Category

China

China: JD Health, Jinxin Fertility Co Ltd, Xinyi Solar Holdings, Novotech Holdings, Asia High Yield Bond Index, CanSino Biologics Inc, Shimao Property Holdings and more

By | China, Daily Briefs

In today’s briefing:

  • JD Health (6618 HK): Be Careful of Amazon Style Accounting
  • Jinxin Fertility 1H2021: A Clear Picture of the Long Term Potential
  • HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande
  • Novotech Health IPO: A Solid Start to 2021
  • Novotech Health IPO: Structural Tailwinds in the APAC Biotech CRO Market Offers LT Growth
  • KWG, Starhill, NEA Launch Bonds; Macro; Rating Changes; Talking Heads; New Issues; Top Gainers & …
  • CanSino Biologics (688185.CH/6185.HK) 2021/1H – Concerns on Key Products and the Outlook
  • Morning Views Asia: Country Garden Holdings Co, Seazen (Formerly Future Land), Times China

JD Health (6618 HK): Be Careful of Amazon Style Accounting

By Ming Lu

  • We believe JD Health will follow the accounting of JD.com, which Amazon originated.
  • We believe service is the main business, although product accounts for a large proportion in the nominal revenue.
  • The product plays a cornerstone role; therefore, it is fine to value the company by nominal revenue.
  • Service revenue growth is the important signal for the short-term stock price.

Jinxin Fertility 1H2021: A Clear Picture of the Long Term Potential

By Ke Yan, CFA, FRM

Jinxin Fertility reported its 1H2021 results and hosted a conference call. We attended the call which provided a clearer picture of its execution capability and long term growth drivers than ever before. The results reflect a strong recovery post-COVID-19 as well as strong execution in the company’s strategies. We continue to like the company and the valuation is undemanding thanks to the recent weakness in the healthcare sector. 


HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande

By Brian Freitas

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.

The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review cut-off date are eligible for inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX).

At the December review, we see a high probability of Xinyi Solar Holdings (968 HK) being included in the index and of Evergrande Real Estate Group (3333 HK) being deleted.

Innovent Biologics Inc (1801 HK) is a close add for now and its inclusion would put China Pacific Insurance (2601 HK) at risk of deletion from the index.

XPeng (9868 HK) and Li Auto (2015 HK) are unlikely to be included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance since they have failed the velocity test in August.

With the one change, estimated one-way index turnover is 1.26% and will result in one-way turnover of HK$995m. This number will change over the next couple of months as stocks move around and the turnover increases due to capping changes on Alibaba Group (9988 HK), Tencent (700 HK) and Meituan (3690 HK).


Novotech Health IPO: A Solid Start to 2021

By Arun George

Novotech Holdings (NVT HK) is a global contract research organisation (CRO). Novotech is the third-largest Asia-Pacific-based CRO and the largest biotech-specialist CRO in the Asia-Pacific region, both in terms of revenue in 2020, according to Frost & Sullivan. The controlling shareholder is TPG and the other shareholders include GIC, Kaiser Foundation Hospitals and Sequoia Capital. Novotech has started pre-marketing an HKEx IPO to raise up to $1.5 billion, according to press reports.

In Novotech Health IPO Initiation: On-Demand Science, we noted that, unlike other H-listed CRO peers, Novotech gives investors an avenue to gain exposure to the broader Asia-Pacific CRO industry. We concluded that Novotech’s fundamentals are solid and the IPO is worth a look for investors willing to brave the current weak sentiment on HKEx IPOs. 

In this note, we examine the PHIP which discloses the 1Q21 results along with additional disclosures and recent developments. Overall, we continue to maintain our view that the fundamentals look attractive. 


Novotech Health IPO: Structural Tailwinds in the APAC Biotech CRO Market Offers LT Growth

By Shifara Samsudeen, ACMA, CGMA

Novotech Holdings (NVT HK) is an Asia-Pacific biotech-focused CRO that provides clinical research services for customers from Phase I to Phase IV trials across multiple countries in the Asia-Pacific region including Greater China, South Korea and Australia/New Zealand. According to Frost & Sullivan, the company had a market share of 4.1% in the Asia-Pacific clinical CRO market for biotech companies and small and medium pharmaceutical companies in terms of revenue in 2020.

The company has filed for an IPO to list its shares on the Hong Kong Stock Exchange and according to news media outlets, it plans to raise about $1.5bn through its IPO.

In this insight, we examine Novotech’s business model, growth drivers, revenues, margins and the outlook on the company. Novotech has not yet set the terms for its IPO and we would be discussing the company’s valuation in a follow-up insight.


KWG, Starhill, NEA Launch Bonds; Macro; Rating Changes; Talking Heads; New Issues; Top Gainers & …

By BondEvalue

US markets ended the week mixed before the long labor day weekend and after a disappointing Non Farm Payroll report – Nasdaq gained 0.2% buoyed by tech stocks while S&P was broadly flat. IT up 0.4% was the only sector with some significant gains, Utilities, Materials, Industrials, Financials and Energy were down more than 0.5%. European markets moved lower – CAC was down 1.1% and FTSE and DAX were down 0.4%. UAE’s ADX was down 0.2% while Saudi’s TASI ended 0.1% higher. Brazil’s Bovespa gained 0.2%. Asian markets had a mixed start – Nikkei, Shanghai and HSI were up 1.6%, 0.4% and 0.2% in early trading, while KOSPI and Singapore’s STI were down 0.1% and 0.2% respectively. US 10Y Treasury yields climbed 3bp to 1.32% after the lower than expected jobs report. US IG CDS spreads and HY spread widened 0.5bp and 0.8bp respectively. EU Main CDS and Crossover CDS spreads widened by 0.3bp and 1.9bp respectively. Asia ex-Japan CDS spreads tightened 0.2bp.

CanSino Biologics (688185.CH/6185.HK) 2021/1H – Concerns on Key Products and the Outlook

By Xinyao (Criss) Wang

On August 30, 2021, CanSino Biologics Inc (688185 CH) released it 2021/1H financial results. The revenue was RMB2.06 billion, up 51057.67% YoY, and the net profit was RMB937 million, which was the first time for CanSino to be profitable after successive years of losses. However, it seems that the market was not satisfied with the results. On August 31, the Company’s share price was down 3.34%. Although the share price was up 1.5% on September 1, it continued to fall by 4.94% on September 2 and 0.72% on September 3. It is also worth mentioning that since the beginning of Q3, CanSino’s share price has fallen by 52.56%, and the market value is also below RMB100 billion by the end of September 3. This insight mainly analyzed the concerns on key products and the outlook of the Company.


Morning Views Asia: Country Garden Holdings Co, Seazen (Formerly Future Land), Times China

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

China: Tencent, Galaxy Entertainment Group, Alibaba Group, China Gas Holdings, HKEX, TAL Education, Imeik Technology Development, China Conch Venture Holdings, Guangzhou R&F Properties and more

By | China, Daily Briefs

In today’s briefing:

  • Tencent Holdings – Incredulous Management
  • Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities
  • Alibaba Group Holdings – Penance
  • HSI Index Rebalance Preview: Potential Inclusions in December
  • Hong Kong Exchanges & Clearing – China Plays Long Game With HKEx
  • TAL Education – Key Investor Capitulates, Should the Rest Follow?
  • Pre-IPO Imeik Technology Development (300896 CH) – Is High Profitability Sustainable?
  • Conch Venture (586 HK): Better Fortunes Going Forward
  • Morning Views Asia: Central China Securities, CIFI Holdings, Guangzhou R&F Properties

Tencent Holdings – Incredulous Management

By Thomas J. Monaco

*Why Do They Always Do This?: At a competitor conference, management ridiculously diminished government allegations. Tencent Holdings (700.HK) [Tencent] should simply answer “yes, we made mistakes and pushed the envelope but we are actively rectifying these issues. Its going to be painful for investors as we address the government’s numerous over the near-term”;  

*Elephant In The Room: Mainland China’s crackdown on capital markets activities has rapidly expanded under the broad narrative of “financial stability”. There remains no doubt, in our view, that Tencent will follow Alibaba Group (BABA.US) [Alibaba] in the formation of a financial holding company. It’s pretty surprising that Tencent refuses to discuss this matter when financial services are the largest component of earnings and growth; and    

*Results Have Also Deteriorated As Distractions Mount: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged.       


Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities

By Smartkarma Research

For our next Webinar, we are thrilled to welcome Insight Provider Howard J Klein. Howard will go over his outlook on the casino and gaming sector in Asia for 2022 and present opportunities for investors in this space.

The webinar will be hosted on Wednesday, 8 September 2021, 11:00 SGT/HKT.

