Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Equity Capital Markets

<ul><li>Three major concerns/questions I'd ask regarding the potential IPO of <a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a>:</li></ul><ol>
<li>
<a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener"></a>Single monetization channel: as the company seeks further growth, can it really compete against the distribution channels of the tech and insurance giants in China?</li>
<li>
Insurance/product development potential: does the company have the expertise to develop its own products without just having to rely on the distribution channels?</li>
<li>
Valuation: if the investment thesis is to ride the growth of healthcare and medical insurance spending in China, isn't it more direct to invest in an online (or even traditional) insurer, which is at a much lower valuation?</li>
</ol>

Three major concerns/questions I'd ask regarding the potential IPO of Waterdrop Inc (WDH US):

Single monetization channel: as the company seeks further growth, can it really compete against the distribution channels of the tech and insurance giants in China?

Insurance/product development potential: does the company have the expertise to develop its own products without just having to rely on the distribution channels?

Valuation: if the investment thesis is to ride the growth of healthcare and medical insurance spending in China, isn't it more direct to invest in an online (or even traditional) insurer, which is at a much lower valuation?


Waterdrop Inc: Can the Water Keep Flowing After Its IPO?

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

As an important supplement to China's basic medical insurance and an integral part of the multi-level medical security system, commercial health insurance has developed rapidly in recent years. The product structure, market scale, insured population and service connotation of commercial health insurance have undergone tremendous changes. However, it is undeniable that compared with other mature markets, the market of commercial health insurance in China still needs to be further explored, and the insurance products and service models also need to be continuously innovated. In particular, how to keep up with the pace of the times, meet the needs of the market, and constantly realize the iterative upgrading of health insurance products and services, so as to meet the diversified and personalized health insurance needs of people based on the inclusive basic medical insurance is undoubtedly a new subject for domestic commercial health insurance companies.

As an important supplement to China's basic medical insurance and an integral part of the multi-level medical security system, commercial health insurance has developed rapidly in recent years. The product structure, market scale, insured population and service connotation of commercial health insurance have undergone tremendous changes. However, it is undeniable that compared with other mature markets, the market of commercial health insurance in China still needs to be further explored, and the insurance products and service models also need to be continuously innovated. In particular, how to keep up with the pace of the times, meet the needs of the market, and constantly realize the iterative upgrading of health insurance products and services, so as to meet the diversified and personalized health insurance needs of people based on the inclusive basic medical insurance is undoubtedly a new subject for domestic commercial health insurance companies.

Industry Report - Insights on China Commercial Health Insurance Industry

Medlive Technology / Equity Capital Markets

On March 29, 2021, <a href="https://www.smartkarma.com/entities/medlive-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:32985:1" rel="noopener">Medlive Technology (MLT HK)</a> submitted its listing application to the Hong Kong Stock Exchange. Medlive is the largest online professional physician platform in China. Actually, the digital medical information services is a popular market that is favored by capital. For example,  in 2017, KKR acquired WebMD Health for about $2.8 billion. In China, in 2020, DXY (Ding Xiang Yuan) obtained $500 million of investment from Trustbridge Partners, Tencent and Hillhouse Capital. ByteDance also acquired Baikemy.com for RMB500 million. So how is the future prospects of Medlive? The following mainly analyzed the strength and challenges for the Company.

On March 29, 2021, Medlive Technology (MLT HK) submitted its listing application to the Hong Kong Stock Exchange. Medlive is the largest online professional physician platform in China. Actually, the digital medical information services is a popular market that is favored by capital. For example,  in 2017, KKR acquired WebMD Health for about $2.8 billion. In China, in 2020, DXY (Ding Xiang Yuan) obtained $500 million of investment from Trustbridge Partners, Tencent and Hillhouse Capital. ByteDance also acquired Baikemy.com for RMB500 million. So how is the future prospects of Medlive? The following mainly analyzed the strength and challenges for the Company.

