China: Ant Financial, CSC Financial, Trip.com, Ping An Insurance (H), Remegen Ltd, Greenland Hong Kong Holdings, Jinke Smart Services and more

In today’s briefing:

  • Ant Group IPO First Look: Swarming to Market
  • China Brokers: Regulator Encourages M&A Among Brokers and Mutual Fund Houses
  • Ctrip in Talks with Investors for Nasdaq Delisting; Ability to Attract a Large Premium Seems Limited
  • Ping An Insurance [2318-HK]:  Momentum Stall
  • Ping An Insurance – 1H20 Preview
  • RemeGen (荣昌生物) Pre-IPO: Top-Notch R&D Capability and a Strong Team
  • Morning Views Asia: Glenmark Pharmaceuticals, Redco Properties
  • Jinke Smart Services (金科智慧服务) Pre-IPO – GFA Growth at the Expense of Fees

Ant Group IPO First Look: Swarming to Market

By Arun George

Ant Financial (1051260D CH)/Ant Group is a technology company that provides digital payment services and digital financial services to consumers and small and micro businesses (SMBs) in China and across the world. Ant said last week it would pursue a simultaneous dual-listing in Hong Kong and on the Shanghai stock exchange’s STAR board. The Hong Kong share sale alone could raise about $10 billion at a $200 billion valuation, according to press reports. 

In this note, we take a first look at Ant and run through its history, industry and operating segments. We then take a closer look at the rumoured $200 billion valuation in the context of Ant’s financial performance. Based on available disclosure, our estimates and peer group multiples, the $200 billion valuation is justifiable, in our view.  


China Brokers: Regulator Encourages M&A Among Brokers and Mutual Fund Houses

By Roger Xie

China’s top securities regulator is encouraging mergers and acquisitions among brokerages and mutual fund houses, the state-run China Securities Journal reported last week. The China Securities Regulatory Commission (CSRC) aims to solve the problem of competition among industry peers with the move, and the top securities watchdog also supports launching employee stock ownership and equity incentive plans. We believe it is policy maker’s intention to have a more institutionalized and internationalized industry, which will better serve China economic transformation. Based on valuation and favorite policy, brokerage and asset managers are in sweet spot for investors. 

According to Securities Association of China, there are 98 licensed brokerage firms in China. In 2019, the top-10 brokerage firms’ revenue only account 46% of industry-wide revenue. Their relevant profits account about 60% of industry-wide profit. Interestingly, top-10 brokerage firms in US account more than 70% of revenue and profit for the industry. We believe there are plenty of room for further consolidation in brokerage business. It is also reported in April that Citic Securities (H) (6030 HK) and CSC Financial (6066 HK), along with their major shareholders CITIC Group and Central Huijin, have started due diligence and a feasibility study on a potential merger of these two brokers. If the speculation has been realized, the combined CITICS and CSC Financial will become the largest brokerage firm in China with asset exceeding RMB 1trn. It will become No. 1 player in brokerage, margin financing, investment banking and asset management.

CSC Financial (6066 HK) is our top pick in Chinese broker sector. CSC Financial was ranked 4th by equity and bond underwriting ranking. It has a dominant position on the IPO underwriting volume and pipeline in ChiNext board, which has direct benefits from the ChiNext board reform. 


Ctrip in Talks with Investors for Nasdaq Delisting; Ability to Attract a Large Premium Seems Limited

By Shifara Samsudeen, ACMA, CGMA

The US-China trade tensions and the US crackdown on Chinese companies listed in the US have led to a large number of US-listed Chinese stocks to look for alternatives. While some companies have sought secondary listings on the Hong Kong Stock Exchange, another set of companies have been delisting their shares from the US stock exchanges.

Earlier this week, the Chinese tech giant Tencent offered to buy out and take private the Beijing based web search company Sogou.

Over the last couple of days, several news media outlets reported that the Chinese online travel firm Ctrip (Trip.com) is now considering delisting its shares from Nasdaq. In this insight, we take a look at Ctrip, intention to delist its shares from Nasdaq and its valuation.


Ping An Insurance [2318-HK]:  Momentum Stall

By Steven Holden

  • Ping An Insurance (H) (2318 HK) is the 4th most widely held stock in China and the 2nd most widely held Financial company across the Asia Ex-Japan region. It is also the 2nd largest overweight position behind HDFC Bank (HDFCB IN) .
  • However, active fund ownership in Ping An Insurance (H) (2318 HK) is losing momentum after a 5-year boom in positioning. After hitting a peak at the end of 2019, average fund weights have fallen to 1.87% (from 2.5%) and the percentage of funds invested has dropped to 71.4% (from 74.5%). All of our positioning metrics have trended lower over the last 6-months. 
  • Whilst many investors still hold sizeable positions in Ping An Insurance (H) (2318 HK) , they can no longer rely on momentum to drive prices higher.   With so many funds overweight the stock, the investment case needs to be rock solid from here on in.

Ping An Insurance – 1H20 Preview

By Thomas J. Monaco

*Weak Results Ahead: Ping An Insurance (2318.HK) [Ping An] is set to report 1H20 results on August 27, 2020. We anticipate COVID-19 to negatively impact Ping An’s multiple lines of business, which should aggregate to a YOY net income decline of 5% to CNY 69.8 bn, by our calculation; and

*Struggles By Insurance Unit: The slowdown in new business volume is anticipated to weigh on Ping An Life’s bottom-line. As such, we anticipate a 35% decline in the value of new business during 1H20. Credit insurance exposure is likely to be a drag down performance again, and Ping An P&C’s 1H20 combined ratio will be challenged and is due to increase to a tad under 100% – or barely profitable operationally.


RemeGen (荣昌生物) Pre-IPO: Top-Notch R&D Capability and a Strong Team

By Ke Yan, CFA, FRM

RemeGen is a China-based commercial-ready biopharmaceutical company with a focus on first-in-class and best-in-class biologics in the area of autoimmune, oncology and ophthalmic diseases. 

We think the company’s R&D is the top notch among Hong Kong listed biotech companies. It has two near commercialization products, RC18 and RC48.

RC18 (BLyS/APRIL target) has an innovative design and has demonstrated a superior efficacy for SLE which has big unmet demand. RC48 (HER2 ADC) is the first domestically developed ADC that has entered the clinical trial stage. It also has a differentiated indication targeting HER2 low-expressing patients, compared to competing drug candidates. Thanks to its ADC platform and bispecific platform, the company has interesting and differentiated pipeline products entering clinical trials.

The company has a strong management team and backing from reputable investors. We foresee strong demand for the deal.


Morning Views Asia: Glenmark Pharmaceuticals, Redco 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.


Jinke Smart Services (金科智慧服务) Pre-IPO – GFA Growth at the Expense of Fees

By Zhen Zhou, Toh

Jinke Smart Services (JKS HK)  is looking to raise about US$500m in its upcoming Hong Kong IPO.

JKS is the property management arm of Jinke Property Group. As of December 2019, JKS has 754 property management projects with a total contracted GFA of 248.6m sqm. Out of that, 417 projects are currently under management which is about 120.5m sqm. 

The company focuses on the three major regions in China such as Southwestern China, Eastern and Southern China, and Central China. It covered 115 cities in 21 provinces, municipalities, and autonomous regions. 


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