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Daily Briefs

TMT: ByteDance, Tencent Holdings, TeamSpirit Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor
  • Tencent Holdings – FHC Restructure On Its Way
  • Japan Small Cap Growth: TeamSpirit – Better Days Ahead

ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor

By Zhen Zhou, Toh

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Asia ECM pipeline continued to build up this week. Grab announced the details of its SPAC listing with a target market value of about US$40bn. The company will raise more than US$4bn proceeds from a fully committed PIPE which include BlackRock, MSIM, T. Rowe Price, Fidelity, Janus Henderson, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek. We shared our initial thoughts in:

In Hong Kong, it was reported that ByteDance has kicked off IPO preparations for some of its main businesses, which includes Douyin. The company was still deliberating on the listing venue but it is likely that it will conduct a separate listing of its overseas assets.

Dida re-filed with HKEX after its initial application from October last year lapsed last week. The company is probably trying to get ahead of Didi Chuxing’s listing as the latter filed confidentially for a US listing last week. There were also news reports of SF REIT looking to pre-market this month and JD Logistics will be seeing listing approval at the end of this month.

Trip.com’s secondary listing in Hong Kong will debut on Monday and the company’s ADR corrected in line with our earlier expectation but the spread out allocation might weigh on near-term performance.

Our upcoming IPO coverage this week centered around Healthcare names. Zhaoke Ophthalmology Pharma (6622 HK) launched its bookbuild on Friday and it is expected to price this coming Wednesday. 

We also looked at We Doctor, Bio-Thera, Medlive, and Edding Group. :

In the US, Waterdrop Inc prospectus is publicly filed with the SEC. The online insurance technology company is looking to raise about US$500m but there had been news reports that the company was facing pushback from local regulators. 

Aside from Didi Chuxing, Ximalaya FM also filed confidentially for up to US$1bn IPO. Soulgate, a Chinese social networking app operator, and Keep, a Chinese fitness app are looking to file their prospectuses this month. 

This week we took a brief look at TuSimple, a pre-commercialization autonomous technology vendor for truck freights, before it debuted on Thursday.  

In Thailand, Ngern Tid Lor (NTL TB), launched its US$1bn bookbuild. Books will close on 27th April.

In the Philippines, we followed-up with a peer comparison of Monde Nissin against competitors. 

Singapore ECM suffered a setback this week.  ThaiBev announced on Friday that they have decided to defer the Proposed Spin-off listing of BeerCo citing uncertain market conditions and volatile outlook. We had discussed management’s valuation expectation of BeerCo vs. the likely valuation it can command in our earlier note. Core REIT has also shelved its IPO citing weak demand and volatile market conditions.

Placements were spread out over the past week, with Regis Resources (RRL AU) in Australia and Lasalle Logiport Reit (3466 JP) in Japan. Kakao Corp (035720 KS)’s founder  sold about US$450m worth of shares.

Credits to Clarence Chu for helping out with the Weekly Update.

Accuracy Rate:

Our overall accuracy rate is 73.9% for IPOs and 67.2% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings this week

  • Dida (HK, US$500m, refiled)
  • Shanghai Hanyu Medical Technology Co., Ltd (HK, US$500m)
  • Waterdrop Inc (The U.S, US$500m)
  • Shriram Properties (India, US$100m)
  • G R Infraprojects (India, US$100m)

News on Upcoming IPOs

Hong Kong/China

U.S.

India

Others

Analysis on Upcoming IPOs

NameInsight
Hong Kong
Betta Pharma

Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 

ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

ByteDance

ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 

ByteDance

ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) Pre-IPO – Globally the Most Downloaded App for Jan 2020 Driven by India 

ByteDance

ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 

Chaoju

Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive 

Dida

Dida Pre-IPO – Making Hay While Big Brother Retreats 

Dida

Dida Pre-IPO – Earnings Forecast and First Stab at Valuation 

Dida

Dida Pre-IPO – Peer Comparison – Lagging in Scale, Leading in Profitability 

Intco Med

Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 

Kilcoy

Kilcoy Global Foods Pre-IPO – Rapid Earnings Growth on the Back of Margin Improvement 

Kilcoy

Kilcoy Global Foods Pre-IPO – A Lot of Things Still Remain Unexplained 

Kindstar

Kindstar (康圣环球) Pre-IPO: Issues with Scalability 

Kindstar

Kindstar (康圣环球) Pre-IPO: Is It Worth the Premium? 

RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Bio-heart Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
Youran Dairy China Youran Dairy(悠然牧业) Pre-IPO – A Leader Pulling Ahead in a Fragmented Market 
India
Aadhar Housing Aadhar Housing Finance Pre-IPO – Decent past Growth but Comes with Weird Disclosures 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food

Tencent Holdings – FHC Restructure On Its Way

By Thomas J. Monaco

*One Reorganization Down, One More To Go: Tencent Holdings (700.HK) [Tencent] announced a new round of organizational and employee adjustments in its Platform and Content Group (PCG) – the largest reshuffle since it began in 2018. With Alibaba Holdings (BABA] agreeing to form a financial holding company. Tencent cannot be far behind; and  

*Earnings To Decline, Capital Requirements To Increase: For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn, FinTech represents a growing 28.8% of revenue – and are key component of Tencent’s current and future results.  No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.


Japan Small Cap Growth: TeamSpirit – Better Days Ahead

By Mark Chadwick

Q2 Trading update 

  • TeamSpirit Inc (4397 JP)  reported 2Q FY8/21 earnings after the April 9 close. The stock price fell by around 20% following that and a full-year guidance cut.  
  • The market reacted to the slower than anticpated growth in licences, which is the key revenue driver. Full year sales estimates were cut 8% to ¥2.9b.  
  • We take a positive view of management reaffirming its growth strategy and stepping up marketing activities for the new enterprise product, TeamSpirit EX.  


Before it’s here, it’s on Smartkarma

Consumer: Thai Beverage, HLB Inc, Lawson Inc and more

By | Consumer, Daily Briefs

In today’s briefing:

  • ThaiBev BeerCo’s Deferred IPO -Beer Comparison – Sober Up
  • KOSDAQ Short/Loan Int: Pearl Abyss on Radar for Recent Bounce & Big Names KOSPI Moving
  • Lawson: Primed for Mitsubishi to Take Full Control
  • Thai Beverage: No Near Term Catalyst as BeerCo IPO Is Deferred. Value Buy or Value Trap?

ThaiBev BeerCo’s Deferred IPO -Beer Comparison – Sober Up

By Zhen Zhou, Toh

On 16th April, Thai Beverage (THBEV SP) announced it had decided to defer the Proposed Spin-off Listing of BeerCo, citing uncertain market conditions and volatile outlook.

We briefly looked at BeerCo’s valuation and ThaiBev’s holdco valuation in our previous note where we pointed out that management wanted an expensive valuation for BeerCo (~US$9bn) which we thought was hard to justify. 

In this note, we will compare BeerCo to its ASEAN and regional peers and discuss the reasons for the lukewarm demand from institutional investors.


KOSDAQ Short/Loan Int: Pearl Abyss on Radar for Recent Bounce & Big Names KOSPI Moving

By Sanghyun Park

KMW and HLB are at the top in both short and loan interests among the KOSDAQ stocks (excluding SillaJen).

