Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Thematic (Sector/Industry)

Necessity is the mother of financial innovation. The non-traditional listings of <a href="https://www.smartkarma.com/entities/spotify-technology-sa" target="_blank" data-smartkarma-citation="entities:26772:1" rel="noopener">Spotify Technology SA (SPOT US)</a>, <a href="https://www.smartkarma.com/entities/slack-technologies-inc" target="_blank" data-smartkarma-citation="entities:27904:1" rel="noopener">Slack Technologies Inc (WORK US)</a> and <a href="https://www.smartkarma.com/entities/palantir-technologies-inc" target="_blank" data-smartkarma-citation="entities:27728:1" rel="noopener">Palantir Technologies Inc (PLTR US)</a> exhibit an increasing trend toward direct listings, in place of traditional IPOs incorporating lock-up agreements and dysfunctional pricing and allocation process.
This week Airbnb announced plans to go public next year joining the ranks of companies like Spotify and Slack that have used a direct listing to go public.
Is this IPO shortcut route appropriate for all companies? What are the pros and cons? And closer to home, which exchanges are open these virtual IPOs?
In this insight, I address the questions above, discuss various discussions with exchanges in the Asia-Pac regions, and also analyse alternative IPO routes such as special purpose acquisition company (SPACs).
<div class="content-highlight">
<h2>What's Original?</h2>
This insight explores the process, benefits, and track record to date of direct listings in equity markets, through to the current developments in Asia.
</div>

Necessity is the mother of financial innovation. The non-traditional listings of Spotify Technology SA (SPOT US), Slack Technologies Inc (WORK US) and Palantir Technologies Inc (PLTR US) exhibit an increasing trend toward direct listings, in place of traditional IPOs incorporating lock-up agreements and dysfunctional pricing and allocation process.
This week Airbnb announced plans to go public next year joining the ranks of companies like Spotify and Slack that have used a direct listing to go public.
Is this IPO shortcut route appropriate for all companies? What are the pros and cons? And closer to home, which exchanges are open these virtual IPOs?
In this insight, I address the questions above, discuss various discussions with exchanges in the Asia-Pac regions, and also analyse alternative IPO routes such as special purpose acquisition company (SPACs).

What's Original?
This insight explores the process, benefits, and track record to date of direct listings in equity markets, through to the current developments in Asia.


Virtual IPOs/Direct Listings: Uninhibited Price Discovery

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

As Q4'19 approaches, there is an opportunity to spruce up returns, or at least prevent them from being worse. Here's what we see in terms of trends, portfolio adjustments, and stock picks:<ul>
<li> Gloomy environment. Things continue to look bad on the export, tourism, and consumption side. Stiffer bank regulations reduce their risk but also cap their loan growth. This takes a huge swath of stocks out of the equation. Some sectors that may benefit during this downturn include oil and leasing.</li>
<li>
Rebound plays. At the same time, for those who like stocks that are traditionally resilient, we recommend tourism sector (eg. AOT, MINT, ERW) and industry leaders CPALL when they correct. Banks do look oversold, but their recovery in a low interest rate environment is less certain. These are stocks that are unlikely to recover in the sector, but could do well beyond 2019.</li>
<li>
Safe havens. For less adventurous investors, dividend stocks and defensives tend to do well (or at least fall less). Stability rather than yield is the criteria here. We hold RATCH, B-WORK, INTUCH and would recommend looking at EGATIF  as well.</li>
<li>
IPOs in spotlight. While more caution is needed in this bear market, we recommend looking at some of the new listings mentioned in IPO Radar. We notice a few interesting ideas such as BAC and Singha Hotels. If they go IPO below the expected prices, they might be worth a bet after all.</li>
</ul>

As Q4'19 approaches, there is an opportunity to spruce up returns, or at least prevent them from being worse. Here's what we see in terms of trends, portfolio adjustments, and stock picks:
 Gloomy environment. Things continue to look bad on the export, tourism, and consumption side. Stiffer bank regulations reduce their risk but also cap their loan growth. This takes a huge swath of stocks out of the equation. Some sectors that may benefit during this downturn include oil and leasing.

Rebound plays. At the same time, for those who like stocks that are traditionally resilient, we recommend tourism sector (eg. AOT, MINT, ERW) and industry leaders CPALL when they correct. Banks do look oversold, but their recovery in a low interest rate environment is less certain. These are stocks that are unlikely to recover in the sector, but could do well beyond 2019.

