Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27351" target="_blank" data-smartkarma-citation="entities:27351:1">Babytree Inc (BABYTRE HK)</a> could be looking to raise as much as US$800m in its planned IPO. I covered most aspects of the deal in my earlier insight, <a href="https://www.smartkarma.com/insights/babytree-group-pre-ipo-young-moms-need-it-but-almost-all-seem-to-have-it-might-be-at-peak-mau" target="_blank">Babytree Group Pre-IPO - Young Moms Need It but Almost All Seem to Have It, Might Be at Peak MAU</a>. 
Since then there has been negative newsflow regarding its MAU slump but that doesn't seem to have deterred the bankers from putting up lofty valuation range of US$2.5-4.3bn, as per media reports.
While waiting for the company to file its PHIP with updated 1H18 performance,  I have been fielding some questions around valuations. In this insight, I'll try and come up with a few plausible valuation scenarios.

Babytree Inc (BABYTRE HK) could be looking to raise as much as US$800m in its planned IPO. I covered most aspects of the deal in my earlier insight, Babytree Group Pre-IPO - Young Moms Need It but Almost All Seem to Have It, Might Be at Peak MAU. 
Since then there has been negative newsflow regarding its MAU slump but that doesn't seem to have deterred the bankers from putting up lofty valuation range of US$2.5-4.3bn, as per media reports.
While waiting for the company to file its PHIP with updated 1H18 performance,  I have been fielding some questions around valuations. In this insight, I'll try and come up with a few plausible valuation scenarios.

Babytree Group Pre-IPO - Valuation Estimates - Even the Last Round Might Have Been Too High

CHINA - Healthcare, Steel, Autos, Education, Research From Beijing

Scott Laprise/ 乐天虎

CHINA - Healthcare, Steel, Autos, Education

Research From Beijing

We try to provide our clients with on the ground research of what is really going on here in China.

Our business goal and focus are to provide on the ground research This will give our clients an early look at changes about to happen in China and to give them an edge.

To have the ability to go out and check a car dealer or visit a hospital or go see any new launches in the market. We have regular products such as our steel monthly, a visit to the traders and discuss with them what they see. The steel trader visit gives a great early proxy to spending by the government. We do weekly car dealer visits to see how the car companies are doing but this is also a proxy to the consumer and how is the consumer thinking these days. We visit school and hospitals and attend events to find out what people are really thinking.

Our primary method of research is fundamental research starting with a neutral view, analyzing the financials and building the case for the company. We rarely look at the news as we have found the views to be incomplete lacking the understanding of Chinese thinking. We strive for a fresh differential view on the Chinese stocks. Most Chinese research is made by analysts reading the news and reading other Chinese analysts giving clients the same old view. We also try to give you a better understanding of how the Chinese look at issues. The English media tends to focus on examining issues from the western view giving investors often an incomplete view.

If you want your research done by professionals on the ground who are able to give you early feedback instead of most research taking a long distance view driven by the media. This is our value proposition: focused on the ground research to limited clients. We think this is the best way to give you the best chance to generate alpha for your funds.

Equity Bottom-Up

This strength in consumer spending is counter to the views of most Chinese foreign-based analysts. Consumption is much stronger than consensus is expecting. We have just written a 31 page NON-CONSESNUS report on China’s debt and the state of the economy, let me know if you are interested in this report.

This strength in consumer spending is counter to the views of most Chinese foreign-based analysts. Consumption is much stronger than consensus is expecting. We have just written a 31 page NON-CONSESNUS report on China’s debt and the state of the economy, let me know if you are interested in this report.

China Singles Day – Consensus Is Wrong on Chinese Consumers and Consumption

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

* Online ad revenues and the operating margin declined due to FIFA World Cup and government's inspection of all online advertisers' licenses, but we believe the impact of these will moderate soon.
* However, member revenues and the member base grew robustly due to a popular exclusive TV series.
* Compared to peer companies' price/sales ratios, we believe there is upside of 93%.

* Online ad revenues and the operating margin declined due to FIFA World Cup and government's inspection of all online advertisers' licenses, but we believe the impact of these will moderate soon.
* However, member revenues and the member base grew robustly due to a popular exclusive TV series.
* Compared to peer companies' price/sales ratios, we believe there is upside of 93%.

