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

<p><strong><em>*Another Poor Set Of Results Expected: </em></strong>Pre-market on November 11, 2020, AIA Group (1299.HK) [AIA] is set to release its usual limited set of results. By our calculation, AIA’s overall Value of New Business (VONB) is expected to decline 30% YOY on a constant exchange rate basis – remaining flat on a linked quarter basis, however - due largely to weaker volumes and margins;</p><p> <strong><em>*It’s More Than VONB:</em></strong> AIA’s product mix remains sub-optimal with the single premium product remaining the focus due to the COVID-19 impact on face-to-face agency sales. Equity markets where AIA operates had setbacks: Hong Kong (down 4%); Singapore (down 5%); and Thailand (down 8%). AIA’s EV also suffered an 8% impairment due to an investment portfolio challenges – which is a continued worry for us given the global economic challenges that all corporates and sovereigns are facing; and  </p><p> <strong><em>*No Hong Kong Rebound In Sight:</em></strong> The focus should remain Hong Kong, where a 60% plus YOY decline in VONB would not be out of the question as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.</p>

*Another Poor Set Of Results Expected: Pre-market on November 11, 2020, AIA Group (1299.HK) [AIA] is set to release its usual limited set of results. By our calculation, AIA’s overall Value of New Business (VONB) is expected to decline 30% YOY on a constant exchange rate basis – remaining flat on a linked quarter basis, however - due largely to weaker volumes and margins; *It’s More Than VONB: AIA’s product mix remains sub-optimal with the single premium product remaining the focus due to the COVID-19 impact on face-to-face agency sales. Equity markets where AIA operates had setbacks: Hong Kong (down 4%); Singapore (down 5%); and Thailand (down 8%). AIA’s EV also suffered an 8% impairment due to an investment portfolio challenges – which is a continued worry for us given the global economic challenges that all corporates and sovereigns are facing; and   *No Hong Kong Rebound In Sight: The focus should remain Hong Kong, where a 60% plus YOY decline in VONB would not be out of the question as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.

AIA Group – 3Q Results Will Remain Very Challenging

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

<div><p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. Lufax has launched its IPO at a price range of $11.50-13.50 per ADS to raise net proceeds of $2,109 million at the mid-point of the IPO price range. At the mid-point of the IPO price range, Lufax will command a market cap of $30.5 billion which is around 20% lower than the 2018 Series C round valuation of $39 billion. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/lufax-ipo-initiation-lost-in-transition" target="_blank" rel="noopener">our initiation note</a>, we stated that while Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile. Overall, our valuation analysis suggests that the IPO price range is unattractive and we would be inclined to give the IPO a pass.</p></div></div></div>

Lufax Holdings (LU US) is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. Lufax has launched its IPO at a price range of $11.50-13.50 per ADS to raise net proceeds of $2,109 million at the mid-point of the IPO price range. At the mid-point of the IPO price range, Lufax will command a market cap of $30.5 billion which is around 20% lower than the 2018 Series C round valuation of $39 billion. In our initiation note, we stated that while Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile. Overall, our valuation analysis suggests that the IPO price range is unattractive and we would be inclined to give the IPO a pass.

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.

<div><p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> (Lufax) aims to raise around US$2.4bn via its US listing. The company is backed by <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> (Ping An).</p></div><div><p>Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.</p></div><div>
<p>I covered the various aspects of the deal in my earlier notes:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-positives-able-to-grow-despite-the-headwinds" target="_blank" rel="noopener">Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds</a></li>
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-negatives-remains-in-flux" target="_blank" rel="noopener">Lufax Pre-IPO - The Negatives - Remains in Flux</a></li>
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-peer-review-bigger-than-ant-s-credittech-in-revenue" target="_blank" rel="noopener">Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue</a></li>
</ul>
</div><div><p>In this insight, I'll run the deal through our ECM framework and talk about valuations.</p></div>

Lufax Holdings (LU US) (Lufax) aims to raise around US$2.4bn via its US listing. The company is backed by Ping An Insurance (H) (2318 HK) (Ping An).Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.
I covered the various aspects of the deal in my earlier notes:

Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds
Lufax Pre-IPO - The Negatives - Remains in Flux
Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue

In this insight, I'll run the deal through our ECM framework and talk about valuations.

