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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia Small-Cap Sector ----------------------------------------------------------------------------------------
David & Goliath Small-Cap Weekly: 6% low risk returns in 10 days
● The latest issue of our regional small-cap weekly David & Goliath
(D&G) has been published. For the full version of this note, please
click here.
● Amid the weak stock market sentiment, we are surprised that such
few people realised the real returns of the iBond, which is a threeyear inflation-linked floating-rate HK$10 bn retail bond issued by
the Hong Kong Government.
● Only 2% of the total Hong Kong population applied for the iBond
with a small over-subscription of only 0.3x. Amid the preconceived
criticism of this government’s offer, many missed the key point of
the bond price appreciation on its debut.
● Finally, people who did not subscribe the iBond, are ‘surprised’
that each applicant can be allocated up to HK$440,000 and the
bond is traded at 106.7% on its debut, or a virtually risk-free return
of 6% after fees in 10 days.
● In this issue of D&G, we include nine small-cap stories from the
region, with two key stories—Glorious Property and ASM Pacific.
● The latest issue of our regional small-cap weekly David & Goliath
(D&G) has been published. For the full version of this note, please
click here.
● Amid the weak stock market sentiment, we are surprised that such
few people realised the real returns of the iBond, which is a threeyear inflation-linked floating-rate HK$10 bn retail bond issued by
the Hong Kong Government.
● Only 2% of the total Hong Kong population applied for the iBond
with a small over-subscription of only 0.3x. Amid the preconceived
criticism of this government’s offer, many missed the key point of
the bond price appreciation on its debut.
● Finally, people who did not subscribe the iBond, are ‘surprised’
that each applicant can be allocated up to HK$440,000 and the
bond is traded at 106.7% on its debut, or a virtually risk-free return
of 6% after fees in 10 days.
● In this issue of D&G, we include nine small-cap stories from the
region, with two key stories—Glorious Property and ASM Pacific.
Cover story: 6% low risk returns in 10 days
Underperformance trend of the small caps has yet to reverse to
suggest a market turnaround. Quite a few export manufacturers
indicate that the orders for 2H11 do not look particularly promising
after stripping out the seasonality effect. D&G believes that 2H11 will
continue to see earnings downgrade risks after the anticipated
earnings cuts in the 1H11 reporting season.
iBond – an inflation-linked retail bond
Amid the weak stock market sentiment, D&G is surprised that such
few people appreciated the kindness of the Hong Kong government in
the recent iBond (4208.HK, HK$106.7, Not Rated) issuance. iBond is
a three-year inflation-linked floating-rate retail bond issued by the
Hong Kong Government with the coupon being the higher of the
average of the six-month YoY change of the CPI and 1%. Given the
yield of 0.51% of a three-year Hong Kong Exchange Fund note
(Figure 1), iBond should look attractive given its much higher coupon.
Preconceived criticism hid the key point of the iBond
While institutional investors were not eligible for the iBond
subscription, there were only 155,000 individuals (2% of the total Hong
Kong population) applying for the HK$10 bn iBond at par with a small
over-subscription of only 0.3x. Amid the preconceived criticism of this
government offer, such as the low returns compared with other
investment instruments, potential poor subscription allocation of only
HK$10,000 for each applicant and long lock-in period of three years
(in fact the iBond is traded on the Hong Kong Stock Exchange and the
OTC bond market), many people missed the key point of the bond
price appreciation on its debut.
6% virtually risk-free returns in 10 days
Finally, with the weak subscription amid the landslide criticism, people
who did not subscribe the iBond, are ‘surprised’ that each iBond
applicant can be allocated up to HK$440,000, not just only
HK$10,000. They are further ‘surprised’ that the iBond is traded at
106.7% (implying a low yield of 2.75% despite the high inflation
expectations (Figure 2)) on its debut – it suggests that each iBond
subscriber can make a virtually risk-free return of 6% after fees in 10
days by selling it in the secondary market. The iBond price
appreciation should not be a secret and totally unexpected, as long as
you know the basics of bond price calculation. However, many Hong
Kong citizens did not realise the government’s generosity.
Although we have all the rights to dislike and criticise things around
us, it is often found that many things are better and more beneficial
than we assume after all.
Davids of the week
In this issue of D&G weekly, we include nine small-cap stories in the
region. The two key small-cap stories are:
China: We initiate research coverage of Glorious Property (0845.HK,
HK$2.40, OUTPERFORM [V], TP HK$3.14), a China mass-market
property developer with sales growth topping the peers we cover. The
stock trades at 6.1x 2011E P/E, 58% discount to NAV with 31%
potential upside. (Wenhan Chen, wenhan.chen@credit-suisse.com).
Hong Kong: ASM Pacific (0522.HK, HK$85.60, UNDERPERFORM,
TP HK$71.50) is warning of an industry cyclical downturn, which may
last until 1Q12, after many quarters of robust growth. The stock trades
at 12.5x 2012E P/E with 16% potential downside. (Kenny Lau, CFA,
kenny.lau@credit-suisse.com)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia Small-Cap Sector ----------------------------------------------------------------------------------------
David & Goliath Small-Cap Weekly: 6% low risk returns in 10 days
● The latest issue of our regional small-cap weekly David & Goliath
(D&G) has been published. For the full version of this note, please
click here.
