Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

Xinyi Solar Holdings is one of the largest solar glass producers in the world. This year has been a breakthrough year for solar industry in China since solar has achieved grid parity in China. In 2021, this is the first year in which all newly completed utility scale and commercial distributed PV generation projects in China are operated on a grid-parity basis. This should have a significantly positive impact on major solar players such as Xinyi Solar. The following are the key catalysts for Xinyi Solar:1) Ambitious Plans to Increase Renewables &amp; Decrease Coal Announced at COP262) Higher Insider Purchase3) Accelerating Sales &amp; Profit Margins4) A likely upcoming inclusion of Xinyi Solar (968 HK) into the Hang Seng China Enterprises IndexValuation - Xinyi Solar is trading at EV/EBITDA multiples of 16.4x in 2021 and 14.6x in 2022. The comps are trading at an average EV/EBITDA of 20.1x in 2021 and 18.3x in 2022. However, Xinyi Solar has better metrics than its peers in terms of net margins, ROE, and sales growth. Therefore, we would argue that Xinyi Solar is undervalued and that it deserves to trade at higher valuation multiples.

Xinyi Solar Holdings is one of the largest solar glass producers in the world. This year has been a breakthrough year for solar industry in China since solar has achieved grid parity in China. In 2021, this is the first year in which all newly completed utility scale and commercial distributed PV generation projects in China are operated on a grid-parity basis. This should have a significantly positive impact on major solar players such as Xinyi Solar. The following are the key catalysts for Xinyi Solar:1) Ambitious Plans to Increase Renewables &amp; Decrease Coal Announced at COP262) Higher Insider Purchase3) Accelerating Sales &amp; Profit Margins4) A likely upcoming inclusion of Xinyi Solar (968 HK) into the Hang Seng China Enterprises IndexValuation - Xinyi Solar is trading at EV/EBITDA multiples of 16.4x in 2021 and 14.6x in 2022. The comps are trading at an average EV/EBITDA of 20.1x in 2021 and 18.3x in 2022. However, Xinyi Solar has better metrics than its peers in terms of net margins, ROE, and sales growth. Therefore, we would argue that Xinyi Solar is undervalued and that it deserves to trade at higher valuation multiples. 

Xinyi Solar: One of the Key Beneficiaries to Phase Out Coal and Increase Renewables

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Japan Post, Chinese Estates, NIPPO Corp, Hopson/Evergrande, PICC

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Evergrande Property Services / Event-Driven

Trading in <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> was halted pre-market today along with <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a> and <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>.There are reports now that <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> is looking to buy 51% 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> at a valuation of more than HK$40bn. This amends an earlier report that <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> would pay HK$40bn for 51% of <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>. The HK$40bn number values <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> at HK$3.7/share, a 27.7% discount  to its last close.<a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> will need to make a Mandatory General Offer (MGO) to all existing shareholders in cash at HK$3.70/share or higher. With a closing low of HK$4.03/share since listing, it is unlikely that there will be many takers in the MGO.<a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a> is a very high probability deletion from 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> at the December rebalance and is expected to be replaced by <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>.<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> is also an <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> constituent and is a high probability deletion from the index at the March 2022 review, where <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a> is a potential inclusion.

Trading in Hopson Development (754 HK) was halted pre-market today along with Evergrande (3333 HK) and Evergrande Property Services (6666 HK).There are reports now that Hopson Development (754 HK) is looking to buy 51% in Evergrande Property Services (6666 HK) at a valuation of more than HK$40bn. This amends an earlier report that Hopson Development (754 HK) would pay HK$40bn for 51% of Evergrande Property Services (6666 HK). The HK$40bn number values Evergrande Property Services (6666 HK) at HK$3.7/share, a 27.7% discount  to its last close.Hopson Development (754 HK) will need to make a Mandatory General Offer (MGO) to all existing shareholders in cash at HK$3.70/share or higher. With a closing low of HK$4.03/share since listing, it is unlikely that there will be many takers in the MGO.Evergrande (3333 HK) is a very high probability deletion from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance and is expected to be replaced by Xinyi Solar Holdings (968 HK).Evergrande Property Services (6666 HK) is also an Hang Seng China Enterprises Index (HSCEI INDEX) constituent and is a high probability deletion from the index at the March 2022 review, where Innovent Biologics Inc (1801 HK) is a potential inclusion.

Hopson (754 HK) To Buy 51% of Evergrande Property Services? Upcoming MGO & Potential HSCEI Changes

Last Week in Event SPACE: Shinsei Bank, Hongkong Land, SOHO China, Bank Rakyat, Oil Search, JCNC

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review cut-off date are eligible for inclusion in 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>.At the December review, we see a high probability of <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> being included in the index and 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> being deleted.<a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a> is a close add for now and its inclusion would put <a href="https://www.smartkarma.com/entities/china-pacific-insurance-group" target="_blank" data-smartkarma-citation="entities:6177:1" rel="noopener">China Pacific Insurance (2601 HK)</a> at risk of deletion from the index.<a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> and <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a> are unlikely to be included in 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> at the December rebalance since they have failed the velocity test in August.With the one change, estimated one-way index turnover is 1.26% and will result in one-way turnover of HK$995m. This number will change over the next couple of months as stocks move around and the turnover increases due to capping changes on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review cut-off date are eligible for inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX).At the December review, we see a high probability of Xinyi Solar Holdings (968 HK) being included in the index and of Evergrande Real Estate Group (3333 HK) being deleted.Innovent Biologics Inc (1801 HK) is a close add for now and its inclusion would put China Pacific Insurance (2601 HK) at risk of deletion from the index.XPeng (9868 HK) and Li Auto (2015 HK) are unlikely to be included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance since they have failed the velocity test in August.With the one change, estimated one-way index turnover is 1.26% and will result in one-way turnover of HK$995m. This number will change over the next couple of months as stocks move around and the turnover increases due to capping changes on Alibaba Group (9988 HK), Tencent (700 HK) and Meituan (3690 HK).

HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande

China

China Oilfield Services Limited provides oilfield services. The Company provides geophysical prospecting, drilling, oilfield technology development, and other services. China Oilfield Services also operates transportation businesses.

Offshore Oil Engineering Co., Ltd. provides offshore oil engineering services, including designing, construction, installation, and repair and maintenance services.  The Company's main businesses include oil/gas exploration engineering, subsea pipeline laying, oil/gas field equipment testing and maintenance, as well as pressure container and steel structure manufacturing.

Pingdingshan Tianan Coal Mining Co., Ltd. operates underground coal mining, coal washing and processing. The company also provides ground transportation services.

Yangquan Coal Industry Group Co Ltd. produces, processes, and sells coal. The Company also generates electricity and heat. Yangquan Coal sells its products domestically and exports to other countries.

Yantai Jereh Oilfield Services Group Co., Ltd develops, manufactures and sells oil field equipment.  The Company's products include well cementing equipment, well fracturing equipment, and natural gas compression and transportation equipment.

Wintime Energy  Co., Ltd. is in coal mining business.  The Company's main businesses are coal mining, investment in the power plant, developing new energy technology, trading business, and rental.

Datong Coal Industry Co., Ltd. operates underground mining, preparation and sales of coal.

Shanxi Meijin Energy Co., Ltd. produces coal and related products.

Shanxi Meijin Energy Co, Ltd. (000723 CH)

Guanghui Energy Co., Ltd. is principally engaged in energy development, automotive services and real estate property leasing. The Company is in the business of coal mining and related coal chemical manufacturing. The Company is also engaged in the processing and distributing of granite materials and trading of general merchandise such as plastic doors and windows.

Jizhong Energy Resources Co., Ltd. produces and markets coal products, generates electric power, and manufactures cement.

Scorpio Tankers Inc. operates as a shipping company. The Company provides seaborne transportation of crude oil and other petroleum products. Scorpio Tankers serves customers worldwide.

Helmerich & Payne, Inc. provides contract drilling of oil and gas wells in the Gulf of Mexico and South America. The Company operates land rigs and platform rigs.

Golar LNG Limited is an independent owner and operator of liquefied Natural Gas (LNG) infrastructure including carriers, Floating Storage and Regasification Units (FSRUs) and Floating Liquefaction (FLNG) vessels.  Collectively these assets make Golar an integrated midstream LNG services provider supporting resource holders, gas producers and consumers.

Patterson-UTI Energy, Inc. provides land-based drilling services to major and independent oil and natural gas companies.  The Company conducts drilling operations in Texas, New Mexico, Utah, Oklahoma, Louisiana, and western Canada. Patterson-UTI is also involved in pressure pumping, oil and gas exploration and production, and drilling and completion fluids services.

Northern Oil and Gas, Inc. is an oil and gas exploration and production company. The Company produces petroleum products. Northern Oil and Gas is currently focused on the Rocky Mountain regions of the United States.

PBF Energy Inc. is an independent petroleum refiner and supplier. The Company offers unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. PBF's finished products are sold through long-term offtake and supply agreements.

California Resources Corporation is an independent oil and natural gas company. The Company focuses on maximizing the value of land, mineral and technical resources for decarbonization by developing carbon capture and storage and other emissions reducing projects. California Resources serves customers in the State of California.

Archrock, Inc. operates as a natural gas contract compression services company. The Company offers natural gas compression and aftermarket services, as well as provides used equipment for oil and gas industry. Archrock serves customers in the United States.

Transocean Ltd. is an offshore drilling contractor.  The Company owns or operates mobile offshore drilling units, inland drilling barges, and other assets utilized in the support of offshore drilling activities worldwide. Transocean specializes in technically demanding segments of the offshore drilling business, including deepwater and harsh environment drilling services.

CNX Resources Corporation operates as a natural gas exploration and production company. The Company owns gas reserves that develop and produce natural gas, including methane and shale beds. CNX Resources serves natural gas industry in the United States.

Xinyi Solar Holdings Limited manufactures solar glass.  The Company produces ultra-clear photovoltaic raw glass and ultra-clear photovoltaic processed glass. Xinyi Solar Holdings offers its products to major solar product component manufactures both domestically and internationally.

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Xinyi Solar Holdings (968 HK)

Xinyi Solar: One of the Key Beneficiaries to Phase Out Coal and Increase Renewables

Xinyi Solar is one of the key beneficiaries to phase out coal and increase renewables. We believe that Xinyi Solar is trading at attractive...

Douglas Kim

Last Week in Event SPACE: Japan Post, Chinese Estates, NIPPO Corp, Hopson/Evergrande, PICC

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

Hopson (754 HK) To Buy 51% of Evergrande Property Services? Upcoming MGO & Potential HSCEI Changes

Hopson is reportedly looking to buy 51% in Evergrande Prop Serv for more than HK$40bn.That is a 41.7% premium to the last close and will trigger an...

Brian Freitas

Last Week in Event SPACE: Shinsei Bank, Hongkong Land, SOHO China, Bank Rakyat, Oil Search, JCNC

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

HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande

Xinyi Solar could replace China Evergrande at the HSCEI December rebalance. Over 20% of Xinyi Solar is held by passive investors and the stock...

Brian Freitas

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