News of new shares

INNOVENT BIO-B (01801) issues 236 million shares and is expected to be listed on October 31

INNOVENT BIO-B (01801) issued 236 million shares from October 18 to October 23, of which 90.0% were international offerings, 10.0% public offerings and 15% over-allotment rights. The offering price per share is HK $12.50-HK $14.00 (same as below); 500 shares per share are expected to be listed on October 31.

The company is a biopharmaceutical company. At present, the company's products have not been approved for commercial sale, so the company has not recorded any revenue from product sales. The company did not recognize any business revenue in 2016. Revenues of RMB 18.53 million and RMB 4.43 million were recognized in 2017 and the six months ended June 30, 2018 respectively, all of which were generated from granting licenses to a Sino Biopharmaceutical company in 2017 and providing R & D services to the company in the second half of 2017.

Dragon Resources (01712) is expected to go public on November 5th.

Dragon Resources (01712) from October 18 to October 23, the company offered 50 million shares at an issue price of HK $2.03 per share (the same below); 1000 shares per share are expected to be listed on November 5.

The Group is mainly engaged in gold exploration, mining and processing in the Nordic region. The group started its business in Nordic region in 1999. From 2015 to 2017, the company's earnings were A $76.836 million, A $55.039 million and A $41.27 million, respectively.

Of the net proceeds of 53.9 million yuan, 90.0% were used to finance mine development, capital expenditure and operating expenditure activities related to the F ä boliden project, and 10.0% were used for working capital and general corporate purposes.

MOS HOUSE (01653) public offering is 16.61 times oversubscribed and is expected to go public on October 19th.

MOS HOUSE (01653) announced that the company will issue 500 million shares at a price of HK $0.19 per share (the same below); 20, 000 shares per share, which is expected to be listed on October 19.

The company's public offering is 16.61 times oversubscribed, and the total number of offer shares allocated to the public offering has increased to 100 million shares, equivalent to 20% of the total number of offer shares.

In addition, the final number of redistributed placing shares allocated to 232 placing shares according to the placing is 400 million shares, equivalent to 80% of the total number of shares offered.

The net proceeds are 81.5 million yuan, 25.6% for expanding the retail network, 42.5% for obtaining distribution rights from European tile manufacturers, 31.3% for appropriate strategic acquisition opportunities, and the balance will be used for general working capital purposes.

STERLING GP (01825) IPO is 18.43 times oversubscribed and is expected to go public on October 19th.

STERLING GP (01825) announced that the company will issue 228 million shares at a price of HK $0.40 per share (the same below); 10, 000 shares per share, which is expected to be listed on October 19.

The company's public offering is 18.43 times overbought. As a result of the redistribution, a total of 45.6 million offer shares can be subscribed under the public offer and 182 million offer shares can be subscribed under the placing, accounting for 20 per cent and 80 per cent of the number of offer shares respectively.

The net income is 52 million yuan, 30% is used to expand and renovate the company's production plants in Sri Lanka and China, 25% is used to repay part of the company's outstanding bank loans to improve the company's financial position, capital-debt ratio and liquidity; 25% is used to acquire production facilities; 10% is used to upgrade the company's information technology system, lean production and productivity improvement plan; 10% is used as general working capital of the group.

Margin statistics of new shares

Fuhui Construction (01034), INNOVENT BIO Pharmaceutical (01801) and Dragon Resources (01712) are in the process of offering shares. As of October 18, Huili, Xincheng and Yaocai have lent 13.6 million, 331 million and 101.5 million margin funds for Fuhui Construction (01034), INNOVENT BIO Pharmaceutical (01801) and Dragon Resources (01712) respectively.

New stock research report

INNOVENT BIO (01801): no income biotechnology new shares, the company's equity is scattered

INNOVENT BIO (01801)

INNOVENT BIO (1801) is the fourth income-free biotech company in Hong Kong with the mission of creating a world-class Sino Biopharmaceutical company founded by Dr. Yu Dechao in 2011

-IPO date: October 18-23

-listing date: October 31

-Co-sponsors: Morgan Stanley, Goldman Sachs Group, JPMorgan Chase & Co, China Merchants

-receiving bank: BOC Hong Kong (Holdings) Limited, China Merchants Wing Lung Bank

-236 million shares, 90 per cent placing, 10 per cent public offering and 15 per cent over-allotment options

-the share price ranges from 12.50 to 14 yuan per share, raising up to 3.304 billion yuan and listing expenses of about 179 million yuan.

