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

<ul>
<li>JD’s revenue growth accelerated in 1Q21.</li>
<li>An important competitor, Suning, is shrinking.</li>
<li>The Logistics service for third parties is rewarding.</li>
<li>JD's GMV (Gross Merchandise Value) is still No. 2 in China.</li>
<li>We set an upside of 58% for the end of 1H22.</li>
</ul>


JD’s revenue growth accelerated in 1Q21.
An important competitor, Suning, is shrinking.
The Logistics service for third parties is rewarding.
JD's GMV (Gross Merchandise Value) is still No. 2 in China.
We set an upside of 58% for the end of 1H22.


JD.com (JD): 1Q21, Direct Sales Got Opportunity and Service Got Reward

<ul>
<li>Most Xiaomi new smartphones are priced high.</li>
<li>At a Xiaomi store, we found customers were very interested in the highly-priced products.</li>
<li>The risk is the competition from Apple, Oppo, and Vivo.</li>
</ul>
Our previous coverage on Xiaomi:
<a href="https://www.smartkarma.com/insights/xiaomi-1810-hk-market-was-wrong-after-4q20-result-upgrade-to-buy" target="_blank" data-smartkarma-citation="insights:49672" rel="noopener">Xiaomi (1810 HK): Market Was Wrong After 4Q20 Result, Upgrade to Buy</a> 
<a href="https://www.smartkarma.com/insights/xiaomi-1810-hk-terminate-contracts-with-small-authorized-stores" target="_blank" data-smartkarma-citation="insights:48499" rel="noopener">Xiaomi (1810 HK): Terminate Contracts with Small Authorized Stores</a> 
<a href="https://www.smartkarma.com/insights/xiaomi-1810-hk-taking-advantage-of-huawei-s-sale-of-smartphone-brand-but-overvalued" target="_blank" data-smartkarma-citation="insights:46324" rel="noopener">Xiaomi (1810 HK): Taking Advantage of Huawei’s Sale of Smartphone Brand, But Overvalued</a>


Most Xiaomi new smartphones are priced high.
At a Xiaomi store, we found customers were very interested in the highly-priced products.
The risk is the competition from Apple, Oppo, and Vivo.

Our previous coverage on Xiaomi:
Xiaomi (1810 HK): Market Was Wrong After 4Q20 Result, Upgrade to Buy 
Xiaomi (1810 HK): Terminate Contracts with Small Authorized Stores 
Xiaomi (1810 HK): Taking Advantage of Huawei’s Sale of Smartphone Brand, But Overvalued 

Xiaomi (1810 HK): No Longer Concerned About High Prices of New Smartphones, A Store Visit

HK/China Equity Long-Short

Osbert Tang, CFA

Shenzhen International / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> managed to engine a rebound in 2H20 after the serious negative impact of COVID-19 outbreak on its two key businesses - <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co H (548 HK)</a> and Shenzhen Airlines. Instead of the 20% YoY decline in headline FY20 profit, we think the market's focus should be on the sharp HoH turnaround in its bottomline (excluding one-off items).In the post-FY20 result call, management believes that SZ Int has significant potential to be released in the future. Besides the recovery of logistics, toll road and airlines operations, it will benefit from the expansion in logistics network, securitisation of logistics facilities, contribution from Qianhai project and in the longer term, the transformation and upgrade of South China Logistics Park. We remain positive on SZ Int and believe the stock's current multiples are far from being able to fully reflect its value.

Shenzhen Intl (152 HK) managed to engine a rebound in 2H20 after the serious negative impact of COVID-19 outbreak on its two key businesses - Shenzhen Expressway Co H (548 HK) and Shenzhen Airlines. Instead of the 20% YoY decline in headline FY20 profit, we think the market's focus should be on the sharp HoH turnaround in its bottomline (excluding one-off items).In the post-FY20 result call, management believes that SZ Int has significant potential to be released in the future. Besides the recovery of logistics, toll road and airlines operations, it will benefit from the expansion in logistics network, securitisation of logistics facilities, contribution from Qianhai project and in the longer term, the transformation and upgrade of South China Logistics Park. We remain positive on SZ Int and believe the stock's current multiples are far from being able to fully reflect its value.