KMW has a 4.83% short interest (as a % of SO), closely followed by HLB at 4.57%.

Not much change in their short interest, but KMW had a substantial weekly increase in its loan interest, +18.42% and +2.18%p. Its loan interest now sits at a whopping 18.42% of the SO.

Top 20 short interestTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Apam Corp073070#N/A2.41%0.00%0.00%p4.09%0.00%0.00%p
Sangsangin Co Ltd038540502.08%-4.34%-0.09%p4.11%-0.76%-0.03%p
Toptec Co Ltd1082301372.07%-1.95%-0.04%p4.05%0.60%0.02%p
NatureCell Co Ltd007390191.96%4.13%0.08%p5.31%-0.76%-0.04%p
Kuk Il Paper MFG Co Ltd078130171.92%3.92%0.07%p6.75%1.77%0.12%p
Komipharm International Co., Ltd.0419601281.84%-1.23%-0.02%p4.51%1.30%0.06%p
BH Co Ltd090460451.79%0.30%0.01%p4.90%0.96%0.05%p
Power Logics047310#N/A1.75%-0.12%0.00%p2.85%-7.12%-0.22%p
Innovation For Creative Devices Co Ltd040910#N/A1.73%-0.92%-0.02%p2.83%0.57%0.02%p
Korea Alcohol Industrial017890#N/A1.72%3.37%0.06%p2.99%0.00%0.00%p
Cancer Rop Co Ltd180400#N/A1.67%0.00%0.00%p1.98%-0.12%0.00%p
Curocom Co., Ltd.040350#N/A1.62%3.46%0.05%p2.84%0.00%0.00%p
MS Autotech Co Ltd123040#N/A1.50%0.12%0.00%p2.73%0.00%0.00%p
Hyundai Bioscience Co Ltd0484101481.49%-0.67%-0.01%p4.50%1.37%0.06%p
ACT Co Ltd (Chungcheongbuk-do)138360#N/A1.48%0.00%0.00%p1.98%0.00%0.00%p
Orbitech Co Ltd046120#N/A1.46%-1.78%-0.03%p2.04%0.39%0.01%p
STCube Inc052020781.45%0.82%0.01%p3.62%1.94%0.07%p
Chemtronics Co Ltd089010#N/A1.45%-1.14%-0.02%p3.23%-0.21%-0.01%p
Source: KRX & KOFIA
Top 20 loan balanceTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Easy Holdings Co Ltd0358101130.46%0.58%0.00%p8.08%3.57%0.28%p
Anterogen Co Ltd065660720.59%1.17%0.01%p7.44%-3.19%-0.25%p
Medipost Co Ltd078160420.84%-0.17%0.00%p7.36%1.90%0.14%p
Intops Co Ltd049070#N/A0.07%0.00%0.00%p7.33%-28.64%-2.94%p
Ecopro Co., Ltd.086520860.74%-5.99%-0.05%p7.04%1.68%0.12%p
Kuk Il Paper MFG Co Ltd078130171.92%3.92%0.07%p6.75%1.77%0.12%p
NHN KCP Corp06025090.09%23.86%0.02%p6.72%2.53%0.17%p
Jusung Engineering Co., Ltd.0369301180.42%-9.99%-0.05%p6.52%2.24%0.14%p
PearlAbyss Corp2637501420.43%284.98%0.32%p6.52%394.02%5.20%p
Seegene Inc096530660.67%-2.59%-0.02%p6.16%23.97%1.19%p
PARTRON Co Ltd0917001411.41%-26.86%-0.52%p6.11%12.15%0.66%p
Genic Co Ltd123330#N/A0.33%0.00%0.00%p6.07%-0.13%-0.01%p
TSE Co Ltd131290#N/A0.07%0.00%0.00%p5.88%-11.63%-0.77%p
MedyTox Inc086900410.60%2.17%0.01%p5.86%-0.01%0.00%p
DAWONSYS CO., LTD068240260.76%1.00%0.01%p5.86%-6.62%-0.41%p
JYP Entertainment Corp03590060.57%96.86%0.28%p5.84%-1.89%-0.11%p
Cafe24 Corp0420001231.21%10.81%0.12%p5.59%1.83%0.10%p
L&K Biomed Co Ltd156100#N/A0.05%53.16%0.02%p5.35%-0.79%-0.04%p
Source: KRX & KOFIA

In the run-up to the May 3 short-selling resumption, we should probably focus on gainers in loan interest, which often serves as a leading indicator of short-selling.

Last week, the biggest gainer was Pearl Abyss, with a 5.2%p increase to 6.52% of the SO. Kyhyoung and KMW follow distantly, with 3.24%p and 2.18%p, respectively.

The market seems to be interested in shorting Pearl Abyss on the recent bounce, largely resulting from the stock split event.

Top 20 loan balance gainersTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
PearlAbyss Corp2637501420.43%284.98%0.32%p6.52%394.02%5.20%p
Kohyoung Technology Inc098460151.10%387.22%0.87%p4.04%405.32%3.24%p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
Victek Co., Ltd.065450#N/A0.19%-73.11%-0.53%p2.64%132.44%1.51%p
Seegene Inc096530660.67%-2.59%-0.02%p6.16%23.97%1.19%p
Ace Technologies Corp.088800810.82%-0.75%-0.01%p3.67%40.14%1.05%p
HLB Life Science Co Ltd067630831.32%-1.60%-0.02%p4.62%23.87%0.89%p
Bosung Power Technology Co., Ltd.006910#N/A1.05%-0.11%0.00%p2.43%51.56%0.83%p
Alteogen Inc196170740.26%39.89%0.07%p3.20%34.31%0.82%p
Helixmith Co Ltd0849901470.78%-0.71%-0.01%p4.89%15.94%0.67%p
PARTRON Co Ltd0917001411.41%-26.86%-0.52%p6.11%12.15%0.66%p
Deutsch Motors Inc067990#N/A0.89%2.00%0.02%p2.81%29.96%0.65%p
Kakao Games Corp2934901220.00%-100.00%-0.01%p4.08%18.68%0.64%p
Youngsin Metal Industrial007530#N/A0.00%#DIV/0!0.00%p0.98%171.75%0.62%p
Eone Diagnomics Genome Center Co Ltd245620#N/A0.32%127.91%0.18%p1.46%69.18%0.60%p
Huons Global Co Ltd084110#N/A0.08%-10.97%-0.01%p1.23%85.37%0.57%p
FORMETAL CO., LTD.119500#N/A0.00%#DIV/0!0.00%p2.11%36.06%0.56%p
LET Co Ltd297890#N/A0.00%#DIV/0!0.00%p0.52%#DIV/0!0.52%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Fantagio Corp032800#N/A0.31%400.00%0.25%p0.58%307.70%0.44%p
Source: KRX & KOFIA

Lawson: Primed for Mitsubishi to Take Full Control

By Oshadhi Kumarasiri

Mitsubishi Corp (8058 JP) has had a longstanding interest in Japan’s third largest convenience store chain, Lawson Inc (2651 JP), for quite some time, lifting its stake in Lawson to 50.1% from 33.4% in 2016 via a tender offer at ¥8,650 per share.

