Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of January 26th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight the weekly Hong Kong connect flows for Tencent.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of January 26th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight the weekly Hong Kong connect flows for Tencent.


Hong Kong Connect Flows (Jan 26th): Tencent

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Shanghai Chicmax Cosmetic / Equity Bottom-Up

<ul>
<li>Chicmax’s 2022 performance was ugly, which was mainly due to the weak sales growth in online channels. Without obvious improvement in sales channels, Chicmax would easily reach a growth bottleneck.</li>
<li>If Chicmax cannot transform from a marketing-driven low-end brand to a brand with growth potential that adheres to long-term principles,emphasizes equally on R&amp;D and marketing, it would lose investment value.</li>
<li>Chicmax is overvalued. Its valuation should be lower than that of Bloomage and Botanee. If things go badly in the future, its valuation could be lower than <a href="https://www.smartkarma.com/entities/shanghai-jahwa-united-co-a" target="_blank" data-smartkarma-citation="entities:4266:1" rel="noopener">Shanghai Jahwa</a>.</li>
</ul>


Chicmax’s 2022 performance was ugly, which was mainly due to the weak sales growth in online channels. Without obvious improvement in sales channels, Chicmax would easily reach a growth bottleneck.
If Chicmax cannot transform from a marketing-driven low-end brand to a brand with growth potential that adheres to long-term principles,emphasizes equally on R&amp;D and marketing, it would lose investment value.
Chicmax is overvalued. Its valuation should be lower than that of Bloomage and Botanee. If things go badly in the future, its valuation could be lower than Shanghai Jahwa.


Shanghai Chicmax Cosmetic (2145.HK) - Start to Enter a Vicious Cycle

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.</li>
<li>We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.</li>
<li>19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.</li>
</ul>


There are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.
We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.
19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.


HSCI Index Rebalance: 35 Adds, 28 Deletes & Changes to Southbound Stock Connect

Equity Capital Markets

Shanghai Chicmax Cosmetic / Equity Capital Markets

<ul>
<li>According to the PHIP, Chicmax’s performance growth showed a downward trend. Due to consumption downgrade and weak economic situation, the Company's short-term performance could continue to be under pressure.</li>
<li>If the top three brands fail to performance well, Chicmax has no other blockbuster brands to make up for it afterwards. We have concerns on Chicmax’s competitiveness in the industry.</li>
<li>If the total retail sales of consumer goods don’t maintain well, the probability of endogenous growth problems is high, which would finally be reflected in the decline of share price.</li>
</ul>


According to the PHIP, Chicmax’s performance growth showed a downward trend. Due to consumption downgrade and weak economic situation, the Company's short-term performance could continue to be under pressure.
If the top three brands fail to performance well, Chicmax has no other blockbuster brands to make up for it afterwards. We have concerns on Chicmax’s competitiveness in the industry.
If the total retail sales of consumer goods don’t maintain well, the probability of endogenous growth problems is high, which would finally be reflected in the decline of share price.


Pre-IPO Shanghai Chicmax Cosmetic - PHIP Updates: Declining Performance and Challenging Outlook

<ul>
<li>Although adopting a multi-brand strategy, <a href="https://www.smartkarma.com/entities/shanghai-chicmax-cosmetic-co-ltd" target="_blank" data-smartkarma-citation="entities:35503:1" rel="noopener">Shanghai Chicmax Cosmetic (CMC HK)</a>’s revenue mainly came from three brands, namely KANS, One Leaf and Baby Elephant, with no blockbuster brands afterwards. </li>
<li>Chicmax emphasizes marketing/promotion over R&amp;D, which has dragged down net profit margin despite solid revenues and gross profit margins. Product quality problem is also a concern.</li>
<li>We hope that Chicmax can increase R&amp;D investment and strengthen product innovation and quality control, so as to gain more consumer loyalty and trust, especially in high-end market. </li>
</ul>


Although adopting a multi-brand strategy, Shanghai Chicmax Cosmetic (CMC HK)’s revenue mainly came from three brands, namely KANS, One Leaf and Baby Elephant, with no blockbuster brands afterwards. 
Chicmax emphasizes marketing/promotion over R&amp;D, which has dragged down net profit margin despite solid revenues and gross profit margins. Product quality problem is also a concern.
We hope that Chicmax can increase R&amp;D investment and strengthen product innovation and quality control, so as to gain more consumer loyalty and trust, especially in high-end market. 


Pre-IPO Shanghai Chicmax Cosmetic - The Current Development Strategy Will Not Go Far

China

Shanghai Chicmax Cosmetics Co., Ltd. produces and sells cosmetic products. The Company manufactures and sells skin care products, facial masks, makeup products, and other related products. Shanghai Chicmax Cosmetic markets its products worldwide.

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Shanghai Chicmax Cosmetic (2145 HK)

Hong Kong Connect Flows (Jan 26th): Tencent

We analyzed southbound Hong Kong connect flows in the past week and highlight southbound Hong Kong connect flows for Tencent.

Ke Yan, CFA, FRM