Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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 Bottom-Up

JD Health International  / Equity Bottom-Up

<ul class="">
<li>We believe JD Health will follow the accounting of JD.com, which Amazon originated.</li>
<li>We believe service is the main business, although product accounts for a large proportion in the nominal revenue.</li>
<li>The product plays a cornerstone role; therefore, it is fine to value the company by nominal revenue.</li>
<li>Service revenue growth is the important signal for the short-term stock price.</li>
</ul>


We believe JD Health will follow the accounting of JD.com, which Amazon originated.
We believe service is the main business, although product accounts for a large proportion in the nominal revenue.
The product plays a cornerstone role; therefore, it is fine to value the company by nominal revenue.
Service revenue growth is the important signal for the short-term stock price.


JD Health (6618 HK): Be Careful of Amazon Style Accounting

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The September rebalance of 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> was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.</p><p>The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in 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>.</p><p>There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.</p><p>With Hang Seng Indexes looking to get up to 80 <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> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.</p><p>Stocks that are ranked towards the top of their Industry group and are potential inclusions are <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-beer-holdings" target="_blank" data-smartkarma-citation="entities:399:1" rel="noopener">China Resources Beer Holdings (291 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>, <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a>, <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>.</p><p>Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.</p>

The September rebalance of the Hong Kong Hang Seng Index (HSI INDEX) was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.Stocks that are ranked towards the top of their Industry group and are potential inclusions are Smoore International (6969 HK), Nongfu Spring (9633 HK), China Resources Beer Holdings (291 HK), China Resources Mixc Lifestyle Services (1209 HK), Sunac China Holdings (1918 HK), China Gas Holdings (384 HK), JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK), China Hongqiao (1378 HK) and Fosun International (656 HK).Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.

HSI Index Rebalance Preview: Potential Inclusions in December

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Ping An Healthcare and Technology / Equity Bottom-Up

<p>On August 24, 2021, <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>(PAGD) released its 2021 interim results. The revenue was RMB3.82 billion, up 39% YoY. Gross profit was RMB1.025 billion, up 24.8% YoY. Net loss was RMB879.3 million, up 312% YoY. After the financial report was released, PAGD’s share price fell about 13.7% for three consecutive days from August 25, reflecting the attitude of the market. This insight mainly analyzed PAGD in terms of its performance in 2021/1H, the business and the underlying logic, the concerns and the outlook of the Company.</p>

On August 24, 2021, Ping An Healthcare and Technology Company Limited (1833 HK) (PAGD) released its 2021 interim results. The revenue was RMB3.82 billion, up 39% YoY. Gross profit was RMB1.025 billion, up 24.8% YoY. Net loss was RMB879.3 million, up 312% YoY. After the financial report was released, PAGD’s share price fell about 13.7% for three consecutive days from August 25, reflecting the attitude of the market. This insight mainly analyzed PAGD in terms of its performance in 2021/1H, the business and the underlying logic, the concerns and the outlook of the Company.

Ping An Good Doctor (1833.HK) - A Vicious Cycle?

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> and <a href="https://www.smartkarma.com/entities/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics Inc (6185 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> and <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>. Shorts increased in the Health Care, Consumer Discretionary, Information Technology and Materials sectors while decreasing in the Financials and Communication Services sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/toto-ltd" target="_blank" data-smartkarma-citation="entities:11028:1" rel="noopener">Toto Ltd (5332 JP)</a> and <a href="https://www.smartkarma.com/entities/shimano-inc" target="_blank" data-smartkarma-citation="entities:3777:1" rel="noopener">Shimano Inc (7309 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a>, <a href="https://www.smartkarma.com/entities/kawasaki-kisen-kaisha-ltd" target="_blank" data-smartkarma-citation="entities:3548:1" rel="noopener">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/nisshinbo-holdings-inc" target="_blank" data-smartkarma-citation="entities:10561:1" rel="noopener">Nisshinbo Holdings (3105 JP)</a>. Shorts increased in the Information Technology, Industrials and Health Care sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a>, <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a> and <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>. </p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/asia-cement-corp" target="_blank" data-smartkarma-citation="entities:15350:1" rel="noopener">Asia Cement (1102 TT)</a>, <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co-ltd" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">TA Chen Stainless Pipe (2027 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Shenzhou Intl Group Holdings (2313 HK), Xiaomi Corp (1810 HK), Great Wall Motor (2333 HK), JD Health (6618 HK) and CanSino Biologics Inc (6185 HK) while there was short covering on Alibaba Group (9988 HK), BYD (1211 HK), Tencent (700 HK), Ping An Insurance (H) (2318 HK) and Xinyi Solar Holdings (968 HK). Shorts increased in the Health Care, Consumer Discretionary, Information Technology and Materials sectors while decreasing in the Financials and Communication Services sectors.In Japan, stocks increased on Renesas Electronics (6723 JP), Shionogi &amp; Co (4507 JP), Advantest Corp (6857 JP), Toto Ltd (5332 JP) and Shimano Inc (7309 JP) while there was short covering on Nippon Building Fund (8951 JP), Kawasaki Kisen Kaisha (9107 JP), freee (4478 JP), Welcia Holdings (3141 JP) and Nisshinbo Holdings (3105 JP). Shorts increased in the Information Technology, Industrials and Health Care sectors.In Korea, shorts increased on Celltrion Inc (068270 KS), Hyundai Motor Co (005380 KS), LG Display (034220 KS), HMM Co., Ltd. (011200 KS) and Amorepacific Corp (090430 KS) while shorts were covered on Samsung Electronics (005930 KS), NCSOFT Corp (036570 KS), Doosan Heavy Industries &amp; Construction (034020 KS), LG Chem Ltd (051910 KS) and Kakao Corp (035720 KS). In Taiwan, shorts increased on Novatek Microelectronics Corp (3034 TT), Mediatek Inc (2454 TT), Innolux Corp (3481 TT), Yageo Corporation (2327 TT) and TSMC (2330 TT) while shorts covered on Wan Hai Lines (2615 TT), Evergreen Marine Corp (2603 TT), Asia Cement (1102 TT), Shin Kong Financial Holding (2888 TT) and TA Chen Stainless Pipe (2027 TT).