Howard J Klein has 25+ years of experience as a C-level executive of the casino industry in operations, marketing, international development, and strategic planning. He is currently a consultant specialising in the casino space, an industry expert contributor, and publisher of a subscription letter called “The House Edge”. He gained extensive experience in marketing and development in the Asian gaming market while a senior executive at Caesars, Ballys Grand, and Trump Taj Mahal, and he was part of senior executive teams that valued acquisitions and mergers with companies in the casino, hotel, entertainment, and restaurant space.


Alibaba Group Holdings – Penance

By Thomas J. Monaco

*The Hits Just Keep On Coming: Various media outlets have reported that Alibaba Holdings (BABA.US) [BABA] is planning to spend CNY 100 bn (USD 15.4 bn or nearly 2/3 of 2020 earnings) through 2025 in order to support the government’s “common prosperity” initiatives – implying another significant earnings hit; and

*FHC Challenges Ahead As Well: BABA’s Ant Group subsidiary is also reorganizing as a financial holding company, and will now be regulated more along the lines of a commercial bank by the China Bank and Insurance Regulatory Commission (CBIRC). As a result, Ant Financial needs to adhere to minimum CAR capital requirements, and follow other bank regulatory guidelines.


HSI Index Rebalance Preview: Potential Inclusions in December

By Brian Freitas

The September rebalance of the Hong Kong Hang Seng Index (HSI INDEX) was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.

The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).

There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.

With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.

Stocks that are ranked towards the top of their Industry group and are potential inclusions are Smoore International (6969 HK), Nongfu Spring (9633 HK), China Resources Beer Holdings (291 HK), China Resources Mixc Lifestyle Services (1209 HK), Sunac China Holdings (1918 HK), China Gas Holdings (384 HK), JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK)China Hongqiao (1378 HK) and Fosun International (656 HK).

Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance – while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.


Hong Kong Exchanges & Clearing – China Plays Long Game With HKEx

By Thomas J. Monaco

*Creation of New Beijing Exchange: The establishment of a new Beijing Exchange will support small-to-medium sized enterprises (SME) exchange listings. The Beijing Exchange will only manage the highest-quality SMEs, with investment being made very accessible to small retail investors (minimum CNY 1 mn in liquid assets) – virtually ensuring success of the new Beijing Exchange; and

*HKEx Continues To Be Hollowed Out: Coupled with mainland China’s establishment of a new stock exchange to attract overseas-listed firms, mainland China continues to reinforce the notion that Shanghai will become the pre-eminent global financial center in Asia – limiting Hong Kong Exchanges & Clearing’s (388.HK) [HKEx] ability to attract up and coming mainland Chinese IPOs over longer-term. In other words, if HKEx’s mainland China story goes away so should HKEX’s exorbitant valuation.


TAL Education – Key Investor Capitulates, Should the Rest Follow?

By Jason Yap, CFA

The “double reduction” crackdown on K9 after school tutoring (“AST”) that covers primary and middle school curriculums has inflicted major pain on the USD38 billion industry. With the original aim of easing student pressure inside and outside school, it has led to unintended consequences of tutor layoffs, early lease terminations, and fresh anxiety among parents on how to occupy their children’s available after school time.

The regulations also shook the confidence of AST investors and enterprises. Weak hands folded by shutting operations, filing for bankruptcy and/or exiting investments while industry leaders with a stronger cash position frown over the best approach to pivot operations.

For industry leaders like New Oriental Education (EDU US) and TAL Education (TAL US), revenues generated from K9 academic tutoring comprise between 50% to 80% of total revenues. Hence, there is a direct material impact on forward revenue and earnings.  In addition, they will incur one-time costs for, amongst others, staff severance, early lease terminations, and refund liabilities for K9 courses that can no longer be administered.  

In August 2021, Beijing education authorities extended an olive branch, highlighting that AST companies may switch to sectors that aren’t affected by the new regulations, such as high school tutoring, vocational education, all-round education and adopting hybrid business models. A similar stance might by adopted nationwide and signals (at least some) policy support for the embattled AST sector.

Using TAL Education as a bellwether for the AST sector, we examine the financial and accounting concerns that arise as a direct result of the new regulations. In addition, we analyse the recent exit of a key Convertible Notes investor, who has essentially capitulated in the face of execution uncertainties of TAL’s pivot strategy.  Should other investors follow?


Pre-IPO Imeik Technology Development (300896 CH) – Is High Profitability Sustainable?

By Xinyao (Criss) Wang

On July 29, 2021, Imeik Technology Development (300896 CH), which has been listed in A shares, submitted its prospectus to the HKEX and is expected to become the first company in medical aesthetic industry with “A+H” shares listing. Meanwhile, Imeik also released its 2021/1H financial results recently. The revenue was RMB633 million, up 161.87% YoY, and the net profit was RMB425 million, up 195.42% YoY, maintaining high growth momentum. This insight mainly analyzed the industry characteristics, the business, the financial position and the concerns of the Company. 


Conch Venture (586 HK): Better Fortunes Going Forward

By Osbert Tang, CFA

We think the secured project pipeline for China Conch Venture Holdings (586 HK) should drive encouraging double-digit growth in its core environmental business profit in the next three years. It expects a CAGR of 52.8% in completed waste incineration capacity and 30.2% in completed solid waste and hazardous waste capacity, which in our view, should underpin remarkable earnings outlook.

The flat 1H21 profit is masked by a 5% drop in contribution from Anhui Conch Cement (914 HK). which, in flat, core earnings have surged 31.4% YoY. It solid new project win is an excellent demonstration of its competitiveness. Even for Anhui Conch, the 2H21 outlook is getting more positive than 1H21. We believe that at just 5.9x PER (ex-Anhui Conch) for FY21, the market has sharply undervalued Conch Venture’s environmental operations, especially given its lower-than-peers gearing of 19.4% only.


Morning Views Asia: Central China Securities, CIFI Holdings, Guangzhou R&F Properties

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

China: China Logistics Property Holdings, Novotech Holdings, Kerry Logistics Network, Shanghai Stock Exchange Composite Index and more

By | China, Daily Briefs

In today’s briefing:

  • China Logistics (1589 HK): JD.com’s Offer Comes Up Short
  • Novotech Health IPO Initiation: On-Demand Science
  • Asia-Pac Weekly Risk Arb Summary: China Logistics, Kerry Logistics, China Youzan
  • Buying Opportunities Within Emerging Markets and Japan; US Dollar Failing At 93.50

China Logistics (1589 HK): JD.com’s Offer Comes Up Short

By David Blennerhassett

China Logistics Property Holdings (1589 HK) (CLPH) has announced its chairman, Li Shifa, has entered into an S&P Agreement with JD.com Inc. (9618 HK), to sell his 26.38% stake in CLPH at a price of $4.35/share.

Provided conditions to the S&P are fulfilled, and with JD.com currently holding 10.64%, it would be obligated to make a Mandatory General Offer (MGO) – also at HK$4.35/share.

The key S&P condition is approval from China’s AML (Anti-Monopoly Law) Authority.

The key condition to the MGO becoming unconditional is JD.com holding 50% of the voting rights in CLPH. RRJ Capital, Joy Orient, and Dajia Baoxian have given irrevocables to tender in their 21.94%, 3.3%, and 4.14% respective stakes.

This all looks pretty clean.

The pushback is that when CLPH announced on the 29 December 2020 Li and RRJ Capital were “conducting a preliminary strategic review of their stakes“, indicating a possible change of control for the company, the pre-announcement share price was HK$3.90. Therefore the Offer Price is an 11.5% premium to the undisturbed price. Many investors thought a $4.50+ handle was more in keeping with this space which has been garnering significant attention.

The Offer price will not be increased. 

Still, as one reader put it, they’re just happy to get this slow-burning deal off their books.

More below the fold.


Novotech Health IPO Initiation: On-Demand Science

By Arun George

Novotech Holdings (NVT HK) is a global contract research organisation (CRO). Novotech is the third-largest Asia-Pacific-based CRO and the largest biotech-specialist CRO in the Asia-Pacific region, both in terms of revenue in 2020, according to Frost & Sullivan.

The controlling shareholder is TPG and the other shareholders include GIC, Kaiser Foundation Hospitals and Sequoia Capital. Novotech is set to pre-market an HKEx IPO to raise up to $1.5 billion, according to press reports.

While the Chinese regulatory reset has wreaked havoc on several sectors, investor sentiment on the China CRO industry remains relatively solid with the H-shares of WuXi AppTec Co. Ltd. (2359 HK) and Pharmaron Beijing Co Ltd-H (3759 HK) up 18% and 30% YTD, respectively.

Unlike other H-listed CRO peers, Novotech gives investors an avenue to gain exposure to the broader Asia-Pacific CRO industry. On balance, we think that Novotech’s fundamentals are solid and the IPO is worth a look for investors willing to brave the current weak sentiment on HKEx IPOs. 


