Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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<div style="text-align: start;">Our base case valuation of Kakao Pay is an implied market cap of 12.1 trillion won or 89,335 won per share.</div>
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<ul>
<li>Our base case valuation is based on 10.7x EV/Sales multiple and applying this to our estimated sales of 954 billion won in 2022.</li>
<li>The EV/S multiple of 10.7x is based on the median valuation multiple of the comps in 2022.</li>
</ul>
<p>The IPO price range is from 63,000 won to 96,000 won. If the IPO is priced near the high end of the IPO price range, we would avoid this deal. <span>On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.</span></p>
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Our base case valuation of Kakao Pay is an implied market cap of 12.1 trillion won or 89,335 won per share.


Our base case valuation is based on 10.7x EV/Sales multiple and applying this to our estimated sales of 954 billion won in 2022.
The EV/S multiple of 10.7x is based on the median valuation multiple of the comps in 2022.

The IPO price range is from 63,000 won to 96,000 won. If the IPO is priced near the high end of the IPO price range, we would avoid this deal. On the other hand, if the IPO is priced close to the low end of the IPO price range, we would be more comfortable with taking the deal.


Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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 Bottom-Up

<ul class="">
<li>The new law impacts Alibaba (BABA) and Tencent (700 HK) loan business.</li>
<li>Alibaba (BABA) is strengthening its “community group purchase” of fresh food.</li>
<li>Trip.com (TCOM) was still in stress in 4Q20.</li>
<li>Baidu (BIDU) set up an automobile joint venture.</li>
</ul>


The new law impacts Alibaba (BABA) and Tencent (700 HK) loan business.
Alibaba (BABA) is strengthening its “community group purchase” of fresh food.
Trip.com (TCOM) was still in stress in 4Q20.
Baidu (BIDU) set up an automobile joint venture.


China Internet Weekly (Mar 8): New Law Limits BABA & Tencent’s Loan Biz, BIDU Starts Car Production.

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>With <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> under regulatory pressure from PBoC, Chinese NBFCs are set to gain market share in Chinese consumer and SMB credit</li>
<li>We review prospects and valuations for four listed names in this report</li>
<li>We see fundamental opportunities still, despite the marked outperformance of three out of four names since November 2020</li>
<li>We would highlight <a href="https://www.smartkarma.com/entities/lexinfintech-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26036:1" rel="noopener">Lexinfintech Holdings (LX US)</a> for its premium returns and most attractive valuations versus peers</li>
<li>
<a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> is the unloved name, and it is lower return than its peers; yet it should deliver better returns with faster growth in credit volumes going forward</li>
<li>Delinquency ratios remain ranging from 2% to under 5% in 3Q 2020, and we do not expect these ratios to rise sharply and threaten profitability</li>
<li>Risks to our positive view on Chinese NBFCs generally include a sharp deterioration in credit quality, which could drive far higher credit costs; on the regulatory side, an increase in required capital adequacy for NBFCs could adversely impact the pace of loan origination</li>
</ul>


With Ant Financial Services Group (6688 HK) under regulatory pressure from PBoC, Chinese NBFCs are set to gain market share in Chinese consumer and SMB credit
We review prospects and valuations for four listed names in this report
We see fundamental opportunities still, despite the marked outperformance of three out of four names since November 2020
We would highlight Lexinfintech Holdings (LX US) for its premium returns and most attractive valuations versus peers

Lufax Holdings (LU US) is the unloved name, and it is lower return than its peers; yet it should deliver better returns with faster growth in credit volumes going forward
Delinquency ratios remain ranging from 2% to under 5% in 3Q 2020, and we do not expect these ratios to rise sharply and threaten profitability
Risks to our positive view on Chinese NBFCs generally include a sharp deterioration in credit quality, which could drive far higher credit costs; on the regulatory side, an increase in required capital adequacy for NBFCs could adversely impact the pace of loan origination


China Non-Bank Finance Companies (NBFCs); Ant’s Loss, Their Gain

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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<p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> (Lufax) raised around US$2.4bn via its US listing. The company is backed by <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> (Ping An).</p>
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<p>Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.</p>
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<p>I covered the various aspects of the deal in my earlier notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-positives-able-to-grow-despite-the-headwinds" target="_blank" rel="noopener">Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds</a></li>
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-negatives-remains-in-flux" target="_blank" rel="noopener">Lufax Pre-IPO - The Negatives - Remains in Flux</a></li>
<li><a href="https://www.smartkarma.com/insights/lufax-pre-ipo-peer-review-bigger-than-ant-s-credittech-in-revenue" target="_blank" rel="noopener">Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue</a></li>
</ul>
</div>
<ul>
<li><a href="https://www.smartkarma.com/insights/lufax-ipo-stuck-with-the-earlier-fundraising-valuation" target="_blank" rel="noopener">Lufax IPO - Stuck with the Earlier Fundraising Valuation</a></li>
</ul>
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<p>In this insight, talk about deal dynamics and provide a table with implied valuation at different ADS levels.</p>
</div>


Lufax Holdings (LU US) (Lufax) raised around US$2.4bn via its US listing. The company is backed by Ping An Insurance (H) (2318 HK) (Ping An).


Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.


I covered the various aspects of the deal in my earlier notes:



Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds
Lufax Pre-IPO - The Negatives - Remains in Flux
Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue



Lufax IPO - Stuck with the Earlier Fundraising Valuation


In this insight, talk about deal dynamics and provide a table with implied valuation at different ADS levels.


Lufax IPO Trading - Possible FTSE Inclusion Might Help in the Short-Term

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares</li>
<li>Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation</li>
<li>Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers</li>
<li>Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers</li>
<li>Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view</li>
<li>Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China</li>
</ul>



Ant Group (6688 HK) has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares
Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation
Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers
Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers
Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view
Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China


Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

China

360 Finance, Inc. operates as a holding company. The Company, through its subsidiaries, provides a digital finance platform to render loans and capital contributions. 360 Finance serves clients in China.

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360 Finance, Inc. (QFIN US)

Kakao Pay IPO Valuation Analysis

Our base case valuation of Kakao Pay is an implied market cap of 12.1 trillion won or 89,335 won per share, which is based on 10.7x EV/Sales...

Douglas Kim

China Internet Weekly (Mar 8): New Law Limits BABA & Tencent’s Loan Biz, BIDU Starts Car Production.

The new law impacts Alibaba and Tencent loan business. Alibaba is strengthening its “community group purchase” of fresh food. Trip.com was still in...

Ming Lu

China Non-Bank Finance Companies (NBFCs); Ant’s Loss, Their Gain

Chinese NBFCs' share prices have rallied as Ant's regulatory hurdles mounted; yet we see more scope for re-rating in the case of LexinFintech on...

Victor Galliano

Lufax IPO Trading - Possible FTSE Inclusion Might Help in the Short-Term

Lufax Holdings (LU US) raised around US$2.4bn via its US listing. The company is backed by Ping An (2318 HK). It might go into the FTSE on fast...

Sumeet Singh

Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

Ant Group's share price at IPO is above the original expected range; still, we expect solid share re-rating potential given its growth prospects...

Victor Galliano

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