-per 500 shares, the admission fee is 7070.53 yuan

-the above price limit is 14 yuan, and the market capitalization is about 15.65 billion yuan

-as at the end of June 18, the average net current asset value was about 2.06 billion yuan

-the public offering is divided into Group A (5 million or less applicants) and Group B (over 5 million applicants)

Business:

The income from 16 to 17 was 33.3 million yuan and 82.94 million yuan respectively, and the income in the first six months of this year was 4.43 million yuan, mainly from government subsidies.

The net profit from 16 to 17 years was 504 million yuan and 562 million yuan respectively, and the net profit in the first six months of this year was 43.89 million yuan.

-founder Dr. Yu invented the world's first oncolytic virus-based immunotherapy drug Oncorine, and co-invented and led the development of China's first innovative all-human antibody therapy drug Conbercept, which has been approved to be marketed in China. The company is committed to innovation in drug development and has established global quality standards in all aspects of the company's business and operations.

-the company has used the platform to establish a product line of 17 antibody drug candidates in the past seven years, four of which have entered late clinical development in China.

In the face of the fact that the share prices of the three unprofitable biotech stocks listed in Hong Kong are still diving, Xi Hao, chief financial officer, pointed out that the share prices of listed companies are affected by various factors, and it is believed that the company is supported by business results. investors are expected to support it if the price is reasonable.

-52% of the proceeds were used to fund ongoing and planned clinical trials of Cindilizumab, preparations for registration and planned commercial launch

Cornerstone investors:

-the introduction of 10 foundation investors involving US $245 million (about HK $1.911 billion), accounting for about 61.26% of the share offering at the median price, with a six-month lock-up period

-including US $60 million (about HK $468 million) subscribed by Sequoia Capital, US $30 million (about HK $234 million) by Weili Group and Yongjin Capital, US $25 million (about HK $195 million) by Cormorant Asset, and US $20 million (about HK $156 million) by Jinglin, Temasek and Capital Group respectively.

Eleven rounds of financing prior to the IPO:

-an earlier round of financing was in April 18, when the offering price was discounted by 20.7% to the median price.

-investors have a six-month lock-up period before the IPO

Post-listing shareholder structure:

There is no single major shareholder in the company. Yu de Chao, chairman, president and chief executive officer, holds about 13.03% of the company's shares after listing. He admitted that the equity of the company was more scattered than that of ordinary listed companies, but pointed out that in the past, the management and founders had always been in line with the interests of shareholders, communicated well with investors, and had no problems at the operational level.

Brief comments:

INNOVENT BIO (1801) is the fourth income-free biotech company in Hong Kong, founded by Dr. Yu Tak-Chao in 2011

-INNOVENT BIO, as a biotech company that is still losing money, its income depends very much on the company's research and development achievements and the efficiency of drug introduction to the market. the stock prices of the three unprofitable biotech companies listed in Hong Kong in the past have performed poorly, so investors should pay attention to the related risks.

The prospect of new shares

Break a lot of net brokerage stocks, United Finance also want to join?

As of October 16, the Hang Seng Index had fallen 23% from its peak, and many pessimistic market participants commented: "it is still 'late autumn' and the real 'cold winter' is yet to come." At this time when the "bear smell" is strong, a Hong Kong local securities firm called United Financial Group (hereinafter referred to as "United Finance") submitted an application for listing. The company should know very well when handing over the table that it is not realistic to expect IPO to sell at a good price because there are a lot of dilapidated brokerage stocks in the market (top of the industry).

The income of securities underwriting business is growing by leaps and bounds.

United Finance has three main businesses: Securities trading business, equity capital market business and asset management business. Among them, securities trading business includes brokerage business and margin financing business, equity capital market business refers to the underwriting and placing of securities, the following three businesses will be introduced respectively.

