摩根士丹利--股票策略-A股定价、流动性、分配和交易规则以及股票观点-201977-22页

Laura Wang Jonathan Garner Fran Chen Corey Ng MORGAN STANLEY ASIA LIMITED Laura Wang EQUITY STRATEGIST 852 2848 6853 Jonathan F Garner EQUITY STRATEGIST 852 2848 7288 Fran Chen CFA EQUITY STRATEGIST 852 2848 7135 Corey Ng CFA EQUITY STRATEGIST 852 2848 5523 China China Equity StrategyEquity Strategy Asia Pacific Asia Pacific More about A share STAR Board Pricing Liquidity Allocation overall impact on A shares should be limited We raise our forecasts for the total number of STAR IPO listings and total capital raised within the first six months post STAR s launch because the actual number of applications submitted in 1H19 141 was 40 more than our previous base case assumption between 92 and 110 at the time we published the launch report and the SSE and CSRC s review and approval processes have been more efficient than the guided time frame Our new base case expects liquidity demand of Rmb113bn US 16 4bn Our bull and bear cases are Rmb178bn and Rmb67bn respectively Increasing our projections for STAR listings and fund raising demand Number of listings per month revised up from 12 to 27 Exhibit 3 In total the SSE received 141 STAR listing applications in 1H19 In light of the 100 pass rate thus far we boosted our success rate estimate from 70 to 90 under our base case For the four companies that completed their pricing it took them on average 90 days from application submission to determining the pricing We therefore assume that applications submitted before the end of August previously end June and successful will be listed on the STAR by end 2019 We estimate 40 more applications to be received in July and August at par with total applications received in May and June which brings the total number of applications to c 180 by end August and monthly listing to 27 in 2H19 Average capital raised per listing lowered from Rmb800mn to Rmb700mn Exhibit 3 For the 141 applications received in 1H19 the average excluding one outlier of Rmb10 5bn and median of capital raised are Rmb850mn and Rmb650mn respectively These are down 4 5 and 11 respectively from the 92 applications received as of April 24 We therefore reduce our average deal size assumption from Rmb800mn to Rmb700mn 55th percentile of the 141 applications For bull bear cases We raise our pass rate assumption under bull bear case to 100 80 from 90 50 in line with upward revision under our base case We reduce the average capital raised per listing under our bull bear case to Rmb900mn Rmb530mn from Rmb1bn Rmb600mn in line with upward revision under our base case Similar to the base case we assume all applications submitted before the end of August previously end June and successful will be listed on the STAR by end 2019 We expect 60 and 20 more applications in July and August combined under our bull and bear cases respectively 4 Rmb113bn of fund raising demand likely in 2H19 overall liquidity impact manageable but potentially bigger for ChiNext Board Under our revised base case STAR aggregate fund raising by end 2019 we expect to see the liquidity demand of about 0 6 of estimated A share free float market cap which is still considered limited impact in our view Exhibit 4 In trading turnover terms Rmb113bn represents 19 of YTD average daily turnover of A shares To put these numbers into context of ChiNEXT board which arguably is more comparable to the STAR board funding demand by STAR funds in 2H19 is about 5 2 of estimated ChiNext free float market cap and 118 of ChiNext YTD average daily turnover under our new base case In the case that STAR s launch diverges more liquidity from the ChiNEXT board we may observe some negative liquidity impact there Exhibit 3 Scenario analysis for STAR capital raising in the first 6 and 12 months of trading Average capital raised listing Total capital raised in 6 months Total capital raised in 12 months RMB bn RMB bn RMB bn No of listings per monthAverage capital raising per listing Base27700113227 Assume 1 90 success rate 2 c 40 more applications in July and August 3 applications received before end of Aug c 180 and are successful will be listed by end 2019 4 the momentum in 2H 2019 would continue in 1H 2020 Our base case estimate of 27 listings per month is double the average monthly number of ChiNext listings 12 month within the first 12 months of launch based on the momentum and market reaction thus far The average excluding one outlier of RMB 10 5 bn and median of capital raising targets of the 141 applications received in H1 2019 are RMB 850 mn and RMB 650mn respectively We think RMB 700mn would be a reasonable estimate and this is at 55 percentile of the 141 applications Bull33900178356 Assume 1 100 success rate 2 c 60 more applications in July and August 3 applications received before end of Aug c 200 and are successful will be listed by end 2019 4 the momentum in 2H 2019 would continue in 1H 2020 70 percentile of 141 applications received in H1 2019 is RMB 894mn Bear2153067100 Assume 1 80 success rate 2 c 20 more applications in July and August 3 applications received before end of Aug c 160 and are successful will be listed by end 2019 4 the momentum in 2H 2019 would half in 1H 2020 35 percentile of 141 applications received in H1 2019 is RMB 530mn No of listings month Rationale Source Shanghai Stock Exchange Morgan Stanley Research Estimates 5 Unqualified retail investors rely on mutual funds to get exposure To qualify for investing in single stock listings on the STAR Chinese retail investors must have no less than two years of trading history and no less than Rmb0 5mn of average daily assets in their trading accounts for 20 days prior to commencing of STAR trading This is a significant uplift from nil retail investor entry barrier for A shares in general 18 STAR related mutual funds launched so far As of end June 18 mutual funds six open end and rest closed end have been approved which will partially invest in the STAR their mandates are wider than the STAR Each fund is