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

Shenton Research

Shenton 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.

Equity Capital Markets

Shenzhen Transsion Holdings / Equity Capital Markets

<ul>
<li>Firmus pulled its USD 5.5bn ASX IPO. AS Watson's USD 30bn dual listing was reportedly delayed to 2027, and Moonshot reportedly eyes an HK IPO of up to USD 5bn.</li>
<li>ESWIN, the week's only HK listing, raised USD 319m and fell 1.0% on day one. Eight listings in the past month have a median return of -2.5% since IPO.</li>
<li>On HKEX, one company filed an AP and three posted PHIPs. Transsion's USD 428m A+H IPO lists on 15 Oct.</li>
</ul>


Firmus pulled its USD 5.5bn ASX IPO. AS Watson's USD 30bn dual listing was reportedly delayed to 2027, and Moonshot reportedly eyes an HK IPO of up to USD 5bn.
ESWIN, the week's only HK listing, raised USD 319m and fell 1.0% on day one. Eight listings in the past month have a median return of -2.5% since IPO.
On HKEX, one company filed an AP and three posted PHIPs. Transsion's USD 428m A+H IPO lists on 15 Oct.


This Week in APAC ECM (Oct 4-10): Firmus Pulls ASX IPO; Moonshot Eyes USD 5bn; Jio Sets Price Band

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Global indexes including the MSCI ACWI and ACWI ex-US are following in the MSCI EM index’s footsteps by breaking to new highs. This is bullish and signals a new leg higher is underway. Additionally, the US dollar is showing signs of a breakdown, something we view as a positive for global risk sentiment as long as the decline continues to be orderly. Overall our outlook remains bullish and we suggest buying any dips. Growth remains long-term leadership -- remain overweight. Attractive growth Sectors highlighted in today’s report include: Health Care, Services, Technology, and Communications

Global indexes including the MSCI ACWI and ACWI ex-US are following in the MSCI EM index’s footsteps by breaking to new highs. This is bullish and signals a new leg higher is underway. Additionally, the US dollar is showing signs of a breakdown, something we view as a positive for global risk sentiment as long as the decline continues to be orderly. Overall our outlook remains bullish and we suggest buying any dips. Growth remains long-term leadership -- remain overweight. Attractive growth Sectors highlighted in today’s report include: Health Care, Services, Technology, and Communications

U.S. Dollar Breakdown: Bullish For Ex-U.S. Equities

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/496/original/2020-06-30_14-16-44.png?1593494217" class="editor-image img-responsive" data-smartkarma-image-id="143496"></figure>
<div class="content-caption">Source • Japan Analytics</div>
THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.
Net Working Capital Days varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-
<ul>
<li>
+ Receivables/Revenue - the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.</li>
<li>
+ Inventory/Cost of Goods Sold - the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.</li>
<li>- Payables/Cost of Goods Sold -the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.</li>
</ul>
The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/529/original/2020-06-30_15-09-41.png?1593497395" class="editor-image img-responsive" data-smartkarma-image-id="143529"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/530/original/2020-06-30_15-10-32.png?1593497471" class="editor-image img-responsive" data-smartkarma-image-id="143530"></figure>
<div class="content-caption">Source • Japan Analytics</div>
<div class="content-caption"></div>
NET WORKING CAPITAL DAYS AS A STRESS TEST - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  <a href="https://www.smartkarma.com/entities/nikon-corp" target="_blank" data-smartkarma-citation="entities:7117:1" rel="noopener">Nikon (7731 JP)</a>, or ignored - <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a> since 2018. (For more on SMC working capital issues, please see my colleague <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s Insight of last year - <a href="https://www.smartkarma.com/insights/smc-6273-jp-getting-in-line-with-reality" target="_blank" data-smartkarma-citation="insights:30081" rel="noopener">SMC (6273 JP): Getting in Line with Reality</a>).   
For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the DETAIL section below, we shall cover the outliers at both ends of Receivables Days, Inventory Days, Payables Days, and finally Net Working Capital Days.


Source • Japan Analytics
THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.
Net Working Capital Days varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-


+ Receivables/Revenue - the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.

+ Inventory/Cost of Goods Sold - the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.
- Payables/Cost of Goods Sold -the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.

The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.


Source • Japan Analytics

NET WORKING CAPITAL DAYS AS A STRESS TEST - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  Nikon (7731 JP), or ignored - SMC (6273 JP) since 2018. (For more on SMC working capital issues, please see my colleague Scott Foster's Insight of last year - SMC (6273 JP): Getting in Line with Reality).   
For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the DETAIL section below, we shall cover the outliers at both ends of Receivables Days, Inventory Days, Payables Days, and finally Net Working Capital Days.

