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 analyse the changes of A/H premium on 136 stocks over the last week.</li>
<li>Utilities and consumer staples sectors let the increase of A-H premium while communication services, consumer discretionary and industries led the decrease.</li>
<li>We highlight the following A-H stocks: Shanghai Pharma, China Eastern Air, Huaneng Power, Shenzhen Hepalink.</li>
</ul>


We analyse the changes of A/H premium on 136 stocks over the last week.
Utilities and consumer staples sectors let the increase of A-H premium while communication services, consumer discretionary and industries led the decrease.
We highlight the following A-H stocks: Shanghai Pharma, China Eastern Air, Huaneng Power, Shenzhen Hepalink.


A-H Premium Weekly: Shanghai Pharma, China Eastern Air, Huaneng Power, Shenzhen Hepalink

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Zhejiang Expressway Co H / Equity Bottom-Up

<ul>
<li>We believe there is room for <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> to raise dividend payout ratio moderately, following that of <a href="https://www.smartkarma.com/entities/anhui-expressway-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5236:1" rel="noopener">Anhui Expressway (995 HK)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a>. </li>
<li>It has a comparable gearing with SZEX, positive earnings outlook, improved operating cash flow and manageable capex which all are supportive to raise payout ratio.</li>
<li>If it increases to 55% payout, versus an average of 45.6% previously, we estimate the stock is trading on attractive dividend yield of 11.3% and 12.4%, respectively for FY21-22.</li>
</ul>


We believe there is room for Zhejiang Expressway Co H (576 HK) to raise dividend payout ratio moderately, following that of Anhui Expressway (995 HK) and Shenzhen Expressway (548 HK). 
It has a comparable gearing with SZEX, positive earnings outlook, improved operating cash flow and manageable capex which all are supportive to raise payout ratio.
If it increases to 55% payout, versus an average of 45.6% previously, we estimate the stock is trading on attractive dividend yield of 11.3% and 12.4%, respectively for FY21-22.


Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

<p>After reporting an 8.65x surge in profit in 1H21, we think there are three drivers that should bring better outlook for <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> (ZJEC) over the next twelve months. These positive factors include further rebound in traffic and toll revenue, additional contribution from new projects and good upside from profit of <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities Co Ltd (601878 CH)</a>. </p><p>YTD, share price of ZJEC increased by 10%, but we still see good upside potential given that it trades on only 0.9x P/B for FY21 and its ROE for 1H21 already reached 10.1% (before annualised). On earnings valuation, its 5.7x and 5.0x PER for FY21 and FY22, respectively, also appeared very attractive, in our view. </p>

After reporting an 8.65x surge in profit in 1H21, we think there are three drivers that should bring better outlook for Zhejiang Expressway Co H (576 HK) (ZJEC) over the next twelve months. These positive factors include further rebound in traffic and toll revenue, additional contribution from new projects and good upside from profit of Zheshang Securities Co Ltd (601878 CH). YTD, share price of ZJEC increased by 10%, but we still see good upside potential given that it trades on only 0.9x P/B for FY21 and its ROE for 1H21 already reached 10.1% (before annualised). On earnings valuation, its 5.7x and 5.0x PER for FY21 and FY22, respectively, also appeared very attractive, in our view. 

Zhejiang Expressway (576 HK): Drivers in Place for Robust Outlook

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.

Event-Driven

<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

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>On the 12 August last year, <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> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0812/2020081201368.pdf" target="_blank" rel="noopener">announced</a> its largest shareholder Qilu Transportation would be merged and absorbed by Shandong Hi-Speed Group (SHSG). The absorption simplified the holdings of Shandong SASAC, the ultimate parent of both Qilu Transportation and SHSG, into Qilu.</p>
</div>
<div>
<p>The restructuring triggered an obligation for SHSG to make a mandatory general offer for all shares not owned, and SHSG and Qilu Transportation jointly made an application to the SFC to waive this obligation, which was granted on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0821/2020082100191.pdf" target="_blank" rel="noopener">20 August</a>. </p>
</div>
<div>
<p>There was also the issue over the resulting free float, as the public float would fall below the minimum prescribed percentage of 25% under the restructuring. The restructuring was completed on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/2020111700550.pdf" target="_blank" rel="noopener">17 November</a> and an application for a  "<em>waiver from strict compliance</em>" with the public float was concurrently lodged, and subsequently granted on the 20 November, with an <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0504/2021050400876.pdf" target="_blank" rel="noopener">extension granted</a> to the 30 June 2021 in which to comply.</p>
<h3>The New News</h3>
</div>
<div>
<p>Qilu has now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0513/2021051300351.pdf" target="_blank" rel="noopener">announced</a> SHSG  plans to inject 778.5mn domestics shares, or 38.93% of Qilu, into Shandong Hi-Speed, an entity 70.91% controlled by SHSG.</p>
<p>The completion of this restructuring also triggers an MGO - unless a waiver is granted. </p>
<p>This all looks like history repeating itself. Don't expect an MGO to unfold.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


On the 12 August last year, Qilu Expressway Co Ltd (1576 HK) announced its largest shareholder Qilu Transportation would be merged and absorbed by Shandong Hi-Speed Group (SHSG). The absorption simplified the holdings of Shandong SASAC, the ultimate parent of both Qilu Transportation and SHSG, into Qilu.


The restructuring triggered an obligation for SHSG to make a mandatory general offer for all shares not owned, and SHSG and Qilu Transportation jointly made an application to the SFC to waive this obligation, which was granted on the 20 August. 


There was also the issue over the resulting free float, as the public float would fall below the minimum prescribed percentage of 25% under the restructuring. The restructuring was completed on the 17 November and an application for a  "waiver from strict compliance" with the public float was concurrently lodged, and subsequently granted on the 20 November, with an extension granted to the 30 June 2021 in which to comply.
The New News


Qilu has now announced SHSG  plans to inject 778.5mn domestics shares, or 38.93% of Qilu, into Shandong Hi-Speed, an entity 70.91% controlled by SHSG.
The completion of this restructuring also triggers an MGO - unless a waiver is granted. 
This all looks like history repeating itself. Don't expect an MGO to unfold.


More below the fold.


Qilu Expressway (1576 HK): Deja Vu All Over Again

China

Anhui Expressway Co. Ltd. principally holds, operates and develops toll expressways and highways in Anhui province in China.

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Anhui Expressway Co Ltd H (995 HK)

A-H Premium Weekly: Shanghai Pharma, China Eastern Air, Huaneng Power, Shenzhen Hepalink

We highlight utilities, consumer staple, comm servcies, and consumer discretionary sector and the following A-H stocks: Shanghai Pharma, China...

Ke Yan, CFA, FRM

Zhejiang Expressway (576 HK): Is There Any Room for Higher Dividend Payout?

Higher dividend payout is a possibility and its financial profile can support such increase. At 55% payout (historical average at 45.6%), FY21-22...

Osbert Tang, CFA

Zhejiang Expressway (576 HK): Drivers in Place for Robust Outlook

We believe sustained traffic and toll recovery, contribution from new project addition and positive outlook for Zheshang Securities will drive...

Osbert Tang, CFA

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

Qilu Expressway (1576 HK): Deja Vu All Over Again

Qilu has announced another restructuring that could trigger an MGO - unless a waiver is granted. This all looks like history repeating itself....

David Blennerhassett

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