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

China Renaissance Holdings / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/27365" target="_blank" data-smartkarma-citation="entities:27365:1">China Renaissance Holdings L (1290022D CH)</a> is a boutique investment bank and investment management firm focused on new economy companies. According to press reports, China Renaissance will start pre-marketing this week for a Hong Kong IPO. It is seeking a valuation of $3-4 billion and looking to raise $300-400 million.</p><p>China Renaissance currently has three business segments - investment banking, investment management and Huajing Securities. We believe that investment management is the crown jewel due to high revenue visibility from management fees and high margins. Due to the current bubble around China new economy companies, China Renaissance will likely have a stellar 2018. However, a closer inspection leads us to adopt a cautious view due to:</p><ol>
<li>Like peers, the investment banking’s revenue profile is volatile, and it is uncertain if the favourable market conditions behind the strong 1H18 performance (100% YoY revenue growth) are sustainable. Over the last two years, investment banking revenue declined 6% in both 2016 and 2017.</li>
<li>Worryingly, investment banking’s EBIT margin has precipitously fallen from 44.0% in 2016 to 13.4% in 2017 due to a 45% increase in employee expenses. While investment banking’s margins increased to 27.9% in 1H18 due to operational leverage, it is still materially below the historic highs.</li>
<li>The investment banking business is not directly comparable to listed competitors due to differing services mix. Nevertheless, it is instructive to compare margins to gauge the ROE and cost discipline of the investment banking business. China Renaissance’s investment banking EBIT margin of 27.9% in 1H18 is materially below the investment banking business of <a href="https://www.smartkarma.com/entities/463" target="_blank" data-smartkarma-citation="entities:463:1">Citic Securities (H) (6030 HK)</a> (42%).</li>
<li>Like private equity peers, investment management’s adjusted revenue comprises of management fees, realised and unrealised income from carried interest (performance-based fees). The typical realisation events include the sale of a portfolio company and dividends. However, over the track record period, investment management’s adjusted revenue consists entirely of management fees and unrealised income from carried interest. In other words, the investment management business has yet to record revenue from realisations events.</li>
<li>The investment management business raises capital from domestic and global institutional funds and high net-worth individuals. AUM increased 113% YoY to RMB4.1 billion in 1Q18 but marginally declined to RMB4.0 billion in 2Q18. Notably, the investment management business has a large single customer dependence. The single customer accounted for 54% of investment management’s revenue in 2017 and 34% of revenue in 1Q18.</li>
</ol><div class="content-highlight"><p>For public market investors, buying into the hype of Chinese new economy companies have largely proved to be dreadful investments. China Renaissance has astutely timed its IPO as its 2018 results will fully benefit from the current bubble around new economy companies. Bubbles eventually burst, and when combined with less than stellar fundamentals, we would need a compelling valuation to participate in the IPO.  </p></div>

China Renaissance Holdings L (1290022D CH) is a boutique investment bank and investment management firm focused on new economy companies. According to press reports, China Renaissance will start pre-marketing this week for a Hong Kong IPO. It is seeking a valuation of $3-4 billion and looking to raise $300-400 million.China Renaissance currently has three business segments - investment banking, investment management and Huajing Securities. We believe that investment management is the crown jewel due to high revenue visibility from management fees and high margins. Due to the current bubble around China new economy companies, China Renaissance will likely have a stellar 2018. However, a closer inspection leads us to adopt a cautious view due to:
Like peers, the investment banking’s revenue profile is volatile, and it is uncertain if the favourable market conditions behind the strong 1H18 performance (100% YoY revenue growth) are sustainable. Over the last two years, investment banking revenue declined 6% in both 2016 and 2017.
Worryingly, investment banking’s EBIT margin has precipitously fallen from 44.0% in 2016 to 13.4% in 2017 due to a 45% increase in employee expenses. While investment banking’s margins increased to 27.9% in 1H18 due to operational leverage, it is still materially below the historic highs.
The investment banking business is not directly comparable to listed competitors due to differing services mix. Nevertheless, it is instructive to compare margins to gauge the ROE and cost discipline of the investment banking business. China Renaissance’s investment banking EBIT margin of 27.9% in 1H18 is materially below the investment banking business of Citic Securities (H) (6030 HK) (42%).
Like private equity peers, investment management’s adjusted revenue comprises of management fees, realised and unrealised income from carried interest (performance-based fees). The typical realisation events include the sale of a portfolio company and dividends. However, over the track record period, investment management’s adjusted revenue consists entirely of management fees and unrealised income from carried interest. In other words, the investment management business has yet to record revenue from realisations events.
The investment management business raises capital from domestic and global institutional funds and high net-worth individuals. AUM increased 113% YoY to RMB4.1 billion in 1Q18 but marginally declined to RMB4.0 billion in 2Q18. Notably, the investment management business has a large single customer dependence. The single customer accounted for 54% of investment management’s revenue in 2017 and 34% of revenue in 1Q18.
For public market investors, buying into the hype of Chinese new economy companies have largely proved to be dreadful investments. China Renaissance has astutely timed its IPO as its 2018 results will fully benefit from the current bubble around new economy companies. Bubbles eventually burst, and when combined with less than stellar fundamentals, we would need a compelling valuation to participate in the IPO.  

