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.

Thematic (Sector/Industry)

<p>China property management companies (PMCs) have had a dramatic pull back despite asset-light models and strong earnings visibility. We think it gives investors a chance to accumulate positions in the leaders of the industry.</p><p>In this note, we take a brief look at the industry, how the PMCs have traded, and share some thoughts on which names that could continue to do well in the industry.</p>

China property management companies (PMCs) have had a dramatic pull back despite asset-light models and strong earnings visibility. We think it gives investors a chance to accumulate positions in the leaders of the industry.In this note, we take a brief look at the industry, how the PMCs have traded, and share some thoughts on which names that could continue to do well in the industry.

China Property Management Services - Pullback Is a Chance to Accumulate the Leaders

APAC IPOs & Placements

Zhen Zhou, Toh

Equity Capital Markets

Evergrande Property Services / Equity Capital Markets

<div>
<p>Undisclosed institutional sellers (Vendor Group) are looking to sell about US$340m (with US$280m upsize option) worth of shares in <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> (EGS).</p>
<p>In this note, we look at deal dynamics and share our thoughts on the selldown.</p>
<p>EGS was listed on the Hong Kong Exchange on 2nd December, 2020, and its IPO lock-up will expire tomorrow on 2nd June, 2021. After <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> (CEG) sold a portion of its stake in Evergrande New Energy Vehicle (ENEV), we discussed the possibility that EGS could be the next listco to be sold by CEG.</p>
<ul><li>
<a href="https://www.smartkarma.com/insights/evergrande-property-services-lock-up-expiry-trade-the-next-one-to-be-sold-by-evergrande" target="_blank" data-smartkarma-citation="insights:51392" rel="noopener">Evergrande Property Services Lock-Up Expiry Trade - The Next One to Be Sold by Evergrande</a> </li></ul>
</div><div><p>Prior to that, we covered the IPO in:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/evergrande-services-pre-ipo-bad-parenting" target="_blank" data-smartkarma-citation="insights:45461" rel="noopener">Evergrande Services (恒大物业) Pre-IPO - Bad Parenting</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/evergrande-services-ipo-overhang-issues" target="_blank" data-smartkarma-citation="insights:45607" rel="noopener">Evergrande Services (恒大物业) IPO - Overhang Issues</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/evergrande-services-ipo-trading-slightly-weaker-demand" target="_blank" data-smartkarma-citation="insights:45917" rel="noopener">Evergrande Services (恒大物业) IPO Trading - Slightly Weaker Demand</a> </li>
</ul></div>


Undisclosed institutional sellers (Vendor Group) are looking to sell about US$340m (with US$280m upsize option) worth of shares in Evergrande Property Services (6666 HK) (EGS).
In this note, we look at deal dynamics and share our thoughts on the selldown.
EGS was listed on the Hong Kong Exchange on 2nd December, 2020, and its IPO lock-up will expire tomorrow on 2nd June, 2021. After Evergrande Real Estate Group (3333 HK) (CEG) sold a portion of its stake in Evergrande New Energy Vehicle (ENEV), we discussed the possibility that EGS could be the next listco to be sold by CEG.

Evergrande Property Services Lock-Up Expiry Trade - The Next One to Be Sold by Evergrande 
Prior to that, we covered the IPO in:

Evergrande Services (恒大物业) Pre-IPO - Bad Parenting 

Evergrande Services (恒大物业) IPO - Overhang Issues 

Evergrande Services (恒大物业) IPO Trading - Slightly Weaker Demand 


Evergrande Property Services (恒大物业) Placement - An Expected Selldown but Not from the One Expected

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.

