China: Trip.com, Ping An Insurance (H), Remegen Ltd, China Southern Airlines, Jinke Smart Services, MSCI Emerging Markets Index and more

In today’s briefing:

  • Ctrip in Talks with Investors for Nasdaq Delisting; Ability to Attract a Large Premium Seems Limited
  • Ping An Insurance [2318-HK]:  Momentum Stall
  • RemeGen (荣昌生物) Pre-IPO: Top-Notch R&D Capability and a Strong Team
  • China Southern Airlines (1055 HK): Better Summer Yields Have Kicked In
  • Jinke Smart Services (金科智慧服务) Pre-IPO – GFA Growth at the Expense of Fees
  • EM Equities At New Highs Despite Some Caution Signs

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.

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.


China Southern Airlines (1055 HK): Better Summer Yields Have Kicked In

By Osbert Tang, CFA

With overseas travel being virtually impossible this summer, China visitors have turned to domestic travel, and this has benefited China Southern Airlines (1055 HK) most significantly. In Jul, the average one-way fare for the top 5 domestic routes in China operated by CSA has increased by 11.3% MoM. But, the monthly average figure has underestimated the momentum of summer fare recovery – the average fare for 31-Jul is 80.7% higher than that for 30-Jun, as fare has maintained a continued uptrend since end-Jun. 

The recent COVID-19 cases in Urumqi and Dalian are not expected to have a material impact on domestic air traffic, in our view, as collectively these two airports only account for 3.3% of China’s air passenger throughput. Moreover, CSA’s launch of Rmb3,699 all-you-can-fly package was well received, and was sold out in just two days. The stock’s current 0.73x P/B is inexpensive (-1 SD below average) as we are of the view that the worst is behind us.  


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. 


EM Equities At New Highs Despite Some Caution Signs

By Joe Jasper

We continue to believe the path of least resistance is higher for global equities. As a result, our outlook remains bullish and we suggest buying any dips. This week we are focusing on Consumer Staples and Health Care, two Sectors that have been less-loved over the past several months. We also highlight additional ideas in the following Sectors: Services, Technology, Financials, Real Estate, Communications, and Utilities.


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