Daily Brief Financials: Ping An Insurance (H), AIA Group Ltd, Westpac Banking, Integral Corporation, Longfor Properties, Vonovia , Binance Coin and more

• The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
• There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
• A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

• 1Q23 shows strong Value Of New Business (VONB), not sure of profit flow through
• Comparative to 1H22 is easy vs loss of USD556m in the period, but risk to downside
• Despite, stock buybacks, increased dividends market cap down 34% since peak this year

• New release shows surge in Australia residential mortgage non-performing exposures QoQ
• From March 2023 to June 2023 these NPLs rose by 10.5% and this is not an annualized rate
• Its total NZ non-performing loans rose from AUD671m to AUD741m or 10.4% QoQ

• Integral Corporation (5842 JP) is looking to raise around US$175m in its Japan IPO.
• Integral is a private equity management company advising funds that invest in both listed and unlisted companies in Japan, with a focus on mid-sized companies.
• In this note, we talk about the positive aspects of the deal.

• Integral Corporation (5842 JP) is looking to raise around US$175m in its Japan IPO.
• Integral is a private equity management company advising funds that invest in both listed and unlisted companies in Japan, with a focus on mid-sized companies.
• In this note, we talk about the not-so-positive aspects of the deal.

• Integral Corporation (5842 JP) is an independent Japanese private equity firm seeking to raise about US$175 million. The pricing is on 4 September, and the listing is on 20 September. 
• Integral primarily targets investments in Japanese medium-sized companies and invests its own capital both through investments in funds under management and through direct investments.
• The bull case rest on rising AUM, strong operating income growth, cash flow potential through material unrealised carried interest and solid potential returns on its principal investments.

Longfor’s H1/23 results were weaker than expected, with y-o-y declines of 35% in overall revenue to CNY 65 bn and 40% in revenue from property development to CNY 50 bn. That said, recurring income rose 10.4% to CNY 12.2 bn, which is becoming a meaningful annuity-like cash flow. This will be helpful in underpinning Longfor’s financial risk profile should there be a prolonged downturn in the property sector.

The company appears to have healthy access to bank funding, and should have sufficient liquidity to meet near-term debt maturities. That said, we highlight the risk of a potential reduction in the liquidity buffer, due to weak contracted sales and higher ST debt. Longfor recorded contracted sales of only CNY 7.6 bn in July 2023, compared to an average of CNY 11 bn per month in H1. ST debt surged 75% to c. CNY 39 bn, from c. CNY 22 bn at FYE 2022.

We maintain our “Hold” recommendation on the LNGFOR curve. The various notes appear to offer good value at current yields of 15-21%. That said, market technicals are very poor for private developers, with even the bonds of solid names such as Longfor experiencing volatility.

• Fundamentals of the German residential market our strong. The imbalance between demand and supply is widening.
• Overall message from IR is positive. Market is pricing a bearish scenario. As the interest rates environment stabilizes, we should see improvements in the German real estate market
• Trading at 61% to NTA. The market believes that the NTA that Vonovia shows is unsustainable in higher interest rate environment. The market remains very bearish. 

• Exceptionally low liquidity, macro factors, and a flurry of bad news were among the drivers of last week’s flash crash, pushing BTC to its lowest level in months and spurring a wave of liquidations across derivative markets. 
• While BTC 2% market depth has stabilized over the past few months at around 5k BTC, it remains more than 50% below its pre-FTX highs.
• As BTC prices began falling towards $25k around 8pm UTC on August 17, market depth dropped 50% to just 2k BTC.