China Renaissance IPO Preview: Sorry to Burst Your New Economy Bubble

APAC IPOs & Placements

Zhen Zhou, Toh

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.

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Next week will be an exciting week for the ECM space as a few key IPOs will list beginning with 111 Inc (YI US) and NIO Inc (NIO US) which are expected to price on Tuesday, 11th September, and likely start trading the day after. So far, we heard that books have been covered since earlier this week but nothing on whether it is oversubscribed. The performance of these IPOs will likely set the tone for the subsequent Chinese ADR listings this and next quarter such as Qutoutiao Inc (QTT US), which will list on Friday, and the much anticipated Tencent Music which we heard will likely list in October.
Beyond that, in Hong Kong, China Chunlai Education (1969 HK) will be braving the China education storm by being the first to list after the proposed change in the law. Hong Kong-listed education stocks have mostly been smashed, especially the recently listed Hope Education Group Co Ltd (1765 HK). The company will be listing on the 13th of September. 
Hua Medicine Ltd (2552 HK) is also looking to go against the odds after the spectacular crash of Ascletis Pharma Inc (1672 HK) last month. In Ke Yan, CFA, FRM 's insight, he explained that the IPO valuation is priced to perfection and leaves little upside for a company with just a single drug that is undergoing Phase III clinical trial.
We are hearing that Sichuan Haidilao Catering (0172918D HK) will be launching its bookbuild next Monday and other IPOs doing their pre-marketing rounds are China Renaissance Holdings (US$500m), Midea Real Estate (Hong Kong, US$500m), and Osotspa Energy (Thailand, US$600m). Lodha Developers (LODHA IN) is also expected to launch a smaller IPO this month. In the U.S., other IPOs in the pipeline are LAIX Inc (LAIX US) , X Financial (XYF US) , Viomi Technology Co Ltd (VIOT US) , and Studio City.
Accuracy Rate:Our overall accuracy rate is 71.3% for IPOs and 63.9% for Placements (Performance measurement criteria is explained at the end of the note).New IPO filings this week  
Hansoh Pharma (Hong Kong, ~US$1.5bn)
Entertainment Plus (Hong Kong, ~US$1bn)
Fosun Tourism (Hong Kong, ~US$500m)
CMGE Tech (Hong Kong, ~US$400m)
Aoyuan Healthy Life (Hong Kong, ~US$100m)
Duiba Group (Hong Kong, ~US$100m)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.Source: Smartkarma IPO AnalyzerNews on Upcoming IPOs  
PE-backed Chinese Menswear Retailer GXG Files For $300M HK IPO
SoftBank Is Seeking Loans From Banks Pitching for Big IPO
Indonesia's stock exchange to launch technology platform, eyes Go-Jek IPO
P6.77-B Cal-Comp IPO approved by regulators
Smartkarma Community's this week Analysis on Upcoming IPO   
Qutoutiao IPO Valuation: Updated Disclosure Poses More Questions than It Answers
Meituan-Dianping IPO, Part 4: Proposed Price Range, Jan-Apr Results, &amp; A Lesson From Groupon
Meituan Dianping IPO: Results to April Offers More Positives than Negatives
Meituan Dianping IPO Valuation: Would Investors Buy Into Reasonable P/S Multiple?
CooTek IPO Preview: A Question of Sustainability
Livent IPO Preview (Part 1): A Profitable Company that Produces Lithium
Haidilao IPO – A Popular Niche Restaurant or the Next McDonald’s?
List of pre-IPO Coverage on Smartkarma

Name
Insight

Hong Kong

Ant Financial
Ant Financial IPO Early Thought: Understand Fintech Empire, Growth &amp; Risk Factors


BabyTree
Babytree Group Pre-IPO - Young Moms Need It but Almost All Seem to Have It, Might Be at Peak MAU


Canaan Inc.
Canaan Inc. IPO Preview (Part 1) - The Biggest Blockchain Related IPO Globally in 2018


Canaan Inc.
Canaan Inc. IPO Preview (Part 2) - A Closer Look at ASIC Developments and Competition


Canaan Inc.
Canaan Inc. IPO Preview (Part 3): Earnings Forecast &amp; Valuation Analysis


Canaan Inc.
Canaan (嘉楠耘智) IPO Quick Take: Beware that ASIC Is a Different Ball Game


Cenmintang
Cenmintang IPO Preview: A Beverage and Snack Play Whose Growth Is Hard to Grasp


China Feihe
China Feihe IPO Preview: Goat Bless Infant Formula Milk?