Asia Shorts: Shenzhou, Xiaomi, BABA, BYD, Renesas, Shionogi, Freee, Celltrion, LGD, Novatek, Wan Hai

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-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> reported 1H2021 results on Tuesday (24<sup>th</sup> August) which saw revenues growing 55.4% YoY to RMB13.6bn (vs consensus revenues of RMB9.4bn) driven primarily by the sale of pharmaceutical and healthcare products as a result of expansion in the number of user accounts.</p><p>The company reported an operating loss for the period compared to an OPM of 4.5% in 1H2020. However, huge share-based payment expense during 1H2021 was the reason for the operating losses during the period and excluding these costs, JD Health made an OPM of 3.4% for 1H2021.</p><p>JD Health’s shares have lost about 72% since mid-July with the ongoing regulatory overhaul in the Chinese tech sector and news surfacing about the government of China preparing to introduce new regulations to increase supervision of  prescription drugs sold through online platforms.</p>

JD Health (6618 HK) reported 1H2021 results on Tuesday (24th August) which saw revenues growing 55.4% YoY to RMB13.6bn (vs consensus revenues of RMB9.4bn) driven primarily by the sale of pharmaceutical and healthcare products as a result of expansion in the number of user accounts.The company reported an operating loss for the period compared to an OPM of 4.5% in 1H2020. However, huge share-based payment expense during 1H2021 was the reason for the operating losses during the period and excluding these costs, JD Health made an OPM of 3.4% for 1H2021.JD Health’s shares have lost about 72% since mid-July with the ongoing regulatory overhaul in the Chinese tech sector and news surfacing about the government of China preparing to introduce new regulations to increase supervision of  prescription drugs sold through online platforms.

JD Health: Strong Earnings but Regulatory Environment Remains a Concern

China

JD Health International Inc. operates drug stores. The Company retails Chinese and Western medicines, nutrition products, health care products, and other products. JD Health International markets its products throughout China.

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JD Health International (6618 HK)

JD Health (6618 HK): Be Careful of Amazon Style Accounting

We believe JD Health will follow the accounting of JDc.om, which is the originated by Amazon. We believe service is the main business, although...

Ming Lu

HSI Index Rebalance Preview: Potential Inclusions in December

There could be 10 inclusions to the HSI at the Dec rebalance to help reach the 80 index member count by mid-2022. Index turnover & regulations will...

Brian Freitas

Ping An Good Doctor (1833.HK) - A Vicious Cycle?

This article mainly analyzed Ping An Good Doctor in terms of its performance in 2021/1H, the business and the underlying logic, the comparison with...

Xinyao (Criss) Wang

Asia Shorts: Shenzhou, Xiaomi, BABA, BYD, Renesas, Shionogi, Freee, Celltrion, LGD, Novatek, Wan Hai

The Insight looks at movements in short interest across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

JD Health: Strong Earnings but Regulatory Environment Remains a Concern

JD Health’s shares have increased about 3.0% during today's trading despite reporting solid earnings as investors remain concerned over new...

Shifara Samsudeen, FCMA, CGMA

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