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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>At long last, Hang Seng Indexes (HSIL) has released the consultation paper on the "Proposal to enhance the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants have until 24 January to submit their views to the HSIL.</p><p>There are 5 main proposals in the consultation paper:</p><ol>
<li>Select constituents by industry group based on a target coverage for each industry group</li>
<li>Increase the number of constituents to between 65 to 80</li>
<li>Removal of the Minimum Listing History requirement for eligible candidates</li>
<li>Maintain a certain number of constituents classified as Hong Kong companies to sustain the level of representation of Hong Kong portion in the index</li>
<li>Lower the weighting cap of individual constituents from 10% to 8%, and increase the weighting cap of WVRs and Secondary Listings from 5% to 8%.</li>
</ol><p>The simulated one-way turnover of increasing the number of constituents to between 65-80 is estimated at 15-20% and HSIL proposes to implement the transition to the enhanced methodology within one year.</p><p>In this Insight, we look at the impact on the index from the proposed changes.</p>

At long last, Hang Seng Indexes (HSIL) has released the consultation paper on the "Proposal to enhance the Hong Kong Hang Seng Index (HSI INDEX) as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants have until 24 January to submit their views to the HSIL.There are 5 main proposals in the consultation paper:
Select constituents by industry group based on a target coverage for each industry group
Increase the number of constituents to between 65 to 80
Removal of the Minimum Listing History requirement for eligible candidates
Maintain a certain number of constituents classified as Hong Kong companies to sustain the level of representation of Hong Kong portion in the index
Lower the weighting cap of individual constituents from 10% to 8%, and increase the weighting cap of WVRs and Secondary Listings from 5% to 8%.
The simulated one-way turnover of increasing the number of constituents to between 65-80 is estimated at 15-20% and HSIL proposes to implement the transition to the enhanced methodology within one year.In this Insight, we look at the impact on the index from the proposed changes.

HSI Market Consultation - Wide Ranging Changes Proposed

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p><a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> , the largest online healthcare platform and retail pharmacy in China started trading on the 7<sup>th</sup> of December. The company set the final IPO pricing at the upper end of the IPO price range of HK$70.58 per share and raised net proceeds of HK$26.46bn (approximately US$3.41bn).</p><p>JD Health’s shares had a bold debut at the IPO, hitting an intra-day high of HK$123.3 per share, about 75% higher than the IPO price. The company’s shares are currently trading at HK$166 per share (end of today’s trading), a 135% increase compared to the IPO price of HK$70.58 per share.</p><p>In our previous insights on the company’s IPO, we examined the company’s business model, financials, valuations and a comparison with its peers.</p><p>We highlighted that the company has a strong business model which is poised to benefit from the structural changes in the Chinese healthcare market that is currently shifting towards digitisation. Moreover, the Covid-19 outbreak has further accelerated this transition towards online channels, and we believe the company’s business is sustainable beyond Covid-19.</p>

JD Health (6618 HK) , the largest online healthcare platform and retail pharmacy in China started trading on the 7th of December. The company set the final IPO pricing at the upper end of the IPO price range of HK$70.58 per share and raised net proceeds of HK$26.46bn (approximately US$3.41bn).JD Health’s shares had a bold debut at the IPO, hitting an intra-day high of HK$123.3 per share, about 75% higher than the IPO price. The company’s shares are currently trading at HK$166 per share (end of today’s trading), a 135% increase compared to the IPO price of HK$70.58 per share.In our previous insights on the company’s IPO, we examined the company’s business model, financials, valuations and a comparison with its peers.We highlighted that the company has a strong business model which is poised to benefit from the structural changes in the Chinese healthcare market that is currently shifting towards digitisation. Moreover, the Covid-19 outbreak has further accelerated this transition towards online channels, and we believe the company’s business is sustainable beyond Covid-19.

JD Health IPO Trading Update: Be Ready to Buy if It Drops Post Index Inclusion

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

Alibaba Health Information Tec / Equity Bottom-Up

<p>This Insight summarizes the takeaways from a recent China healthcare industry conference focused on biopharmaceuticals and medical devices, and builds on our Originals Insight <a href="https://www.smartkarma.com/insights/asian-healthcare-coming-of-age" target="_blank" data-smartkarma-citation="insights:45676" rel="noopener">Asian Healthcare - Coming of Age</a>.  Topics addressed include value-based purchasing for drugs and devices; development of commercial health insurance; internet hospitals and online pharmacies; DRGs for hospitals; issues for medical device companies; and amendments to China's patent laws.</p>

This Insight summarizes the takeaways from a recent China healthcare industry conference focused on biopharmaceuticals and medical devices, and builds on our Originals Insight Asian Healthcare - Coming of Age.  Topics addressed include value-based purchasing for drugs and devices; development of commercial health insurance; internet hospitals and online pharmacies; DRGs for hospitals; issues for medical device companies; and amendments to China's patent laws.