subject to Rmb1bn fund raising cap and eligible for priority allocation in the placing tranche Out of 18 the first batch of seven and second batch of five funds were already launched and have completed fund raising The remainder were launched on 24 June The closed end mutual funds operate with one to three years of lock up periods The second and third batches are all closed end funds and can either participate as a strategic investor or are eligible for priority allocation during the placing tranche There Exhibit 4 Estimated fund raising size of STAR listings by end 2019 six months after STAR starts trading as of A shares free float market cap close to 0 9 under revised bull case vs 0 5 previously Scenario analysis of STAR Aggregate Fund Raising BaseBullBear 11317867 STAR liquidity demand by end 2019 as of market cap average daily turnover BaseBullBear Total54 9600 09 0 15 0 05 Tradable45 4550 25 0 39 0 15 Est Free Float20 3350 56 0 88 0 33 BaseBullBear Total5 3331 4 2 2 0 8 Tradable3 3683 4 5 3 2 0 Est Free Float2 1875 2 8 1 3 1 BaseBullBear A share total58919 30 11 ChiNext total96118 185 69 Expected fund raising demand by STAR listings by 2019 year end RMB bn A share average daily turnover YTD RMB bn A share market cap RMB bn ChiNext market cap RMB bn Source CEIC Shanghai Stock Exchange Morgan Stanley Research estimates A share data as of 2 July 2019 The estimated free float for A shares in general is 37 and for ChiNext is 41 We follow CEIC s definition of tradable 6 are still more than 90 funds in the approval queue Open ended mutual funds likely to be more popular as retail investors tend to have shorter investment horizon Retail investors showed great enthusiasm in subscribing for the first batch of seven approved mutual funds six open end one closed end All seven funds concluded their fund raising within one day and 6 of which were more than 10 times over subscribed The second batch was all over subscribed although to a lesser extent than the first batch This is largely due to their closed end nature Retail investors who are the driving force behind the over subscription tend to be more sentiment driven Current A share market sentiment range bound at subdued level To measure the sentiment level in the A share market we publish MSASI on a weekly basis Our latest assessment report link showed that the weighted sentiment level is at 26 A share sentiment measured by our sentiment indicator has been largely range bound since May post a rapid fall in April following the liquidity tightening messages from policy makers and then the re escalation of US China trade tension In the near term we expect the current trend to continue given unresolved uncertainty on the trade front and weakening macro trend given the lagging effect of top down stimulus measures Exhibit 5 Morgan Stanley A share Sentiment Indicator MSASI Weighted MSASI is currently at 26 approaching our alert level of 20 26 26 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500 6 000 0 10 20 30 40 50 60 70 80 90 100 Jan 14Jan 15Jan 16Jan 17Jan 18Jan 19 MSASI Simple MSASI Weighted MSASI Simple Current MSASI Weighted Current CSI300 RHS Source CEIC Bloomberg Morgan Stanley Research Data as of June 26 2019 7 Stock implications Do not recommend indirect exposure through brokers Kingsoft may benefit from WPS s STAR listing Brokers Limited impact on 2019 earnings from STAR deal flows CICC is leading by both total sponsored deal size and average deal size sponsored and China Securities is leading by the number of deals sponsored for the 141 applications submitted We refreshed the league tables of brokers Exhibit 6 Compared to our initial report in early May the composition of top 9 did not change despite minor reshuffling in the ranking CICC remains at the top of the league table Our China Financials team continues to believe that revenue from sponsoring STAR listings has a limited impact on brokers 2019 earnings The deal flow revenue will be positive for their investment banking business but less so for brokerage trading volume For details please refer to China Financials Securities Technology Innovation Board A Testing Ground with Potential Long term Benefits 3 Mar 2019 Exhibit 6 Top sponsors of STAR listing applications by deal size CICC leads by a large margin 275 9 126 6 122 3 117 4 80 1 73 2 63 1 42 9 39 1 33 7 315 6 0 50 100 150 200 250 300 350 STAR listing sponsored deal size RMB mn Source Shanghai Stock Exchange Morgan Stanley Research Data as of 4 July 2019 8 Kingsoft Corp MS Internet Analyst Alex Poon recently raised his price target for Kingsoft Corp driven by two positive near term drivers one of which is the potential listing of WPS on the STAR WPS is the office software arm of Kingsoft and it could become the key NAV driver for Kingsoft in the longer term China s office software and related services market was worth Rmb8 5bn in 2018 and is projected to reach Rmb14 9bn in 2023 12 CAGR vs 9 CAGR over 2015 18 according to CCW Alex thinks monetizing the mobile traffic is the key long term growth driver because For more details please refer to Kingsoft Corp Ltd Unlocking the Gold Mine 10 Jun 2019 WPS Office has a dominant market share in China in terms of mobile MAU of 187mn in 1Q19 Microsoft Office 14mn the paying ratio and monthly ARPPU remain low at 2 and Rmb10 respectively with paying users growth of 120 YoY to 4 7mn in 1Q19 and the addressable market is expanding from business to non business use cases and globalization China had 655mn office software users in 2018 7 CAGR 2012 18 mainly white collar workers and students For enterprises WPS has over 80 market share among government and SOE entities and Chinese banks Alex expects WPS revenue and net profit CABR of 30 CAGR over 2018 21 9 Pricing for STAR Listings No P E cap book building with institutional investors only Pricing for STAR listings is more market driven as the CSRC takes a back seat in determining the absolute level of valuation and focuses purely on the integrity of the