Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<p>China’s largest domestic dental brace manufacturer, <a href="https://www.smartkarma.com/entities/angelalign-technology-inc" target="_blank" data-smartkarma-citation="entities:31480:1" rel="noopener">Angelalign Technology (6699 HK)</a>  shares surged to HKD 490 within one month from their issue price of HKD 173 (debuted in HKEX in June). Since then, shares are facing tough time and corrected more than 30%. In-line H1 results, lack of any near-term catalyst, and stagnant market share are looming on the share price. Shares are trading at a P/E of 76x 2023E EPS, which is higher than its nearest competitor Align Technology’s 36x. Although clear aligner market in China is huge and underpenetrated, we believe players have no pricing power as products offered have little or no differentiation and competition is rising. We expect Angelalign’s EPS will have a CAGR of 30% during 2020–2023, slower than 58% CAGR reported during 2018–2020, dragged by margin contraction due to faster growth in Lower ASP product line (Comfos) at the cost of higher ASP product line (Angelalign Pro) and introduction of lower margin scanner business. This does not justify the superior valuation. Angelalign needs to penetrate deeper in lower tiered cities and pursue its outside China initiatives to justify its premium valuation.</p>

China’s largest domestic dental brace manufacturer, Angelalign Technology (6699 HK)  shares surged to HKD 490 within one month from their issue price of HKD 173 (debuted in HKEX in June). Since then, shares are facing tough time and corrected more than 30%. In-line H1 results, lack of any near-term catalyst, and stagnant market share are looming on the share price. Shares are trading at a P/E of 76x 2023E EPS, which is higher than its nearest competitor Align Technology’s 36x. Although clear aligner market in China is huge and underpenetrated, we believe players have no pricing power as products offered have little or no differentiation and competition is rising. We expect Angelalign’s EPS will have a CAGR of 30% during 2020–2023, slower than 58% CAGR reported during 2018–2020, dragged by margin contraction due to faster growth in Lower ASP product line (Comfos) at the cost of higher ASP product line (Angelalign Pro) and introduction of lower margin scanner business. This does not justify the superior valuation. Angelalign needs to penetrate deeper in lower tiered cities and pursue its outside China initiatives to justify its premium valuation.

Angelalign Technology (6699 HK): Pricey Valuation Is Clouding the Upside Potential

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the September 2021 review should be made on 13 August and will be effective after the close of trading on 3 September.</p><p>Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.</p><p>We see 28 potential inclusions to the HSCI at the rebalance and 15 potential deletions, plus another 7 close deletions. Only 10 of the potential deletions will be removed from Southbound Stock Connect buy list since the other deletions are either not a part of Stock Connect currently or have listed A-shares.</p><p>The inclusions to the HSCI outperformed the deletions at the March rebalance from review cut-off to announcement of the changes before giving by some of the gains to implementation and then some more for the 1 month post the implementation of the changes.</p>

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the September 2021 review should be made on 13 August and will be effective after the close of trading on 3 September.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.We see 28 potential inclusions to the HSCI at the rebalance and 15 potential deletions, plus another 7 close deletions. Only 10 of the potential deletions will be removed from Southbound Stock Connect buy list since the other deletions are either not a part of Stock Connect currently or have listed A-shares.The inclusions to the HSCI outperformed the deletions at the March rebalance from review cut-off to announcement of the changes before giving by some of the gains to implementation and then some more for the 1 month post the implementation of the changes.

HSCI Index Rebalance & Stock Connect: Expected Changes in September

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

Full Truck Alliance   / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> (FTA),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.6bn via a US listing. It is backed by Softbank and Sequoia.</p></div><div><p>In our earlier notes, we spoke about the positive and negatives aspects of the deal, <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-the-positives-category-leader" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - The Positives - Category Leader</a> and <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-the-negatives-still-a-mixed-bag" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag,</a> as well as valuations in <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-valuation-even-the-previous-round-might-have-been-a-stretch" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - Valuation, Even the Previous Round Might Have Been a Stretch</a>.</p></div><div><p>In this note, we will talk about the deal dynamics and run the deal through our ECM framework. </p></div>

Full Truck Alliance (YMM US) (FTA),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.6bn via a US listing. It is backed by Softbank and Sequoia.In our earlier notes, we spoke about the positive and negatives aspects of the deal, Full Truck Alliance Pre-IPO - The Positives - Category Leader and Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag, as well as valuations in Full Truck Alliance Pre-IPO - Valuation, Even the Previous Round Might Have Been a Stretch.In this note, we will talk about the deal dynamics and run the deal through our ECM framework. 