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

Our positive outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains intact and we believe a “buy the dip” strategy is warranted. We recommend taking advantage of recent weakness -- where applicable -- by adding exposure to cyclical Sectors. Today’s recommendations focus on autos, auto parts, and machinery which span the Consumer Discretionary and Manufacturing Sectors.

Our positive outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains intact and we believe a “buy the dip” strategy is warranted. We recommend taking advantage of recent weakness -- where applicable -- by adding exposure to cyclical Sectors. Today’s recommendations focus on autos, auto parts, and machinery which span the Consumer Discretionary and Manufacturing Sectors. 

Global Equity Strategy: Overweight Cyclicals

HK/China Equity Long-Short

Osbert Tang, CFA

Wuxi Lead Intelligent Equipmen / Equity Capital Markets

Wuxi Lead Intelligent Equipmen (300450 CH)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/wuxi-lead-intelligent-equipmen" target="_blank" data-smartkarma-citation="entities:27971:1" rel="noopener">Wuxi Lead Intelligent Equipment (470 HK)</a> has a lukewarm H-share IPO response, but is still priced at the maximum of HK$45.80. This places it on 29.2x PER for FY26F.</li>
<li>We consider an appropriate HA discount to be roughly 25-30%, implying a fair value of HK$45.6-48.8, or 6.6% downside/upside, and it is almost fairly-valued. </li>
<li>At the top-end of our estimated fair value, its multiples do not appear attractive against the A-share and other global peers, so HK$48.8 is the ceiling. </li>
</ul>



Wuxi Lead Intelligent Equipment (470 HK) has a lukewarm H-share IPO response, but is still priced at the maximum of HK$45.80. This places it on 29.2x PER for FY26F.
We consider an appropriate HA discount to be roughly 25-30%, implying a fair value of HK$45.6-48.8, or 6.6% downside/upside, and it is almost fairly-valued. 
At the top-end of our estimated fair value, its multiples do not appear attractive against the A-share and other global peers, so HK$48.8 is the ceiling. 


Wuxi Lead Equipment (470 HK): Almost Fair

Japan

CKD Corporation manufactures pneumatic equipment and control devices including valves, cylinders, filters, and dryers.  The Company also produces automated labor-saving machines such as integrated circuit (IC) production equipment, assembly machines, auto-transport machinery, and packaging machines for pharmaceutical products.

Price Gauge
52-week Range	0.00 - 0.00
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Ckd Corp (6407 JP)

This Week in APAC ECM (Oct 4-10): Firmus Pulls ASX IPO; Moonshot Eyes USD 5bn; Jio Sets Price Band

This week in APAC ECM: Firmus pulled its ASX IPO of up to USD 5.5bn, Moonshot reportedly targeted up to USD 5bn in Hong Kong, and Jio reportedly...

Ke Yan, CFA, FRM

U.S. Dollar Breakdown: Bullish For Ex-U.S. Equities

Global indexes including the MSCI ACWI and ACWI ex-US are following in the MSCI EM index’s footsteps by breaking to new highs. This is bullish and...

Vermilion Research

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to...

Campbell Gunn

Global Equity Strategy: Overweight Cyclicals

Our positive outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains intact and we believe a “buy the dip” strategy is warranted. We...

Vermilion Research

Wuxi Lead Equipment (470 HK): Almost Fair

Wuxi Lead Intelligent Equipment's lukewarm IPO response leads to a fair value estimate of HK$45.6-48.8, suggesting it is almost fairly-valued with...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

This Week in APAC ECM (Oct 4-10): Firmus Pulls ASX IPO; Moonshot Eyes USD 5bn; Jio Sets Price Band

This week in APAC ECM: Firmus pulled its ASX IPO of up to USD 5.5bn, Moonshot reportedly targeted up to USD 5bn in Hong Kong, and Jio reportedly...

Ke Yan, CFA, FRM

U.S. Dollar Breakdown: Bullish For Ex-U.S. Equities

Global indexes including the MSCI ACWI and ACWI ex-US are following in the MSCI EM index’s footsteps by breaking to new highs. This is bullish and...

Vermilion Research

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to...

Campbell Gunn

Global Equity Strategy: Overweight Cyclicals

Our positive outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains intact and we believe a “buy the dip” strategy is warranted. We...

Vermilion Research

Wuxi Lead Equipment (470 HK): Almost Fair

​Wuxi Lead Intelligent Equipment's lukewarm IPO response leads to a fair value estimate of HK$45.6-48.8, suggesting it is almost fairly-valued with...

Osbert Tang, CFA

Wuxi Lead Intelligent Equipment's lukewarm IPO response leads to a fair value estimate of HK$45.6-48.8, suggesting it is almost fairly-valued with...