IQiyi (IQ): Temporary Headwind in Ad Revenues, But Robust Membership Revenues in 3Q18

<ul class="">
<li>The operating margin of the search business declined in 3Q18 - We believe return to the hospital clients raised marketing expenses.</li>
<li>We believe that hospital clients will bring significant revenues.</li>
<li>Subsidiary iQiyi (IQ)’s negative operating margin was flat with the same period last year.</li>
<li>
<a href="https://www.smartkarma.com/entities/26755" target="_blank" data-smartkarma-citation="entities:26755:1">iQIYI Inc (IQ US)</a> revenues grew 40% yoy in 3Q18 versus 15% yoy for the search business.</li>
</ul>


The operating margin of the search business declined in 3Q18 - We believe return to the hospital clients raised marketing expenses.
We believe that hospital clients will bring significant revenues.
Subsidiary iQiyi (IQ)’s negative operating margin was flat with the same period last year.

iQIYI Inc (IQ US) revenues grew 40% yoy in 3Q18 versus 15% yoy for the search business.


Baidu (BIDU): Returning to Hospital Clients Impacted Margin, But Will Bring Growth, 17%~59% Upside

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Since its IPO at $18.00 per ADS, <a href="https://www.smartkarma.com/entities/26755" target="_blank" data-smartkarma-citation="entities:26755:1">iQIYI Inc (IQ US)</a>'s shares reached a high of $46.23 to mark the peak of its hype cycle. However, the shares have given up most of its gains and last closed at $22.20 per ADS. We believe that today’s 3Q18 results reinforce our view that iQIYI will struggle to generate shareholder value and will likely require external funding for the foreseeable future. We maintain our sell recommendation which we outlined <a href="https://www.smartkarma.com/insights/iqiyi-ipo-valuation-throwing-good-money-after-bad" target="_blank" data-smartkarma-citation="insights:18607">IQIYI IPO Valuation: Throwing Good Money After Bad</a> and <a href="https://www.smartkarma.com/insights/iqiyi-ipo-update-still-likely-to-remain-a-not-for-profit" target="_blank" data-smartkarma-citation="insights:18168">IQIYI IPO Update: Still Likely to Remain a Not-For-Profit</a>.

Since its IPO at $18.00 per ADS, iQIYI Inc (IQ US)'s shares reached a high of $46.23 to mark the peak of its hype cycle. However, the shares have given up most of its gains and last closed at $22.20 per ADS. We believe that today’s 3Q18 results reinforce our view that iQIYI will struggle to generate shareholder value and will likely require external funding for the foreseeable future. We maintain our sell recommendation which we outlined IQIYI IPO Valuation: Throwing Good Money After Bad and IQIYI IPO Update: Still Likely to Remain a Not-For-Profit.

IQIYI (IQ US): 3Q18 Results Show that the Hype Is Slowly Running Out of Steam

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

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Baidu (BIDU US)

Babytree Group Pre-IPO - Valuation Estimates - Even the Last Round Might Have Been Too High

Babytree Inc (BABYTRE HK) could be looking to raise as much as US$800m in its planned IPO. I covered most aspects of the deal in my earlier...

Sumeet Singh

China Singles Day – Consensus Is Wrong on Chinese Consumers and Consumption

This strength in consumer spending is counter to the views of most Chinese foreign-based analysts. Consumption is much stronger than consensus is...

Scott Laprise/ 乐天虎

IQiyi (IQ): Temporary Headwind in Ad Revenues, But Robust Membership Revenues in 3Q18

* Online ad revenues and the operating margin declined due to FIFA World Cup and government's inspection of all online advertisers' licenses, but...

Ming Lu

Baidu (BIDU): Returning to Hospital Clients Impacted Margin, But Will Bring Growth, 17%~59% Upside

The operating margin of the search business declined in 3Q18 - We believe return to the hospital clients raised marketing expenses. We believe...

Ming Lu

IQIYI (IQ US): 3Q18 Results Show that the Hype Is Slowly Running Out of Steam

Since its IPO at $18.00 per ADS, iQIYI Inc (IQ US)'s shares reached a high of $46.23 to mark the peak of its hype cycle. However, the shares have...

Arun George

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