Pre-IPO Medlive Technology - Here Are the Strength and the Challenges

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

China Merchants Bank H / Equity Bottom-Up

*Good 1Q21 Bottom-Line: China Merchants Bank (3968.HK) [CMB] reported 1Q21 results of CNY 32.0 bn, increasing CNY 11.3 bn (54.4%) linked quarter. Results were driven by net interest income improvement; robust fee growth; and an operating expense reduction; and *Credit Wall Continues To Grow: Net new problem loans continue to accelerate at an Indian bank pace of CNY 18.9 bn or 138.5% on an annualized basis, accelerating form the 04.7% growth rate posted in 4Q20. Provided (and its not a stretch) that the net new NPL ratio trajectory holds, reserve cover of NPLs will drop to 184% - suggesting that even the mighty are falling.

*Good 1Q21 Bottom-Line: China Merchants Bank (3968.HK) [CMB] reported 1Q21 results of CNY 32.0 bn, increasing CNY 11.3 bn (54.4%) linked quarter. Results were driven by net interest income improvement; robust fee growth; and an operating expense reduction; and *Credit Wall Continues To Grow: Net new problem loans continue to accelerate at an Indian bank pace of CNY 18.9 bn or 138.5% on an annualized basis, accelerating form the 04.7% growth rate posted in 4Q20. Provided (and its not a stretch) that the net new NPL ratio trajectory holds, reserve cover of NPLs will drop to 184% - suggesting that even the mighty are falling. 

China Merchants Bank – Pig Still In Python

China Huarong Asset Management / Equity Bottom-Up

*Already On Edge:  Again in mainland China, there have been rumblings of another credit default over the past several days. The CBIRC disclosed that China Huarong Asset Management (2799.HK) [Huarong] is actively working with its auditor to complete its annual report. The issue appears to be Huarong’s legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed post-removal in 2018; and *Another Audit Delay: Huarong is delaying its 2020 earnings results beyond the April 30, 2021 deadline, which, in our view, only exacerbates concerns over a potential Huarong default. Ironic, given that Huarong was supposed to help mainland China clean up its bad debt mess. This further delay will not help bond liquidity which already appears to have disappeared. Contagion risk remains a real threat as bondholders likely sell other holdings.

*Already On Edge:  Again in mainland China, there have been rumblings of another credit default over the past several days. The CBIRC disclosed that China Huarong Asset Management (2799.HK) [Huarong] is actively working with its auditor to complete its annual report. The issue appears to be Huarong’s legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed post-removal in 2018; and *Another Audit Delay: Huarong is delaying its 2020 earnings results beyond the April 30, 2021 deadline, which, in our view, only exacerbates concerns over a potential Huarong default. Ironic, given that Huarong was supposed to help mainland China clean up its bad debt mess. This further delay will not help bond liquidity which already appears to have disappeared. Contagion risk remains a real threat as bondholders likely sell other holdings.

China Huarong Asset Management  - This Can’t Be Good

China

Ping An Healthcare and Technology Company Limited provides health care software solutions. The Company offers mobile platform for online consultation, hospital referral and appointment, health management, and wellness interaction services, as well as connects consumers and patients with health care resources. Ping An Healthcare and Technology serves customers in China.

Ping An Healthcare and Technology (1833 HK)

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Ping An Healthcare and Technology (1833 HK)

Waterdrop Inc: Can the Water Keep Flowing After Its IPO?

Waterdrop Inc is an interesting company with good intentions. But these are the three major concerns one should pay particular attention to when...

Alec Tseung

Industry Report - Insights on China Commercial Health Insurance Industry

This article mainly analyzed the current situation, market potential, industry characteristics, challenges and future trends of China commercial...

Xinyao (Criss) Wang

Pre-IPO Medlive Technology - Here Are the Strength and the Challenges

The article analyzed Medlive Technology in terms of both the strength (market potential, industry outlook, physician resources) and challenges...

Xinyao (Criss) Wang

China Merchants Bank – Pig Still In Python

CHINA MERCHANTS BANK: CMB reported a 1Q21 QOQ results increase of 54.4% driven by net interest income; fee growth; and lower expenses. Net new...

Thomas J. Monaco

China Huarong Asset Management - This Can’t Be Good

CHINA HUARONG ASSET MANAGEMENT: Huarong is delaying its 2020 earnings results beyond the April 30, 2021 deadline, which, in our view, only...

Thomas J. Monaco

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