Shenzhen Intl (152 HK): Remarkable 2H20; Promising Prospects Revealed in Post-Result Call

We believe the potential acquisition of a 71.83% stake in <a href="https://www.smartkarma.com/entities/shenzhen-investment-holdings-bay-area-development" target="_blank" data-smartkarma-citation="entities:12134:1" rel="noopener">Shenzhen Investment Holdings Bay Area Development (737 HK)</a> by <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway Co H (548 HK)</a> has positive strategic implications on <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a>. SZ Bay Area Dev's historical stable earnings stream and its net cash balance are other added strengths of the proposed deal. Since the deal is still on a MoU stage, it is too early to discuss on the funding arrangement. However, we prefer SZ Exp issuing new shares as acquisition consideration, as this will be more advantageous to SZ Int. Under this scenario, SZ Int's stake in SZ Exp will dilute to 38% from 52% but the earnings impact is relatively insignificant. The best thing is that without the need to consolidate the heavily leveraged SZ Exp, SZ Int's overall gearing will be lowered and possibly provide more financial muscle for it to focus on logistics expansion.

We believe the potential acquisition of a 71.83% stake in Shenzhen Investment Holdings Bay Area Development (737 HK) by Shenzhen Expressway Co H (548 HK) has positive strategic implications on Shenzhen Intl (152 HK). SZ Bay Area Dev's historical stable earnings stream and its net cash balance are other added strengths of the proposed deal. Since the deal is still on a MoU stage, it is too early to discuss on the funding arrangement. However, we prefer SZ Exp issuing new shares as acquisition consideration, as this will be more advantageous to SZ Int. Under this scenario, SZ Int's stake in SZ Exp will dilute to 38% from 52% but the earnings impact is relatively insignificant. The best thing is that without the need to consolidate the heavily leveraged SZ Exp, SZ Int's overall gearing will be lowered and possibly provide more financial muscle for it to focus on logistics expansion.  

Shenzhen Intl (152 HK): Implications of SZ Exp's Potential Acquisition of SZ Bay Area Dev

We took a deep look in the recent plan to acquire 8% stake in <a href="https://www.smartkarma.com/entities/suning-com-co-ltd-a" target="_blank" data-smartkarma-citation="entities:9178:1" rel="noopener">Suning Commerce Group Co., Ltd. A (002024 CH)</a> as announced by <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> (SZIH). We believe the deal is not only good to SZIH, but is also a wise one. While the Rmb5.2bn consideration is sizable and will not generate much near-term financial impacts, the strategic benefits to SZIH are significantly more important.We estimate that the cost of acquisition only equals to 1.2-2.2% of SZIH's FY19 profit, but the strategic benefits will include fostering further collaboration, accelerating network expansion, potentially restructuring assets and gaining quasi-control in Suning.

We took a deep look in the recent plan to acquire 8% stake in Suning Commerce Group Co., Ltd. A (002024 CH) as announced by Shenzhen Intl (152 HK) (SZIH). We believe the deal is not only good to SZIH, but is also a wise one. While the Rmb5.2bn consideration is sizable and will not generate much near-term financial impacts, the strategic benefits to SZIH are significantly more important.We estimate that the cost of acquisition only equals to 1.2-2.2% of SZIH's FY19 profit, but the strategic benefits will include fostering further collaboration, accelerating network expansion, potentially restructuring assets and gaining quasi-control in Suning. 

Shenzhen Intl (152 HK): Is Investing in Suning a Good or Bad Deal?

China

Suning.com Co., Ltd. operates retail chain stores to sell household appliances, electronic products, office equipment, and communication products. The Company also provides installation and maintenance services.

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Suning.com (002024 CH)

JD.com (JD): 1Q21, Direct Sales Got Opportunity and Service Got Reward

JD’s revenue growth accelerated in 1Q21. An important competitor, Suning, is shrinking.The Logistics service for third parties is rewarding. JD's...

Ming Lu

Xiaomi (1810 HK): No Longer Concerned About High Prices of New Smartphones, A Store Visit

Most Xiaomi new smartphones are priced high.At a Xiaomi store, we find customers are very interested in the highly-priced products.The risk is the...

Ming Lu

Shenzhen Intl (152 HK): Remarkable 2H20; Promising Prospects Revealed in Post-Result Call

After a good 2H20, we see good future potential at SZ Int and a step up in corporate activities. Its multiples are unable to reflect its recovery...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Implications of SZ Exp's Potential Acquisition of SZ Bay Area Dev

A scenario that SZ Exp issuing new shares for the potential acquisition of SZ Bay Area Dev from its parent will be positive to SZ Int. We believe...

Osbert Tang, CFA

Shenzhen Intl (152 HK): Is Investing in Suning a Good or Bad Deal?

We see SZIH's acquisition of 8% stake in Suning a value-enhancing move in the strategic perspective, though the near-term financial impact and...

Osbert Tang, CFA

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