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>*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.

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.

<p><a href="https://www.smartkarma.com/entities/fwd-group-holdings" target="_blank" data-smartkarma-citation="entities:34332:1" rel="noopener">FWD Group Holdings (FWD US)</a> is a Pan-Asia insurer founded in 2013 by Richard Li. FWD is seeking to raise $2 billion through an NYSE IPO and a valuation between $13 billion and $15 billion, according to press reports. </p><p>In <a href="https://www.smartkarma.com/insights/fwd-group-ipo-forward-march" target="_blank" data-smartkarma-citation="insights:58263" rel="noopener">FWD Group IPO: Forward March</a>, we stated that in the long-term, FWD’s compelling customer propositions and multi-channel distribution across different geographies within Asia will likely support further market share gains. FWD notes that there remains significant potential for cross-selling and up-selling to its millennial customers (59% of organic new individual policyholders in 1H21) as they advance through different life stages and gain spending power. On balance, we concluded that FWD has sufficient headroom to continue to gain market share while improving profitability. </p><div class="content-highlight"><p>A successful listing of FWD will provide investors with a new proxy for Asian insurance growth vs well-established names such as <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a> and <a href="https://www.smartkarma.com/entities/prudential-plc-4b9124ab-0799-4543-abca-bac6f31da5b6" target="_blank" data-smartkarma-citation="entities:34048:1" rel="noopener">Prudential PLC (2378 HK)</a>. Prudential’s recent oversubscribed share offer which raised US$2.4 billion in Hong Kong will help grow its investor base in Hong Kong and increase the liquidity of its shares on the HKEx. In this context, there is increasing interest in drawing comparisons between FWD, AIA and Prudential. In this note, we compare the insurers’ actuarial assumptions and key metrics across FWD’s key regions.  </p></div>

FWD Group Holdings (FWD US) is a Pan-Asia insurer founded in 2013 by Richard Li. FWD is seeking to raise $2 billion through an NYSE IPO and a valuation between $13 billion and $15 billion, according to press reports. In FWD Group IPO: Forward March, we stated that in the long-term, FWD’s compelling customer propositions and multi-channel distribution across different geographies within Asia will likely support further market share gains. FWD notes that there remains significant potential for cross-selling and up-selling to its millennial customers (59% of organic new individual policyholders in 1H21) as they advance through different life stages and gain spending power. On balance, we concluded that FWD has sufficient headroom to continue to gain market share while improving profitability. A successful listing of FWD will provide investors with a new proxy for Asian insurance growth vs well-established names such as AIA Group Ltd (1299 HK) and Prudential PLC (2378 HK). Prudential’s recent oversubscribed share offer which raised US$2.4 billion in Hong Kong will help grow its investor base in Hong Kong and increase the liquidity of its shares on the HKEx. In this context, there is increasing interest in drawing comparisons between FWD, AIA and Prudential. In this note, we compare the insurers’ actuarial assumptions and key metrics across FWD’s key regions.  

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Ping An A-shares <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> are trading at a 11% premium to the H-shares <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>. This continues the cycle of premiums and discounts going back to 2015.</p><p>The last time the A-shares traded at a premium this large to the H-shares was in December last year. By mid to late January, the A-shares were trading near parity versus the H-shares.</p><p>With <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> trading at a 11% premium to <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> the risk/reward is favourable to setting up a premium contraction trade. The current premium lies at the 95th percentile over the last 5 years and the premium has widened faster than that of the HSAHP Index.</p><p>Northbound and Southbound Stock Connect holdings of <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> and <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> have dropped sharply over the last couple of months, though there has been an uptick over the last couple of weeks.</p><p>In this Insight, we look at the historical premium for Ping An and compare it to the premium on the AH index and other large caps, and look at some catalysts that could lead to an contraction of the premium.</p>