Asia-Pac Weekly Risk Arb Summary: China Logistics, Kerry Logistics, China Youzan

By David Blennerhassett

This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.

I number 37, mostly firm, deals around the region.

More below the fold.


Buying Opportunities Within Emerging Markets and Japan; US Dollar Failing At 93.50

By Joe Jasper

While there are always exceptions at the individual stock level, MSCI Emerging Markets (EEM-US) and Japan (TOPIX, TOPIX Small) have been some of the weaker areas to invest throughout 2021. We now see early signs of positive change and we recommend adding exposure to emerging markets and Japan.


Before it’s here, it’s on Smartkarma

China: Sunpower Group, China Logistics Property Holdings and more

By | China, Daily Briefs

In today’s briefing:

  • Sunpower Group (SPWG SP): A purer play on clean energy going forward
  • China Logistics Property’s Mandatory Conditional Offer Set in Motion

Sunpower Group (SPWG SP): A purer play on clean energy going forward

By KGI Securities

  • The disposal of the M&S business for RMB2.29bn has been completed, with two tranches of special dividend of S$0.1406 a share and S$0.1006 a share paid out in June and July.
  • New capacity from Tongshan P1, Shantou P2, Xintai Zhengda and Shanxi Xinjiang plants are expected to complete construction in 2021/early 2022 and contribute to the group next year.
  • We maintain our OUTPERFORM recommendation with an unchanged target price of $$1.22 based on the discounted cash flows of each project.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Logistics Property’s Mandatory Conditional Offer Set in Motion

By Arun George

China Logistics Property Holdings (1589 HK)/CNLP is a leading provider of premium logistics facilities in China. As of 30 June 2021, CNLP had 179 logistics facilities in operation in 38 logistics parks located in logistics hubs in 19 provinces or centrally administered municipalities. 

As discussed in China Logistics Property’s Potential MGO from JD.com, CNLP announced on 26 August that Mr Li Shifa, the founder and the Chairman, is in discussions with a potential purchaser to sell his 26.38% stake in CNLP. If the transaction is completed, it may lead to a change in control and a mandatory general offer (MGO) under Rule 26.1 of the Takeovers Code. The announcement was in response to a Bloomberg article that claimed that JD.com Inc (ADR) (JD US) is in discussions to purchase Mr Li Shifa along with RRJ Capital’s stake in CNLP at a valuation of about $2 billion (implies a price of HK$4.48 per share). 

Today, CNLP announced that Mr Li Shifa entered into a sale and purchase agreement with JD Property Group Corporation (owned 83.89% by JD.com) to sell his 26.38% stake in CNLP. The purchase price is HK$4.35 per sale share, a 17.25% premium to the unaffected share price of HK$3.71 (25 August). 

The completion of the sale and purchase agreement will result in the offeror owning 37.02% of the outstanding shares, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The sale and purchase agreement is subject to various conditions including regulatory approval (AML authority). Regulatory approval which is expected within six months should be forthcoming as the transaction is unlikely to raise market concentration issues.

The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrevocables which represent 29.38% of the outstanding shares. Consequently, the 50%+ voting threshold will be satisfied due to the irrevocables. At the last close price of HK$4.05, the gross spread to the MGO price of HK$4.35 per is 7.4%. 


Before it’s here, it’s on Smartkarma

China: Weilong Delicious Global, Helen’s International Holding, Industrial Bank Co Ltd A, ABM Investama, Central China Real Estate and more

By | China, Daily Briefs

In today’s briefing:

  • Weilong Delicious Global: A Store Visit for “Spicy Stick”
  • Helens International Holdings IPO: Valuation Takes The Steam Out of Encouraging Growth Prospects
  • Industrial Bank: Trends Are Better than Peers
  • Asia HY Monthly – Chinese Variable Interest Entities – Lucror Analytics
  • Morning Views Asia: Adani Green Energy, Central China Securities

Weilong Delicious Global: A Store Visit for “Spicy Stick”

By Ming Lu

  • We saw that customers chose Weilong in stores.
  • There are many brands in the market.
  • This is a low-end food market.
  • The industry has a low entry barrier.
  • Weilong’s advantage is that the company started advertising early.

Helens International Holdings IPO: Valuation Takes The Steam Out of Encouraging Growth Prospects

By Oshadhi Kumarasiri

  • Helen’s International Holding (9869 HK) is the largest pub chain in China with around 528 pubs across a number of cities in the Eastern part of China. The company intends to raise around US$ 315-347m from the proposed Hong Kong IPO by selling 135m primary shares at an offer price range of HK$ 18.82-20.72 per share.
  • We think the IPO price range is rather expensive as it indicates a trailing EV/Sales of 21.1-23.2x. Although the growth prospects of Helens International seems excellent, the company may need to increase its revenue by around 6.0-7.0x to even remotely justify its IPO multiple.

Industrial Bank: Trends Are Better than Peers

By Paul Hollingworth

EXECUTIVE SUMMARY

According to our model PH Score™Industrial Bank commands above average value-quality characteristics.  The valuation variable within the model (as elsewhere in China) helps the Score but other variables are broadly benign. Adding technical factors and the low valuation, Industrial Bank ranks in the top quartile globally of our VFM (Valuation, Fundamentals, Momentum) universe. 

Elsewhere in China, recent bank data show subpar or mixed fundamental momentum and trends. This is not the case with Industrial Bank. However, it would be wrong to think that the bank was not affected by general systemic asset quality challenges.

On a LTM basis, the bank’s PH Score™ of 8.5 reflects progression in Profitability, in Efficiency, in Capital Adequacy, in NIM/Spread (impressive), in headline Asset Quality, as well as the valuation variable, though Liquidity, as measured by the rising LDR, eroded and the Provisioning metric utilised by the model softened somewhat.

A FV of 9% and a PBV of 0.72x are not unattractive. These are below thresholds of 10% and 1x, respectively. An Earnings Yield of 17.0% and a Dividend Yield of 4.2% underpin the valuation thesis though China and the world have cheaper banks. We are less enthusiastic about finding the cheapest banks per se but rather more interested in capturing the combination between fundamental progression -or quantamental trends- with valuation. 

Industrial Bank is focused on mainly corporate lending but also has a strong mortgage business. Given Leverage (Debt/Equity) and a more risky Funding Structure, revolving around wholesale markets and time deposits, though transaction accounts account for 41% of deposits, we see Industrial Bank as a more speculative opportunity in the Chinese Banking Space.


Asia HY Monthly – Chinese Variable Interest Entities – Lucror Analytics

By Charles Macgregor

In this month’s “In-Focus” section, we discuss variable interest entities (VIEs) in China, including recent developments in China and the US that may complicate the future use of VIEs. We also give an overview of recent bond defaults.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.


Morning Views Asia: Adani Green Energy, Central China Securities

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

China: Baidu, Great Wall Motor, Lansen Pharmaceutical Holdings Co, Ltd., Tencent Music, Tencent, Evergrande Real Estate Group, Shanghai NewMed Medical, ICBC (H), West China Cement, Bairong and more

By | China, Daily Briefs

In today’s briefing:

  • FTSE China 50 Index Rebalance: High Turnover; Relatively Low Impact; Surging Shorts
  • FTSE China A50 Index Rebalance: Strong Momentum; No Surprises
  • Lansen Pharm (503 HK): Here Is Your Exit
  • TME Facing the Music; Ends Exclusive Music Licensing Deals
  • Tencent – An Analytical Framework For “Tomorrow’s” Gaming Minors
  • China Evergrande – Earnings Flash – H1 FY 2021 Results – Lucror Analytics
  • NewMed (纽脉医疗) Pre-IPO: Uphill Battle for TAVR but Leads the TMVR
  • ICBC: Model Says “Yes” Though the Market Says “No”.
  • West China Cement – Earnings Flash – H1 FY 2021 Results – Lucror Analytics
  • Bairong: Upcoming Lock-Up Expiry

FTSE China 50 Index Rebalance: High Turnover; Relatively Low Impact; Surging Shorts

By Brian Freitas

Post HK market close today, FTSE Russell announced the changes to the FTSE China 50 Index as part of the June review. The changes will be effective after the close of trading on 17 September.

As expected, there are 4 sets of changes to the index. Baidu (9888 HK), Ganfeng Lithium (1772 HK)Geely Auto (175 HK) and Sunny Optical (2382 HK) have been added to the index, replacing Hansoh Pharmaceutical (3692 HK)Alibaba Health Information Technology (241 HK)Haidilao (6862 HK) and China Merchants Securities Co Ltd (H) (6099 HK).

