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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.</p><p>For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.</p><p>Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.</p><p>Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.</p><p>Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.</p><p>We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.</p>

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

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

China Resources Mixc Lifestyle / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is <a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a>. </p></div><div><p>At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). </p></div><div><p>Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, <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>,  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-resources-mixc-lifestyle-ipo-initiation-the-paradox-of-plenty" target="_blank" data-smartkarma-citation="insights:45244" rel="noopener">China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty</a>, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. </p></div></div></div>

China Resources Mixc Lifestyle Services (1209 HK)/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is China Resources Land (1109 HK). At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, Ping An Insurance (H) (2318 HK),  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. In China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. 

China Resources Mixc Lifestyle IPO: Valuation Insights

Shimao Services Holdings Limited / Event-Driven

<p>Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.</p><p>Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.</p><p>Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.</p><p>There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.</p><p>There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.</p><p>Read on for more details and stocks affected by the changes.</p>

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

Jinke Smart Services / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/jinke-smart-services" target="_blank" data-smartkarma-citation="entities:29214:1" rel="noopener">Jinke Smart Services (9666 HK)</a> is a Chinese property management company which is a subsidiary of <a href="https://www.smartkarma.com/entities/jinke-property-group-co-ltd" target="_blank" data-smartkarma-citation="entities:13291:1" rel="noopener">Jinke Property Group (000656 CH)</a>. At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/jinke-smart-services-ipo-initiation-street-smart" target="_blank" rel="noopener">our initiation note</a>, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. </p></div></div></div>

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. In our initiation note, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. 

Jinke Smart Services IPO: Valuation Insights

Jinke Property Group / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/jinke-smart-services" target="_blank" data-smartkarma-citation="entities:29214:1" rel="noopener">Jinke Smart Services (9666 HK)</a> is a Chinese property management company which is a subsidiary of <a href="https://www.smartkarma.com/entities/jinke-property-group-co-ltd" target="_blank" data-smartkarma-citation="entities:13291:1" rel="noopener">Jinke Property Group (000656 CH)</a>. From 2015 to 2020, Jinke was ranked first among the Top 100 property management companies as measured by overall strengths in the Southwestern China Region, according to China Index Academy. Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. </p><div class="content-highlight"><p>Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs seems to have turned as recent IPOs of <a href="https://www.smartkarma.com/entities/kwg-living-group" target="_blank" data-smartkarma-citation="entities:29231:1" rel="noopener">KWG Living Group (3913 HK)</a> and <a href="https://www.smartkarma.com/entities/shimao-services-holdings-limited" target="_blank" data-smartkarma-citation="entities:29199:1" rel="noopener">Shimao Services Holdings (873 HK)</a> are trading 20% and 5% below their IPO prices, respectively. The poor post-IPO performance despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Overall, on a fundamental view, we believe that Jinke is attractive.</p></div>

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). From 2015 to 2020, Jinke was ranked first among the Top 100 property management companies as measured by overall strengths in the Southwestern China Region, according to China Index Academy. Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs seems to have turned as recent IPOs of KWG Living Group (3913 HK) and Shimao Services Holdings (873 HK) are trading 20% and 5% below their IPO prices, respectively. The poor post-IPO performance despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Overall, on a fundamental view, we believe that Jinke is attractive.

Jinke Smart Services IPO Initiation: Street Smart

China

S-Enjoy Service Group Co., Limited provides property management services. The Company offers building maintenance and security, bill payment, and other related services. S-Enjoy Service Group serves customers in China.

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S-Enjoy Service Group Co Ltd (1755 HK)

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

There are 36 inclusions/ 29 exclusions for the Hang Seng Composite Index. 9 stocks will be deleted from the Stock Connect Buy list & there are a...

Brian Freitas

China Resources Mixc Lifestyle IPO: Valuation Insights

At the mid-point of the IPO price range, CR Mixc will raise net proceeds of $1.4 billion. We label this insight bearish as we would participate at...

Arun George

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

While the HSCI does not have assets benchmarked to it, the index review is closely watched since the index forms the basis of stocks that are a...

Brian Freitas

Jinke Smart Services IPO: Valuation Insights

Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on...

Arun George

Jinke Smart Services IPO Initiation: Street Smart

Jinke has launched a Hong Kong IPO to raise net proceeds of HK$5,738.1 million ($740 million) at the mid-point of the IPO price range. On a...

Arun George

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