ChinaDaily Briefs

China: Hangzhou Tigermed Consulting (H), Alibaba Group, Yatsen Holding, JD Health, Tencent Holdings, Joinn Laboratories China Co-A, China Yangtze Power Co, Ltd., Edding Group, Car Inc and more

In today’s briefing:

  • FTSE GEIS Index Rebalance Preview: IPOs and J-REITs
  • China Internet Weekly (9Nov2020): Singles’ Day Performance, BABA, JD, VIPS, PDD
  • Yatsen IPO: Valuation Insights
  • ECM Weekly (15 November 2020) – JD Health, Kuaishou, CR Mixc Life, Antengene, and Placements!
  • Tencent: The Deferred Revenue Issue
  • JOINN Laboratories – Q3 Performance in Line with Expectations; Promising Globalization After HK IPO
  • China Yangtze Power (600900 CH): Well Positioned to Capture China’s Clean Energy Initiative
  • Edding Group (亿腾医药) Pre-IPO: Distributor Turning Pharmaceutical
  • Morning Views Asia: Car Inc, Future Retail, Jingrui Holdings

FTSE GEIS Index Rebalance Preview: IPOs and J-REITs

By Brian Freitas

FTSE Russell will announce the changes to the Global Equity Index Series (GEIS) as a part of the quarterly review on 20 November and the changes will be effective after the close of trading on 18 December.

The quarterly review is used to include IPOs which did not qualify as an immediate fast entrant to the indices at the time of listing and were not listed for at least 3 months by the following semi-annual review to be included in the indices.

There will be passive buying on the J-REIT’s as part of the tranched inclusion in the GEIS – the inclusion commenced at the September 2020 semi-annual index review and this will be the second tranche.

Stocks that listed recently and could be included in the index are Hangzhou Tigermed Consulting (H) (3347 HK), Smoore International (6969 HK), Yeahka Limited (9923 HK), Dada Nexus Ltd (DADA US), Kingsoft Cloud (KC US), Li Auto Inc. (LI US), Agora Inc. (API US), Burning Rock Biotech (BNR US), Legend Biotech Corp (LEGN US), Mindspace Business Parks REIT (MBP IN), SK Biopharmaceuticals (326030 KS), Sri Trang Gloves (STGT TB) and Modalis Therapeutics (4883 JP).

Hangzhou Tigermed Consulting (H) (3347 HK), Smoore International (6969 HK) and Kingsoft Cloud (KC US) are also inclusions in the MSCI China index and passive funds tracking the MSCI Standard indices will need to buy the stocks at the close of trading on 30 November.


China Internet Weekly (9Nov2020): Singles’ Day Performance, BABA, JD, VIPS, PDD

By Ming Lu

During the shopping season of the Singles Day:

  • Alibaba (BABA)’ GMV up 26% YoY.
  • JD.com (JD)’ GMV up 33% YoY.
  • Vipshop (VIPS) released its performance for the first time.
  • However, Pinduoduo (PDD) refused to release any data.

Yatsen IPO: Valuation Insights

By Arun George

Yatsen Holding (YSG US) is the largest and only domestic company among the top ten beauty companies in China as measured by colour cosmetics retail sales value, according to CIC. 

Yatsen has launched its IPO at a price range of $8.50-10.50 per ADS. Indications of interest have been received for up to $300 million of the offer shares. Existing shareholders, Hillhouse Capital and Tiger Global will subscribe for $120 million and $80 million of the offer shares, respectively. Tencent Holdings (700 HK) and Yunfeng Financial Group will subscribe for $50 million and $50 million of the offer shares, respectively. Yatsen will raise net proceeds of $521.5 million at the mid-point of the IPO price range. 

In Yatsen IPO Initiation: Face the Facts, we stated that while Yasten is seemingly another new economy company with a winning proposition, the fundamentals are less than ideal which suggests that caution is warranted. In Yatsen IPO: Comparison with Leading Domestic Brands we noted that in comparison to peers, Yatsen offers investors a trade-off between high growth and margin/cash generation. Our valuation analysis suggests that IPO price is unattractive and we would be inclined to give the IPO a pass. 


ECM Weekly (15 November 2020) – JD Health, Kuaishou, CR Mixc Life, Antengene, and Placements!

By Zhen Zhou, Toh

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

Much has happened since Ant Group (6688 HK)‘s IPO got pulled so this will be a lengthy weekly note.

Thanks to The Wall Street Journal (WSJ), we now know that Xi Jinping personally cancelled Ant’s IPO due to Jack Ma’s brazen comments a few weeks earlier. This doesn’t look good, especially with news of China’s antitrust watchdogs publishing draft rules targeting monopolistic practices of digital platforms.