Li Ning (2331 HK) just missed out on index inclusion and joins the Reserve List along with Bilibili (9626 HK), Shanghai Fosun Pharmaceutical (Group) (2196 HK), China Overseas Land & Investment (688 HK) and CRRC Corp Ltd H (1766 HK)

Estimated one-way index turnover is 11.07% and will result in a one-way trade of HK$5.03bn. The large turnover is a result of the number of changes and the capping changes to the largest index constituents. Final capping will use prices from the close of trading on 10 September.

Short interest has risen rapidly on the deletions and is at the high on three of the four names. There could be small covering close to implementation date.


FTSE China A50 Index Rebalance: Strong Momentum; No Surprises

By Brian Freitas

FTSE Russell has announced changes to the FTSE China A50 Index (XIN9I INDEX) as a part of the September review that will be implemented at the close of trading on 16 September.

There are 2 inclusions, Great Wall Motor (601633 CH) and Cosco Shipping Holdings (601919 CH), and 2 exclusions, CSC Financial Co Ltd (601066 CH) and China Citic Bank Corp (601998 CH).

Estimated one-way index turnover is 1.43% and will result in a one-way trade of CNY 698m. This is almost no impact of the funding trade on the other index constituents.

Only China Citic Bank Corp (601998 CH) has more than 1 day of ADV to trade from passive funds, but the strong momentum on the inclusions could continue.

Long/short trades on the stocks have been performing well over the last couple of months. There could be more opportunities over the next couple of weeks prior to implementation of the changes.

Important: The implementation will be at the close on 16 September, one day ahead of the other rebalances, since Northbound Stock Connect is shut on 17 September.


Lansen Pharm (503 HK): Here Is Your Exit

By David Blennerhassett

Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a terrific little earner since December last year.

  • But first, some background information to bring us up to date:

Date

Data in the Date

9-Mar-16

Zhejiang Starry Pharmaceut-A (603520 CH) (Starry) specialises in the research and development, manufacture, marketing, and sales of bulk pharmaceuticals and intermediates.
One of the core products of Starry is iohexol for X-CT non-ionic contrast agents. Starry is the largest generic drug manufacturer of iohexol’s active pharmaceutical ingredients in China.
Starry IPO-ed on the Shanghai Stock Exchange on 9 March 2016.
Lansens’s equity interest in Starry was diluted from 21.5% to 16.1%, which constituted a disposal of an associate. 

FY17Lansen sold down its stake in Starry to 12.6% as at Dec-17
FY18Lansen sold down its stake in Starry to 10.8% as at Dec-18
FY19Lansen sold down its stake in Starry to 4% as at Dec-19
FY20

Lansen sold down its stake in Starry to 1.3% as at Dec-20

29-Sep-21Lansen’s chairman Wu Zhen Tao made a Tender Offer for Cathay International.
We, via his holding in common shares and A Shares, controlled 73.54% of the vote in Cathay.
Cathay, in turn, held 52.83% of Lansen
3-Nov-21Cathay’s Tender Offer was approved by shareholders
11-Nov-21Cathay’s Tender Offer closed on the 11 November with 94.3% of the common shares and A shares held
1-Dec-21A compulsory acquisition notice was issued by Cathay and was done and dusted by the 11 January this year.
11-Dec-21Wu started buying shares in Lansen – aggressively. 41 separate incidences of buying, up to and including the 27 April, lifting his stake to 69.56%, from 52.83% initially.
23-Feb-21Lansen sells more Starry shares and then held ~1.3%.
15-Apr-21Lansen sells more Starry shares and then held ~0.9%
24-May-21Lansen sells more Starry shares and then held ~0.3%.
2-Jun-21Two days after the AGM, Lansen starting buying back shares, and proceeded to do so over a 10 separate trading days, stopping on the 26 July, prior to the earnings blackout.
Once canceled these buybacks lifted Wu’s stake to 71.54%
31-Aug-21Interim results released
Source: HKEx announcements

The Takeaway from the Above

  • Lansen has made significant gains from the sale of Starry. Cash on hand was US$103mn (~HK$800mn) as at 1H21, with a net cash position of US$73.88mn (~HK$575mn). Lansens held 0.3% of Starry as at 30 June. 
  • Wu acquired 66.44mn shares (16.873%) at an average price of HK$1.84/share, outlaying HK$122.5mn. The highest price paid was ~HK$2.197/share. 
  • Buybacks were 11.01mn shares (2.772% of shares out) at an average price of HK$2.71/share, outlaying ~HK$30mn. The highest price paid was probably ~HK$2.85/share. Buybacks accounted for ~40% of daily volume, on average.
  •  Lansen is not a large, nor liquid company. But it was a potential privatisation play.
  • After gaining another 35% in the preceding week, on 15th July when shares were changing hands at HK$3.75,  I said (in the discussions section at the bottom of Lansen Pharma (503 HK): This Is Still A Buy) that “my pound-the-table recommendation is wavering, given the 260+% gain since Wu started buying last December.  I think the risk/reward has shifted at current levels“.
  • Shares closed yesterday at HK$2.23.

The New News

  • Concurrent with its interim results, Lansen announced a special dividend of HK$1.55/share. 
  • That’s equivalent to ~HK$599mn assuming shares recently bought back are canceled. 
  • The record date is the 16 September, with payment on the 28 September.

The idea of a small-cap company returning excess cash to shareholders is a welcome change; however, my initial reaction was that there could may be some degree of disappointment the preceding events didn’t (so far) lead to a takeover. And the back-end will now focus on the lackluster underlying business ops.

Not to be. Not even close. Shares gained 33% today to close at HK$2.97.

This is your cue to exit.


TME Facing the Music; Ends Exclusive Music Licensing Deals

By Shifara Samsudeen, ACMA, CGMA

Tencent Music (TME US) announced on Tuesday (31st August) that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators. It was reported by several news media outlets in July that that the State Administration of Market Regulation (SAMR) in China is likely to order Tencent Music (TME US) to give up exclusive rights to music labels and at the same time, impose a fine of RMB500,000 (US$77k) for failing to appropriately report the acquisitions of Kugou and Kuwo in 2016.

TME previously had exclusive music licensing agreements with global music streaming giants Warner Music Group (WMG), Universal Music (UMG) and Sony Music in China. The company also previously had exclusive rights to sub-license these catalogs to local rivals in China.

TME’s partnerships with these leading music labels have offered the company the content leadership position in music streaming in China. In addition to having exclusive rights to music labels, the company also has established exclusive distribution deals with leading independent artists such as Mandopop Star Jay Chou to further its growth and under the SAMR’s new mandate, TME is allowed to keep its exclusive music deals with these independent artists for a period of 3-years.


Tencent – An Analytical Framework For “Tomorrow’s” Gaming Minors

By Jason Yap, CFA

Tencent (700 HK)‘s share price retreated 3.2% overnight on news that China would restrict playing time for minors to 3 hours a week – that is, 8pm to 9pm time slots on Friday, Saturday and Sunday, with an extra hour on public holidays.  The share price erased these losses and recorded an intra-day gain of 3.3% by Tuesday’s market close, suggesting that regulatory concerns were assuaged by Tencent’s affirmation of low single-digit revenue contribution of minors. 

Insight Provider Mio Kato wrote a unique but sensible piece about how the market may have misunderstood the significance of the restrictions, with the implications for the long-term growth of the industry more severe and an appreciation of the relevant issues would come sooner.  A key thrust of the argument is that habit-formation of gaming at an early age would be disrupted to an extent that gaming habits and user time spent do not carry over into adulthood. 

Tencent’s gaming revenue is derived primarily from the sales of in-game virtual items and the provision of adjacent services.  In this article, we expand on the above argument by highlighting how the habit-formation disruption not only affects user time spent but also have a knock-on impact with respect to in-game virtual item spending, subscription, and IP consumption. 

Further, Tencent’s revenue recognition on the provision of online games heavily depends on management’s assumptions of the gamer’s usage profile, which was in turn determined based on past gaming habits. This was historically raised as a Key Audit Matter in Tencent’s Audit Opinions. Accordingly, we also discuss in this article how the underlying management assumptions might change as a result of the regulations and consequent impact on Tencent’s gaming revenues. 


China Evergrande – Earnings Flash – H1 FY 2021 Results – Lucror Analytics

By Chuanyi Zhou

In our view, it is now a critical time for Evergrande. The group will likely be unable to extend any debt beyond current maturities. If the introduction of new investors does not progress well and meet the government’s expectations, a default is likely to occur. This will likely follow an out-of-court arrangement with creditors, which may involve an exchange offer (as was the case for Kaisa Group) with extended maturities.

In its interim report, Evergrande noted that its risks include defaulting on borrowings as well as litigation cases outside of the normal course of business. Therefore, we revise our recommendation on the Notes to “Not Recommended”.