● Amid the weak stock market sentiment, we are surprised that such
few people realised the real returns of the iBond, which is a threeyear inflation-linked floating-rate HK$10 bn retail bond issued by
the Hong Kong Government.
● Only 2% of the total Hong Kong population applied for the iBond
with a small over-subscription of only 0.3x. Amid the preconceived
criticism of this government’s offer, many missed the key point of
the bond price appreciation on its debut.
● Finally, people who did not subscribe the iBond, are ‘surprised’
that each applicant can be allocated up to HK$440,000 and the
bond is traded at 106.7% on its debut, or a virtually risk-free return
of 6% after fees in 10 days.
● In this issue of D&G, we include nine small-cap stories from the
region, with two key stories—Glorious Property and ASM Pacific.
● The latest issue of our regional small-cap weekly David & Goliath
(D&G) has been published. For the full version of this note, please
click here.
● Amid the weak stock market sentiment, we are surprised that such
few people realised the real returns of the iBond, which is a threeyear inflation-linked floating-rate HK$10 bn retail bond issued by
the Hong Kong Government.
● Only 2% of the total Hong Kong population applied for the iBond
with a small over-subscription of only 0.3x. Amid the preconceived
criticism of this government’s offer, many missed the key point of
the bond price appreciation on its debut.
● Finally, people who did not subscribe the iBond, are ‘surprised’
that each applicant can be allocated up to HK$440,000 and the
bond is traded at 106.7% on its debut, or a virtually risk-free return
of 6% after fees in 10 days.
● In this issue of D&G, we include nine small-cap stories from the
region, with two key stories—Glorious Property and ASM Pacific.
Cover story: 6% low risk returns in 10 days
Underperformance trend of the small caps has yet to reverse to
suggest a market turnaround. Quite a few export manufacturers
indicate that the orders for 2H11 do not look particularly promising
after stripping out the seasonality effect. D&G believes that 2H11 will
continue to see earnings downgrade risks after the anticipated
earnings cuts in the 1H11 reporting season.
iBond – an inflation-linked retail bond
Amid the weak stock market sentiment, D&G is surprised that such
few people appreciated the kindness of the Hong Kong government in
the recent iBond (4208.HK, HK$106.7, Not Rated) issuance. iBond is
a three-year inflation-linked floating-rate retail bond issued by the
Hong Kong Government with the coupon being the higher of the
average of the six-month YoY change of the CPI and 1%. Given the
yield of 0.51% of a three-year Hong Kong Exchange Fund note
(Figure 1), iBond should look attractive given its much higher coupon.
Preconceived criticism hid the key point of the iBond
While institutional investors were not eligible for the iBond
subscription, there were only 155,000 individuals (2% of the total Hong
Kong population) applying for the HK$10 bn iBond at par with a small
over-subscription of only 0.3x. Amid the preconceived criticism of this
government offer, such as the low returns compared with other
investment instruments, potential poor subscription allocation of only
HK$10,000 for each applicant and long lock-in period of three years
(in fact the iBond is traded on the Hong Kong Stock Exchange and the
OTC bond market), many people missed the key point of the bond
price appreciation on its debut.
6% virtually risk-free returns in 10 days
Finally, with the weak subscription amid the landslide criticism, people
who did not subscribe the iBond, are ‘surprised’ that each iBond
applicant can be allocated up to HK$440,000, not just only
HK$10,000. They are further ‘surprised’ that the iBond is traded at
106.7% (implying a low yield of 2.75% despite the high inflation
expectations (Figure 2)) on its debut – it suggests that each iBond
subscriber can make a virtually risk-free return of 6% after fees in 10
days by selling it in the secondary market. The iBond price
appreciation should not be a secret and totally unexpected, as long as
you know the basics of bond price calculation. However, many Hong
Kong citizens did not realise the government’s generosity.
Although we have all the rights to dislike and criticise things around
us, it is often found that many things are better and more beneficial
than we assume after all.
Davids of the week
In this issue of D&G weekly, we include nine small-cap stories in the
region. The two key small-cap stories are:
China: We initiate research coverage of Glorious Property (0845.HK,
HK$2.40, OUTPERFORM [V], TP HK$3.14), a China mass-market
property developer with sales growth topping the peers we cover. The
stock trades at 6.1x 2011E P/E, 58% discount to NAV with 31%
potential upside. (Wenhan Chen, wenhan.chen@credit-suisse.com).
Hong Kong: ASM Pacific (0522.HK, HK$85.60, UNDERPERFORM,
TP HK$71.50) is warning of an industry cyclical downturn, which may
last until 1Q12, after many quarters of robust growth. The stock trades
at 12.5x 2012E P/E with 16% potential downside. (Kenny Lau, CFA,
kenny.lau@credit-suisse.com)
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