Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

Hygeia Healthcare / Equity Capital Markets

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<p>For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.</p>
<p>There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in <a href="https://www.smartkarma.com/entities/shenzhen-hepalink-pharmaceutical-h" target="_blank" data-smartkarma-citation="entities:29142:1" rel="noopener">Shenzhen HepaLink Pharmaceutical (H) (9989 HK)</a>, which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. </p>
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<p>According to <a href="https://en-rules.hkex.com.hk/rulebook/1007-0" target="_blank" rel="noopener">Main Board Rule 10.07(1)</a> (or <a href="https://en-rules.hkex.com.hk/rulebook/1316a" target="_blank" rel="noopener">GEM rule 13.16A(1)</a>), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.</p>
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<p>For cornerstone investors, the following is often stated in the share offer document:</p>
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<p>Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ... <br>Hepalink's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0624/2020062400097.pdf" target="_blank" rel="noopener">Global Offering Doc</a> (page 403)</p>
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<p>Every week in my <a href="https://www.smartkarma.com/compose/insight/46538/Last%20Week%20in%20Event%20SPACE:%20Japan%20Post,%20JD.com,%20Toyota,%20NTT,%20Jardines,%20Indices/Exec.%20Orders,%20Tianneng.%20Read%20more:%20https:/skr.ma/vhr6W" target="_blank" rel="noopener">Event SPACE</a> wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. </p>
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<p>Large movement(s) concerning recently listed companies are likely lock-up related. </p>
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<p>This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.</p>
<p>I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. </p>
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<p>A summary of Main Board listings in 2020 is also attached at the bottom of this insight.</p>
<p>More below the fold.</p>
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For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.
There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in Shenzhen HepaLink Pharmaceutical (H) (9989 HK), which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. 


According to Main Board Rule 10.07(1) (or GEM rule 13.16A(1)), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.


For cornerstone investors, the following is often stated in the share offer document:



Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ...  Hepalink's Global Offering Doc (page 403)



Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 


Large movement(s) concerning recently listed companies are likely lock-up related. 


This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.
I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. 


A summary of Main Board listings in 2020 is also attached at the bottom of this insight.
More below the fold.


Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

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>After market close on Friday, <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a>/HEG announced a pre-conditional privatisation offer by way of a scheme of arrangement from <a href="https://www.smartkarma.com/entities/qingdao-haier-co-ltd-a" target="_blank" data-smartkarma-citation="entities:7196:1" rel="noopener">Qingdao Haier Co Ltd A (600690 CH)</a>/HSH. The offeror will offer 1.60 new HSH H shares and a HK$1.95 cash payment per scheme share. In connection with the privatisation proposal, HSH is seeking a listing of the HSH H shares by way of introduction on the Main Board of the HKEX. Based on the independent valuer’s HSH H shares value range of RMB16.45-16.90 (HK$18.23-18.72), the privatisation proposal values each scheme share at a theoretical mid-point of HK$31.51. At this theoretical mid-point, the bid represents a premium of 44.20% over the closing price of HK$21.85 per share on the last trading day (12 December 2019). </p><div class="content-highlight">
<p>As the share exchange accounts for the majority of the consideration (around 94%), the attractiveness of the proposal hinges on the robustness of the HSH H share valuation. On the assumption that the HSH H shares value range is reasonable and fair, the privatisation proposal is attractive for scheme shareholders due to several factors. </p>
<p>However, the independent valuer’s HSH H shares value range looks generous. The valuation range was based on three methodologies, all of which have issues in our view. While the independent valuer’s HSH H shares value range is flawed, on balance, we think that the privatisation proposal will likely succeed due to HEG’s shareholder register. </p>
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After market close on Friday, Haier Electronics Group Co (1169 HK)/HEG announced a pre-conditional privatisation offer by way of a scheme of arrangement from Qingdao Haier Co Ltd A (600690 CH)/HSH. The offeror will offer 1.60 new HSH H shares and a HK$1.95 cash payment per scheme share. In connection with the privatisation proposal, HSH is seeking a listing of the HSH H shares by way of introduction on the Main Board of the HKEX. Based on the independent valuer’s HSH H shares value range of RMB16.45-16.90 (HK$18.23-18.72), the privatisation proposal values each scheme share at a theoretical mid-point of HK$31.51. At this theoretical mid-point, the bid represents a premium of 44.20% over the closing price of HK$21.85 per share on the last trading day (12 December 2019). 
As the share exchange accounts for the majority of the consideration (around 94%), the attractiveness of the proposal hinges on the robustness of the HSH H share valuation. On the assumption that the HSH H shares value range is reasonable and fair, the privatisation proposal is attractive for scheme shareholders due to several factors. 
However, the independent valuer’s HSH H shares value range looks generous. The valuation range was based on three methodologies, all of which have issues in our view. While the independent valuer’s HSH H shares value range is flawed, on balance, we think that the privatisation proposal will likely succeed due to HEG’s shareholder register. 