With Itochu Corp (8001 JP) acquiring 100% of FamilyMart Co Ltd (8028 JP) mid-way through last year and Seven & I Holdings (3382 JP) standing strong on its own, Lawson has become even more important to Mitsubishi’s food processing and distribution businesses. At 1.35x Topix, Lawson is currently trading at a new historical low level relative to the Topix index and could perhaps lure Mitsubishi into taking full control.


Thai Beverage: No Near Term Catalyst as BeerCo IPO Is Deferred. Value Buy or Value Trap?

By Devi Subhakesan

Thai Beverage (THBEV SP) has deferred the earlier proposed listing of BeerCo, it’s subsidiary that holds beer assets in Vietnam and Thailand, citing current uncertain market conditions and volatile outlook, aggravated by the worsening COVID-19 pandemic in Thailand and other countries. This upends our bullish view on the stock ( Thai Beverage: Bouncy 1QFY21 Can Fire up the Stock; 20% Upside on SOTP ) as we see little upside to the stock in the near term with no catalyst to trigger a valuation upside. Recent reports of a third wave of infections in Thailand has led to Government imposing fresh restrictions including a ban on sale of alcohol in restaurants, adding further concerns on a protracted revival in tourism. 

In this insight we discuss Thai Beverage (THBEV SP) ‘s valuation to assess what is priced in the stock and discuss  investment view on the stock at current levels.


Before it’s here, it’s on Smartkarma

Financials: China Huarong Asset Management, Citigroup Inc, iShares Barclays USD Asia High Yield Bond Index ETF, Bank Of America and more

By | Daily Briefs, Financials

In today’s briefing:

  • China Huarong Asset Management  – Ratings Agencies Fail Us Again
  • Citigroup – Shifting Winds
  • Bank Credit Weekly: Narrative Change Pushes Carry-Trade Unwind as Treasuries Rally
  • Bank of America – Not Exactly A Shining Result

China Huarong Asset Management  – Ratings Agencies Fail Us Again

By Thomas J. Monaco

*Another Potential Default:  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 

*Ratings Agencies Are More Than Culpable: Wouldn’t you know it, the sleepy, fee hungry ratings agencies (Standard & Poors, Moody’s, and Fitch Ratings) finally put Huarong on review for a potential downgrade. C’mon guys, where have you been?


Citigroup – Shifting Winds

By Thomas J. Monaco

*Results Materially Supported By Provision Reversals and Principal Transactions: Citigroup (C.US) [Citi] reported 1Q21 bottom-line results of USD 7.6 bn, increasing USD 3.7 bn (89.0%) linked quarter. Citi reversed provisions of USD 2.1 bn – increasing 43.7x versus 4Q20. In addition to the negative provision, Citi’s results were also supported by a USD 2.0 bn (99.7%) increase in principal transaction gains;

*Credit Weaker But Coverage Strong: Net new NPLs came in about 1/3 of the previous quarter’s result came in at USD 635 mn or increasing 48.0% on an annualized basis – still far worse than JPM for the last three consecutive quarters. Citi’s loan loss reserve declined to 422% of NPLs and 325 bp of total loans – but still pretty darn good for the known and potential risk in the loan portfolio; and 

*Puzzling EM Exit: Citi also announced strategic changes in the Global Consumer Bank (GCB), where they are exiting 13 markets, of which ten are in Asia-Pacific. As rationale for the move, new CEO Jane Fraser believe that Citi “does not have the scale” to compete in those markets which account for USD 7 bn in allocated equity and USD 70 bn in loans. We await clarity on the potential restructuring costs and the capital release from these divestitures.


Bank Credit Weekly: Narrative Change Pushes Carry-Trade Unwind as Treasuries Rally

By Hank Calenti, CFA

Executive Summary: The narrative has changed and there is little to stand in the way of further Treasury market strength near term. This should lead to US dollar weakness and may be Emerging Market risk asset supportive. Nonetheless, we suspect that Asia will remain driven by concerns that China is tightening which could constrain investor sentiment in this market.

Trading volume-, Treasury issuance- and economic data-risks were no match for short-position unwinding, data reappraisal, and Japanese investor re-entry into the Treasury bond market over the last week. Treasury yields continued their retracement, posting their biggest weekly rally since August. Furthermore, after the worst quarter since 1980, Treasuries have gained around 1% this month, paring 2021 losses to about 3.3%. We may have seen a sell-the-rumor, buy-the-fact market event occur with respect to Treasuries and the better-than-expected March economic data set.

The narrative has changed to one that is Treasury bond supportive. Fixed income markets are discounting lower economic growth and price expectations. Scenarios with a declining growth rate may be increasingly discounted in the Treasury markets. With GDP growth anticipated to tail-off over the next few quarters, sustainable wage growth may not materialize. Meanwhile, supply chain bottlenecks and rising producer prices may negatively impact corporate margins rather than consumer wallets. We elaborate on each of these themes within.

Against this backdrop, there are limited economic announcements which could impact the Treasury market over the next few weeks. Meanwhile, Japanese investors may find buying US$ denominated bonds attractive after hedging the currency risk. This may be risk asset supportive going forward.  We review this inside.

In the bank credit markets, March’s carry trade outperformance continued to unwind as shorter-duration bonds outperformed during the week. All recent higher coupon outperformers experienced large spread declines. Even the Turkish bank credit curve behaved in a manner consistent with other bonds globally, rather than trade at a discount. We identify the winners and losers.

In China, while the immediate threat of Credit Armageddon may be lower, the ultimate game plan for China Huarong Asset Management is yet to be known. As such, the market may remain skittish while trading opportunities remain amongst the other asset management companies. Please see: China Huarong: Contagion Creates Opportunity for more details.

US banks set a high bar for performance by announcing stellar investment banking and progressively improving core banking results last week. Then they signaled that they anticipate significantly higher interest rates later this year by hitting the market for record breaking amounts. Middle East- and Asia-headquartered banks may lead the headlines next week. Amongst major European names, only Credit Suisse is scheduled to provide final Q1 results on Tuesday, 20 April. For our thoughts, please see: Credit Suisse: Skating on a Thin Layer of Capital.

Market Outlook: Already looking past upcoming spikes in inflation and job creation, the Treasury market is repricing for lower growth and lower rates over a longer time-period. This should be risk asset supportive as the US dollar finally weakens. The risk is that of impotent monetary policy and a constrained fiscal response in a shorter than expected business cycle.  


Bank of America – Not Exactly A Shining Result

By Thomas J. Monaco

*Results Better, But Likely Unsustainable: Bank of America (BAC.US) [BAC] reported 1Q21 bottom-line results of USD 7.6 bn, increasing USD 2.4 bn (45.2%) linked quarter. Results were driven by two factors: a) a negative USD 1.9 bn, in contravention to overall credit performance; and b) a USD 2.1 bn (147.3%) increase trading activities, the sustainability of which we call into question; and

*BAC Still Needs To Focus On Credit Quality: Given the USD 774 mn in NCOs (33 bp annualized of total loans), we note that net new NPLs reversed course – increasing a a high 74.8% on an annualized basis. JPM and Citigroup each reported declines. Relative to NPLs, however, reserves – while still significant – declined 67.4% to 3.00x while declining 24 bp to 1.79% against total loans.