First of all, this paper introduces the securities trading business, in which the brokerage business refers to the securities company's business of buying and selling securities on behalf of clients. This business usually "depends on the sky to eat", when the market is good, the market mood is high, the trading volume is large, the brokerage business income is high, when the market is bad, it is the opposite. The Hong Kong stock market has experienced many bull-bear changes in the past decade, so the brokerage income of the securities industry has also fluctuated sharply.

United Financial's brokerage business also fluctuates with market conditions. For example, brokerage commission income fell in 2016 compared with the same period last year, but rebounded sharply in 2017 and exceeded the 2015 high.

United Finance began to do margin financing business in 2018 and has developed rapidly in the past two years. The interest income of margin financing in the first half of 2016 has approached the income of brokerage business.

Secondly, it introduces the equity capital market services, and the business of United Finance in this area is mainly the underwriting and placing of securities, from which the commission is collected. Underwriting is a type of underwriting, which means that an investment bank (or an investment banking group) writes a cheque to the company according to the total selling price of the securities issued by a company, buys all the securities issued by the company, and re-issues. In the process of full underwriting, the underwriting institution and the securities issuer are not principal-agent relationship, but buying and selling relationship (ownership transfer). Therefore, in order to spread the underwriting risk, the securities company will invite the subunderwriter to participate in the securities underwriting and pay the subunderwriter commission.

The underwriting business of United Securities has grown rapidly in the past three years and now accounts for the majority of total revenue. United Finance said in its prospectus that the company would expand its team and allocate more resources to the equity capital market business in 2016. The rapid development of underwriting business in the context of the bull market of 2017 Hong Kong stocks also proves that United Securities made the right decision at the beginning.

Finally, it introduces the capital management business, which mainly includes fund management and wealth management. At present, the development scale of United Finance is still very small and can be ignored for the time being.

The market pattern is stable and the long-term prospect is bright.

The securities industry in Hong Kong has a large number of participants. as at 31 March 2018, there were 658 participants in the Stock Exchange. The main market participants were divided into three categories, including international investment banks, Chinese securities companies and local securities companies in Hong Kong.

The SEHK divides market participants into three groups according to market turnover: group A (top 14), group B (15th to 65th) and group C (other stockbrokers).

The market structure of Hong Kong's securities industry is basically stable, with the market share of group A securities companies stabilizing at about 55%, while group B securities companies stabilizing at about 35%, and group C securities companies stabilizing at about 10%. United Finance is the securities company in Group B, ranking in the middle of the industry.

The author is optimistic about the future development of Hong Kong's securities industry, because as an international financial center and an offshore RMB center, Hong Kong has a sound financial system and a transparent legal system, which will continue to attract listed companies and investors from all over the world. And Hong Kong will continue to benefit from Chinese capital inflows. According to information disclosed by the Hong Kong Stock Exchange, the total value of southbound transactions of the Shanghai-Shenzhen-Hong Kong Stock Connect has increased from 836 billion yuan in 2016 to 2.2597 trillion yuan in 2017. In the long run, the trading volume of the Shanghai-Shenzhen-Hong Kong Stock Connect is expected to grow further.

Revenue and profits grow steadily, costs and expenses are too fast.

In 2016, United Financial's operating income did not decrease as a result of the bear market, although brokerage business income declined slightly in that year, but the income from equity capital market services increased significantly, so the overall operating income increased by 83.6%. On the whole, the operating income and net profit of United Finance are increasing year by year.

The cost expenditure of United Finance mainly includes commission expenditure, employee salary and welfare expenditure and other operating expenses, among which commission expenditure mainly includes commission paid to subunderwriters and distributors.

The increase in costs and expenses of United Securities significantly exceeded the increase in profits in 2017. The reason is that United Finance began to recruit staff at the end of 2016, focusing on securities underwriting and placing business, resulting in a substantial increase in costs.

In short, United Finance is a small securities firm with no obvious industry competitiveness. although the securities underwriting business is remarkable, its main business is greatly affected by the industry as a whole. Hong Kong stocks are now in a bear market, and the timing of listing is really not very good.