Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: NTT Docomo, Car, Sunac Services, Evergrande, Jardine Cycle, PRC Antitrust

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

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. 

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<p>The IPO for <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services Holdings (1516 HK)</a> ("SSH"), the latest property management service company to seek listing, is open for applications. The Offer Price is expected to be announced on the 18 November, with the commencement of trading in the shares on the 19 November.</p>
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<p>SSH is the spin-off 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>, who will own 72% in SSH after the IPO, down from 100% prior to a recent capitalisation.</p>
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<p>As with <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>, SSH's punchy implied PER is, to some degree, supported by its strong growth (and absolute size), although on a FY20E (LTM) metric, SSH's valuation is only surpassed by <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>.</p>
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<p>Sunac China, on the other hand, is expensive when de-consolidating out the implied market cap of SSH.</p>
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<p>More below the fold. </p>
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The IPO for Sunac Services Holdings (1516 HK) ("SSH"), the latest property management service company to seek listing, is open for applications. The Offer Price is expected to be announced on the 18 November, with the commencement of trading in the shares on the 19 November.


SSH is the spin-off of Sunac China Holdings (1918 HK), who will own 72% in SSH after the IPO, down from 100% prior to a recent capitalisation.


As with KWG Living Group (3913 HK), and Shimao Services Holdings (873 HK), SSH's punchy implied PER is, to some degree, supported by its strong growth (and absolute size), although on a FY20E (LTM) metric, SSH's valuation is only surpassed by Ever Sunshine Lifestyle Services (1995 HK).


Sunac China, on the other hand, is expensive when de-consolidating out the implied market cap of SSH.


More below the fold. 


Sunac Services (1516 HK): Lofty Metrics In A Congested Space

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.</p><ul><li><a href='#lucror-entity-28953'>Central China New Life</a></li><li><a href='#lucror-entity-713'>Evergrande Auto</a></li><li><a href='#lucror-entity-18387'>CIFI Holdings</a></li><li><a href='#lucror-entity-14882'>Seazen (Formerly Future Land)</a></li><li><a href='#lucror-entity-29239'>Sunac Services Holdings</a></li><li><a href='#lucror-entity-473'>Wynn Macau Ltd</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Central China New LifeEvergrande AutoCIFI HoldingsSeazen (Formerly Future Land)Sunac Services HoldingsWynn Macau Ltd

Morning Views Asia: Central China New Life, Evergrande Auto, CIFI Holdings

<p><br/> In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. <br/></p>

  In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

China

Sunac China Holdings Limited is a real estate development company.

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Sunac China Holdings (1918 HK)

Last Week in Event SPACE: NTT Docomo, Car, Sunac Services, Evergrande, Jardine Cycle, PRC Antitrust

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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

Sunac Services (1516 HK): Lofty Metrics In A Congested Space

SSH is not cheap, regardless of its top four market cap status. The recent share price performance of recent listings - and the sector as a whole -...

David Blennerhassett

Morning Views Asia: Central China New Life, Evergrande Auto, CIFI Holdings

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our...

Lucror Analytics

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