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<p style="text-align: justify;"><a target="_blank"></a>In recent years, China digital healthcare industry has grown rapidly. The increasing cost of diseases and traditional medical treatment provides potential impetus for the long-term development of digital medicine. Especially during the epidemic, digital medical tools have helped people make full use of existing medical resources. Methods such as real-time epidemic information broadcast, Internet diagnosis and treatment platform, and remote drug purchase have all played an important role in the epidemic. Comprehensive intelligent digital healthcare treatment is gradually accepted and recognized by people, and will become the new direction of the development in the post-epidemic era (Related companies: <a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, and <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)).</a></p>

In recent years, China digital healthcare industry has grown rapidly. The increasing cost of diseases and traditional medical treatment provides potential impetus for the long-term development of digital medicine. Especially during the epidemic, digital medical tools have helped people make full use of existing medical resources. Methods such as real-time epidemic information broadcast, Internet diagnosis and treatment platform, and remote drug purchase have all played an important role in the epidemic. Comprehensive intelligent digital healthcare treatment is gradually accepted and recognized by people, and will become the new direction of the development in the post-epidemic era (Related companies: JD Health (6618 HK), Alibaba Health Information Technology (241 HK), and Ping An Healthcare and Technology Company Limited (1833 HK)).

Industry Report - Insights on China Digital Healthcare Industry

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p><em>This week in StubWorld ...</em></p>
<p><a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> was listed on the 8 December at an IPO price of <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1207/9539949/2020120700123.pdf" target="_blank" rel="noopener">HK$70.58</a>, towards the top-end of its price range, and has traded up ~88% to HK$132.50/share, with a current market cap of US$52.7bn. </p>
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<p>JDH is the spin-off of <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a> / <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, which owns <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1208/2020120800216.pdf" target="_blank" rel="noopener">68.73%</a> in JDH after the IPO, down from 81.04% pre-IPO.</p>
<p>That stake is worth US$36.5bn, or around 30% of its current market cap, therefore this is not a super strong parent/subsidiary relationship. </p>
<p>Yet the implied stub is trading at a not-undemanding forward PER of 34x, for a company with a three-year net profit CAGR of 44%.</p>
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<p>Preceding my comments on JD.com are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...
JD Health (6618 HK) was listed on the 8 December at an IPO price of HK$70.58, towards the top-end of its price range, and has traded up ~88% to HK$132.50/share, with a current market cap of US$52.7bn. 


JDH is the spin-off of JD.com (HK) (9618 HK) / JD.com Inc (ADR) (JD US), which owns 68.73% in JDH after the IPO, down from 81.04% pre-IPO.
That stake is worth US$36.5bn, or around 30% of its current market cap, therefore this is not a super strong parent/subsidiary relationship. 
Yet the implied stub is trading at a not-undemanding forward PER of 34x, for a company with a three-year net profit CAGR of 44%.




Preceding my comments on JD.com are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.



China

Alibaba Health Information Technology Limited is an integrated healthcare information and content service provider. The Company uses product identification, authentication, and tracking system data for its healthcare information.

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Alibaba Health Information Tec (241 HK)

HSI Market Consultation - Wide Ranging Changes Proposed

HSIL has announced the market consultation for the Hang Seng Index. The conclusions should be announced in February. If the market agrees to most...

Brian Freitas

JD Health IPO Trading Update: Be Ready to Buy if It Drops Post Index Inclusion

JD Health’s shares had a bold debut at the IPO and the shares are currently trading at HK$166 per share (end of today’s trading), a 135% increase...

Shifara Samsudeen, FCMA, CGMA

China Healthcare: Macro Themes

This Insight summarizes the takeaways from a recent China healthcare industry conference. There is much talk of pressures on the industry, but...

Kemp Dolliver, CFA

Industry Report - Insights on China Digital Healthcare Industry

The article analyzed China digital healthcare industry in terms of market potential, regional development, main business models(online...

Xinyao (Criss) Wang

StubWorld: JD.com In JD Health's Shadow

JD looks attractive here, down 13.5% from its recent peak. The market is assigning US$9.4bn less to the stub ops since JDH's debut, while JD has...

David Blennerhassett

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