Event-Driven

Sichuan Languang Justbon Service Group / Event-Driven

<p><a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> has despatched the composite document in relation to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. </p><p>The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). </p><p>Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. </p><p>The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> and <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> have previously failed due to the inability to meet the 90% minimum acceptance condition.  </p><div class="content-highlight"><p>Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.</p></div>

Sichuan Languang Justbon Service Group (2606 HK) has despatched the composite document in relation to Country Garden Services Holdings (6098 HK) base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for Beijing Jingneng Clean Energy (579 HK) and Harbin Electric Co Ltd H (1133 HK) have previously failed due to the inability to meet the 90% minimum acceptance condition.  Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> has corrected sharply over the last 6 months despite showing stellar results. We believe that the correction in the stock is due to: </p><ul>
<li>A small probability of the parent ( <a href="https://www.smartkarma.com/entities/times-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:8085:1" rel="noopener">Times China (1233 HK)</a> ) breaching the three red lines.</li>
<li>Tightening by the Chinese government in the property sector.</li>
<li>IPO fatigue in the sector. 2020 featured the listing of several property management companies that raised lots of cash, casting doubt on the companies ability to make acquisitions at good prices to fuel its future growth.</li>
<li>Pivot by the company from a more acquisitive to a third party strategy + expansion of community VAS services.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/869/original/image_15589350561618115623007.png?1618115619" class="editor-image img-responsive" data-smartkarma-image-id="199869"></figure><p><em>Source: Bloomberg</em></p><h3>Why do we like <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>?</h3><ul>
<li>We believe that with the current valuation of 12.4x FY21/8.6x FY22 and 5.8x FY23 implying &gt;50% CAGR EPS growth from FY21-23,  <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> could potentially be an acquisition target for larger groups like <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/a-living-services-co-ltd" target="_blank" data-smartkarma-citation="entities:26728:1" rel="noopener">A-Living Services (3319 HK)</a> or <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> that are targeting aggressive growth over the next 2-3 years. We admit that we don't know if the controlling shareholders of <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> desire to sell out. Recently though, with the <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> founders having sold out to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK), </a>we believe this may be the first step towards increased M&amp;A activity in the listed company space. We believe this acquisition's consummation will lead to a rerating of the cheaper companies like <a href="https://www.smartkarma.com/entities/aoyuan-healthy-life-group-company-limited" target="_blank" data-smartkarma-citation="entities:29130:1" rel="noopener">Aoyuan Healthy Life Group (3662 HK)</a>, <a href="https://www.smartkarma.com/entities/central-china-new-life" target="_blank" data-smartkarma-citation="entities:28953:1" rel="noopener">Central China New Life (9983 HK), </a>and <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>.</li>
<li>
<a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a>  has demonstrated good execution in its short time period as a listed company. </li>
</ul><p>We believe that <a href="https://www.smartkarma.com/entities/times-neighborhood-holdings" target="_blank" data-smartkarma-citation="entities:28666:1" rel="noopener">Times Neighborhood (9928 HK)</a> could double from here, trading up to 25x FY21 with a target PEG of 0.6x.</p>

Times Neighborhood (9928 HK) has corrected sharply over the last 6 months despite showing stellar results. We believe that the correction in the stock is due to: 
A small probability of the parent ( Times China (1233 HK) ) breaching the three red lines.
Tightening by the Chinese government in the property sector.
IPO fatigue in the sector. 2020 featured the listing of several property management companies that raised lots of cash, casting doubt on the companies ability to make acquisitions at good prices to fuel its future growth.
Pivot by the company from a more acquisitive to a third party strategy + expansion of community VAS services.
Source: BloombergWhy do we like Times Neighborhood (9928 HK)?
We believe that with the current valuation of 12.4x FY21/8.6x FY22 and 5.8x FY23 implying &gt;50% CAGR EPS growth from FY21-23,  Times Neighborhood (9928 HK) could potentially be an acquisition target for larger groups like Country Garden Services Holdings (6098 HK), China Resources Mixc Lifestyle Services (1209 HK), A-Living Services (3319 HK) or Sunac Services Holdings (1516 HK) that are targeting aggressive growth over the next 2-3 years. We admit that we don't know if the controlling shareholders of Times Neighborhood (9928 HK) desire to sell out. Recently though, with the Sichuan Languang Justbon Service Group (2606 HK) founders having sold out to Country Garden Services Holdings (6098 HK), we believe this may be the first step towards increased M&amp;A activity in the listed company space. We believe this acquisition's consummation will lead to a rerating of the cheaper companies like Aoyuan Healthy Life Group (3662 HK), Central China New Life (9983 HK), and Times Neighborhood (9928 HK).