NewMed (纽脉医疗) Pre-IPO: Uphill Battle for TAVR but Leads the TMVR

By Ke Yan, CFA, FRM

Shanghai NewMed, a China-based heart valve medical device company, plans to raise up to USD 200m via a Hong Kong listing.

The company’s core TAVR (transcatheter aortic valve replacement) product Prizvalve is a few years behind its competitors, despite its unique balloon expandable design. The selling point for the company is that in the international market such design is better than the self-expandable design which is mainstream in China. On the other hand, the company is leading the TMVR (transcatheter mitral valve replacement) development which is potentially a bigger market than the TAVR. 

The company has quality institutional investors alongside individual investors, as well as an experienced management team. We think investors should follow the IPO.


ICBC: Model Says “Yes” Though the Market Says “No”.

By Paul Hollingworth

According to our model PH Score™, ICBC seems headed in the right direction.  The valuation variable within the model helps the Score but other variables are broadly benign. Adding technical factors and the low valuation, ICBC ranks in the top quartile globally of our VFM (Valuation, Fundamentals, Momentum) universe. 

Elsewhere in China, recent bank results show subpar or mixed fundamental momentum and trends. This is not the case with Big Bertha, ICBC. However, it would be strange if this most systemic of banks did not reflect trends elsewhere. And it is with Asset Quality that the bank shows more than a fair share of stress with NCOs and “doubtful loans” plus “loss loan” buckets in particular showing outsized growth, indicating bad asset migration.

Elsewhere, on a LTM basis, the bank’s PH Score™ of 9 reflects progression in Profitability, in Efficiency, in Capital Adequacy, in Provisioning as well as the valuation variable though  NIM/Spread compressed and Liquidity eroded somewhat. Having said that, the LDR is at a “sweet spot” level. 

A FV of 6% and a PBV of 0.47x are not unattractive. These are below thresholds of 10% and 1x, respectively. An Earnings Yield of 24.1%, a Dividend Yield of 7.3%, and a Total Return Ratio of 3.3x underpin the valuation thesis.  

Given the current hostile environment, ICBC will come in for greater external scrutiny regarding its numbers. Others will have moved on to sunnier climes – wherever that may be. Whether management “manages” things more than managers elsewhere is a difficult one to decipher but the authorities are clearly on top of the situation and the bank is not turning off the credit spigot. Disclosure was sufficient for such a globally systemic entity. For those who want to lend money to China, the Dividend Yield alone may provide sufficient compensation for systemic risks. Others may balk at the yield on offer and may ask if something might not be quite right.


West China Cement – Earnings Flash – H1 FY 2021 Results – Lucror Analytics

By Leonard Law, CFA

West China Cement’s (WCC) H1/21 results were acceptable. The company reported robust revenue growth, but margins weakened as a result of higher coal input costs. EBITDA and OCF grew moderately, rising 24% and 13% y-o-y, respectively. That said, FCF was negative, owing to high capex for maintenance and new plant investments. Leverage weakened slightly but remained moderately strong, with Debt/EBITDA of 1.6x (FYE 2020: 1.2x) and Net Debt/EBITDA of 1.0x (FYE 2020: 0.7x). We foresee that leverage could continue to weaken in the near term, as there is a time lag before WCC’s new plants generate earnings.


Bairong: Upcoming Lock-Up Expiry

By Arun George

Bairong (6608 HK) is a leading independent AI-powered technology platform in China serving the financial services industry. It is the largest independent financial big data analytics solutions provider in China with a 9.0% revenue market share in 2020, according to Frost & Sullivan.

Bairong was listed on the HKEx on 31 March 2021 and raised net proceeds of HK$3,759.0 million at HK$31.80 per share. The shares currently trade 62% below their IPO price. Bairong priced its IPO at the market peak and the shares have collapsed in part due to China’s regulatory reset. 

Kuaishou Technology (1024 HK) fell 15% on 5 August after a lockup expiry, as early backers headed for the exit amid fears of China’s widening online crackdown. The ongoing regulatory crackdown has alerted investors to the risk of upcoming expiring lockups.  

Bairong’s pre-IPO investors’ lock-up period expires on 20 September. The cornerstones investors lock-up period expires on 30 September. In this note, we look at the returns of the pre-IPO investors and potential share sales post-lockup expiry.


Before it’s here, it’s on Smartkarma

China: Tencent, China Youzan, Ping An Insurance (H), Dongyue Group, Meituan, Helen’s International Holding, NetEase Inc, Shimao Property Holdings, ANE Logistics, Sunac China Holdings and more

By | China, Daily Briefs

In today’s briefing:

  • Tencent/Netease: Online Game Tightening Coming to an End
  • China Youzan (8083 HK): Once Bitten …
  • Ping An Insurance – Ugggh
  • Dongyue Group (东岳集团) Placement – Opportunistic Raise at All Time High but Easily Digestible
  • Meituan: New Initiatives Continue to Heavily Weigh on Margins
  • Helens Intl (海伦司国际) IPO – Cheap Drinks, Expensive Valuation
  • NetEase (NTES): Slower in 2Q21, But Do Not Short It
  • Shimao Group – Earnings Flash – H1 FY 2021 Results – Lucror Analytics
  • ANE Logistics Pre-IPO – Margins Expanding but Appears to Be Falling Behind
  • Sunac China – Earnings Flash – H1 FY 2021 Results – Lucror Analytics

Tencent/Netease: Online Game Tightening Coming to an End

By Ke Yan, CFA, FRM

We have discussed previously that the Chinese central government could impose tightening measure on online game companies to restrict screen time for the youth. Last night the NPPA announced a notice further tightening the youth playing. In this note, we will take a look at the notice and assess the impact on Tencent and Netease. We are of the view that this policy will have little impact on the two companies. 


China Youzan (8083 HK): Once Bitten …

By David Blennerhassett

Back on the 28 February this year, SaaS provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong’s mainboard by “way of introduction“. Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.

In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock –  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 

Disinterested Scheme Shareholders approved at the First SGM on the 6 May, a rollover arrangement and other side-agreements – not the take-private proposal as was incorrectly reported by some media sources.

At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 

And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 

The Scheme Document was expected to be posted on or before the 15 June, but was delayed on that day to at least the 19 October. 

Reportedly Youzan Tech’s listing application had been rejected, however, the wording in the monthly update on the 13 August said “Youzan Technology has been revising features of its application“, a slightly varied statement to “Youzan Technology has continued to progress its application with the Stock Exchange” seen in previous monthly updates

Shares touched a low of HK$0.71/share on the 23 August. 

The New News

China Youzan announced yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 

Both the scrip ratio and cash portion remain unchanged under China Youzan’s delisting transaction, by way of Scheme.

The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 

Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 

Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.

There’s probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a “fair value.” Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?

More below the fold.


Ping An Insurance – Ugggh

By Thomas J. Monaco

*Regulatory Onslaught Continues: The China Banking and Insurance Regulatory Commission (CBIRC) announced that it is investigating Ping An Insurance’ (2318.HK) [Ping An] property investments. Regulatory scrutiny of Ping An is occurring against the backdrop of the country’s skyrocketing real estate market and excessive leverage to the sector. This is on top of the CBIRC’s roll out of the internet insurance revision plan, which aims to scrutinize mainland China’s insurance technology platforms to which Ping An too has exposure; and

*Improving Overall Fundamentals: Ping An’s reported 1H21 results of CNY 58.0 bn, declined CNY 16.4 bn (22.0%) HOH related to the above real estate risk. Excluding the real estate write-downs, we note that Ping An’s HOH operating result would have actually improved CNY 8.2 bn or 11.0% on the back of insurance fundamental improvement nearly across the board.


Dongyue Group (东岳集团) Placement – Opportunistic Raise at All Time High but Easily Digestible

By Zhen Zhou, Toh

Dongyue Group (189 HK)  is looking to raise US$443m in its placement to fund the enhancement of its production capacity. 

In this note, we take a brief look at the company’s recent results and share our thoughts on the deal.


Meituan: New Initiatives Continue to Heavily Weigh on Margins

By Shifara Samsudeen, ACMA, CGMA

Meituan (3690 HK) reported 2Q2021 results on Monday which saw revenues increasing 77.0% YoY to RMB23.1bn (vs consensus revenues of RMB22bn) while the company reported an operating loss of RMB3.25bn (7.4% of total revenues) as opposed to an operating profit of RMB2.18bn (OPM of 8.8%) in the same quarter a year ago.

Strong growth in revenue across all three segments contributed to the top line growth, however, New Initiatives & Others continue to weigh on Meituan’s margins where it generated an operating loss of RMB9.2bn (76.8% of revenues) in 2Q2021. Lower revenue base during 2Q2020 due to the Covid-19 outbreak also partially supported growth in revenue during the quarter. The other two segments reported improvements in OPM which helped partially offset operating losses from new initiatives & others.