Before it’s here, it’s on Smartkarma

South Korea: HLB Inc, SK Bioscience and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSDAQ Short/Loan Int: Pearl Abyss on Radar for Recent Bounce & Big Names KOSPI Moving
  • SK BioS Lockup Release Today: FO Drop Can Signal a Tight Supply for Passive Mirroring K200

KOSDAQ Short/Loan Int: Pearl Abyss on Radar for Recent Bounce & Big Names KOSPI Moving

By Sanghyun Park

KMW and HLB are at the top in both short and loan interests among the KOSDAQ stocks (excluding SillaJen).

KMW has a 4.83% short interest (as a % of SO), closely followed by HLB at 4.57%.

Not much change in their short interest, but KMW had a substantial weekly increase in its loan interest, +18.42% and +2.18%p. Its loan interest now sits at a whopping 18.42% of the SO.

Top 20 short interestTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Apam Corp073070#N/A2.41%0.00%0.00%p4.09%0.00%0.00%p
Sangsangin Co Ltd038540502.08%-4.34%-0.09%p4.11%-0.76%-0.03%p
Toptec Co Ltd1082301372.07%-1.95%-0.04%p4.05%0.60%0.02%p
NatureCell Co Ltd007390191.96%4.13%0.08%p5.31%-0.76%-0.04%p
Kuk Il Paper MFG Co Ltd078130171.92%3.92%0.07%p6.75%1.77%0.12%p
Komipharm International Co., Ltd.0419601281.84%-1.23%-0.02%p4.51%1.30%0.06%p
BH Co Ltd090460451.79%0.30%0.01%p4.90%0.96%0.05%p
Power Logics047310#N/A1.75%-0.12%0.00%p2.85%-7.12%-0.22%p
Innovation For Creative Devices Co Ltd040910#N/A1.73%-0.92%-0.02%p2.83%0.57%0.02%p
Korea Alcohol Industrial017890#N/A1.72%3.37%0.06%p2.99%0.00%0.00%p
Cancer Rop Co Ltd180400#N/A1.67%0.00%0.00%p1.98%-0.12%0.00%p
Curocom Co., Ltd.040350#N/A1.62%3.46%0.05%p2.84%0.00%0.00%p
MS Autotech Co Ltd123040#N/A1.50%0.12%0.00%p2.73%0.00%0.00%p
Hyundai Bioscience Co Ltd0484101481.49%-0.67%-0.01%p4.50%1.37%0.06%p
ACT Co Ltd (Chungcheongbuk-do)138360#N/A1.48%0.00%0.00%p1.98%0.00%0.00%p
Orbitech Co Ltd046120#N/A1.46%-1.78%-0.03%p2.04%0.39%0.01%p
STCube Inc052020781.45%0.82%0.01%p3.62%1.94%0.07%p
Chemtronics Co Ltd089010#N/A1.45%-1.14%-0.02%p3.23%-0.21%-0.01%p
Source: KRX & KOFIA
Top 20 loan balanceTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Easy Holdings Co Ltd0358101130.46%0.58%0.00%p8.08%3.57%0.28%p
Anterogen Co Ltd065660720.59%1.17%0.01%p7.44%-3.19%-0.25%p
Medipost Co Ltd078160420.84%-0.17%0.00%p7.36%1.90%0.14%p
Intops Co Ltd049070#N/A0.07%0.00%0.00%p7.33%-28.64%-2.94%p
Ecopro Co., Ltd.086520860.74%-5.99%-0.05%p7.04%1.68%0.12%p
Kuk Il Paper MFG Co Ltd078130171.92%3.92%0.07%p6.75%1.77%0.12%p
NHN KCP Corp06025090.09%23.86%0.02%p6.72%2.53%0.17%p
Jusung Engineering Co., Ltd.0369301180.42%-9.99%-0.05%p6.52%2.24%0.14%p
PearlAbyss Corp2637501420.43%284.98%0.32%p6.52%394.02%5.20%p
Seegene Inc096530660.67%-2.59%-0.02%p6.16%23.97%1.19%p
PARTRON Co Ltd0917001411.41%-26.86%-0.52%p6.11%12.15%0.66%p
Genic Co Ltd123330#N/A0.33%0.00%0.00%p6.07%-0.13%-0.01%p
TSE Co Ltd131290#N/A0.07%0.00%0.00%p5.88%-11.63%-0.77%p
MedyTox Inc086900410.60%2.17%0.01%p5.86%-0.01%0.00%p
DAWONSYS CO., LTD068240260.76%1.00%0.01%p5.86%-6.62%-0.41%p
JYP Entertainment Corp03590060.57%96.86%0.28%p5.84%-1.89%-0.11%p
Cafe24 Corp0420001231.21%10.81%0.12%p5.59%1.83%0.10%p
L&K Biomed Co Ltd156100#N/A0.05%53.16%0.02%p5.35%-0.79%-0.04%p
Source: KRX & KOFIA

In the run-up to the May 3 short-selling resumption, we should probably focus on gainers in loan interest, which often serves as a leading indicator of short-selling.

Last week, the biggest gainer was Pearl Abyss, with a 5.2%p increase to 6.52% of the SO. Kyhyoung and KMW follow distantly, with 3.24%p and 2.18%p, respectively.

The market seems to be interested in shorting Pearl Abyss on the recent bounce, largely resulting from the stock split event.

Top 20 loan balance gainersTickerK150Short1W Δ1W Δ %pLoan1W Δ1W Δ %p
PearlAbyss Corp2637501420.43%284.98%0.32%p6.52%394.02%5.20%p
Kohyoung Technology Inc098460151.10%387.22%0.87%p4.04%405.32%3.24%p
KMW Co Ltd0325001264.83%-0.10%0.00%p14.02%18.42%2.18%p
Victek Co., Ltd.065450#N/A0.19%-73.11%-0.53%p2.64%132.44%1.51%p
Seegene Inc096530660.67%-2.59%-0.02%p6.16%23.97%1.19%p
Ace Technologies Corp.088800810.82%-0.75%-0.01%p3.67%40.14%1.05%p
HLB Life Science Co Ltd067630831.32%-1.60%-0.02%p4.62%23.87%0.89%p
Bosung Power Technology Co., Ltd.006910#N/A1.05%-0.11%0.00%p2.43%51.56%0.83%p
Alteogen Inc196170740.26%39.89%0.07%p3.20%34.31%0.82%p
Helixmith Co Ltd0849901470.78%-0.71%-0.01%p4.89%15.94%0.67%p
PARTRON Co Ltd0917001411.41%-26.86%-0.52%p6.11%12.15%0.66%p
Deutsch Motors Inc067990#N/A0.89%2.00%0.02%p2.81%29.96%0.65%p
Kakao Games Corp2934901220.00%-100.00%-0.01%p4.08%18.68%0.64%p
Youngsin Metal Industrial007530#N/A0.00%#DIV/0!0.00%p0.98%171.75%0.62%p
Eone Diagnomics Genome Center Co Ltd245620#N/A0.32%127.91%0.18%p1.46%69.18%0.60%p
Huons Global Co Ltd084110#N/A0.08%-10.97%-0.01%p1.23%85.37%0.57%p
FORMETAL CO., LTD.119500#N/A0.00%#DIV/0!0.00%p2.11%36.06%0.56%p
LET Co Ltd297890#N/A0.00%#DIV/0!0.00%p0.52%#DIV/0!0.52%p
HLB Inc028300824.57%1.26%0.06%p10.92%4.51%0.47%p
Fantagio Corp032800#N/A0.31%400.00%0.25%p0.58%307.70%0.44%p
Source: KRX & KOFIA

SK BioS Lockup Release Today: FO Drop Can Signal a Tight Supply for Passive Mirroring K200

By Sanghyun Park

The second batch of the lockup releases hit the market today on Monday.

