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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of August 16th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for Tencent (700 HK) , China Mobile (941 HK) .</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of August 16th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for Tencent (700 HK) , China Mobile (941 HK) .


Hong Kong Connect Flows (Aug 16th): Tencent, China Mobile

Independent Research, Turtles all the way down

Turtles all the way down

Independent Research

Writing short articles about mis-priced boring stocks around the world.

Equity Bottom-Up

<ul>
<li>I think most (value) investors go through four stages: Stage 0: Buy stuff that goes up. Especially when a lot of people around you get rich from doing it.</li>
<li>Stage 1: Invest in the future! Buy into some fancy exciting new technology that will become big some day! The Cathie Wood stage. Usually stage 1 and stage 0 go hand in hand.</li>
<li>Stage 2: Buy at low PE multiples. Some are smart and skip the first two. This stage is not bad, it should lead to slight outperformance. Can be dangerous without wide diversification as a lot of them are value traps.</li>
</ul>


I think most (value) investors go through four stages: Stage 0: Buy stuff that goes up. Especially when a lot of people around you get rich from doing it.
Stage 1: Invest in the future! Buy into some fancy exciting new technology that will become big some day! The Cathie Wood stage. Usually stage 1 and stage 0 go hand in hand.
Stage 2: Buy at low PE multiples. Some are smart and skip the first two. This stage is not bad, it should lead to slight outperformance. Can be dangerous without wide diversification as a lot of them are value traps.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Yuexiu Transport Infrastructure / Event-Driven

<p>Back on the 30 April 2020, the China Securities Regulatory Commission (CSRC) and the National Development and Reform Commission (NDRC) jointly <a href="http://www.csrc.gov.cn/pub/zjhpublic/zjh/202004/t20200430_374847.htm" target="_blank" rel="noopener">announced</a> (Chinese-only) a new pilot for Chinese infrastructure real estate investment trusts (or C-REITs) - a mechanism to fund infrastructure projects such highways and airports,  and only for such infrastructure which has been operational for three years.  </p>
<p>This announcement signified the official commencement of the pilot program for the public listing of immovable property investment trusts for infrastructure assets.</p>
<p>I discussed this development in <em><a href="https://skr.ma/z1xjh" target="_blank" rel="noopener">Chinese Expressways: A Step In The REIT Direction</a></em>.</p>
<p>This was followed by a notice on the <a href="https://www.ndrc.gov.cn/xwdt/tzgg/202008/t20200803_1235509.html?code=&amp;state=123" target="_blank" rel="noopener">4 August</a> from the NDRC concerning the application process; and on the <a href="http://www.csrc.gov.cn/pub/zjhpublic/zjh/202008/t20200807_381310.htm" target="_blank" rel="noopener">7 August</a>, when the CSRC updated the guidelines for REIT listings.</p>
<h3>The New News</h3>
<p><a href="https://www.smartkarma.com/entities/yuexiu-transport-infrastructure-ltd" target="_blank" data-smartkarma-citation="entities:9198:1" rel="noopener">Yuexiu Transport Infrastructure (1052 HK)</a> has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1014/2021101400079.pdf" target="_blank" rel="noopener">announced</a> that CAMC and CITIC have submitted the application materials on the registration and listing of CAMC-Yuexiu Expressway Close-end Infrastructure Securities Investment Fund to the CSRC and the Shenzhen Stock Exchange.</p>
<p>The application concerns the Wuhan - Xiaogan Expressway (漢孝高速公路) or Han-Xiao Expressway, one of 10 expressways operated by Yuexiu.</p>
<p>The spin-off, should it proceed, is not expected to have a material impact on Yuexiu. But potentially leading this pilot program is a vote of confidence on its investment portfolio.</p>
<p>More below the fold.</p>

Back on the 30 April 2020, the China Securities Regulatory Commission (CSRC) and the National Development and Reform Commission (NDRC) jointly announced (Chinese-only) a new pilot for Chinese infrastructure real estate investment trusts (or C-REITs) - a mechanism to fund infrastructure projects such highways and airports,  and only for such infrastructure which has been operational for three years.  
This announcement signified the official commencement of the pilot program for the public listing of immovable property investment trusts for infrastructure assets.
I discussed this development in Chinese Expressways: A Step In The REIT Direction.
This was followed by a notice on the 4 August from the NDRC concerning the application process; and on the 7 August, when the CSRC updated the guidelines for REIT listings.
The New News
Yuexiu Transport Infrastructure (1052 HK) has announced that CAMC and CITIC have submitted the application materials on the registration and listing of CAMC-Yuexiu Expressway Close-end Infrastructure Securities Investment Fund to the CSRC and the Shenzhen Stock Exchange.
The application concerns the Wuhan - Xiaogan Expressway (漢孝高速公路) or Han-Xiao Expressway, one of 10 expressways operated by Yuexiu.
The spin-off, should it proceed, is not expected to have a material impact on Yuexiu. But potentially leading this pilot program is a vote of confidence on its investment portfolio.
More below the fold.

