Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Evergrande Property Services / Event-Driven

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<p>The IPO for <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> ("EPS"), joins the ever-expanding listing of property management service company to seek a listing. The Offer Price is expected to be announced on the 1 December, with the commencement of trading in the shares on the 2 December.</p>
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<p>EPS is the spin-off of <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a>, which will own 59.04% in EPS after the IPO, down from 71.939% currently, before over-allotment. Both EPS and Evergrande will raise $7.4bn if using HK$9.13/share, the mid-point of the indicative Offer Price range.</p>
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<p>As with the recent listing 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>, <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>, and <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a>, EPS is targeting a high-end PER, backed by recent strong earnings growth and expanding gross/profit margins. At the high-end of the IPO range, only <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> and <a href="https://www.smartkarma.com/entities/ever-sunshine-lifestyle-services-group-limited" target="_blank" data-smartkarma-citation="entities:28932:1" rel="noopener">Ever Sunshine Lifestyle Services (1995 HK)</a>'s FY20(L) PER surpass EPS'.</p>
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<p>For Evergrande, its recent capital actions (share issuance and market buybacks) appear unrelated to fundamental value creation for its shareholders. </p>
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<p>More below the fold. </p>
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The IPO for Evergrande Property Services (6666 HK) ("EPS"), joins the ever-expanding listing of property management service company to seek a listing. The Offer Price is expected to be announced on the 1 December, with the commencement of trading in the shares on the 2 December.


EPS is the spin-off of Evergrande Real Estate Group (3333 HK), which will own 59.04% in EPS after the IPO, down from 71.939% currently, before over-allotment. Both EPS and Evergrande will raise $7.4bn if using HK$9.13/share, the mid-point of the indicative Offer Price range.


As with the recent listing of KWG Living Group (3913 HK), Shimao Services Holdings (873 HK), and Sunac Services (1516 HK), EPS is targeting a high-end PER, backed by recent strong earnings growth and expanding gross/profit margins. At the high-end of the IPO range, only Sunac Services (1516 HK) and Ever Sunshine Lifestyle Services (1995 HK)'s FY20(L) PER surpass EPS'.


For Evergrande, its recent capital actions (share issuance and market buybacks) appear unrelated to fundamental value creation for its shareholders. 


More below the fold. 


Evergrande Services (6666 HK): Evergrande Needs This More Than You

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

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

<p><a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> has <a href="http://www.iporesults.hkex.com.hk/listedco/listconews/sehk/2020/1118/9516503/2020111800032.pdf" target="_blank" rel="noopener">announced</a> that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.</p><p>Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.</p><p><a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> trackers will receive shares in <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> by virtue of their holding of <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>. We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.</p><p>Index arb traders will need to adjust their index compositions since the traded price of <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> will be used in the calculation of the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> level and will result in the index moving 1.5bps higher.</p>

Sunac Services (1516 HK) has announced that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.Hang Seng China Enterprises Index (HSCEI INDEX) trackers will receive shares in Sunac Services (1516 HK) by virtue of their holding of Sunac China Holdings (1918 HK). We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.Index arb traders will need to adjust their index compositions since the traded price of Sunac Services (1516 HK) will be used in the calculation of the Hang Seng China Enterprises Index (HSCEI INDEX) level and will result in the index moving 1.5bps higher.

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

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

<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 (CRML 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>. CR Mixc is joining the ever-expanding list of property management IPOs by seeking to raise $1 billion, according to press reports.  </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 has turned cautious. In such an environment, an IPO hopeful needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention. Unfortunately, CR Mixc’s fundamentals are mixed, in our view. Consequently, we label this insight bearish pending the IPO price range announcement. </p></div>

China Resources Mixc Lifestyle Services (CRML 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). CR Mixc is joining the ever-expanding list of property management IPOs by seeking to raise $1 billion, according to press reports.  Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs has turned cautious. In such an environment, an IPO hopeful needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention. Unfortunately, CR Mixc’s fundamentals are mixed, in our view. Consequently, we label this insight bearish pending the IPO price range announcement. 

China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty

Sunac Services Holdings / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> is a Chinese property management company. Sunac is the fastest-growing large-scale property management service provider in China, according to China Index Academy. At the proposed IPO price range of HK$10.55-12.65 per share, Sunac will have a market cap of HK$31,650-37,950 million ($4.1-4.9 billion). At the mid-point of the IPO price range, Sunac will raise net proceeds of HK$7,810.0 million ($1 billion).</p>
<p>Four cornerstone investors will subscribe for $370 million worth of the offer shares (35.83% of the offer shares at the IPO mid-point). The cornerstone investors are <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, IDG Capital, Hillhouse Capital and Snow Lake Capital. </p>
</div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/sunac-services-ipo-initiation-next-in-line" target="_blank" rel="noopener">our initiation note</a>, we stated that Sunac’s fundamentals over the track record period are attractive. In <a href="https://www.smartkarma.com/insights/sunac-services-ipo-phip-data-points" target="_blank" rel="noopener">our PHIP update note</a>, we noted that the PHIP data points support our view that Sunac is a well-run property management company. However, 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. 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>


Sunac Services (1516 HK) is a Chinese property management company. Sunac is the fastest-growing large-scale property management service provider in China, according to China Index Academy. At the proposed IPO price range of HK$10.55-12.65 per share, Sunac will have a market cap of HK$31,650-37,950 million ($4.1-4.9 billion). At the mid-point of the IPO price range, Sunac will raise net proceeds of HK$7,810.0 million ($1 billion).
Four cornerstone investors will subscribe for $370 million worth of the offer shares (35.83% of the offer shares at the IPO mid-point). The cornerstone investors are Tencent Holdings (700 HK), IDG Capital, Hillhouse Capital and Snow Lake Capital. 
In our initiation note, we stated that Sunac’s fundamentals over the track record period are attractive. In our PHIP update note, we noted that the PHIP data points support our view that Sunac is a well-run property management company. However, 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. 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

SSH is the property management unit of Shimao Group Holdings.

Shimao Services Holdings Limited (873 HK)

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Shimao Services Holdings Limited (873 HK)

Evergrande Services (6666 HK): Evergrande Needs This More Than You

I find Evegrande to be effectively un-investable. I'm also not a buyer of Evergradne Services. The significant improvement in fundamentals in 2020...

David Blennerhassett

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

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

Sunac Services has issued shares at HKD 11.6 and starts to trade tomorrow. HSCEI trackers will receive 1.1m shares of Sunac Services that they will...

Brian Freitas

China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty

A property management IPO needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention in a cautious market....

Arun George

Sunac Services IPO: Valuation Insights

Sunac is seeking to raise net proceeds of HK$7,810.0 million ($1 billion). We label this insight bearish as we would participate at most at the low...

Arun George

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