ChinaDaily Briefs

China: ESR Cayman , Nexteer Automotive, China Communications Construction, Ocumension Therapeutics, New Horizon Health, BeiGene Ltd, Hong Kong Medical Consultants Holdings, Wuxi Rural Commercial Bank Co, Softbank Group, Yang Ming Marine Transport and more

In today’s briefing:

  • ESR Cayman Placement – Past Deals Have Generally Done Well
  • Nexteer (1316): Time to Book Some Profit
  • China Comm Const (1800 HK): Positive Takeaways from Call with Company
  • Ocumension Theraputics Placement – IPO Was Hot, Deal Should Be Supported Despite Lock-Up Expiry
  • New Horizon Health IPO: Aiming to Become Pioneer in Cancer Screening
  • BeiGene: Novartis Grabs Tislelizumab Rights
  • Pre-IPO Hong Kong Medical Consultants – Promising Future Despite Short-Term Declining Profitability
  • Wuxi Rural Commercial Bank: In a Consolidating Space, Wuxi Rural Can Be a Winner
  • Morning Views Asia: China Fortune Land, China SCE, Softbank Group
  • Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

ESR Cayman Placement – Past Deals Have Generally Done Well

By Sumeet Singh

Warburg Pincus (WP) is looking to raise around US$219m by selling about 2.1% of ESR Cayman (1821 HK). This is a clean-up trade.

We have covered the IPO and previous placements, links to which are below. In this insight, we will discuss the deal dynamics and run the deal through our ECM framework.

June, September and November 2020 placement:

Links to our earlier insights, from its IPO:


Nexteer (1316): Time to Book Some Profit

By Henry Soediarko

Nexter’s share price has moved in tandem with Geely Auto (175 HK) in the past half a year, which particularly have benefited from the rumor that they entered into a partnership with Baidu (BIDU US) to develop autonomous vehicles although it was denied by the companies yesterday. 

The management has repeatedly stated last year that they will make an effort to further grow the business in China but it will take some time and as per the latest interim report in 2020, the revenue from China still has not surpassed the US. Nexter bought a stake in Tactile Mobility, the leading tactile virtual sensing, and data company based in Israel, which will be a key element to win a mandate in autonomous vehicle projects. The stock may see another leg up tomorrow but after a 71% return (prior to today’s) in 6 months, it is time to sell to lock in some profit


China Comm Const (1800 HK): Positive Takeaways from Call with Company

By Osbert Tang, CFA

We had a call with China Communications Construction (1800 HK) with positive takeaways. We see management taking action to address the issues of high gearing and slow cash payback, good progress in infrastructure REIT issuance, potential improvement in profitability and limited impact of the Sino-US tension. The company is also exploring various options to support its share prices.

After a 13% rebound since the exclusion from MSCI global indexes, there still exists significant upside potential for CCCC, in our view. Its 12-month forward P/B multiple of 0.21x remains cheap. With improvement in profitability and a narrowing in the H-A discount, we expect re-rating to continue – a return to 1SD below historical average P/B will imply 66% upside.  


Ocumension Theraputics Placement – IPO Was Hot, Deal Should Be Supported Despite Lock-Up Expiry

By Sumeet Singh

Ocumension Therapeutics (1477 HK) aims to raise around US$103m to commercialize new products, fund clinical trials and develop new facilities. 

We have covered the IPO in our previous notes, links to which are below. In this note, I’ll talk about the updates since then.

Our previous coverage


New Horizon Health IPO: Aiming to Become Pioneer in Cancer Screening

By Shifara Samsudeen, ACMA, CGMA

New Horizon Health (NHH HK) , the pioneer in China’s colorectal cancer screening market has filed for an IPO on the Hong Kong Stock Exchange and according to Bloomberg, the company plans to raise about US$300m through the IPO.

The company is a commercial stage biotech company with two proprietary cancer screening products, ColoClear and Pupu Tube developed for screening colorectal cancer.

ColoClear is the first and only molecular cancer screening test approved by NMPA, and as of the latest practicable date, there was no other colorectal cancer screening candidate in the market or carried out prospective clinical trial in China.

China has the highest colorectal cancer incidence in the world thus presenting huge market opportunity for screening tests. If detected early, colorectal cancer is one of the most curable and preventable cancers which creates huge demand for colorectal cancer screening tests.

In addition to the company’s two core proprietary screening tests, there are two other screening product candidates that are in the development pipeline.


