ChinaDaily Briefs

China: Ping An Insurance (H), FWD Group Holdings, China Risun, Abbisko Cayman, Ausnutria Dairy Corp, China Longyuan Power Group Corp, EDDA Healthcare and Technology, Hana Financial, Green Tea Group and more

In today’s briefing:

  • Ping An A/​H: Discount Turns to a BIG Premium
  • FWD Group: IPO & Index Fast Entry Possibilities
  • China Risun (1907 HK): Even Greater Profits Or A Steel Trap?
  • Abbisko (和誉) IPO Trading: Poor Demand for the Early Stage R&D
  • China Risun – Coke-Coking Coal Spread Inverting
  • Ausnutria in Trading Halt – Will Yili Lob an Offer?
  • China Longyuan (916 HK): Takeaways from Management Update
  • Pre-IPO EDDA Healthcare and Technology – Concerns Are on Commercialization
  • 5 New Deals incl. Kexim, KEB Hana; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers …
  • Green Tea Group Pre-IPO Tearsheet (Refiled)

Ping An A/​H: Discount Turns to a BIG Premium

By Brian Freitas

The Ping An A-shares Ping An Insurance Group Co Of China (601318 CH) are trading at a 11% premium to the H-shares Ping An Insurance (H) (2318 HK). This continues the cycle of premiums and discounts going back to 2015.

The last time the A-shares traded at a premium this large to the H-shares was in December last year. By mid to late January, the A-shares were trading near parity versus the H-shares.

With Ping An Insurance Group Co Of China (601318 CH) trading at a 11% premium to Ping An Insurance (H) (2318 HK) the risk/reward is favourable to setting up a premium contraction trade. The current premium lies at the 95th percentile over the last 5 years and the premium has widened faster than that of the HSAHP Index.

Northbound and Southbound Stock Connect holdings of Ping An Insurance Group Co Of China (601318 CH) and Ping An Insurance (H) (2318 HK) have dropped sharply over the last couple of months, though there has been an uptick over the last couple of weeks.

In this Insight, we look at the historical premium for Ping An and compare it to the premium on the AH index and other large caps, and look at some catalysts that could lead to an contraction of the premium.

FWD Group: IPO & Index Fast Entry Possibilities

By Brian Freitas

FWD Group Holdings (FWD US) filed its draft registration statement with the SEC on 16 June and followed it up with its latest registration statement on 8 October. While no numbers have been officially disclosed, media reports indicate that the IPO will be completed in the current quarter and will raise between US$2-3bn and value the company between US$12-15bn.

FWD Group Holdings (FWD US) will have a dual-class voting structure. The Class A shares will be listed and carry one vote per share while the Class B shares will carry 10 votes per share. All shares currently held by PCGI Holdings Limited will be converted to Class B shares.

Based on the information currently available officially and through media reports, we do not see the stock getting Fast Entry to the MSCI Standard and FTSE All-World indices. The stock will not meet the full and free float market cap required for inclusion in the MSCI Standard index, while the stock will fail the Minimum Voting Rights test for inclusion in the FTSE All-World Index.

The stock will need to double from its current valuation to meet the free float market cap requirement and be included in the MSCI Standard index at a subsequent review, while the stock will need its voting rights to increase substantially to be eligible for inclusion in the FTSE All-World index at a later stage.

China Risun (1907 HK): Even Greater Profits Or A Steel Trap?

By David Blennerhassett

Replacing coal-generated electricity with renewable energy to meet future carbon emission targets looks good on paper. Except when consumption surges in tandem with flood-impacted coal mines being shut down. This has resulted in varying degrees of production restrictions amid power curtailment in coke production areas. 

Yesterday coking coal’s most-active January contract on China’s Dalian Commodity Exchange increased by ~6.9% to a contract high of RMB3,428 (US$532.80) per tonne. That’s up from ~RMB1,800/tonne in the middle of July.

Coke, the processed form of coking or metallurgical (met) coal, is the key reducing agent of iron ore, the primary steelmaking ingredient.

Dalian iron ore closed 6.5% higher yesterday at RMB797.50/tonne, just below a session-high RMB799.50, the highest level since1st September. 

S&P summarised the provincial warnings by the NDRC, as it relates to power curtailment, as follows:

 … where green represents “smooth progress”, yellow is a “relatively tough situation” and red presents a “very tough situation.”

The coal chemical industry is highly susceptible to upstream and downstream industries. And rising raw materials (coke prices) will likely push steel prices higher.

China Risun (1907 HK) operates in the midstream of the coal value chain. This insight takes a look at Risun’s recent fortunes and compares it to Henan Jinma Energy (6885 HK).

Abbisko (和誉) IPO Trading: Poor Demand for the Early Stage R&D

By Ke Yan, CFA, FRM

Abbisko raised HKD 1,605 million (USD 206m) from its global offering and will list on the Hong Kong Stock Exchange on Wednesday, October 13th.