Helens Intl (海伦司国际) IPO – Cheap Drinks, Expensive Valuation

By Zhen Zhou, Toh

Helen’s International Holding (9869 HK) (HIH) is looking to raise up to US$358m in its Hong Kong IPO. 

Helens International Holdings (HIH) is the operator of a bar chain called “Helen’s”. The company was the largest bar chain in China in 2018 –  March 2021, in terms of the number of bars, according to Frost and Sullivan (F&S).

In this note, we will look at deal dynamics, assumptions, and share our thoughts on valuation.

Our previous coverage of the IPO:


NetEase (NTES): Slower in 2Q21, But Do Not Short It

By Ming Lu

  • The lower growth rate in 2Q21 was due to the high comparison base last year.
  • The new rule of time limit is not a concern.
  • The pandemic will pull players back to their mobile phones.
  • Our concern is expense in minor businesses.
  • We conclude an upside of 7.6%.

Shimao Group – Earnings Flash – H1 FY 2021 Results – Lucror Analytics

By Leonard Law, CFA

Shimao’s H1/21 results were acceptable. The company reported healthy growth in contracted sales and revenue recognition, while the gross margin remained robust. Liquidity is strong, with high Cash/ST Debt coverage. Shimao remains in compliance with all of the Three Red Lines thresholds, even if its perpetuals are treated as debt. This should allow the company to retain its strong access to financing. On a slightly negative note, Shimao’s net debt increased marginally despite a steep reduction in land spending. During the earnings call, management explained that the pullback in land spending was due to the company’s cautious approach to project selection, with Shimao aiming to maintain its above-average gross margins.

We move our recommendation to “Buy” from “Hold” on the SHIMAO curve. 


ANE Logistics Pre-IPO – Margins Expanding but Appears to Be Falling Behind

By Sumeet Singh

ANE, an express freight network operator in China for less-than-truckload (LTL) market, aims to raise around US$500m in its Hong Kong IPO. The company is backed by a host of financial investors including Centurium, Carlyle, CDH, CPE, NWS, Ping An, Goldman Sachs and Yili.

As per iResearch, ANE’s network was the largest in China in terms of total freight volume over 2017-20 with a market share of 17.2% in 2020.

By Dec 2020, it had collaborated with approximately 26,400 freight partners and agents to serve 3.6m shippers across approximately 96% of the counties and townships in China. Both the freight partners and freight agents operate under its brand and are required to adhere to its service guidelines and policies.

ANE’s overall volume and top line growth has been decent. However, not all of its offerings have been growing, while some of its revenue growth was driven by accounting changes. 

Moreover, despite claiming to be the largest player in its segment, it appears to be losing market share and like the rest of the industry, it appears to have little pricing power.


Sunac China – Earnings Flash – H1 FY 2021 Results – Lucror Analytics

By Chuanyi Zhou

Sunac’s H1/21 results are in line with our expectations, with improvements in contracted sales and revenue recognition, although margins contracted. Debt remained at the same level as at FYE 2020, and interest expense declined. Credit metrics continued to improve. We view the company’s deleveraging efforts positively, and expect credit metrics to strengthen further. That said, Sunac has expanded aggressively, with close to 38% of the attributable contracted sales spent on land acquisitions.

During the investor presentation, Sunac announced its aims of bringing the average financing cost down to 5% (H1/21: 8%) and achieving an investment grade rating in three years. In our view, this is very ambitious given the company’s financial profile and despite the improvements over the past two years. 

As of end-June, Sunac was in compliance with two of the Three Red Lines requirements, with Liabilities/Assets (excluding customer advances) at 76% (70% threshold set by the regulator). Cash/Short-term Debt and Net Debt/Equity were within the thresholds at 1.1x and 97%, respectively.


Before it’s here, it’s on Smartkarma

China: PC Partner, Alibaba Group, Kerry Logistics Network, WH Group, Meituan, Tencent, China Youzan, BYD, JOYY and more

By | China, Daily Briefs

In today’s briefing:

  • PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash
  • Alibaba Cloud: Near-Zero Dollars Valuation Is Not Entirely Impossible
  • Kerry Logistics (636 HK): Technicalities As Partial Draws To An End
  • WH Group Low Re Test
  • Meituan (3690 HK): 2Q21, Initiatives Loss Continued to Swell
  • HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
  • China Gaming Restrictions Are FAR More Severe Than the Market Is Assuming
  • China Youzan’s Updated Privatisation Proposal
  • Byd (1211) Vs BYDE (285): Carry On
  • JOYY Inc Privatisation: Our Thoughts on Valuation

PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash

By Nicolas Van Broekhoven

PC Partner (1263 HK) has been a small-cap gem we have written about on numerous occasions. The company is not a buy & hold stock but in September 2020 we called it “very cheap” PC Partner: Poor-Man’s Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield when it was trading at 1.2 HKD/share. Fast forward one year and the company just reported close to 1 billion HKD in net profit and is paying an interim dividend of 0.84 HKD on 1H21. This is a 14% interim dividend yield on a stock that closed at 5.82 HKD recently. While a year ago the company was in a net debt position today the balance sheet is rock solid and approximately 65% of the market cap is cash.

So far Mr. Market has met last Friday’s results with a big yawn as the stock barely moved. Investors are assuming results will fall off a cliff in 2H21 and into 2022. Now, what if we told you 2H21 results could grow over 1H21? Cash on the balance sheet has ballooned to 65% of market cap and even taking into account the large interim distribution we forecast cash to grow to over 100% of current market cap by late 2021! Pc Partner has a history of doing shareholder friendly things (buybacks, tender offers, special dividends) and we expect this to continue. The wild card with Pc Partner is if the tight supply and fantastic pricing of VGA’s will last for just one more quarter or well into 2022.

For now there is no indication that 3Q trends have changed meaningfully from 2Q21. This implies that bumper profits will continue at least this quarter. Historically, 4Q is always Pc Partner’s strongest quarter and if Covid strikes again in EU/USA winter season we see no reason why demand for PC’s/gaming will drop off sharply. As echoed by several car manufacturers and chip suppliers we see no end in sight for chip shortages keeping ASP’s elevated. This gets us to a scenario (not guarantee!) that 2H21 profits might actually be higher vs 1H21 profits. It would be an understatement to say that Pc Partner is NOT priced for this scenario at all.

Fair Value raised to 10 HKD (2x 5HKD FY2021 EPS estimate). Major risk here is the VGA supply situation improves drastically and ASP’s fall. The company is scheduled to hold a conf call with investors next week and we look forward to more guidance at this time.


Alibaba Cloud: Near-Zero Dollars Valuation Is Not Entirely Impossible

By Oshadhi Kumarasiri

Reuters reported last week that the Chinese city of Tianjin has asked government firms to migrate their data from private sector operators like Alibaba Group (9988 HK) and Tencent (700 HK) to a state-backed cloud system called “guoziyun” by next year. The decision to exclude private cloud platforms was made under direct instructions by China’s cabinet, the State Council and it prohibits government firms from entering or renewing contracts with third-party cloud platforms for the use of cloud services.

It seems like the intention of the Chinese government is to follow through with all the proposed policy changes regardless of the devastating impact on the Chinese tech sector valuations.

Even though the valuations have dropped drastically from the peak, valuation multiples have plenty of room to the downside. Meanwhile, we think regulatory clampdowns are yet to reach the home stretch, making the risk-reward balance still heavily skewed to the risk side. Thus, we think it is prudent to avoid investing in the Chinese tech sector for the time being.


Kerry Logistics (636 HK): Technicalities As Partial Draws To An End

By David Blennerhassett

Back on the 9 February, Kerry Logistics Network (636 HK) (KLN) announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH) (“SFH”).  SFH intended to acquire 931.21mn shares or 51.8% of shares outstanding, of KLN. The Offer price of  HK$18.80/share was a 19.83% discount to last close. KLN’s shares also gained 25% prior to the suspension.