3,118,610 shares represent 4.08% of the SO and 24.71% of the offering allocation, bringing up the float total from 12.11% to 16.19%.

This would be the first real overhang test on the price. 

SK BioS lockup expirationsQty% of SO% of allocationAccuDate
1 year5.87%100.00%2022-03-19
6 months3,948,10073.59%31.28%94.13%2021-09-19
3 months3,331,0004.35%26.39%20.54%2021-06-19
1 month3,118,6104.08%24.71%16.19%2021-04-19
15 days364,3800.48%2.89%12.11%2021-04-02
Immediate8,897,51011.63%11.63%2021-03-18
Source: KRX & DART

Before it’s here, it’s on Smartkarma

Equity Capital Markets: Thai Beverage, ByteDance, Lodha Developers, Zhaoke Ophthalmology Pharmaceutical and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • ThaiBev BeerCo’s Deferred IPO -Beer Comparison – Sober Up
  • ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor
  • Macrotech (Lodha) Developers IPO Trading – Locals, Including Employees, Give It a Miss
  • Zhaoke Opthalmology IPO Valuation: Overpriced

ThaiBev BeerCo’s Deferred IPO -Beer Comparison – Sober Up

By Zhen Zhou, Toh

On 16th April, Thai Beverage (THBEV SP) announced it had decided to defer the Proposed Spin-off Listing of BeerCo, citing uncertain market conditions and volatile outlook.

We briefly looked at BeerCo’s valuation and ThaiBev’s holdco valuation in our previous note where we pointed out that management wanted an expensive valuation for BeerCo (~US$9bn) which we thought was hard to justify. 

In this note, we will compare BeerCo to its ASEAN and regional peers and discuss the reasons for the lukewarm demand from institutional investors.


ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor

By Zhen Zhou, Toh

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Asia ECM pipeline continued to build up this week. Grab announced the details of its SPAC listing with a target market value of about US$40bn. The company will raise more than US$4bn proceeds from a fully committed PIPE which include BlackRock, MSIM, T. Rowe Price, Fidelity, Janus Henderson, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek. We shared our initial thoughts in:

In Hong Kong, it was reported that ByteDance has kicked off IPO preparations for some of its main businesses, which includes Douyin. The company was still deliberating on the listing venue but it is likely that it will conduct a separate listing of its overseas assets.

Dida re-filed with HKEX after its initial application from October last year lapsed last week. The company is probably trying to get ahead of Didi Chuxing’s listing as the latter filed confidentially for a US listing last week. There were also news reports of SF REIT looking to pre-market this month and JD Logistics will be seeing listing approval at the end of this month.

Trip.com’s secondary listing in Hong Kong will debut on Monday and the company’s ADR corrected in line with our earlier expectation but the spread out allocation might weigh on near-term performance.

Our upcoming IPO coverage this week centered around Healthcare names. Zhaoke Ophthalmology Pharma (6622 HK) launched its bookbuild on Friday and it is expected to price this coming Wednesday. 

We also looked at We Doctor, Bio-Thera, Medlive, and Edding Group. :

In the US, Waterdrop Inc prospectus is publicly filed with the SEC. The online insurance technology company is looking to raise about US$500m but there had been news reports that the company was facing pushback from local regulators. 

Aside from Didi Chuxing, Ximalaya FM also filed confidentially for up to US$1bn IPO. Soulgate, a Chinese social networking app operator, and Keep, a Chinese fitness app are looking to file their prospectuses this month. 

This week we took a brief look at TuSimple, a pre-commercialization autonomous technology vendor for truck freights, before it debuted on Thursday.  

In Thailand, Ngern Tid Lor (NTL TB), launched its US$1bn bookbuild. Books will close on 27th April.

In the Philippines, we followed-up with a peer comparison of Monde Nissin against competitors. 

Singapore ECM suffered a setback this week.  ThaiBev announced on Friday that they have decided to defer the Proposed Spin-off listing of BeerCo citing uncertain market conditions and volatile outlook. We had discussed management’s valuation expectation of BeerCo vs. the likely valuation it can command in our earlier note. Core REIT has also shelved its IPO citing weak demand and volatile market conditions.

Placements were spread out over the past week, with Regis Resources (RRL AU) in Australia and Lasalle Logiport Reit (3466 JP) in Japan. Kakao Corp (035720 KS)’s founder  sold about US$450m worth of shares.

Credits to Clarence Chu for helping out with the Weekly Update.

Accuracy Rate:

Our overall accuracy rate is 73.9% for IPOs and 67.2% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings this week

  • Dida (HK, US$500m, refiled)
  • Shanghai Hanyu Medical Technology Co., Ltd (HK, US$500m)
  • Waterdrop Inc (The U.S, US$500m)
  • Shriram Properties (India, US$100m)
  • G R Infraprojects (India, US$100m)

News on Upcoming IPOs

Hong Kong/China

U.S.

India

Others

Analysis on Upcoming IPOs

NameInsight
Hong Kong
Betta Pharma

Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 

ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

ByteDance

ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 

ByteDance

ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) Pre-IPO – Globally the Most Downloaded App for Jan 2020 Driven by India 

ByteDance

ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 

Chaoju

Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive 

Dida

Dida Pre-IPO – Making Hay While Big Brother Retreats 

Dida

Dida Pre-IPO – Earnings Forecast and First Stab at Valuation 

Dida

Dida Pre-IPO – Peer Comparison – Lagging in Scale, Leading in Profitability 

Intco Med

Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 

Kilcoy

Kilcoy Global Foods Pre-IPO – Rapid Earnings Growth on the Back of Margin Improvement 

Kilcoy

Kilcoy Global Foods Pre-IPO – A Lot of Things Still Remain Unexplained 

Kindstar

Kindstar (康圣环球) Pre-IPO: Issues with Scalability 

Kindstar

Kindstar (康圣环球) Pre-IPO: Is It Worth the Premium? 

RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Bio-heart Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
Youran Dairy China Youran Dairy(悠然牧业) Pre-IPO – A Leader Pulling Ahead in a Fragmented Market 
India
Aadhar Housing Aadhar Housing Finance Pre-IPO – Decent past Growth but Comes with Weird Disclosures 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food

Macrotech (Lodha) Developers IPO Trading – Locals, Including Employees, Give It a Miss

By Sumeet Singh

Macrotech Developers (Lodha) raised around US$345m in its India IPO and will start trading later today.

In this note, we’ll talk about deal updates.


