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 143 stocks over the last week. The average A-H premium was 111.6% as of May 12th.</li>
<li>The average A-H premium changed by 0.4ppt week on week, led by real estate, financials, utilities and offset by consumer staples, consumer discretionary, energy.</li>
<li>We highlight weekly changes in A-H premium for CCB, BoC, China Shenhua, Yankuang Energy, CHina Life.</li>
</ul>


We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 111.6% as of May 12th.
The average A-H premium changed by 0.4ppt week on week, led by real estate, financials, utilities and offset by consumer staples, consumer discretionary, energy.
We highlight weekly changes in A-H premium for CCB, BoC, China Shenhua, Yankuang Energy, CHina Life.


A-H Premium Weekly (May 12th): CCB, BoC, China Shenhua, Yankuang Energy, CHina Life

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>While meeting expectations in 1Q23, <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> has relied on a 105.2% surge in other income, mostly government subsidies. Without them, pre-tax profit would have dropped 21%.</li>
<li>For most business areas, volume has come down YoY and QoQ, highlighting challenging operating environment. JV contribution, mostly DHL-Sinotrans, has also declined 11.5% YoY.</li>
<li>While we like its long-term fundamentals and undemanding multiples, we have concerns on near-term headwinds and weakened earnings quality; and risks of profit downgrades.  </li>
</ul>


While meeting expectations in 1Q23, Sinotrans (598 HK) has relied on a 105.2% surge in other income, mostly government subsidies. Without them, pre-tax profit would have dropped 21%.
For most business areas, volume has come down YoY and QoQ, highlighting challenging operating environment. JV contribution, mostly DHL-Sinotrans, has also declined 11.5% YoY.
While we like its long-term fundamentals and undemanding multiples, we have concerns on near-term headwinds and weakened earnings quality; and risks of profit downgrades.  


Sinotrans (598 HK): Still Seeing Uncertainties Ahead

Thematic (Sector/Industry)

<ul>
<li>Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. </li>
<li>With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. </li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a>, <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> are key beneficiaries, while <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric (3899 HK)</a> may turned into exchange losses.</li>
</ul>


Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. 
With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. 

Shenzhen International (152 HK), ENN Energy (2688 HK), Shenzhen Expressway (548 HK) and Kunlun Energy (135 HK) are key beneficiaries, while CIMC Enric (3899 HK) may turned into exchange losses.


China Strategy: It Is the Foreign Exchange Impact, Stupid!

<ul>
<li>While we like <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.</li>
<li>Indicators including China's PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. </li>
<li>9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. </li>
</ul>


While we like Sinotrans (598 HK) in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.
Indicators including China's PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. 
9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. 


Sinotrans (598 HK): We Are Concerned About the near Term Challenges

<ul>
<li>We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 113.6% as of Mar 31st.</li>
<li>The average A-H premium changed by -0.5ppt week on week, led by communication services, energy, utilities and offset by consumer staples, health care.</li>
<li>We highlight weekly changes in A-H premium for Yankuang Energy, CRRC, China Telecom, CCCC.</li>
</ul>


We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 113.6% as of Mar 31st.
The average A-H premium changed by -0.5ppt week on week, led by communication services, energy, utilities and offset by consumer staples, health care.
We highlight weekly changes in A-H premium for Yankuang Energy, CRRC, China Telecom, CCCC.


A-H Premium Weekly (Mar 31st): Yankuang Energy, CRRC, China Telecom, CCCC

China

Sinotrans Limited provides integrated logistics services with core service of sea, air, rail and road freight forwarding, express services and shipping agency services.  The Company also provides support services of storage and terminal services, trucking and marine transportation services.

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Sinotrans (598 HK)

A-H Premium Weekly (May 12th): CCB, BoC, China Shenhua, Yankuang Energy, CHina Life

We analyzed A-H premium changes in the past week and highlight A-H premium changes for CCB, BoC, China Shenhua, Yankuang Energy, CHina Life.

Ke Yan, CFA, FRM

Sinotrans (598 HK): Still Seeing Uncertainties Ahead

1Q23 net profit is supported by 105% surge in subsidies, but their sustainability is unknown. DHL-Sinotrans also saw an 11% profit decline. We...

Osbert Tang, CFA

China Strategy: It Is the Foreign Exchange Impact, Stupid!

Shenzhen Intl, ENN Energy, Shenzhen Expressway and Kunlun Energy are the key beneficiaries of the reverse in Rmb/USD depreciation trend in FY23,...

Osbert Tang, CFA

Sinotrans (598 HK): We Are Concerned About the near Term Challenges

After a weak 4Q22 result, we think there are risks that 1Q23 and 1H23 earnings may not come out as expected. Market consensus forecast of 10% net...

Osbert Tang, CFA

A-H Premium Weekly (Mar 31st): Yankuang Energy, CRRC, China Telecom, CCCC

We analyzed A-H premium for last week and highlight weekly changes in A-H premium for Yankuang Energy, CRRC, China Telecom, CCCC.

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)