China Kepei
China Kepei Edu (科培教育) Pre-IPO Review - A Well Run Private Higher Education Company


Ganfeng Lithium
Ganfeng Lithium IPO: Present Perfect, Future Tense


Shandong Gold
Shandong Gold Mining IPO Preview: Largest Pure Play Gold Miner to Be Listed in Hong Kong


Shandong Gold
Shandong Gold IPO: Buyers Beware


Sinochem Energy
Sinochem Energy (中化能源) IPO First Impression: Trophy Asset Mixed with Volatile Trading Business


STX 
STX IPO Preview– a One-Hit Wonder


STX 
STX Entertainment (胜图娱乐) IPO: Legendary Founder but Results Matter


Tongcheng
Tongcheng-ELong (同程艺龙) Pre-IPO Review - A Force to Be Reckoned With


Qilu Express
Qilu Expressway IPO Preview: Concentration Risk and Recent News May Mean Discount to Peers


WeLab
WeLab Pre-IPO - Stuck in a Regulatory Quagmire; Not the Right Time to List

South Korea

Creas
Creas Fashion Co. IPO Preview (Part 1)


Daeyu
Daeyu Co. IPO Preview (Part 1)


Ebang
Ebang IPO Preview (Part 1): Lower Sales but Higher Operating Profit Versus Canaan Inc.


Foodnamoo
Foodnamoo Inc IPO Preview (Part 1) - A Leader in Home Meal Replacement Products in Korea


Icure Pharm
Icure Pharm (175250 KS): Post IPO Short Selling Opportunity Checkup


Icure Pharm
Icure Pharm IPO Summary - Front Runner of Dementia Patch Development Race


Livent
Livent IPO Preview (Part 1): A Profitable Company that Produces Lithium


Zinus
Zinus IPO Preview (Part 1) - An Amazing Comeback Story (#1 Mattress Brand on Amazon)

India

Aavas
Aavas Financiers Pre-IPO - Over-Capitalisation Leading to Higher Profitability


CMS Info
CMS Info Systems Pre-IPO Review - When a PE Sells to Another PE... Only One Gets the Timing Right


Crystal Crop
Crystal Crop Protection Pre-IPO - DRHP Raises More Questions than in Answers


Flemingo 
Flemingo Travel Retail Pre-IPO - Its a Different Business in Every Country


NSE
NSE IPO Preview- Not Only Fast..its Risky and Expensive


NSE
National Stock Exchange Pre-IPO Review - Bigger, Better, Stronger but a Little Too Fast for Some


Mazagon Dock
Mazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending


Lodha
Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable


Lodha
Lodha Developers IPO: Large Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt

The U.S.

Cootek
CooTek IPO Preview: A Question of Sustainability


CNFinance
CNFinance (泛华金融) IPO First Impression: Beware Rising Credit Risk and Slowing Loan Origination


CNFinance
CNFinance IPO Preview: A Renaissance that May Not Come


Qutoutiao
Qutoutiao Pre-IPO - Cash Payments Driving Downloads but Aren't as Effective with Usage


Qutoutiao
Qutoutiao 趣头条 (QTT) – A Spendthrift Who Pays News Readers Generously


Qutoutiao
Qutoutiao IPO Preview: Facing an Inescapable Catch-22


Viomi
Viomi Pre-IPO - A Small Cog in Xiaomi's Big Wheel

Australia

Latitude financial
Latitude Financial Group Pre-IPO Review - Credit Prospectus Throw up Some Interesting Data Points



ECM Weekly (8 September 2018) - Qutoutiao, Viomi, 111 Inc., Meituan, Haidilao

China

China Renaissance Holdings Limited provides investment services. The Company offers investment banking, investment management, capital marketing, securities underwriting, research, and trading services. China Renaissance Holdings serves clients in China, Hong Kong, and the Untied States.

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China Renaissance Holdings (1911 HK)

China Renaissance IPO Preview: Sorry to Burst Your New Economy Bubble

China Renaissance Holdings L (1290022D CH) is a boutique investment bank and investment management firm focused on new economy companies. According...

Arun George

ECM Weekly (8 September 2018) - Qutoutiao, Viomi, 111 Inc., Meituan, Haidilao

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for...

Zhen Zhou, Toh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)