BeiGene: Novartis Grabs Tislelizumab Rights

By Kemp Dolliver, CFA

BeiGene has outlicensed ex-China rights to its PD-1 tislelizumab to Novartis on favorable terms, validating the competitive position of this compound in a crowded market. Further, the agreement marks a growing trend of Chinese companies outlicensing products to multinationals, which can have a leveraged benefit on their P&Ls and valuations.


Pre-IPO Hong Kong Medical Consultants – Promising Future Despite Short-Term Declining Profitability

By Xinyao (Criss) Wang

Hong Kong Medical Consultants Holdings (MCH HK) is a comprehensive private healthcare provider, and is also one of Hong Kong’s leading multi-specialties medical centre operators, providing specialty healthcare services supplemented by various allied medical services and medical management services. On October 29th 2020, the Company submitted an application for listing on the main board of the Hong Kong Stock Exchange. Although Hong Kong Medical Consultants has declining profitability in the short-term, its long-term performance could still be promising.


Wuxi Rural Commercial Bank: In a Consolidating Space, Wuxi Rural Can Be a Winner

By Paul Hollingworth

As is often cited, China maintains certain advantages over other parts of the world regarding the terrible weight of C19 that is so devastating other parts of the globe and in relation to the interrelated current macro picture.

Jiangsu-based Wuxi Rural Commercial Bank Co (600908 CH) is specialized in SMEs, Corporate and Retail lending, e-banking, Trade Finance, Credit Cards, and FX services. The bank last year took a stake in another rural lender. China has a total of 1,641 rural banks in 31 provinces. Rural commercial banks were originally rural credit cooperatives. 

Given greater capital constraints and asset quality concerns surrounding the specific space, shares carry a higher risk/reward profile. (Anhui rural banks, Jiangxi Ganzhou Commercial Bank, Jilin Tonghua Rural Commercial Bank, and a rural credit union in Heilongjiang province are examples of how not to function). The brunt of the asset quality pressures in China might not have come through yet because of the still existing moratorium on the repayment of loans as well as its interest payments- but this applies to most jurisdictions with arguably greater pain.

The CBIRC has ordered rural banks to boost capital, merge with other institutions (something Wuxi Rural has already instigated), or introduce strategic investors to mitigate financial risks. Regulators are also looking into converting certain high-risk rural banks into branches for larger state-owned or joint-stock banks. If a bank is deemed severely distressed, local regulators will be able to push for a restructuring, assist in a takeover or shut down the bank entirely. The sector is thus ripe with opportunity as well as risk.

2020 was indeed a year of deeper “National Service” but countering a growing coterie of high-profile detractors, the System may be one of the world’s more resilient ecosystems.

Recent results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, and in NIM and Spread, while Capital Adequacy, and Liquidity (though LDR is low) showed some erosion though headline Asset Quality (excluding the “substandard” bucket) and Provisioning were pretty stable. Growth in “Core Income” was solid, especially in underpenetrated Fee Income while Net Interest Income expansion was underpinned by forceful credit expansion.

A FV of 8%, a PBV of 0.95x, an Earnings Yield of 11.4%, and a Dividend Yield of 3.1% are not unappealing. The bank commands both an above-average PH Score™ and VFM ranking. Wuxi Rural Commercial also has a “3 year off, 1 year on” profile, positioned in the global top decile:  shares have performed relatively well over the last 12 months after a long period of poor performance which can be a benign combination for investors.


Morning Views Asia: China Fortune Land, China SCE, Softbank Group

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.


Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

By Daniel Hellberg

Israel’s ZIM Integrated Shipping Services (proposed ticker ZIM US) has filed documents to launch an IPO in the US. Media reports have speculated the container shipping company hopes to raise at least US$100 mn in the deal; some reports say ZIM could try to raise US$300 mn or more.

The objective of this note is to provide some context for the company and the global container shipping industry. After all, it has been over two decades since a global container ship operator has traded in the US (Matson Inc (MATX US) focuses on niche domestic US markets, generally).

ZIM is a small player in global container shipping, and contrary to its claims the company mainly operates in highly competitive segments. Its “asset-light” model is unusual, but it represents a double-edged sword: chartering in the majority of its capacity offers flexibility, but it also means operating costs may rise in tandem with freight rates over the cycle, limiting margin expansion. 

Fortunately, Europe and Asia offer several direct comps for ZIM, including AP Moeller – Maersk A/S (MAERSKB DC) of Denmark and Evergreen Marine Corp (2603 TT) of Taiwan. These two companies — both of them far larger than ZIM, and more profitable over the cycle — will serve as useful benchmarks once ZIM and its bankers announce details regarding deal size and pricing. 


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