Haier Electronics’ Privatisation Bid from Haier Smart Home

Last Week In Event SPACE: FamilyMart, Sina, Line Corp, Metlifecare, Accordia Golf, Jingjeng, O-Net

Shenzhen Hepalink Pharmaceutical / Equity Capital Markets

Shenzhen Hepalink Pharmaceutical (9989 HK)

<div><p><a href="https://www.smartkarma.com/entities/shenzhen-hepalink-pharmaceuticals-h" target="_blank" data-smartkarma-citation="entities:29142:1" rel="noopener">Shenzhen HepaLink Pharmaceuticals (H) (HEPALINK HK)</a> is a leading China-based pharmaceutical company with global businesses in pharmaceutical, innovative biotech and CDMO (contract development and manufacturing organisation) sectors. Hepalink's H-shares will commence trading on Wednesday, 8 July. Hepalink priced its IPO at HK$18.40, at the bottom end of the indicative price range of HK$18.40-20.60 per share. Hepalink raised net proceeds of HK$3,805.7 million ($491 million).</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/hepalink-pharma-ipo-initiation-take-a-chance-on-me" target="_blank" rel="noopener">our initiation note</a>, we stated that Hepalink is seeking to raise money on the back of the year that displayed revenue decline and margin pressure, largely due to industry headwinds. Looking into the new year, we think the positives (recovery in growth and margin) outweigh the negative (cash conversion). <a href="https://www.smartkarma.com/insights/hepalink-pharma-ipo-a-step-in-the-right-direction" target="_blank" rel="noopener">The PHIP</a> which outlines 2019 and 1Q20 results reinforces our view that Hepalink is heading in the right direction. In <a href="https://www.smartkarma.com/insights/hepalink-pharma-ipo-valuation-insights" target="_blank" rel="noopener">our valuation note</a>, we suggested that the IPO valuation is attractive and we would participate in the IPO. Overall, we think at the IPO price,  Hepalink's H-shares discount to the A-shares is attractively priced. </p></div></div></div>

Shenzhen HepaLink Pharmaceuticals (H) (HEPALINK HK) is a leading China-based pharmaceutical company with global businesses in pharmaceutical, innovative biotech and CDMO (contract development and manufacturing organisation) sectors. Hepalink's H-shares will commence trading on Wednesday, 8 July. Hepalink priced its IPO at HK$18.40, at the bottom end of the indicative price range of HK$18.40-20.60 per share. Hepalink raised net proceeds of HK$3,805.7 million ($491 million).In our initiation note, we stated that Hepalink is seeking to raise money on the back of the year that displayed revenue decline and margin pressure, largely due to industry headwinds. Looking into the new year, we think the positives (recovery in growth and margin) outweigh the negative (cash conversion). The PHIP which outlines 2019 and 1Q20 results reinforces our view that Hepalink is heading in the right direction. In our valuation note, we suggested that the IPO valuation is attractive and we would participate in the IPO. Overall, we think at the IPO price,  Hepalink's H-shares discount to the A-shares is attractively priced. 

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.