In our previous note, we discussed that the company’s product pipeline has a strong focus on selective FGFR small molecules for oncology therapy. Its core products ABSK011 is an FGFR4 inhibitor and ABSK091 is a pan-FGFR inhibitor, which was in-licensed from AstraZeneca with global rights. We think its products have yet to show convincing clinical numbers despite strong prospects from pre-clinical readings. We think the company’s management team is experienced with a proven track record of product development and commercialization. The investor line-up is strong. We also provide forecast and valuation for the two core products, ABSK011 and ABSK091. 

In this note, we look at the updates since our last note. We re-iterate our view that the company is fairly valued for the early stage of R&D despite interesting comprehensive coverage on the FGFR targets.

China Risun – Coke-Coking Coal Spread Inverting

By Mio Kato

China Risun and cheaper compatriot Henan Jinma have enjoyed strong performance in 2021 as supply issues and a recovering economy have driven met coke prices to record levels and bolstered gross profits. Now, however, coking coal prices have risen so far that spreads appear to be under threat.

Ausnutria in Trading Halt – Will Yili Lob an Offer?

By Arun George

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   

Ausnutria entered a trading halt today pursuant to the Hong Kong Code on Takeovers and Mergers. On 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. Yili was said to be in talks with banks to finance a potential deal. The article also speculated that Ausnutria could attract takeover interest from other industry players. There was no takeover price or valuation mentioned in the article.  

We think that Yili is the likely suitor as there is a strong strategic rationale in acquiring Ausnutria. Yili has a strategy to increase its scale in the milk powder business through mergers and acquisitions. Yili was recently unsuccessful in its bid to acquire Reckitt Benckiser (RB/ LN)’s infant-formula and child nutrition business in China. 

In this note, we look at the strategic rationale for Yili’s potential bid and take a stab at estimating the potential offer price.  

China Longyuan (916 HK): Takeaways from Management Update

By Osbert Tang, CFA

In a management update by China Longyuan Power Group Corp (916 HK), the company highlights that outlook stays positive and see no company- and industry-specific reasons for the recent retreat in share price. In fact, Longyuan believes that it is on track to reach its target to achieve utilisation hours of 2,240 for the full-year and the Sep generation figures (+21.7% YoY for wind generation and +15.8% YoY) remain very decent performance.

Longyuan also shared that there will not be significant impact of the recent rise in coal price on its coal-fired power stations, thanks to its own coal trading business which provides a hedge. Other positive developments including the good progress on A-share listing, derived benefit from relaxation of coal-fired power tariffs and increase in power trading. However, offshore wind project will remain on elevated capital costs but Longyuan notes that it is in a good position to secure new projects.  

Pre-IPO EDDA Healthcare and Technology – Concerns Are on Commercialization

By Xinyao (Criss) Wang

With the continuous improvement of science and technology and the development of healthcare industry, there has been new expectations on digitalization and intelligence. On July 9, 2021, EDDA Healthcare and Technology (EDD HK), a pioneer in providing innovative intelligent solutions enabling precision surgery, submitted its prospectus to the HKEX for an IPO on the main board. This insight mainly analyzed the industry characteristics, the business and the concerns of the Company.

5 New Deals incl. Kexim, KEB Hana; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers …

By BondEvalue

US equities ended lower again with the S&P and Nasdaq down 0.7% and and 0.6%. Barring Materials and Real Estate which were marginally in the green, all other sectors were in the red with Utilities, Communication Services and Financials falling over 1%. US 10Y Treasury yields are flat at 1.61%. European stocks were mixed with the DAX and CAC near flat while the FTSE was up 0.7%. Brazil’s Bovespa ended 0.6% lower. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI was down 0.5%. Asian markets opened lower with Shanghai, HSI and the Nikkei down 0.7%, 0.8% and 0.9% and the STI down 0.4%. EU Main CDS spreads were 1bp wider and Crossover CDS spreads widened 4.5bp. Asia ex-Japan CDS spreads widened sharply again, by 7.5bp as Chinese property developers’ bonds plummet and uncertainty on defaults loom.

Green Tea Group Pre-IPO Tearsheet (Refiled)

By Clarence Chu

Green Tea Group (GT HK) is looking to raise US$200m in its upcoming Hong Kong IPO. The deal will be run by Citi and CMB International. This is a refiling from a previous attempt in late Mar 2021. 

Green Tea Group is a restaurant chain operator for fusion cuisine in China. As of the latest practicable date (30 Sept 2021), the firm’s restaurant network consists of 208 restaurants covering 18 provinces, four municipalities and three autonomous regions in the PRC. As per CIC, the firm is the fourth largest casual China restaurant operator in China in terms of revenue and number of restaurants in 2020.

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