO price range of HK$75.10-81.30 per share, Airdoc will have a market cap of HK$7,778-8,420 million ($1.0-1.1 billion). At the mid-point of the IPO price range, the net proceeds are HK$1,632.7 million ($210 million).</p></div><div><p>Eight cornerstone investors will purchase $69.5 million worth of the offer shares (31.0% of the offer shares at the mid-point of the IPO price range). Three out of the eight cornerstones are existing investors. They are LAV Group, Lake Bleu Capital and OrbiMed. The remaining cornerstones which are not existing shareholders are CloudAlpha Capital, GF Fund, IvyRock Funds, LMR Fund and WT Funds.</p></div><div><p>In <a href="https://www.smartkarma.com/insights/airdoc-technology-ipo-initiation-seeing-the-light" target="_blank" data-smartkarma-citation="insights:58501" rel="noopener">Airdoc Technology IPO Initiation: Seeing the Light</a>, we opined that, unlike most healthcare IPO hopefuls, Airdoc has recently commercially launched a version of its core product. With industry-leading sensitivity and specificity achieved in multi-centre clinical trials, Airdoc-AIFUNDUS has the potential to succeed in a competitive market. We concluded that Airdoc is worth a closer look.</p></div><div><div><div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range is attractive. We also note that the mid-point of the IPO price range is a modest 5.7% discount to the last valuation round (Series D to raise $38 million on 30 April 2021).  </p></div></div></div>

Beijing Airdoc Technology (2251 HK) is a global market leader and pioneer in providing AI-empowered retina-based early detection, auxiliary diagnosis and health risk assessment solutions. The core product is Airdoc-AIFUNDUS which is an AI-based Software-as-a-Medical Device (SaMD) that uses deep learning algorithms to accurately detect and diagnose chronic diseases from retinal images. Airdoc-AIFUNDUS (1.0), the first version of the core product, was commercialised at the start of 2021. At the proposed IPO price range of HK$75.10-81.30 per share, Airdoc will have a market cap of HK$7,778-8,420 million ($1.0-1.1 billion). At the mid-point of the IPO price range, the net proceeds are HK$1,632.7 million ($210 million).Eight cornerstone investors will purchase $69.5 million worth of the offer shares (31.0% of the offer shares at the mid-point of the IPO price range). Three out of the eight cornerstones are existing investors. They are LAV Group, Lake Bleu Capital and OrbiMed. The remaining cornerstones which are not existing shareholders are CloudAlpha Capital, GF Fund, IvyRock Funds, LMR Fund and WT Funds.In Airdoc Technology IPO Initiation: Seeing the Light, we opined that, unlike most healthcare IPO hopefuls, Airdoc has recently commercially launched a version of its core product. With industry-leading sensitivity and specificity achieved in multi-centre clinical trials, Airdoc-AIFUNDUS has the potential to succeed in a competitive market. We concluded that Airdoc is worth a closer look.Our valuation analysis suggests that the IPO price range is attractive. We also note that the mid-point of the IPO price range is a modest 5.7% discount to the last valuation round (Series D to raise $38 million on 30 April 2021).  

Airdoc Technology IPO: Valuation Insights

<p><strong><em>*Loan Defaults and USD Bond Payments Set To Continue: </em></strong> China Evergrande Group (3333.HK) [Evergrande] magically made an 11<sup>th</sup> hour interest payment of USD 83.5 mn to bondholders on Friday, October 22, 2021 – escaping default by the skin of its teeth, just as its 30-day grace period with bondholders was about to end. While the market is worried about a China Huarong Asset Management (2799.HK) default crippling the country’s USD credit market, they too should understand that any bond default by Evergande likely roils this market as well; and</p><p><strong><em>* Worrisome Comments By  PBOC Governor Yi:</em></strong> The mainland Chinese government rarely comments on a single entity, which is why Governor Yi’s thoughts are alarming. <em>“First, we’re going to try to prevent contagion to other real estate companies. Second, we’ll prevent contagion to other parts of the financial sector.” </em>This self-inflicted wound will require a tourniquet to stop the bleeding; expect non-D-SIFI bank and insurer failures in mainland China.</p>

*Loan Defaults and USD Bond Payments Set To Continue:  China Evergrande Group (3333.HK) [Evergrande] magically made an 11th hour interest payment of USD 83.5 mn to bondholders on Friday, October 22, 2021 – escaping default by the skin of its teeth, just as its 30-day grace period with bondholders was about to end. While the market is worried about a China Huarong Asset Management (2799.HK) default crippling the country’s USD credit market, they too should understand that any bond default by Evergande likely roils this market as well; and* Worrisome Comments By  PBOC Governor Yi: The mainland Chinese government rarely comments on a single entity, which is why Governor Yi’s thoughts are alarming. “First, we’re going to try to prevent contagion to other real estate companies. Second, we’ll prevent contagion to other parts of the financial sector.” This self-inflicted wound will require a tourniquet to stop the bleeding; expect non-D-SIFI bank and insurer failures in mainland China.

China Evergrande Group – China’s Wrecking Ball

<p><strong><em>*Quarter Highlighted By Weak Credit:</em></strong> Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q21 results of CNY 11.7 bn – increasing CNY 4.1 bn (55.0%). Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An is seemingly pulling on its bank lever to offset what looks to be another quarter self-inflicted harm  within its investment portfolio;  and </p><p><strong><em>*Credit Challenges: </em></strong>By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.</p>

*Quarter Highlighted By Weak Credit: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q21 results of CNY 11.7 bn – increasing CNY 4.1 bn (55.0%). Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An is seemingly pulling on its bank lever to offset what looks to be another quarter self-inflicted harm  within its investment portfolio;  and *Credit Challenges: By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.

China

Ping An Healthcare and Technology Company Limited provides health care software solutions. The Company offers mobile platform for online consultation, hospital referral and appointment, health management, and wellness interaction services, as well as connects consumers and patients with health care resources. Ping An Healthcare and Technology serves customers in China.

Ping An Healthcare and Technology (1833 HK)

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Ping An Healthcare and Technology (1833 HK)

Postal Savings Bank of China – Reserve Reversals Expected

POSTAL SAVINGS BANK: PSB's QOQ 3Q21 increased 18.6%, due largely to credit leverage and net interest income improvement. PSB’s reserves appear...

Thomas J. Monaco

Ping An Insurance – Another Abysmal Result

PING AN: Ping An reported a QOQ 3Q21 results decline of 23.2%, attributed to its investment portfolio. Excluding PAB, whose results were managed,...

Thomas J. Monaco

Airdoc Technology IPO: Valuation Insights

Our valuation analysis suggests that the IPO price range is attractive. We also note that the mid-point of the IPO price range is a modest 5.7%...

Arun George

China Evergrande Group – China’s Wrecking Ball

EVERGRANDE: Evergrande magically made an interest payment to bondholders, escaping default by the skin of its teeth. This self-inflicted wound...

Thomas J. Monaco

Ping An Insurance – Breaking The Bank

PING AN: PAB reported 3Q21 QOQ growth of 55.0%. Credit quality was abysmal and Ping An is pulling on its bank lever to offset another quarter self...

Thomas J. Monaco

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