Safe havens. For less adventurous investors, dividend stocks and defensives tend to do well (or at least fall less). Stability rather than yield is the criteria here. We hold RATCH, B-WORK, INTUCH and would recommend looking at EGATIF  as well.

IPOs in spotlight. While more caution is needed in this bear market, we recommend looking at some of the new listings mentioned in IPO Radar. We notice a few interesting ideas such as BAC and Singha Hotels. If they go IPO below the expected prices, they might be worth a bet after all.


Equity Capital Markets

YGGDRAZIL Group PCL / Equity Capital Markets

Yggdrazil, clearly named after the Viking tree of nine worlds, is a new company that will likely IPO in 2019. This is what we know of them and our initial views:<ul>
<li>
The IPO is good for 45m new shares and is arranged by Yuanta on the secondary bourse MAI. It implies a free float of 25%.</li>
<li>
The Biz. Basically a firm that provides services such as graphics for movies &amp; ads, animation, and games at almost equal split in 2018 revenues. Singapore is their biggest market followed by Thailand and Japan. </li>
<li>
The Value. With no good comparables (pretty different from AsiaSoft), we value this one-of-a-kind firm at Bt3.2/sh implying a market cap of only US$19m, which explains why it's not on the main bourse.</li>
<li>
The Risks are many. Most glaring is the revenue volatility, but other things that might keep you up at night includes staff retention, bidding-related risks, dependence on large platforms, and copyrights violations.</li>
</ul>

Yggdrazil, clearly named after the Viking tree of nine worlds, is a new company that will likely IPO in 2019. This is what we know of them and our initial views:

The IPO is good for 45m new shares and is arranged by Yuanta on the secondary bourse MAI. It implies a free float of 25%.

The Biz. Basically a firm that provides services such as graphics for movies &amp; ads, animation, and games at almost equal split in 2018 revenues. Singapore is their biggest market followed by Thailand and Japan. 

The Value. With no good comparables (pretty different from AsiaSoft), we value this one-of-a-kind firm at Bt3.2/sh implying a market cap of only US$19m, which explains why it's not on the main bourse.

The Risks are many. Most glaring is the revenue volatility, but other things that might keep you up at night includes staff retention, bidding-related risks, dependence on large platforms, and copyrights violations.


IPO Radar: Yggdrazil, The Viking Tree of Game and Animation...in Thailand?

Few things are as futuristic as 3D printing or electric vehicles. That's one reason MCorp Review took a look at AppliCAD, the first (and possibly) only 3D printing solutions company we could find in Thailand. <ul>
<li>The company plans to IPO sometime this year and is firm underwritten by Finansia Syrus. The founding family of Tangudolrit will continue to control 71% post-IPO.</li>
<li>
Value. We put a price target of Bt6/sh for this company, which has high growth, is cash free, and has ridiculously high operating leverage (like all software companies). It's unlikely to trade at the same high multiples as previous software IPOs simply because we are in a seriously depressed market right now.</li>
<li>
Key risks involve software piracy, obsolescence, and high dependency on vendors it represents, particularly SolidWorks.</li>
</ul>

Few things are as futuristic as 3D printing or electric vehicles. That's one reason MCorp Review took a look at AppliCAD, the first (and possibly) only 3D printing solutions company we could find in Thailand. 
The company plans to IPO sometime this year and is firm underwritten by Finansia Syrus. The founding family of Tangudolrit will continue to control 71% post-IPO.

Value. We put a price target of Bt6/sh for this company, which has high growth, is cash free, and has ridiculously high operating leverage (like all software companies). It's unlikely to trade at the same high multiples as previous software IPOs simply because we are in a seriously depressed market right now.

Key risks involve software piracy, obsolescence, and high dependency on vendors it represents, particularly SolidWorks.


IPO Radar: AppliCAD, Thailand's First 3D Printing IPO

Thailand

Applicad Company Limited provides software solutions. The Company develops 3D design software for engineering and construction sectors. Applicad serves customers in Thailand.

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AppliCAD PCL (APP TB)

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Yggdrazil, clearly named after the Viking tree of nine worlds, is a new company that will likely IPO in 2019. This is what we know of them and our...

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IPO Radar: AppliCAD, Thailand's First 3D Printing IPO

Few things are as futuristic as 3D printing or electric vehicles. That's one reason MCorp Review took a look at AppliCAD, the first (and possibly)...

Athaporn Arayasantiparb, CFA

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