Zhaoke Opthalmology IPO Valuation: Overpriced

By Shifara Samsudeen, ACMA, CGMA

The Chinese ophthalmic pharmaceutical company, Zhaoke Ophthalmology Pharmaceutical (6622 HK)  has set the terms for its HK IPO. The company plans to issue 123.6m shares at an indicative IPO price range of HK$15.38-16.8 per share and at the midpoint of the IPO price range of HK$16.09 per share, the company will receive net proceeds of HK$1,858m (US$239m).

Zhaoke Opthalmology IPO Details

No. of Shares Issued

                      123,567,500

IPO Price per Share (HK$)

15.38-16.80

Offer as a % of Outstanding Shares

23.09%

Total Shares Outstanding

535,155,500

Net Proceeds (HK$m)

1,857.80

Market Capitalisation (HK$m)

8,610.65

Enterprise Value (HK$m)

6,687.24

Source: Company disclosures, LSR (Net proceeds, market cap and EV are at the midpoint of the IPO price range, EV is after adjusting for net cash and net IPO proceeds)

The company also has entered into cornerstone investment agreements with CaaS Capital Master Fund, GIC Private Limited, Golden Valley Global and several other investors who have agreed to buy approx. 21.51% (at the midpoint) of the offer shares or approx. HK$427.8m of the offering.

Zhaoke plans to use approx. 32% of the net IPO proceeds for clinical development and commercialisation of its core products. Another 46% of the net proceeds will be used to fund the ongoing R&D activities and 7% of the IPO proceeds will be invested on expanding the production line of its Nansha Manufacturing facility in anticipation of upcoming product launches.


Before it’s here, it’s on Smartkarma

United States: Citigroup Inc, Bank Of America and more

By | Daily Briefs, United States

In today’s briefing:

  • Citigroup – Shifting Winds
  • Bank of America – Not Exactly A Shining Result

Citigroup – Shifting Winds

By Thomas J. Monaco

*Results Materially Supported By Provision Reversals and Principal Transactions: Citigroup (C.US) [Citi] reported 1Q21 bottom-line results of USD 7.6 bn, increasing USD 3.7 bn (89.0%) linked quarter. Citi reversed provisions of USD 2.1 bn – increasing 43.7x versus 4Q20. In addition to the negative provision, Citi’s results were also supported by a USD 2.0 bn (99.7%) increase in principal transaction gains;

*Credit Weaker But Coverage Strong: Net new NPLs came in about 1/3 of the previous quarter’s result came in at USD 635 mn or increasing 48.0% on an annualized basis – still far worse than JPM for the last three consecutive quarters. Citi’s loan loss reserve declined to 422% of NPLs and 325 bp of total loans – but still pretty darn good for the known and potential risk in the loan portfolio; and 

*Puzzling EM Exit: Citi also announced strategic changes in the Global Consumer Bank (GCB), where they are exiting 13 markets, of which ten are in Asia-Pacific. As rationale for the move, new CEO Jane Fraser believe that Citi “does not have the scale” to compete in those markets which account for USD 7 bn in allocated equity and USD 70 bn in loans. We await clarity on the potential restructuring costs and the capital release from these divestitures.


Bank of America – Not Exactly A Shining Result

By Thomas J. Monaco

*Results Better, But Likely Unsustainable: Bank of America (BAC.US) [BAC] reported 1Q21 bottom-line results of USD 7.6 bn, increasing USD 2.4 bn (45.2%) linked quarter. Results were driven by two factors: a) a negative USD 1.9 bn, in contravention to overall credit performance; and b) a USD 2.1 bn (147.3%) increase trading activities, the sustainability of which we call into question; and

*BAC Still Needs To Focus On Credit Quality: Given the USD 774 mn in NCOs (33 bp annualized of total loans), we note that net new NPLs reversed course – increasing a a high 74.8% on an annualized basis. JPM and Citigroup each reported declines. Relative to NPLs, however, reserves – while still significant – declined 67.4% to 3.00x while declining 24 bp to 1.79% against total loans.


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Shenzhen Expressway Co H and more

By | Daily Briefs, Industrials

In today’s briefing:

  • How Much of Toshiba Is Owned By “Activists”?
  • Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)

How Much of Toshiba Is Owned By “Activists”?

By Travis Lundy

This should be considered a Big Question in terms of the Power Dynamics of Shareholders vs Management in the last EGM and the upcoming AGM.

It is difficult to know exactly.

It may also be difficult to define.

It is important to note that the Record Date of the recent EGM was 1 February and in the month after that, nearly 10% of shares out will have changed hands from one type of investor to another. 

It is also important to note that Toshiba directors, if they had chosen to know, could have known a few days into April (before the 6 April CVC approach) with some degree of clarity what the shape of the shareholder base looked like as of 31 March. Most of the rest of us have to wait until the yuho is released near end-June. 

This insight takes a look at the Shareholder Structure as of a point in time when we knew it, and compares it to the rest of MSCI Japan and TOPIX. Then we look at what MIGHT HAVE HAPPENED because of recent float ownership changes and whether that changes anything.


Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)

By Osbert Tang, CFA

Shenzhen Expressway Co H (548 HK) announced a positive profit alert for 1Q21, indicating that its recurring profit will reach about Rmb533m, versus losses of Rmb160m a year ago as the impact of COVID-19 subsided. More importantly, such profit indication is even 10.2% higher than 1Q19, suggesting a full-recovery in traffic and toll revenue momentum.

SZ Exp contributed 44.3% of Shenzhen Intl (152 HK)‘s recurring profit (ex-Shenzhen Airlines) in the last two years. The potential acquisition of Shenzhen Investment Holdings Bay Area Development (737 HK) has received waiver from the SFC for a mandatory general offer and a successful conclusion should beef up SZ Exp’s assets. Lastly, with SZ Exp’s target of an estimated 35% increase in its EBITDA, we believe these factors will support SZ Exp’s contribution to SZ Int’s profit outlook in this year.


Before it’s here, it’s on Smartkarma

Macro: A Blow-Off Top Ahead? and more

By | Daily Briefs, Macro

In today’s briefing:

  • A Blow-Off Top Ahead?
  • Russia:  Overweight Risk as Ukraine Tensions Rise

A Blow-Off Top Ahead?

By Cam Hui

The S&P 500 has been rising steadily since late February. As the stock market advanced, readings became increasingly overbought. The S&P 500 has spent two consecutive weeks above its weekly Bollinger Band (BB). Past upper BB episodes have tended to be signals of positive momentum that led to further gains. The market spent several months on an upper BB ride in late 2017 and early 2018 before it finally topped out.

It appears the S&P 500 is undergoing another melt-up, with a blow-off top ahead. In the past, overruns of a rising trend line have been signals of an imminent blow-off top that lasts no more than two weeks.

Despite our near-term caution, we expect any pullback to be no more than 5–10%. This is still a bull market. Both the Dow Jones Industrials and Transports have achieved fresh all-time highs, which are classic Dow Theory buy signals.

Investors should view any weakness as buying opportunities. Traders should be positioned for a possible blow-off top, followed by a sharp pullback.


Russia:  Overweight Risk as Ukraine Tensions Rise

By Steven Holden

Russia is the largest country overweight among active Emerging Market funds.  The average holding weight of 4.11% represents an overweight of 1.04% above the iShares MSCI Emerging Markets ETF weight (cash adjusted).