Below is a timeline of events that subsequently unfolded:

Date

Data in the Date

30-Mar-21The controlling shareholders of Kerry Logistics Network (636 HK) (KLN), including Kerry Properties (683 HK), plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. Those irrevocables have now been fulfilled – this forms part of the pre-conditions.
9-Apr-21KLN announced that the antitrust approval has been received from the State Administration for Market Regulation with respect to the Partial Offer.
26-May-21At an SGM, KLN shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.
7-Jun-21The free float waiver has been received from the HKEx.
15-Jun-21

Approval by the shareholders of Kerry Properties (683 HK) obtained

29-Jun-21CFIUS approval received
20-Jul-21KLN announced approval by the Independent Shareholders in respect of the Special Deal Agreements and the Framework Services Agreement had been obtained.
2-Aug-21KLN announced NDRC and MoC approval has been received as to the partial offer.
9-Aug-21Exactly on the Long Stop date, KLN announced all of the pre-cons have been met – or waived (the Thai waiver in particular)  – and that the Composite Document is expected to be dispatched, on or before, the 16 August. 
12-Aug-21Composite Doc dispatched
17-Aug-21The Record Date for the Special Dividend is expected to be the 1 September. The Special Dividend is expected to be paid on or about Friday, 17 September 2021
18-Aug-21Irrevocables received. Thai MGO waiver received,. 
Source: HKEx announcements

All appears to be going to plan.  The first close is the 2 September. 

Then KLN announced on the 24 August a delay in the record date for the Special Dividend. KLN estimates:

that the Record Date for the Special Dividend will be on or around Wednesday, 15 September 2021, instead of Wednesday, 1 September 2021 as disclosed in the Special Dividend Announcement. The Special Dividend is expected to be paid on or about Tuesday, 5 October 2021, instead of Friday, 17 September 2021.

With the Partial expected to close on the 2 September, questions have been asked whether those shareholders who have already tendered – or those investors who tender before the 2 September – whether they are still eligible for the special dividend?

More below the fold. 

Plus updated Ye Olde Arb Grids


WH Group Low Re Test

By Thomas Schroeder

WH Group (288 HK)  shows some downside pressure to re test key support lows that will set up a value long play but needs to hold 5.28. Overhead resistance will provide headwinds at 6.70-90.

Big flat bottomed range formation from 2019 shows increasing pressure to the downside.

6.70/90 is near term resistance that will cap a recovery attempt. Short sellers should focus on this area.

5.93 is pivot support to crack.

MACD bull wedge is constructive but needs more time to full mature with buy support outlined.

Buying a washout low tied to the 2018 low holding.


Meituan (3690 HK): 2Q21, Initiatives Loss Continued to Swell

By Ming Lu

  • Meituan’s revenue continued to grew fast in 2Q21 due to the low comparison base in 2Q20.
  • We see restaurants crowded and food delivery scooters running in streets.
  • Both food delivery and in-store were healthy as the operating margins improved.
  • The company admitted that it continued to invest heavily in Meituan Select, but no company wins in the community group purchase market.
  • The operating loss swelled to RMB9.2 billion in 2Q21 from RMB8 billion in 1Q21.

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping

By Brian Freitas

The upcoming rebalances for the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) will be implemented at the close of trading on 3 September. The rebalance will use data from todays close to cap the stocks in the index at a maximum of 8% of the index weight.

In this Insight, we show the flows after capping stocks using the close on 30 August. The final numbers will be marginally different based on todays closing prices.

For the Hong Kong Hang Seng Index (HSI INDEX) there are 3 inclusions – Xinyi Glass Holdings (868 HK)Li Ning Co Ltd (2331 HK) and China Merchants Bank H (3968 HK) and 1 exclusion – Bank Of Communications Co H (3328 HK).

For the Hang Seng China Enterprises Index (HSCEI INDEX), the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK).

For the Hang Seng Tech Index (HSTECH INDEX) there is one set of changes with Trip.com (9961 HK) / Trip.com (TCOM US) replacing Koolearn (1797 HK).

Alibaba Group (9988 HK)‘s weight in all 3 indices is higher than 8% following the increase in the number of index shares at the July monthly rebalance. The stock will have the largest passive selling due to capping back to 8%.

Capping and float changes will lead to passive buying on Tencent (700 HK), Meituan (3690 HK) and Kuaishou Technology (1024 HK), while there will be passive selling on HSBC Holdings (5 HK), AIA Group Ltd (1299 HK), China Construction Bank H (939 HK), Xiaomi Corp (1810 HK) and HKEX (388 HK).

There will be selling on a lot of the Hong Kong Hang Seng Index (HSI INDEX) constituents due to funding flows.


China Gaming Restrictions Are FAR More Severe Than the Market Is Assuming

By Mio Kato

Overnight many Chinese gaming-related names fell ~3% on news that China would be restricting playing time for minors to just three hours a week, specifically 20:00-21:00 on Friday, Saturday and Sunday. The market reaction grossly underestimates how drastic these restrictions will be for gaming companies and seems to simply be superficially looking at the low single-digit revenue contribution percentages of minors.


China Youzan’s Updated Privatisation Proposal

By Arun George

China Youzan (8083 HK) has provided an update on its privatisation proposal. There is no change to the scheme consideration (HK$0.1352 in cash per scheme share) and the terms of the Youzan Technology distribution (0.05077265 Youzan Technology share for every China Youzan share). The key change is that Youzan Technology shares will be listed on the HKEx by way of an offering of new shares, instead of by way of introduction. 

The privatisation offer implies a total value of HK$1.4654 per share, which is a 100.7% premium to the last trading day price of HK$0.73 (27 August). However, the implied valuation of HK$1.4654 per share is -37% lower than the original valuation of HK$2.3088 per share (announced on 28 February 2021). As the cash consideration is unchanged, the lower valuation is driven by the decline in Youzan Technology’s estimated value between the original valuation reference date (30 November 2020) and the new valuation reference date (30 June 2021). 

The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No independent shareholder holds a blocking stake.

The valuer continues to base Youzan Technology’s valuation by deducting the market value of the payment & other business from the market cap of China Youzan. However, since the latest assessment date (30 June 2021), China Youzan’s shares have further declined -45% in part due to the Chinese tech selloff driven by the regulatory reset. Consequently, based on the valuer’s methodology, Youzan Technology’s valuation is RMB11.02 per share at the last close vs the valuation of RMB21.76 per share at the valuation reference date (30 June 2021). 

The privatisation offer remains broadly fair in both the distribution in-specie (distribution ratio in line with the control ratio) and the cash consideration (marginally below the value of the payments business due to peer multiple re-rating).

China Youzan’s valuation hinges on the valuation of Youzan Technology, which remains in a state of flux due to the uncertain regulatory backdrop. China Youzan’s last close price of HK$0.82 per share implies that Youzan Technology is valued at a trailing EV/Sales multiple of 12.7x, broadly in line with SaaS commerce peers’ current trailing EV/Sales multiple of 13.4x (but at a premium to Chinese peers). As Youzan Technology is at best fairly valued at China Youzan’s last close price, we would remain on the sidelines. 


Byd (1211) Vs BYDE (285): Carry On

By Henry Soediarko

1H 2021 result for BYD (1211 HK) was a good topline growth but not followed with a good bottom-line growth due to the gross profit margin contraction from the handset business while the auto business is still producing solid growth with more catalysts to come. 

If investors are willing to take BYD Electronics’ prospects, or long-only investors, when buying BYD (1211 HK) then having BYD only is not a bad idea. However, if a long-short investor prefers not to have exposure to BYD Electronics while still very much in love with the BYD Auto business, then shorting BYD Electronics in addition to going long on BYD can be considered. 
The ratio should be:
1. Long 100 shares of BYD (1211 HK) 
2. Short 50 shares of BYD Electronics (285 HK) .

JOYY Inc Privatisation: Our Thoughts on Valuation

By Shifara Samsudeen, ACMA, CGMA

It was reported by Reuters and several other news media outlets that JOYY (YY US) top two shareholders: David Li – Chairman and Lei Jun – founder of Xiaomi, plan to take the Nasdaq-listed company private. David Li and Lei Jun respectively owned 23.2% and 7.8% of JOYY with David Li having 76% of voting power. Li and Len are said to be planning to offer about US$75-100 per JOYY’s share which will value the company at US$5.8-8bn and is aimed to be finalised by the end of 2021. As at the end of Friday (27th August), JOYY’s shares closed at US$61.97 per share at a market capitalisation of US$4.9bn and an EV of US$1.3bn.

Tightening audit requirements and higher regulatory scrutiny have led to a number of New-York listed Chinese companies to opt out of the US through either going private or carrying out secondary listings in markets closer to China.


Before it’s here, it’s on Smartkarma

China: WH Group, JOYY, Postal Savings Bank of China, Shenzhen International, ZhongAn Online P&C Insurance, Health And Happiness (H&H), Ping An Healthcare and Technology Company Limited and more

By | China, Daily Briefs

In today’s briefing:

  • WH Group Post-Tender Outlook – Index Selldown and Back-End Trading/Valuations
  • Joyy’s Potential Privatisation by Top Two Shareholders
  • Postal Savings Bank of China – Way Too Conservative
  • Shenzhen Intl (152 HK): Encouraging Recovery of Recurring Profit in 1H21
  • ZhongAn Online P&C Insurance – Loss Ratio Improvement
  • Morning Views Asia:
  • Ping An Good Doctor (1833.HK) – A Vicious Cycle?