The draft rules aim to prevent anti-competitive behavior among online platforms, collaboration on customer data, eliminating smaller payers, and etc. It also mentioned greater regulatory oversight of VIE which will obviously impact upcoming China IPOs and listed companies alike since most of them are built upon VIE structure to raise capital from foreign investors. The Chinese government has not officially legalized such a structure and could use this chance to reign in their control over these companies.

Well, it’s 2020, just when you think the bad news end here, there’s more.

Hong Kong’s Securities and Futures Commission (SFC) was said to be planning new code of conduct for equity and debt deals. This may see the introduction of framework to calculate fees for bookrunners. Companies looking to list may also need to secure underwriting syndicates earlier to limit non-bookrunners from pitching shares to investors to show they have demand in a bid to secure the bookrunner role. There are also potential changes to allocation rules, specifically, regarding the cornerstone structure in HK IPOs where cornerstone investors can secure guaranteed (usually larger) allocation in an IPO in exchange for a six-month lock-up period. For now, nothing is set in stone and, to be fair, this isn’t necessarily bad since the goal here is to tighten supervision. 

Aside from Ant’s IPO “hiccup” earlier, Hong Kong IPO activity is still looking strong, for now. JD Health (JDH HK), Blue Moon Group Holdings (BMG HK), and Evergrande Services was said to have gotten their approval this week and will start premarketing in the coming week. Netjoy (NETJOY HK) was also said to be seeking approval this week but we have yet to get confirmation of its approval.

Antengene (6996 HK) launched its IPO this week and Ke Yan, CFA, FRM shared his thoughts on valuation.

We also covered recently filed Beijing Kuaishou Technology Co Ltd (1496219D CH) which is expected to raise US$5bn.

In Australia, it’s a rare treat to get two IPOs almost at the same time. Dalrymple Bay Infrastructure and Nuix have set their terms for IPO and will begin their bookbuild process soon.

There will also be a few trading debuts next week. Jinke Smart Services (9666 HK), Shinsun Holdings (2599 HK), and Sunac Services (1516 HK) will debut in Hong Kong on Tuesday, Wednesday, and Thursday, respectively, followed by Gland Pharma (7172753Z IN) on Friday in India. 

Last but not least, for placements, there were deals across different countries and they were mostly secondary share sale. There is Ascendas Real Estate Investment Trust (AREIT SP) private and preferential placement in Singapore to buy office properties and data centres, Japan Airlines (9201 JP) primary placement to shore up balance sheet, selldowns by shareholders in Jiumaojiu (9922 HK), Shenzhou Intl Group Holdings (2313 HK), BDO Unibank Inc (BDO PM) and VGI PCL (VGI TB).

Out of these, the one that stood out (which happened to be the only one we chose to avoid) was VGI’s placement which closed higher the day after its done despite its massive deal size (relative to ADV) and deep discount (11%) to last close. The deal was said to be driven by reverse enquiries and was well covered by institutional investors.

Accuracy Rate:

Our overall accuracy rate is 73.4% for IPOs and 66.1% for Placements 

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

New IPO filings this week

  • New Horizon Health (Hong Kong, ~US$300m)
  • Central China Management (Hong Kong, >US$100m)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

Analysis on Upcoming IPOs

Name Insight
Hong Kong
Antengene Antengene (德琪医药) Pre-IPO: Proven R&D Track Record by Founder Matters 
Blue Moon

Blue Moon Group Pre-IPO – The Positives – Dominant Market Share, Strong Online Sales 

Blue Moon

Blue Moon Group Pre-IPO – The Negatives – Flagging Offline Sales, Not Really a Primary Raising 

Blue Moon

Blue Moon: No. 1 But No Exclusive Advantage, Observation on the Ground 

Blue Moon

Blue Moon Group Pre-IPO – Online Reviews and Peer Comparison 

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

Dida

Dida Pre-IPO – Making Hay While Big Brother Retreats 

E-Star Comm

E-Star Commercial Management Pre-IPO – Better Disclosure in New Prospectus 

E-Star Comm

E-Star Commercial Management Pre-IPO – Still Largely Reliant on Galaxy, Poor Disclosure Doesn’t Help 

Jiayuan Svcs

Jiayuan Services (佳源服务) Pre-IPO – Another Small Property Management Company 

JD Health

JD Health (京东健康) Pre-IPO – Well-Positioned to Ride China’s Healthcare Digitalization 

JD Health

JD Health (京东健康) Pre-IPO – Peer Comparison – It’s a Close Fight and Competition Is Intensifying 

