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.

Equity Capital Markets

Kuaishou Technology / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Beijing Kuaishou Technology Co Ltd (1496219D CH)</a> is the second-largest short video platform by average DAUs (daily active users) in 1H20, according to iResearch. Users access the platform primarily through a family of mobile apps comprising Kuaishou Flagship, Kuaishou Express and Kuaishou Concept, which is collectively referred to as the Kuaishou App. Kuaishou is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> (21.57% shareholder), Morningside Venture Capital, DCM Capital (9.23%), <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> (3.78%), Sequoia Capital (3.20%), Boyu Capital (2.29%) and Temasek (0.86%). In January 2020, Kuaishou raised $3 billion through a Series F round at a valuation of $28 billion, according to press reports. Kuaishou has filed for a Hong Kong IPO to raise up to $5 billion as early as January 2021, according to Reuters. <div class="content-highlight">As a key competitor to <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>’s Douyin, Kuaishou offers public market investors the first opportunity to gain direct exposure to China’s short-video platform market. While Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive.</div>

Beijing Kuaishou Technology Co Ltd (1496219D CH) is the second-largest short video platform by average DAUs (daily active users) in 1H20, according to iResearch. Users access the platform primarily through a family of mobile apps comprising Kuaishou Flagship, Kuaishou Express and Kuaishou Concept, which is collectively referred to as the Kuaishou App. Kuaishou is backed by Tencent Holdings (700 HK) (21.57% shareholder), Morningside Venture Capital, DCM Capital (9.23%), Baidu (BIDU US) (3.78%), Sequoia Capital (3.20%), Boyu Capital (2.29%) and Temasek (0.86%). In January 2020, Kuaishou raised $3 billion through a Series F round at a valuation of $28 billion, according to press reports. Kuaishou has filed for a Hong Kong IPO to raise up to $5 billion as early as January 2021, according to Reuters. As a key competitor to ByteDance (1460967D CH)’s Douyin, Kuaishou offers public market investors the first opportunity to gain direct exposure to China’s short-video platform market. While Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive.

Kuaishou IPO Initiation: Dancing to Its Own Tune

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in China, India, Taiwan, and South Korea continue to be a major focus when it comes to individual stock recommendations.

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in China, India, Taiwan, and South Korea continue to be a major focus when it comes to individual stock recommendations.

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

* Peak Value:So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and* 3Q20 Results Will Be Telling: HKEx will release its 3Q earnings result on November 11, 2020. While its fund to hope and dream, the reality is that equity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.

* Peak Value:So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and* 3Q20 Results Will Be Telling: HKEx will release its 3Q earnings result on November 11, 2020. While its fund to hope and dream, the reality is that equity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.

Hong Kong Exchanges & Clearing – Fully Discounted

*Trip.com Should Continue to Get a Significant Upward Re-Rating: Mainland China has been at the epicenter of this tourism slowdown. If the virus impact continues to be held in check for 2-3 weeks post-Golden Week, the risk to tourism and confidence should start to seriously abate; and *Travel Rebound Underway: The good news is that mainland China hasn’t “officially” reported local COVID-19 infections since August 15th, although there were two asymptomatic cases disclosed in late September. After nine plus months of hiding and the Covid-19 pandemic largely under control in mainland China, the Ministry of Culture and Tourism stated that the first four days of the Golden Week holiday beginning October 1st witnessed nearly 425 mn local trips - nearly 80% of the level posted in 2019.

*Trip.com Should Continue to Get a Significant Upward Re-Rating: Mainland China has been at the epicenter of this tourism slowdown. If the virus impact continues to be held in check for 2-3 weeks post-Golden Week, the risk to tourism and confidence should start to seriously abate; and *Travel Rebound Underway: The good news is that mainland China hasn’t “officially” reported local COVID-19 infections since August 15th, although there were two asymptomatic cases disclosed in late September. After nine plus months of hiding and the Covid-19 pandemic largely under control in mainland China, the Ministry of Culture and Tourism stated that the first four days of the Golden Week holiday beginning October 1st witnessed nearly 425 mn local trips - nearly 80% of the level posted in 2019.

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)

Kuaishou IPO Initiation: Dancing to Its Own Tune

Kuaishou is a key competitor to ByteDance’s Douyin. While Kuaishou’s performance is distorted due to various factors, we believe that the...

Arun George

Emerging Markets Breaking Out

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1...

Vermilion Research

Cautiously Optimistic on Global Equities

We are constructive on global equities and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75...

Vermilion Research

Hong Kong Exchanges & Clearing – Fully Discounted

Hong Kong Exchanges & Clearing: Alot of Positives Surrounding China Opportunity Has Pushed Shares 45% Higher In 2020, But Recent Fundamentals Would...

Thomas J. Monaco

Trip.com – All Systems Go

Trip.com - All Systems Go: Travel during Golden Week, and C-Trip looks to be biggest beneficiary as largest online travel agency.

Thomas J. Monaco

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