process We expect IPO pricing for listings on the STAR to be better informed and fall within a reasonable range vs current A share valuation We are also mindful of the potential sentiment overshoot reflected in the form of valuation premium of the first batch of stocks traded on the STAR Difference vs current A share practice 1 IPO pricing entirely based on book building Only institutional investors can participate IPO pricing for STAR listings will be determined via book building which is open to institutional investors only This provides more assurance to the fairness and reasonableness of the pricing than the existing A share practice which allows both retail and institutional investors to participate A shares mainly adopts book building and for smaller issuances fixed pricing based on agreements between the issuer and lead underwriter could be used Difference vs current A share practice 2 Implicit valuation cap of 23x P E not enforced in STAR Under registration based IPO mechanism regulatory authorities role is confined to review the lawfulness and compliance of public offering application documents and information disclosure content Judgement on company valuation and investment value will be left to the market The existing A share regime has an unofficial rule of 23x P E valuation cap for new issuances This in some cases runs the risk of stocks being listed at a discounted valuation which implicitly guarantees sizeable returns on investing in these new listings The removal of the cap encourages more market driven IPO pricing and subsequently more rational investment decisions Difference vs current A share practice 3 Green Shoe option is available to all but size wise capped at 15 of issuance Unlike A shares which limit the use of the Green Shoe option to larger issuances only the Green Shoe option is available to all listings on the STAR However the issuer is subject to a 15 cap of planned total issuance in terms of the additional shares it can offer For more details of key differences of IPO valuation between the STAR and A share see Exhibit 7 10 First announced STAR listing valuation considered fair by market On June 25 Suzhou HYC Technology announced the IPO pricing for its upcoming listing on the STAR at Rmb24 26 share 40 x 2018 P E Some 1 285 investors subscribed for the placing tranche at no less than Rmb24 26 share hence they will be allocated with new shares proportionately and the amount of subscription is 258 times the issuance size The level of pricing falls within the ranges recommended by major onshore brokers and is lower than average listed peers current valuation Exhibit 7 Key differences of IPO valuation between the STAR and A shares STARA shares Eligible book building participants Institutional investors only subject to eligibility requirements set by the issuer and lead underwriter Institutional investors and individual investors subject to eligibility requirements set by the issuer and lead underwriter IPO pricing methodology Book building only 1 Book building 2 For smaller issuance fixed price based on agreement between the issuer and lead underwriter could be used Subscription price elimination rules Highest subscription price is eliminated Any subscription price lower than the final IPO price derived from book building or not within the final range of IPO pricing will be eliminated Eliminated subscription is not allowed to participate in the placing tranche Highest subscription price is eliminated subject to restriction that the eliminated subscription cannot exceed 10 of the placing tranche Eliminated subscription is not allowed to participate in the placing tranche Triggers of listing termination The estimated valuation after the preliminary round of book building implies that the company will not meet the listing criteria Subscription for the placing tranche is smaller than the initial size of the placing tranche Other circumstances deemed appropriate by the issuer or regulatory authorities For issuance size of no more than 400mn shares the number of subscribers after elimination of highest subscribers is less than 10 For issuance size of more than 400mn shares the number of subscribers after elimination of highest subscribers is less than 20 Subscription for the placing tranche is smaller than the initial size of the placing tranche Other circumstances deemed appropriate by the issuer or regulatory authorities Valuation capn aUnofficial valuation cap at 23x P E Green shoe option Available to all issuances Size of overallotment cannot exceed 15 of the issuance Available only to issuance size of more than 400mn shares No cap on the size of the overallotment Source Shanghai Stock Exchange CSRC Morgan Stanley Research 11 Allocation of STAR New Shares Pivot to Institutional Investors Candidates for the STAR listings are subject to less stringent entry barriers notably with regard to profitability track record In light of this the mechanism of allocating new share issuance from the STAR pivots to more sophisticated institutional investors than retail investors compared to the existing A share mechanism Qualified STAR retail investors can participate in the initial allocation but the success rate will be lower We think this could help contain turnover and stock price volatility especially during the initial period of trading Like issuance on other A share boards the allocation of STAR new shares consists of three tranches strategic investors tranche placing tranche institutional investors only and public subscription tranche retail and institutional investors Participation by strategic investors is capped unlike for other A shares Under rules of the STAR participation by strategic investors is capped at 20 or 30 of total issuance depending on size and like existing A shares subject to one year lock up period This somewhat alleviates companies concerns that excess strategic investor participation to some extent lowers the liquidity of the stock and negatively affects valuation For li