JD Health

JD Health (京东健康) Pre-IPO – Assumptions and Valuations 

Kilcoy

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

Kilcoy

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

Kuaishou

Kuaishou Technology Pre-IPO – The Positives – Hot Segment, Fast Growth 

Kuaishou

Kuaishou Technology Pre-IPO – The Negatives – Ample Doubts Remain 

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
Megvii Megvii (旷视) Pre-IPO –  Initial Thoughts on Valuation 
Ocumension Ocumension (欧康维视) Pre-IPO: All Ready for a Great Listing Except a Block Buster 
Pop Mart Pop Mart Pre-IPO – The Negatives – Is It a Brand Owner or Just a Retailer? 
Pop Mart Pop Mart Pre-IPO – The Positives – Expanding Portfolio+Wider Distribution= Explosive Earnings Growth 
Pop Mart Pop Mart Pre-IPO – Peer Set and Valuation 
Pop Mart Pop Mart Pre-IPO Quick Note – On the Ground – Pop-Up Stores Are Effective 
RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
India
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol Ind Anmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Burger King

Burger King India Pre-IPO – Has Been Growing Fast and Plans to Grow Even Faster 

Burger King

Burger King India Pre-IPO – Peer Comparison Yields Interesting Nuggets on Profitability and Capex 

Bajaj En

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

CMS Info CMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal Crop Crystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo  Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
IRFC Indian Railway Finance Pre-IPO – Low Risk, Low Margin Business 
NSE NSE IPO Preview- Not Only Fast..its Risky and Expensive
NSE National Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
Mrs. Bector Mrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
Lodha Lodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB Met PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Malaysia
QSR QSR Brands Pre-IPO – As Healthy as Fast Food
Thailand
PTTOR PTT Oil and Retail IPO – F&B Business Is the Profit Driver 
The U.S
CDP CDP Holdings Pre-IPO Review – Highly Reliant on Best Inc. 
CloudMinds CloudMinds Inc Early Thoughts – Still Nascent

Tencent: The Deferred Revenue Issue

By Rickin Thakrar

Tencent Holdings (700 HK) just posted its best EBIT growth in eleven quarters and for two quarters in a row, it has reversed its declining two-year growth rate. Despite the tailwind from the current macro environment, we believe there are underlying issues when looking closer at Tencent’s deferred revenue and underlying EBIT. More details below. 


JOINN Laboratories – Q3 Performance in Line with Expectations; Promising Globalization After HK IPO

By Xinyao (Criss) Wang

Joinn Laboratories China Co-A (603127 CH) recently released the third quarter report. The Q1-Q3 accumulated revenue was RMB632 million with a YoY growth rate of 81.2%. Net income attributed to shareholders in the first three quarters was RMB118 million, up 53.2% YoY. Q1-Q3 net income after deducting non-recurring gains and losses were RMB99 million, up 61.3% YoY. Q3 single quarter revenue, net income attributed to shareholders, and net income after deducting non-recurring gains and losses reached RMB234 million, RMB43 million and RMB34 million respectively, with YoY growth rates of 58.7%, 15.9% and 8.62% respectively. Performance was in line with expectations.

Source: WIND


China Yangtze Power (600900 CH): Well Positioned to Capture China’s Clean Energy Initiative

By Osbert Tang, CFA

Despite outperformance against the Shanghai Composite Index, China Yangtze Power Co, Ltd. (600900 CH) will continue to see positive factors driving its outlook and supporting its valuations. These factors include its excellent position to capture China’s clean energy initiative, improvement in profitability, likely asset injections in the future and good overseas track record that underpins geographical expansion.

The stock is currently trading on 19.5x PER and 3x P/B for FY20F; and these are premium valuations compared with its peers. However, its growth potential from asset injection, immense size (market cap of Rmb467bn) and GDR listing are edges that make it stands out against A-share peers like Huaneng Lancang River Hydr-A (600025 CH), Sichuan Chuantou Energy Stock (600674 CH) and Guangxi Guiguan Electric A (600236 CH)


Edding Group (亿腾医药) Pre-IPO: Distributor Turning Pharmaceutical

By Ke Yan, CFA, FRM

Edding Group, a leading integrated pharmaceutical company in China, plans to raise up to USD 200m via a Hong Kong listing.

The company is turning from a distributor of NMC drugs to a pharmaceutical company by acquiring product rights in the past two years. We are of the view that the Vancocin and Ceclor are the selling point of the company as they both have a dominant position in the respective segment and are in growing markets. 

The company’s Vascepa is an interesting CVD product but the competition is intense given that the statin is the main therapy to reduce CV risks and it has many varieties with a competitive market. 

However, we do not see Mulpleta and EPD 125 attractive. Sales of Mulpleta are very small in Japan and the EDP125 was suspended by Eli Lilly previously given that it failed to demonstrate superiority in Phase II/III clinical trials. 

We think the management does not possess impressive working experience, though investor backing is strong.


Morning Views Asia: Car Inc, Future Retail, Jingrui Holdings

By Charles Macgregor

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


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