Full Truck Alliance IPO - Decent Investor Line-Up, at Best a Punt at These Valuations

China and US Equity Analyst

Roger Xie

Hong Kong Exchanges and Clearing / Equity Bottom-Up

Hong Kong Exchanges and Clearing (388 HK)

<ul>
<li>In his second day on the job, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> new chief executive Nicolas Aguzin expressed his confidence in Hong Kong's outlook as a continued gateway to China, and vowed to promote HKEx role in the connectivity. Although his carefully prepared speech did not outline more detail actions and strategic plan, investors still applauded his stance as new CEO and more diversified management at <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK), </a>the 2nd large exchange in Asia. </li>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> May ADT (Average Daily Turnover) continue to stay at high growth, delivering amazing 33% year-over-year growth in the month (but growth rate slowed from April). The outperformance is partially helped by the easy comparable from last year. For first 5 months of year 2021, HKEx ADT has delivered the year-over-year growth rate to 70%. IPO market remains robust. Total raised fund has reached HK$184 billion, almost 7x the IPO size in same period last year.</li>
<li>HKEx also disclosed its latest listing rule change for main board. The profitability requirement has been raised first time in 26 years, but is much lower than the original proposal.  We believe the original proposal has met with strong opposition from smaller companies and sponsors for listings. HKEx aims to improve listing companies quality and governance, which will be long term positive for HKEx. We remain bullish on <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>  and have TP HKD 550. </li>
</ul>


In his second day on the job, HKEX (388 HK) new chief executive Nicolas Aguzin expressed his confidence in Hong Kong's outlook as a continued gateway to China, and vowed to promote HKEx role in the connectivity. Although his carefully prepared speech did not outline more detail actions and strategic plan, investors still applauded his stance as new CEO and more diversified management at HKEX (388 HK), the 2nd large exchange in Asia. 

HKEX (388 HK) May ADT (Average Daily Turnover) continue to stay at high growth, delivering amazing 33% year-over-year growth in the month (but growth rate slowed from April). The outperformance is partially helped by the easy comparable from last year. For first 5 months of year 2021, HKEx ADT has delivered the year-over-year growth rate to 70%. IPO market remains robust. Total raised fund has reached HK$184 billion, almost 7x the IPO size in same period last year.
HKEx also disclosed its latest listing rule change for main board. The profitability requirement has been raised first time in 26 years, but is much lower than the original proposal.  We believe the original proposal has met with strong opposition from smaller companies and sponsors for listings. HKEx aims to improve listing companies quality and governance, which will be long term positive for HKEx. We remain bullish on HKEX (388 HK)  and have TP HKD 550. 


HKEx(388.HK): A Key Exchange to Connect China and the World, New CEO Said

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Angelalign Technology / Equity Capital Markets

<p>Angelalign raised HKD 2,722 million (USD 351m) from its global offering and will list on the Hong Kong Stock Exchange on Wednesday, June 16th.</p>
<p>In our previous note, we discussed that the company provides the dentists its proprietary digital system that assists in planning the customized treatment for malocclusion patients and sells the clear aligners.  We think the overall story is interesting, with an under penetrated market, a foreign player side-by-side, strong growth and solid financials. While it sells medical devices, it has a consumer element in the products that is similar to aesthetic products. The company also has a long track record for more than 10 years in the market. We had also compared the company with its close peer and provided our preliminary thoughts on valuation. We also looked at the latest disclosure from the post-hearing prospectus which suggests a strong ending of 2020 with both top line growth and margin expansion.</p>
<p>In this note, we look at the updates since our last note. We noted that the allocation for institutional investors is highly concentrated despite the lack of cornerstone tranche. We expect a very strong debut performance. </p>

Angelalign raised HKD 2,722 million (USD 351m) from its global offering and will list on the Hong Kong Stock Exchange on Wednesday, June 16th.
In our previous note, we discussed that the company provides the dentists its proprietary digital system that assists in planning the customized treatment for malocclusion patients and sells the clear aligners.  We think the overall story is interesting, with an under penetrated market, a foreign player side-by-side, strong growth and solid financials. While it sells medical devices, it has a consumer element in the products that is similar to aesthetic products. The company also has a long track record for more than 10 years in the market. We had also compared the company with its close peer and provided our preliminary thoughts on valuation. We also looked at the latest disclosure from the post-hearing prospectus which suggests a strong ending of 2020 with both top line growth and margin expansion.
In this note, we look at the updates since our last note. We noted that the allocation for institutional investors is highly concentrated despite the lack of cornerstone tranche. We expect a very strong debut performance. 

Angelalign (时代天使) IPO Trading: Concentrated Allocation Despite No Cornerstone

China

Angelalign Technology Inc. is a global provider of digital technology-driven clear aligner products and services, offering comprehensive orthodontic solutions including treatment planning, manufacturing, and marketing. The company's portfolio includes products like angelalign Pro, angelalign, and angelalign KID, supported by its iOrtho Digital Orthodontic Intelligent Service Platform. Headquartered in Shanghai, China, the company was founded in 2003.

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Angelalign Technology (6699 HK)