Yuexiu (1052 HK): REIT Application Lodged

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.

<p><a href="https://www.smartkarma.com/entities/qilu-expressway-co-ltd" target="_blank" data-smartkarma-citation="entities:27431:1" rel="noopener">Qilu Expressway Co Ltd (1576 HK)</a> is an expressway operator with the concession rights to construct and operate the Jihe Expressway, the Deshang Expressway and the Shennan Expressway. Revenue is derived primarily from tolls collected from users of the expressways. Qilu listed its H-shares on 19 July 2018 at HK$2.50 per H-share to raise net proceeds of HK$1,172.12 million ($151 million). </p><p>Due to the completion of the merger by absorption of Qilu Transportation by Shandong Hi-Speed Group on 16 November 2020, Shandong Hi-Speed Group and Shandong Hi-Speed Investment owned 38.93% and 5.19% of the outstanding shares. Subsequently, public shareholders accounted for 19.81% of the outstanding shares, which falls below the minimum public float requirement. To date, Shandong Hi-Speed Group has failed to address the minimum public float requirement by its fulfilling its plan to dispose of its H-shares to independent third parties.</p><p>Today, Qilu entered a trading halt pending the release of an announcement pursuant to the Code on Takeovers and Mergers. Subsequently, Qilu disclosed that <a href="https://www.smartkarma.com/entities/shandong-hi-speed-co-ltd-a" target="_blank" data-smartkarma-citation="entities:7178:1" rel="noopener">Shandong Hi Speed Co Ltd A (600350 CH)</a> intends to acquire the 778.5 million domestic shares (86.50% of domestic shares, 38.93% of outstanding shares) held by Shandong Hi-Speed Group. Post-completion, Qilu’s direct controlling shareholder will be changed from Shandong Hi-Speed Group to Shandong Hi-Speed which may trigger a mandatory general offer for all the shares under Rule 26.1 of the Takeovers code, unless it is granted a waiver from the Executive. Notably, Shandong Hi-Speed and Shandong Hi-Speed Group will jointly seek a waiver from the Executive.</p><div class="content-highlight"><p>We note that on 20 August 2020, Shandong Hi-Speed Group was granted a waiver from a mandatory general offer by the Executive in relation to the merger by absorption of Qilu Transportation by Shandong Hi-Speed Group. We think that the Executive will grant a similar waiver for the proposed share acquisition. In combination with ongoing challenges to satisfy the minimum public float requirement, we would not chase the shares. </p></div>

Qilu Expressway Co Ltd (1576 HK) is an expressway operator with the concession rights to construct and operate the Jihe Expressway, the Deshang Expressway and the Shennan Expressway. Revenue is derived primarily from tolls collected from users of the expressways. Qilu listed its H-shares on 19 July 2018 at HK$2.50 per H-share to raise net proceeds of HK$1,172.12 million ($151 million). Due to the completion of the merger by absorption of Qilu Transportation by Shandong Hi-Speed Group on 16 November 2020, Shandong Hi-Speed Group and Shandong Hi-Speed Investment owned 38.93% and 5.19% of the outstanding shares. Subsequently, public shareholders accounted for 19.81% of the outstanding shares, which falls below the minimum public float requirement. To date, Shandong Hi-Speed Group has failed to address the minimum public float requirement by its fulfilling its plan to dispose of its H-shares to independent third parties.Today, Qilu entered a trading halt pending the release of an announcement pursuant to the Code on Takeovers and Mergers. Subsequently, Qilu disclosed that Shandong Hi Speed Co Ltd A (600350 CH) intends to acquire the 778.5 million domestic shares (86.50% of domestic shares, 38.93% of outstanding shares) held by Shandong Hi-Speed Group. Post-completion, Qilu’s direct controlling shareholder will be changed from Shandong Hi-Speed Group to Shandong Hi-Speed which may trigger a mandatory general offer for all the shares under Rule 26.1 of the Takeovers code, unless it is granted a waiver from the Executive. Notably, Shandong Hi-Speed and Shandong Hi-Speed Group will jointly seek a waiver from the Executive.We note that on 20 August 2020, Shandong Hi-Speed Group was granted a waiver from a mandatory general offer by the Executive in relation to the merger by absorption of Qilu Transportation by Shandong Hi-Speed Group. We think that the Executive will grant a similar waiver for the proposed share acquisition. In combination with ongoing challenges to satisfy the minimum public float requirement, we would not chase the shares. 