Times Neighborhood (9928 HK)  has demonstrated good execution in its short time period as a listed company. 
We believe that Times Neighborhood (9928 HK) could double from here, trading up to 25x FY21 with a target PEG of 0.6x.

Times Neighborhood - Value+Growth, Could It Be an Acquisition Target?

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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Quantitative Analysis

<p>Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Mar 05.</p><p>In the past 7 days, the top 3 companies that repurchased the most shares from the market were <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> (HKD 70.3 million worth of buybacks), <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a> (HKD 34.9 million worth of buybacks), Dynam Japan (6889 HK) (HKD 8.7 million worth of buybacks).</p><p>In the past 30 days, the top 3 companies that repurchased the most shares from the market were Fosun International Limited (656 HK) (HKD 280.9 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 274.4 million worth of buybacks), China Jinmao Holdings Group Limited (817 HK) (HKD 75.3 million worth of buybacks).</p><p>In the past 90 days, the top 3 companies that repurchased the most shares from the market were Fosun International Limited (656 HK) (HKD 742.4 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 577.4 million worth of buybacks), New World Development Co Ltd (17 HK) (HKD 378.0 million worth of buybacks).</p><p>In the past 365 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 4,656.7 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 1,644.6 million worth of buybacks), Fosun International Limited (656 HK) (HKD 1,471.2 million worth of buybacks).</p>

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Mar 05.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Sunac Services Holdings (1516 HK) (HKD 70.3 million worth of buybacks), Fosun International (656 HK) (HKD 34.9 million worth of buybacks), Dynam Japan (6889 HK) (HKD 8.7 million worth of buybacks).In the past 30 days, the top 3 companies that repurchased the most shares from the market were Fosun International Limited (656 HK) (HKD 280.9 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 274.4 million worth of buybacks), China Jinmao Holdings Group Limited (817 HK) (HKD 75.3 million worth of buybacks).In the past 90 days, the top 3 companies that repurchased the most shares from the market were Fosun International Limited (656 HK) (HKD 742.4 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 577.4 million worth of buybacks), New World Development Co Ltd (17 HK) (HKD 378.0 million worth of buybacks).In the past 365 days, the top 3 companies that repurchased the most shares from the market were China Evergrande Group (3333 HK) (HKD 4,656.7 million worth of buybacks), Want Want China Holdings Limited (151 HK) (HKD 1,644.6 million worth of buybacks), Fosun International Limited (656 HK) (HKD 1,471.2 million worth of buybacks).

Hong Kong Buybacks League Table: Want Want Bought Back 6% of Free-Float in the past Year

China

Sunac Services Holdings Limited provides property management service. The Company offers property management services including security, cleaning, greening, gardening, and repair and maintenance services for the operation of common area facilities. Sunac Services Holdings also offers real estate brokerage, property interior decoration, and community living services.

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Sunac Services Holdings (1516 HK)

China Property Management Services - Pullback Is a Chance to Accumulate the Leaders

China property management companies (PMCs) have had a dramatic pull back despite asset-light models and strong earnings visibility. We think this...

Sumeet Singh

Evergrande Property Services (恒大物业) Placement - An Expected Selldown but Not from the One Expected

Undisclosed institutional sellers (Vendor Group) are looking to sell about US$340m (with US$280m upsize option) worth of shares in Evergrande...

Zhen Zhou, Toh

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

Times Neighborhood - Value+Growth, Could It Be an Acquisition Target?

This insight highlights an opportunity in the property management company Times Neighborhood, having a 50% CAGR in profits from 2020-23 and trading...

Sameer Taneja

Hong Kong Buybacks League Table: Want Want Bought Back 6% of Free-Float in the past Year

In the past week, the top 3 companies that repurchased the most shares from the market were Sunac Services Holdings (1516 HK), Fosun International...

Ke Yan, CFA, FRM

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