In the wake of new US sanctions and troops gathering on the Ukraine border, the key stock risks to active investors are overweight positions in Sberbank Of Russia Pjsc (SBER LI), LUKOIL PJSC (LUKOY US) and Yandex (YNDX US), with over 80% of the funds in our analysis holding one or more of these stocks.

The 2014 annexation of Crimea provides a useful insight in to the behavior of active investors during a period of political uncertainty.  EM investors were quick to react, reducing Russia exposure by 4.26% over the course of the year and over a quarter of funds moving from overweight to underweight.  Whether this situation reaches the heights of 2014 remains to be seen, but do not underestimate an active manager’s willingness to cut or reduce allocations when the investment case becomes muddied by political events. 


Before it’s here, it’s on Smartkarma

China: China Huarong Asset Management, Tencent Holdings, ByteDance, Jiangsu Hengrui Medicine, Shenzhen Expressway Co H, Link REIT, Zhaoke Ophthalmology Pharmaceutical, Kwg Property Holding and more

By | China, Daily Briefs

In today’s briefing:

  • China Huarong Asset Management  – Ratings Agencies Fail Us Again
  • Tencent Holdings – FHC Restructure On Its Way
  • ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor
  • Jiangsu Hengrui Medicine (600276.CH) – Insights on Recent Pullback and Future Business Prospects
  • Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)
  • Link REIT – Cash Burning Holes
  • Zhaoke Opthalmology IPO Valuation: Overpriced
  • Morning Views Asia: KWG Living Group, Sunac China Holdings

China Huarong Asset Management  – Ratings Agencies Fail Us Again

By Thomas J. Monaco

*Another Potential Default:  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 

*Ratings Agencies Are More Than Culpable: Wouldn’t you know it, the sleepy, fee hungry ratings agencies (Standard & Poors, Moody’s, and Fitch Ratings) finally put Huarong on review for a potential downgrade. C’mon guys, where have you been?


Tencent Holdings – FHC Restructure On Its Way

By Thomas J. Monaco

*One Reorganization Down, One More To Go: Tencent Holdings (700.HK) [Tencent] announced a new round of organizational and employee adjustments in its Platform and Content Group (PCG) – the largest reshuffle since it began in 2018. With Alibaba Holdings (BABA] agreeing to form a financial holding company. Tencent cannot be far behind; and  

*Earnings To Decline, Capital Requirements To Increase: For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn, FinTech represents a growing 28.8% of revenue – and are key component of Tencent’s current and future results.  No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.


ECM Weekly (18th April 2021) – ByteDance Zhaoke, We Doctor, Medlive, Bio-Thera, Grab, Ngern Tid Lor

By Zhen Zhou, Toh

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Asia ECM pipeline continued to build up this week. Grab announced the details of its SPAC listing with a target market value of about US$40bn. The company will raise more than US$4bn proceeds from a fully committed PIPE which include BlackRock, MSIM, T. Rowe Price, Fidelity, Janus Henderson, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek. We shared our initial thoughts in:

In Hong Kong, it was reported that ByteDance has kicked off IPO preparations for some of its main businesses, which includes Douyin. The company was still deliberating on the listing venue but it is likely that it will conduct a separate listing of its overseas assets.

Dida re-filed with HKEX after its initial application from October last year lapsed last week. The company is probably trying to get ahead of Didi Chuxing’s listing as the latter filed confidentially for a US listing last week. There were also news reports of SF REIT looking to pre-market this month and JD Logistics will be seeing listing approval at the end of this month.

Trip.com’s secondary listing in Hong Kong will debut on Monday and the company’s ADR corrected in line with our earlier expectation but the spread out allocation might weigh on near-term performance.

Our upcoming IPO coverage this week centered around Healthcare names. Zhaoke Ophthalmology Pharma (6622 HK) launched its bookbuild on Friday and it is expected to price this coming Wednesday. 

We also looked at We Doctor, Bio-Thera, Medlive, and Edding Group. :

In the US, Waterdrop Inc prospectus is publicly filed with the SEC. The online insurance technology company is looking to raise about US$500m but there had been news reports that the company was facing pushback from local regulators. 

Aside from Didi Chuxing, Ximalaya FM also filed confidentially for up to US$1bn IPO. Soulgate, a Chinese social networking app operator, and Keep, a Chinese fitness app are looking to file their prospectuses this month. 

This week we took a brief look at TuSimple, a pre-commercialization autonomous technology vendor for truck freights, before it debuted on Thursday.  

In Thailand, Ngern Tid Lor (NTL TB), launched its US$1bn bookbuild. Books will close on 27th April.

In the Philippines, we followed-up with a peer comparison of Monde Nissin against competitors. 

Singapore ECM suffered a setback this week.  ThaiBev announced on Friday that they have decided to defer the Proposed Spin-off listing of BeerCo citing uncertain market conditions and volatile outlook. We had discussed management’s valuation expectation of BeerCo vs. the likely valuation it can command in our earlier note. Core REIT has also shelved its IPO citing weak demand and volatile market conditions.

Placements were spread out over the past week, with Regis Resources (RRL AU) in Australia and Lasalle Logiport Reit (3466 JP) in Japan. Kakao Corp (035720 KS)’s founder  sold about US$450m worth of shares.

Credits to Clarence Chu for helping out with the Weekly Update.

Accuracy Rate:

Our overall accuracy rate is 73.9% for IPOs and 67.2% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings this week

  • Dida (HK, US$500m, refiled)
  • Shanghai Hanyu Medical Technology Co., Ltd (HK, US$500m)
  • Waterdrop Inc (The U.S, US$500m)
  • Shriram Properties (India, US$100m)
  • G R Infraprojects (India, US$100m)

News on Upcoming IPOs

Hong Kong/China

U.S.

India

Others

Analysis on Upcoming IPOs

NameInsight
Hong Kong
Betta Pharma

Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 

ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

ByteDance

ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 

ByteDance

ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) Pre-IPO – Globally the Most Downloaded App for Jan 2020 Driven by India 

ByteDance

ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 

Chaoju

Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive 

Dida

Dida Pre-IPO – Making Hay While Big Brother Retreats 

Dida

Dida Pre-IPO – Earnings Forecast and First Stab at Valuation 

Dida

Dida Pre-IPO – Peer Comparison – Lagging in Scale, Leading in Profitability 

Intco Med

Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 

Kilcoy

Kilcoy Global Foods Pre-IPO – Rapid Earnings Growth on the Back of Margin Improvement 

Kilcoy

Kilcoy Global Foods Pre-IPO – A Lot of Things Still Remain Unexplained 

Kindstar

Kindstar (康圣环球) Pre-IPO: Issues with Scalability 

Kindstar

Kindstar (康圣环球) Pre-IPO: Is It Worth the Premium? 

RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Bio-heart Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
Youran Dairy China Youran Dairy(悠然牧业) Pre-IPO – A Leader Pulling Ahead in a Fragmented Market 
India
Aadhar Housing Aadhar Housing Finance Pre-IPO – Decent past Growth but Comes with Weird Disclosures 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food

Jiangsu Hengrui Medicine (600276.CH) – Insights on Recent Pullback and Future Business Prospects

By Xinyao (Criss) Wang

Recently, Jiangsu Hengrui Medicine (600276 CH)‘s share price has seen a significant pullback. Since April 9th, 2021, the Company’s stock price had fallen for six consecutive trading days, with a cumulative decline of more than 10%, and its market value dropped by about RMB63 billion. So what happened to Hengrui? And what is the future business prospects of this Company? The following mainly included some important insights that deserve to pay attention to.


Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)

By Osbert Tang, CFA

Shenzhen Expressway Co H (548 HK) announced a positive profit alert for 1Q21, indicating that its recurring profit will reach about Rmb533m, versus losses of Rmb160m a year ago as the impact of COVID-19 subsided. More importantly, such profit indication is even 10.2% higher than 1Q19, suggesting a full-recovery in traffic and toll revenue momentum.

SZ Exp contributed 44.3% of Shenzhen Intl (152 HK)‘s recurring profit (ex-Shenzhen Airlines) in the last two years. The potential acquisition of Shenzhen Investment Holdings Bay Area Development (737 HK) has received waiver from the SFC for a mandatory general offer and a successful conclusion should beef up SZ Exp’s assets. Lastly, with SZ Exp’s target of an estimated 35% increase in its EBITDA, we believe these factors will support SZ Exp’s contribution to SZ Int’s profit outlook in this year.


Link REIT – Cash Burning Holes

By Thomas J. Monaco

*Update Confirms Weak Outlook: Negative rental reversion rates persist in Hong Kong, as do negative tenant sales. We continue to await another round of negative revaluation of property due to lower rents and/or higher cap rates; and  

*No Serious Capital Management Strategy Exists: Management of Link appears hellbent on destroying shareholder value.As gearing was 19.2% at September 2020, management continues to believe that it has abundant headroom to add debt for acquisition. Instead of weighing a buyback’s return versus new investment ROI, management views share buybacks as a mechanism to defend its shares against short-selling. Maybe a re-re-review of its acquisition strategy will occur by earnings when Link’s new mainland China acquisition strategy truly flops.


Zhaoke Opthalmology IPO Valuation: Overpriced

By Shifara Samsudeen, ACMA, CGMA

The Chinese ophthalmic pharmaceutical company, Zhaoke Ophthalmology Pharmaceutical (6622 HK)  has set the terms for its HK IPO. The company plans to issue 123.6m shares at an indicative IPO price range of HK$15.38-16.8 per share and at the midpoint of the IPO price range of HK$16.09 per share, the company will receive net proceeds of HK$1,858m (US$239m).

Zhaoke Opthalmology IPO Details

No. of Shares Issued

                      123,567,500

IPO Price per Share (HK$)

15.38-16.80

Offer as a % of Outstanding Shares

23.09%

Total Shares Outstanding

535,155,500

Net Proceeds (HK$m)

1,857.80

Market Capitalisation (HK$m)

8,610.65

Enterprise Value (HK$m)

6,687.24

Source: Company disclosures, LSR (Net proceeds, market cap and EV are at the midpoint of the IPO price range, EV is after adjusting for net cash and net IPO proceeds)

The company also has entered into cornerstone investment agreements with CaaS Capital Master Fund, GIC Private Limited, Golden Valley Global and several other investors who have agreed to buy approx. 21.51% (at the midpoint) of the offer shares or approx. HK$427.8m of the offering.

Zhaoke plans to use approx. 32% of the net IPO proceeds for clinical development and commercialisation of its core products. Another 46% of the net proceeds will be used to fund the ongoing R&D activities and 7% of the IPO proceeds will be invested on expanding the production line of its Nansha Manufacturing facility in anticipation of upcoming product launches.


Morning Views Asia: KWG Living Group, Sunac China Holdings

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.


Before it’s here, it’s on Smartkarma

Health Care: Jiangsu Hengrui Medicine, SK Bioscience, Zhaoke Ophthalmology Pharmaceutical and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Jiangsu Hengrui Medicine (600276.CH) – Insights on Recent Pullback and Future Business Prospects
  • SK BioS Lockup Release Today: FO Drop Can Signal a Tight Supply for Passive Mirroring K200
  • Zhaoke Opthalmology IPO Valuation: Overpriced

Jiangsu Hengrui Medicine (600276.CH) – Insights on Recent Pullback and Future Business Prospects

By Xinyao (Criss) Wang

Recently, Jiangsu Hengrui Medicine (600276 CH)‘s share price has seen a significant pullback. Since April 9th, 2021, the Company’s stock price had fallen for six consecutive trading days, with a cumulative decline of more than 10%, and its market value dropped by about RMB63 billion. So what happened to Hengrui? And what is the future business prospects of this Company? The following mainly included some important insights that deserve to pay attention to.


SK BioS Lockup Release Today: FO Drop Can Signal a Tight Supply for Passive Mirroring K200

By Sanghyun Park

The second batch of the lockup releases hit the market today on Monday.

3,118,610 shares represent 4.08% of the SO and 24.71% of the offering allocation, bringing up the float total from 12.11% to 16.19%.

This would be the first real overhang test on the price. 

SK BioS lockup expirationsQty% of SO% of allocationAccuDate
1 year5.87%100.00%2022-03-19
6 months3,948,10073.59%31.28%94.13%2021-09-19
3 months3,331,0004.35%26.39%20.54%2021-06-19
1 month3,118,6104.08%24.71%16.19%2021-04-19
15 days364,3800.48%2.89%12.11%2021-04-02
Immediate8,897,51011.63%11.63%2021-03-18
Source: KRX & DART

Zhaoke Opthalmology IPO Valuation: Overpriced

By Shifara Samsudeen, ACMA, CGMA

The Chinese ophthalmic pharmaceutical company, Zhaoke Ophthalmology Pharmaceutical (6622 HK)  has set the terms for its HK IPO. The company plans to issue 123.6m shares at an indicative IPO price range of HK$15.38-16.8 per share and at the midpoint of the IPO price range of HK$16.09 per share, the company will receive net proceeds of HK$1,858m (US$239m).

Zhaoke Opthalmology IPO Details

No. of Shares Issued

                      123,567,500

IPO Price per Share (HK$)

15.38-16.80

Offer as a % of Outstanding Shares

23.09%

Total Shares Outstanding

535,155,500

Net Proceeds (HK$m)

1,857.80

Market Capitalisation (HK$m)

8,610.65

Enterprise Value (HK$m)

6,687.24

Source: Company disclosures, LSR (Net proceeds, market cap and EV are at the midpoint of the IPO price range, EV is after adjusting for net cash and net IPO proceeds)

The company also has entered into cornerstone investment agreements with CaaS Capital Master Fund, GIC Private Limited, Golden Valley Global and several other investors who have agreed to buy approx. 21.51% (at the midpoint) of the offer shares or approx. HK$427.8m of the offering.

Zhaoke plans to use approx. 32% of the net IPO proceeds for clinical development and commercialisation of its core products. Another 46% of the net proceeds will be used to fund the ongoing R&D activities and 7% of the IPO proceeds will be invested on expanding the production line of its Nansha Manufacturing facility in anticipation of upcoming product launches.


Before it’s here, it’s on Smartkarma