Qilu Expressway’s Largest Shareholder Seeks Another MGO Waiver

<p>2020 has been a bumpy journey for Chinese toll roads. China's State Council first increased the toll-free period over the Chinese New Year to 16 days, up from seven days in a normal year. This was followed by a directive from the Ministry of Transport such that charges for using the toll roads would be waived for users from the 17 February until a later date - an exemption which was finally lifted on the 6 May.</p><p>The sector was already being scrutinized after an ETC (E-Toll discount) policy was introduced in July of last year; and a truck toll charge implemented on the 1 January of this year, with respect to toll-by-weight compared to toll-by-vehicle.</p><p>Collectively, yield-starved investors have questioned the defensiveness of the sector. Shares are off 22% on average YTD, versus 12% for the HSI.</p><h2>The New News</h2><p>On the 30 April, the China Securities Regulatory Commission and the National Development and Reform Commission jointly <a href="http://www.csrc.gov.cn/pub/zjhpublic/zjh/202004/t20200430_374847.htm" target="_blank" rel="noopener">announced</a> (Chinese-only) a new pilot for Chinese infrastructure real estate investment trusts (or C-REITs), which are ostensibly a mechanism to fund infrastructure projects such highways and airports; and only for such infrastructure which has been operational for three years.  </p><p>Details are still to be fully fleshed out, not least how China's complex tax regime will be addressed. But it is worth exploring which toll road companies <em>may</em> be best suited to being taken private and repackaged as a REIT.</p><hr><div class="content-highlight">
<h2>What's Original?</h2>
<p>The CSRC and NDRC's announcement of a pilot program for public infrastructure REITs opens the door for the potential restructuring of listed toll road companies.</p>
<p>This in-depth insight canvasses the key Chinese toll road operators listed in Hong Kong, and assesses which companies may be targeted for acquisition, from both a financial and regulatory perspective, to spearhead this new policy.</p>
</div>

2020 has been a bumpy journey for Chinese toll roads. China's State Council first increased the toll-free period over the Chinese New Year to 16 days, up from seven days in a normal year. This was followed by a directive from the Ministry of Transport such that charges for using the toll roads would be waived for users from the 17 February until a later date - an exemption which was finally lifted on the 6 May.The sector was already being scrutinized after an ETC (E-Toll discount) policy was introduced in July of last year; and a truck toll charge implemented on the 1 January of this year, with respect to toll-by-weight compared to toll-by-vehicle.Collectively, yield-starved investors have questioned the defensiveness of the sector. Shares are off 22% on average YTD, versus 12% for the HSI.The New NewsOn the 30 April, the China Securities Regulatory Commission and the National Development and Reform Commission jointly announced (Chinese-only) a new pilot for Chinese infrastructure real estate investment trusts (or C-REITs), which are ostensibly a mechanism to fund infrastructure projects such highways and airports; and only for such infrastructure which has been operational for three years.  Details are still to be fully fleshed out, not least how China's complex tax regime will be addressed. But it is worth exploring which toll road companies may be best suited to being taken private and repackaged as a REIT.
What's Original?
The CSRC and NDRC's announcement of a pilot program for public infrastructure REITs opens the door for the potential restructuring of listed toll road companies.
This in-depth insight canvasses the key Chinese toll road operators listed in Hong Kong, and assesses which companies may be targeted for acquisition, from both a financial and regulatory perspective, to spearhead this new policy.


Chinese Expressways: A Step In The REIT Direction

Hong Kong

Yuexiu Transport Infrastructure Ltd., through its subsidiaries, invests in, develops, operates, and manages toll highways, expressways, and bridges in China.

Yuexiu Transport Infrastructure (1052 HK)

Price Gauge
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Yuexiu Transport Infrastructure (1052 HK)

Hong Kong Connect Flows (Aug 16th): Tencent, China Mobile

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Tencent (700 HK) , China Mobile (941 HK) .

Ke Yan, CFA, FRM

Investing in HK Stocks

If you invest in Western markets this would be enough, but not in Asian markets where the trust factor is a lot lower, and where ownership is more...

Turtles all the way down

Yuexiu (1052 HK): REIT Application Lodged

Yuexiu's three-year average trailing/forward P/B prior to the onset of Covid was 0.92x and 0.87%. That would indicate ~30% upside to the current...

David Blennerhassett

Qilu Expressway’s Largest Shareholder Seeks Another MGO Waiver

We think that the Executive will grant a similar waiver for the proposed share acquisition. Along with the challenges to satisfy the minimum public...

Arun George

Chinese Expressways: A Step In The REIT Direction

2020 has been a bumpy journey for Chinese toll roads. China's State Council first increased the toll-free period over the Chinese New Year to 16...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)