HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shenzhen International / Equity Bottom-Up

We believe the potential acquisition of a 71.83% stake in <a href="https://www.smartkarma.com/entities/shenzhen-investment-holdings-bay-area-development" target="_blank" data-smartkarma-citation="entities:12134:1" rel="noopener">Shenzhen Investment Holdings Bay Area Development (737 HK)</a> by <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co H (548 HK)</a> has positive strategic implications on <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a>. SZ Bay Area Dev's historical stable earnings stream and its net cash balance are other added strengths of the proposed deal. Since the deal is still on a MoU stage, it is too early to discuss on the funding arrangement. However, we prefer SZ Exp issuing new shares as acquisition consideration, as this will be more advantageous to SZ Int. Under this scenario, SZ Int's stake in SZ Exp will dilute to 38% from 52% but the earnings impact is relatively insignificant. The best thing is that without the need to consolidate the heavily leveraged SZ Exp, SZ Int's overall gearing will be lowered and possibly provide more financial muscle for it to focus on logistics expansion.

We believe the potential acquisition of a 71.83% stake in Shenzhen Investment Holdings Bay Area Development (737 HK) by Shenzhen Expressway Co H (548 HK) has positive strategic implications on Shenzhen Intl (152 HK). SZ Bay Area Dev's historical stable earnings stream and its net cash balance are other added strengths of the proposed deal. Since the deal is still on a MoU stage, it is too early to discuss on the funding arrangement. However, we prefer SZ Exp issuing new shares as acquisition consideration, as this will be more advantageous to SZ Int. Under this scenario, SZ Int's stake in SZ Exp will dilute to 38% from 52% but the earnings impact is relatively insignificant. The best thing is that without the need to consolidate the heavily leveraged SZ Exp, SZ Int's overall gearing will be lowered and possibly provide more financial muscle for it to focus on logistics expansion.  

Shenzhen Intl (152 HK): Implications of SZ Exp's Potential Acquisition of SZ Bay Area Dev

We took a deep look in the recent plan to acquire 8% stake in <a href="https://www.smartkarma.com/entities/suning-com-co-ltd-a" target="_blank" data-smartkarma-citation="entities:9178:1" rel="noopener">Suning Commerce Group Co., Ltd. A (002024 CH)</a> as announced by <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> (SZIH). We believe the deal is not only good to SZIH, but is also a wise one. While the Rmb5.2bn consideration is sizable and will not generate much near-term financial impacts, the strategic benefits to SZIH are significantly more important.We estimate that the cost of acquisition only equals to 1.2-2.2% of SZIH's FY19 profit, but the strategic benefits will include fostering further collaboration, accelerating network expansion, potentially restructuring assets and gaining quasi-control in Suning.

We took a deep look in the recent plan to acquire 8% stake in Suning Commerce Group Co., Ltd. A (002024 CH) as announced by Shenzhen Intl (152 HK) (SZIH). We believe the deal is not only good to SZIH, but is also a wise one. While the Rmb5.2bn consideration is sizable and will not generate much near-term financial impacts, the strategic benefits to SZIH are significantly more important.We estimate that the cost of acquisition only equals to 1.2-2.2% of SZIH's FY19 profit, but the strategic benefits will include fostering further collaboration, accelerating network expansion, potentially restructuring assets and gaining quasi-control in Suning. 

Shenzhen Intl (152 HK): Is Investing in Suning a Good or Bad Deal?

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>Kuaishou (1024 HK)’s vice president of community content was arrested for taking bribes.</li>
<li>Alibaba (BABA)’s public relation manager was rumored to jump off the office building in Beijing.</li>
<li>Suning Commerce (002024 CN)’s founder will sell his shareholdings.</li>
</ul>


Kuaishou (1024 HK)’s vice president of community content was arrested for taking bribes.
Alibaba (BABA)’s public relation manager was rumored to jump off the office building in Beijing.
Suning Commerce (002024 CN)’s founder will sell his shareholdings.


China Internet Weekly (Feb 22): Kuaishou VP Arrested, BABA Manager Dead “by Accident”, & Q4 Results

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.  Companies mentioned this week:<a href="https://www.smartkarma.com/entities/petroleo-brasileiro-sa-5cbcae17-0673-48c8-b792-98cd7ec49fb7" target="_blank" data-smartkarma-citation="entities:22692:1" rel="noopener">Petroleo Brasileiro (PBR US)</a>, <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (Adr) (WB US)</a>, <a href="https://www.smartkarma.com/entities/suning-commerce-group-co-a" target="_blank" data-smartkarma-citation="entities:9178:1" rel="noopener">Suning Commerce Group Co A (002024 CH)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.  Companies mentioned this week:Petroleo Brasileiro (PBR US), Weibo Corp (Adr) (WB US), Suning Commerce Group Co A (002024 CH)

Global Emerging Markets Weekly: 26 February 2021

Given the significant uncertainty surrounding 1) the impact that a regulatory-induced restructuring could have on the eventually listed <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a>, and 2) the full final impact of increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) on the <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, it has been difficult to assess a fair valuation level for the company. Following the indefinite suspension of Ant Group’s IPO, in November 2020, we witnessed a c.30% sell-off (or $260bn!) in Alibaba Group’s share price, before starting its recovery back to current levels, triggered by the reappearance of Jack Ma and a solid earnings report for the quarter ended December 2020. The net result, however, has been a roughly 17% (or $140bn) decline in Alibaba’s listed value. In this insight, I take a deep dive into Alibaba’s Sum-of-The-Parts valuation to assess what implied value is currently priced in for their equity holding in Ant Group, and what can be deduced from the current valuation for their Core Commerce operations.

Given the significant uncertainty surrounding 1) the impact that a regulatory-induced restructuring could have on the eventually listed Ant Group (6688 HK), and 2) the full final impact of increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) on the Alibaba Group (9988 HK), it has been difficult to assess a fair valuation level for the company. Following the indefinite suspension of Ant Group’s IPO, in November 2020, we witnessed a c.30% sell-off (or $260bn!) in Alibaba Group’s share price, before starting its recovery back to current levels, triggered by the reappearance of Jack Ma and a solid earnings report for the quarter ended December 2020. The net result, however, has been a roughly 17% (or $140bn) decline in Alibaba’s listed value. In this insight, I take a deep dive into Alibaba’s Sum-of-The-Parts valuation to assess what implied value is currently priced in for their equity holding in Ant Group, and what can be deduced from the current valuation for their Core Commerce operations.

Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce

China

Suning.com Co., Ltd. operates retail chain stores to sell household appliances, electronic products, office equipment, and communication products. The Company also provides installation and maintenance services.

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Suning.com (002024 CH)

Shenzhen Intl (152 HK): Implications of SZ Exp's Potential Acquisition of SZ Bay Area Dev

A scenario that SZ Exp issuing new shares for the potential acquisition of SZ Bay Area Dev from its parent will be positive to SZ Int. We believe...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Is Investing in Suning a Good or Bad Deal?

We see SZIH's acquisition of 8% stake in Suning a value-enhancing move in the strategic perspective, though the near-term financial impact and...

Osbert Tang, CFA

China Internet Weekly (Feb 22): Kuaishou VP Arrested, BABA Manager Dead “by Accident”, & Q4 Results

Kuaishou’s vice president was arrested for taking bribes. Alibaba’s manager was rumored to jump off the office building. Suning Commerce’s founder...

Ming Lu

Global Emerging Markets Weekly: 26 February 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce

In this insight, I take a deep dive into Alibaba’s Sum-of-The-Parts to assess the implied value for their equity holding in Ant Group, and what can...

Wium Malan, CFA

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