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<p>Shenzhen Hepalink raised HKD 3,806 million (USD 491 m) from its global offering and will list on the Hong Kong Stock Exchange tomorrow.</p>
<p>In our previous insights, we had discussed that the company is a dominant heparin supplier on a global scale but it is not as prominent in the branded heparin segment.  The company's biotech products are under its investee companies.</p>
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<p>In this note, we will look at the allocation and implications. We think there's a 20% upside at the IPO pricing given that the A-share has performed well over the last few days.</p>
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<h2>Our previous coverage on Shenzhen Hepalink:</h2>
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<li><a href="https://www.smartkarma.com/insights/shenzhen-hepalink-a-h-a-heparin-api-king-but-nothing-too-exciting" target="_blank" rel="noopener">Shenzhen Hepalink (海瑞普) A+H: A heparin-API king but nothing too exciting</a></li>
<li><a href="https://www.smartkarma.com/insights/shenzhen-hepalink-a-h-fy2019-results-snippet-and-valuation-update" target="_blank" rel="noopener">Shenzhen Hepalink (海瑞普) A+H: FY2019 Results Snippet and Valuation Update</a></li>
<li><a href="https://www.smartkarma.com/insights/shenzhen-hepalink-a-h-hot-deal-that-might-not-fly" target="_blank" rel="noopener">Shenzhen Hepalink (海瑞普) A+H: Hot Deal that Might Not Fly</a></li>
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Shenzhen Hepalink raised HKD 3,806 million (USD 491 m) from its global offering and will list on the Hong Kong Stock Exchange tomorrow.
In our previous insights, we had discussed that the company is a dominant heparin supplier on a global scale but it is not as prominent in the branded heparin segment.  The company's biotech products are under its investee companies.


In this note, we will look at the allocation and implications. We think there's a 20% upside at the IPO pricing given that the A-share has performed well over the last few days.


Our previous coverage on Shenzhen Hepalink:




Shenzhen Hepalink (海瑞普) A+H: A heparin-API king but nothing too exciting
Shenzhen Hepalink (海瑞普) A+H: FY2019 Results Snippet and Valuation Update
Shenzhen Hepalink (海瑞普) A+H: Hot Deal that Might Not Fly




Shenzhen Hepalink (海普瑞) A+H Trading: 20% Upside Thanks to A-Share Performance

China

Shenzhen Hepalink Pharmaceutical is a multinational biopharmaceutical company with core businesses in the heparin industrial chain, large molecule biologics CDMO services, and the research, development, and commercialization of innovative drugs. Its key products include heparin sodium APIs and enoxaparin sodium preparations. The company is headquartered in Shenzhen, China, and was founded in 1998.

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Shenzhen Hepalink Pharmaceutical (9989 HK)

Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

There exist the "moral hazard" around the expiry of lock-up periods. In 2020, IPO's have on average underperformed the HSI heading into the lock...

David Blennerhassett

Haier Electronics’ Privatisation Bid from Haier Smart Home

After market close on Friday, Haier Electronics Group Co (1169 HK)/HEG announced a pre-conditional privatisation offer by way of a scheme of...

Arun George

Last Week In Event SPACE: FamilyMart, Sina, Line Corp, Metlifecare, Accordia Golf, Jingjeng, O-Net

Last Week in Event SPACE ... Interestingly, the impact of FamilyMart Co Ltd (8028 JP)'s shareholder dynamic on price may not be what "smart"...

David Blennerhassett

Hepalink Pharma IPO: Trading Debut

Shenzhen HepaLink Pharmaceuticals (H) (HEPALINK HK) is a leading China-based pharmaceutical company with global businesses in pharmaceutical,...

Arun George

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52-week Range

Market Cap (USDm)

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Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

There exist the "moral hazard" around the expiry of lock-up periods. In 2020, IPO's have on average underperformed the HSI heading into the lock...

David Blennerhassett

Haier Electronics’ Privatisation Bid from Haier Smart Home

After market close on Friday, Haier Electronics Group Co (1169 HK)/HEG announced a pre-conditional privatisation offer by way of a scheme of...

Arun George

Last Week In Event SPACE: FamilyMart, Sina, Line Corp, Metlifecare, Accordia Golf, Jingjeng, O-Net

Last Week in Event SPACE ... Interestingly, the impact of FamilyMart Co Ltd (8028 JP)'s shareholder dynamic on price may not be what "smart"...

David Blennerhassett

Hepalink Pharma IPO: Trading Debut

Shenzhen HepaLink Pharmaceuticals (H) (HEPALINK HK) is a leading China-based pharmaceutical company with global businesses in pharmaceutical,...

Arun George

Shenzhen Hepalink (海普瑞) A+H Trading: 20% Upside Thanks to A-Share Performance

Shenzhen Hepalink raised HKD 3,806 million (USD 491 m) from its global offering and will list on the Hong Kong Stock Exchange tomorrow. In our...

Ke Yan, CFA, FRM