WH Group Post-Tender Outlook – Index Selldown and Back-End Trading/Valuations

By Travis Lundy

WH Group (288 HK) will see its Tender Offer completed on Monday 30 August. I expect the result will be out as per the 30 July Circular – at 7pm HKT. 

Then we wait. 

And things get a little weird and possibly a little bumpy this week. 

And into the week after…

But we wait anyway. 

More below the fold. 

Insights on This WH Group Event To Date

DateAuthorTitle
02-Jun-21David BWH Group (288 HK): Today’s Pig Is Tomorrow’s Bacon? 
06-Jun-21myselfWH Group Buyback Offer Announced – Strong Accretion Creates Accretion Risk 
20-Jun-21myselfWH Group Vs Peers – Too Many Piggies Going to Market? 
05-Jul-21myselfWH Group – Trading Opportunities Abound 
10-Jul-21myselfWH Group – Long-Only Fundamental Investors Can Take Advantage Too 
30-Jul-21myselfWH Group Offer Doc Out – This Little Piggy Went To Market 
17-Aug-21myselfWH Group Partial Buyback Offer Now Unconditional 
18-Aug-21myselfWH Group – Stock Plummets as Ousted Son Drags Pigs Into The Mud 

Joyy’s Potential Privatisation by Top Two Shareholders

By Arun George

JOYY (YY US) may be subject to a privatisation bid from Mr David Li (co-founder and Chairman) and Mr Jun Lei (founder and Chairman of Xiaomi Corp (1810 HK)), its top two shareholders, according to Reuters report on 26 August. Mr David Li and Mr Jun Lei are looking to privatise Joyy at $75-$100 per ADS and finalise the deal by the end of 2021. Mr David Li and Mr Jun Lei aim to spin off Joyy’s key asset, BIGO, and list it in Hong Kong, to take advantage of higher valuations, according to Reuters. On 27 August, Joyy said it has not received any formal takeover offers, according to Chinese media reports.  

Joyy shares are around 60% below their February peak due to weak guidance (3Q21 revenue guidance was around 16% below consensus), the delay of SAMR anti-trust approval for the YY Live disposal and ongoing policy uncertainty on Chinese tech.

As a reminder, on 16 November 2020, Joyy entered into a definitive agreement with Baidu (BIDU US) for the disposal of YY Live for $3.6 billion in cash, subject to certain adjustments. The sale was substantially completed on 8 February 2021 resulting in a $1.9 billion payment from Baidu. Notably, Joyy’s market cap of $4.9 billion is 7% below its net cash of $5.2 billion, which is the sum of the 2Q1 net cash of $3.9 billion and Baidu’s remaining payment net of tax $1.4 billion.

As Joyy is incorporated in the Cayman Islands, for potential privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. Mr David Li represents 76.0% of the voting interest and has the two-thirds voting interest threshold needed to approve any potential privatisation deal.

Our SOTP and relative valuation suggest that the rumoured privatisation range of $75-100 per ADS is justifiable and reasonable. Our base-case SOTP valuation is $71.69 per ADS, which is a 16% premium to the last close price of $61.97 per ADS. Despite Joyy’s insistence that no formal bid has been received, we would be buyers as the shares offer a favourable risk/reward profile to the emergence of a formal privatisation bid.


Postal Savings Bank of China – Way Too Conservative

By Thomas J. Monaco

*Excess Provisioning Eats Away At 2Q21 Results: Established in 2007, Postal Savings Bank of China (1658.HK) [PSB] is mainland China’s youngest large commercial bank. PSB reported 2Q21 bottom-line results of CNY 19.9 bn – declining CNY 1.4 bn (6.6%) linked quarter. Excluding gains, PSB’s core operating results declined CNY 6.0 bn (36.0%) over the period. Results were impacted by significantly higher loss provisions and negative operating jaws; and

*Credit Quality Turns, But Reserves More Than Adequate: Net new NPLs increased CNY 14.9 bn and equate to an elevated 116.6% annualized – quite the difference from the CNY 9.3 bn or 18.4% annualized posted at year-end. Despite the accelerated increase in net new NPLs, it would appear that PSB’s reserves exceed known and potential credit risk to the tune of CNY 89.5 bn or over a year of pre-tax profits – begging the question of why the increase in loss provisions?


Shenzhen Intl (152 HK): Encouraging Recovery of Recurring Profit in 1H21

By Osbert Tang, CFA

The 44% YoY decline of reported profit in 1H21 at Shenzhen International (152 HK) (SZI) due to one-off gain in last year has masked its good recurring operations recovery. In fact, all business segments posted encouraging rebound in net profit contribution YoY; and even the 49%-owned Shenzhen Airlines (SZA) witnessed a 39% YoY narrowing in losses attributable to SZI. Net of one-off items, 1H21 profit is HK$961m, against losses of HK$1.2bn in 1H20, indicating a sharply positive YoY swing.

Management is cautiously optimistic towards 2H21. New projects, healthy recurring growth and asset recycle will drive logistics segment profit, though SZA’s profitability will still hinge on the local COVID-19 situation. The acquisition of Shenzhen Investment Holdings Bay Area Development (737 HK) by its subsidiary Shenzhen Expressway Co H (548 HK) will solidify SZI’s market share in Shenzhen, and provide upside from the realisation of its land plot values. Currently at 2SD below the historical average P/B, SZI is deeply undervalued, in our view.


ZhongAn Online P&C Insurance – Loss Ratio Improvement

By Thomas J. Monaco

*First Half Profits: ZhongAn Online P&C Insurance (6060.HK) [ZhongAn] reported positive 1H21 bottom-line results of CNY 604.1 mn, an increase of CNY 840.2 mn over losses of CNY 236.1 mn in 2H20. Results were primarily driven by P&C, which delivered profits of CNY 1.0 bn – tracking the improvement in underwriting profits (combined ratio of 99.4%) and investment performance (up 43.2% HOH); and 

*Heavy Handed Government: Increased scrutiny of the online insurance segment by the China Banking and Insurance Regulatory Commission’s (CBIRC) intimates the near wipeout of this current generation of online insurers. This regulatory onslaught is stifling innovation and likely will push business returns to well below the cost of equity.


Morning Views Asia:

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.


    Ping An Good Doctor (1833.HK) – A Vicious Cycle?

    By Xinyao (Criss) Wang

    on August 24, 2021, Ping An Healthcare and Technology Company Limited (1833 HK) (PAGD) released its 2021 interim results. The revenue was RMB3.82 billion, up 39% YoY. Gross profit was RMB1.025 billion, up 24.8% YoY. Net loss was RMB879.3 million, up 312% YoY. After the financial report was released, PAGD’s share price fell about 13.7% for three consecutive days from August 25, reflecting the attitude of the market. This insight mainly analyzed PAGD in terms of its performance in 2021/1H, the business and the underlying logic, the concerns and the outlook of the Company.


    Before it’s here, it’s on Smartkarma

    China: Hang Seng Tech Index, Beijing Capital Land Ltd H, Helen’s International Holding and more

    By | China, Daily Briefs

    In today’s briefing:

    • HK Tech Index Bottom Target
    • Asia-Pac Weekly Risk Arb Summary: Beijing Capital Land, Suchuang Gas, Siam Dev, 1300Smiles
    • Helens Intl (海伦司国际) Pre-IPO – Largest Bar Chain Targeted at Youths

    HK Tech Index Bottom Target

    By Thomas Schroeder

    Hong Kong’s tech index break below 6,900 was a major support breach with the next undershoot support at 5,500. 6,900 must be re taken to start a mending process. Sell pressure will exhaust on the next low.

    We are looking for a washout low in the HSI near 24,000 in September and will align with a new low in the tech index above 5,500 support.

    Macro hurdle: The 6,900 barrier is not likely to be cleared easily and the path ahead is fraught with policy headwinds. 


    Asia-Pac Weekly Risk Arb Summary: Beijing Capital Land, Suchuang Gas, Siam Dev, 1300Smiles

    By David Blennerhassett

    This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.

    I number 36, mostly firm, deals around the region.

    More below the fold.


    Helens Intl (海伦司国际) Pre-IPO – Largest Bar Chain Targeted at Youths

    By Zhen Zhou, Toh

    Helen’s International Holding (HIH HK) is looking to raise US$300m in its upcoming Hong Kong IPO. 

    Helens International Holdings (HIH) is the operator of a bar chain called “Helen’s”. The company was the largest bar chain in China in 2018 –  March 2021, in terms of the number of bars, according to Frost and Sullivan (F&S).

    In this note, we look at the company’s operational and fundamental performance and share our initial thoughts on the IPO.


    Before it’s here, it’s on Smartkarma