The Ping An A-shares Ping An Insurance Group Co Of China (601318 CH) are trading at a 11% premium to the H-shares Ping An Insurance (H) (2318 HK). This continues the cycle of premiums and discounts going back to 2015.The last time the A-shares traded at a premium this large to the H-shares was in December last year. By mid to late January, the A-shares were trading near parity versus the H-shares.With Ping An Insurance Group Co Of China (601318 CH) trading at a 11% premium to Ping An Insurance (H) (2318 HK) the risk/reward is favourable to setting up a premium contraction trade. The current premium lies at the 95th percentile over the last 5 years and the premium has widened faster than that of the HSAHP Index.Northbound and Southbound Stock Connect holdings of Ping An Insurance Group Co Of China (601318 CH) and Ping An Insurance (H) (2318 HK) have dropped sharply over the last couple of months, though there has been an uptick over the last couple of weeks.In this Insight, we look at the historical premium for Ping An and compare it to the premium on the AH index and other large caps, and look at some catalysts that could lead to an contraction of the premium.

Ping An A/​H: Discount Turns to a BIG Premium

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

FWD Group Holdings / Equity Capital Markets

<div><p>FWD, a pan-Asian life insurer founded by Richard Li, aims to raise up to US$3bn in its US IPO. </p></div><div><p>FWD is a pan-Asia life insurer operating in ten markets including Hong Kong (and Macau), Thailand (and Cambodia), Japan, the Philippines, Indonesia, Singapore, Vietnam and Malaysia. Southeast Asia markets contributed over 40% of its Value of New Business (VNB) in 2020. It had served over 9.9m customers as of Jun 21.</p></div><div>
<div>In our previous note, we spoke about the positive  and negatives aspects of the deal in our earleir notes, <a href="https://www.smartkarma.com/insights/fwd-pre-ipo-the-positives-growing-fast" target="_blank" rel="noopener">FWD Pre-IPO - The Positives - Growing Fast</a>, <a href="https://www.smartkarma.com/insights/fwd-pre-ipo-the-negatives-strategy-remains-unclear" target="_blank" rel="noopener">FWD Pre-IPO - The Negatives - Strategy Remains Unclear </a>and <a href="https://www.smartkarma.com/insights/fwd-pre-ipo-peer-comparison" target="_blank" rel="noopener">FWD Pre-IPO - Peer Comparison</a>.</div>
<div></div>
<div>In this note we will talk about valuations.</div>
</div>

FWD, a pan-Asian life insurer founded by Richard Li, aims to raise up to US$3bn in its US IPO. FWD is a pan-Asia life insurer operating in ten markets including Hong Kong (and Macau), Thailand (and Cambodia), Japan, the Philippines, Indonesia, Singapore, Vietnam and Malaysia. Southeast Asia markets contributed over 40% of its Value of New Business (VNB) in 2020. It had served over 9.9m customers as of Jun 21.
In our previous note, we spoke about the positive  and negatives aspects of the deal in our earleir notes, FWD Pre-IPO - The Positives - Growing Fast, FWD Pre-IPO - The Negatives - Strategy Remains Unclear and FWD Pre-IPO - Peer Comparison.

In this note we will talk about valuations.


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)

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

FWD Group Vs AIA Vs Prudential

FWD is seeking to raise $2 billion through an NYSE IPO. In this note, we compare FWD, AIA and Pru’s actuarial assumptions and key metrics across...

Arun George

Ping An A/H: Discount Turns to a BIG Premium

Ping An A-shs are now trading at a 11% premium to the H-shs. This is in the 95th percentile and is partly driven by the buyback on A-shs. We like a...

Brian Freitas

FWD Pre-IPO - Thoughts on Valuation

FWD, a pan-Asian life insurer founded by Richard Li, aims to raise up to US$3bn in its US IPO. In this note we will talk about our thoughts on...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

FWD Group Vs AIA Vs Prudential

FWD is seeking to raise $2 billion through an NYSE IPO. In this note, we compare FWD, AIA and Pru’s actuarial assumptions and key metrics across...

Arun George

Ping An A/​H: Discount Turns to a BIG Premium

Ping An A-shs are now trading at a 11% premium to the H-shs. This is in the 95th percentile and is partly driven by the buyback on A-shs. We like a...

Brian Freitas

FWD Pre-IPO - Thoughts on Valuation

FWD, a pan-Asian life insurer founded by Richard Li, aims to raise up to US$3bn in its US IPO. In this note we will talk about our thoughts on...

Sumeet Singh

Ping An A/H: Discount Turns to a BIG Premium