Lufax IPO - Stuck with the Earlier Fundraising Valuation

<div><p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> (Lufax) aims to raise around US$3bn via its US listing. The company is backed by <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> (Ping An).</p></div><div><p>Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.</p></div><div>
<p>I covered the positive aspects of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-positives-able-to-grow-despite-the-headwinds" target="_blank" rel="noopener">Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds</a> and the negative aspects in<a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-negatives-remains-in-flux" target="_blank" rel="noopener"> Lufax Pre-IPO - The Negatives - Remains in Flux.</a></p>
<p>In this insight, I'll undertake a peer comparison.</p>
</div>

Lufax Holdings (LU US) (Lufax) aims to raise around US$3bn via its US listing. The company is backed by Ping An Insurance (H) (2318 HK) (Ping An).Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.
I covered the positive aspects of the deal in my earlier note, Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds and the negative aspects in Lufax Pre-IPO - The Negatives - Remains in Flux.
In this insight, I'll undertake a peer comparison.


Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue

<p> <strong><em>*Way Too Early Provision Reduction: </em></strong>Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q20 net income of CNY 8.7 bn – increasing CNY 3.6 bn or 70% linked quarter. One factor, and one factor alone, was responsible for the increase  - provisions were pre-emptively reduced CNY 6.7 bn (29.5%) over the period despite a true decrease in credit risk; </p><p> <strong><em>*Credit Is WEAKER: </em></strong>Net new NPLs have increased CNY 23.0 bn linked quarter or a massive 223.1% on an annualized basis. Assuming the credit break in the PAB portfolio holds – which it likely will given the economic weakness attributed to COVID-19 – reserves would appear light by CNY 178 bn if we assume a 2x NPL ratio. This shortfall represents 62% of stated equity; and</p><p> <em><strong>*Fundamentally Challenged Still:</strong></em> Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. </p>

 *Way Too Early Provision Reduction: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q20 net income of CNY 8.7 bn – increasing CNY 3.6 bn or 70% linked quarter. One factor, and one factor alone, was responsible for the increase  - provisions were pre-emptively reduced CNY 6.7 bn (29.5%) over the period despite a true decrease in credit risk;  *Credit Is WEAKER: Net new NPLs have increased CNY 23.0 bn linked quarter or a massive 223.1% on an annualized basis. Assuming the credit break in the PAB portfolio holds – which it likely will given the economic weakness attributed to COVID-19 – reserves would appear light by CNY 178 bn if we assume a 2x NPL ratio. This shortfall represents 62% of stated equity; and *Fundamentally Challenged Still: Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. 

Ping An Insurance – Bank Fundamentals Worsening

China

Ping An Insurance (Group) Company of China Limited provides products and services through its five ecosystems in financial services, healthcare, auto services, real estate services and Smart City solutions. The Group's insurance business writes property, casualty, and life insurance products.

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Ping An Insurance Group of (601318 CH)

AIA Group – 3Q Results Will Remain Very Challenging

AIA GROUP: Previewing 3Q Results, We Note VONB Challenges And Other Risks - Hong Kong Not Rebounding, Weak Equity Markets, and Further Investment...

Thomas J. Monaco

Lufax IPO: Valuation Insights

Our valuation analysis suggests that the IPO price range is unattractive and we would be inclined to give the IPO a pass.

Arun George

Lufax IPO - Stuck with the Earlier Fundraising Valuation

Lufax Holdings (LU US) aims to raise around US$2.4bn via its US listing. The company is backed by Ping An Insurance and has undergone major changes...

Sumeet Singh

Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue

Lufax Holdings (LU US) aims to raise around US$3bn via its US listing. The company is backed by Ping An Insurance (2318 HK).

Sumeet Singh

Ping An Insurance – Bank Fundamentals Worsening

PING AN INSURANCE: PING AN BANK Reported A Completely Manufactured 3Q20 Earnings Result, Cutting Provisions Despite Substantially Weaker Credit

Thomas J. Monaco

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