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 Capital Markets

WM Tech Corporation / Equity Capital Markets

<ul>
<li>Here in Shanghai Wumart convenience stores have already been closed.</li>
<li>Wumart supermarkets do not have advantageous locations.</li>
<li>We have not seen home delivery business in one of its supermarkets.</li>
<li>Also see <a href="https://www.smartkarma.com/insights/wm-tech-pre-ipo-digitalization-efforts-coming-through-but-not-well-substantiated" target="_blank" data-smartkarma-citation="insights:52007" rel="noopener">WM Tech Pre-IPO - Digitalization Efforts Coming Through but Not Well Substantiated</a> by <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh</a>. </li>
</ul>


Here in Shanghai Wumart convenience stores have already been closed.
Wumart supermarkets do not have advantageous locations.
We have not seen home delivery business in one of its supermarkets.
Also see WM Tech Pre-IPO - Digitalization Efforts Coming Through but Not Well Substantiated by Zhen Zhou, Toh. 


WM Tech Pre-IPO: Wumart as Main Brand, Marginalized on the Ground

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.

<p><a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a> is the second-largest online music platform after <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> as measured by users and revenue in China. The cornerstone product is <em>NetEase Cloud Music</em> that delivers diverse music and music-inspired content and provides interactive community features. Cloud Village has filed for HKEx IPO to raise $1 billion, according to press reports.</p><p>Founded by <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">NetEase Inc (NTES US)</a>, <em>NetEase Cloud Music</em>, has been operating as a stand-alone business since October 2016. NetEase owns 62.46% of the outstanding shares. The other shareholders include CMC Capital Partners, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>, General Atlantic, Boyu Capital, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and Yunfeng Capital. </p><div class="content-highlight"><p>At first sight, Cloud Village performance seems poor as its high growth has come at the cost of losses at the gross profit level and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure along with rising monetisation. Also, the recent exit of Alibaba’s music platform (<em>Xiami</em>) and Tencent Music’s increased regulatory scrutiny on anti-trust grounds should provide a boost. Overall, we think that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  </p></div>

Cloud Village (CLV HK) is the second-largest online music platform after Tencent Music (TME US) as measured by users and revenue in China. The cornerstone product is NetEase Cloud Music that delivers diverse music and music-inspired content and provides interactive community features. Cloud Village has filed for HKEx IPO to raise $1 billion, according to press reports.Founded by NetEase Inc (NTES US), NetEase Cloud Music, has been operating as a stand-alone business since October 2016. NetEase owns 62.46% of the outstanding shares. The other shareholders include CMC Capital Partners, Baidu (BIDU US), General Atlantic, Boyu Capital, Alibaba Group (BABA US) and Yunfeng Capital. At first sight, Cloud Village performance seems poor as its high growth has come at the cost of losses at the gross profit level and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure along with rising monetisation. Also, the recent exit of Alibaba’s music platform (Xiami) and Tencent Music’s increased regulatory scrutiny on anti-trust grounds should provide a boost. Overall, we think that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  

Cloud Village (NetEase Music) IPO Initiation: Musical Shares

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<p>As the partial removal of the mask mandate signaled an end to the US’s COVID-19 troubles, investors started to aggressively reposition their portfolios to take advantage of the reopening of the economy. Chinese tech stocks listed on the US exchanges were among the hardest-hit by this trend, as inflation plays (with no sign of decreasing government spending) surged.</p><p>This sell-off has brought back the tech valuations from their peaks to a more than desirable level, especially the valuations of companies like <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>, which can be considered a value stock in the tech space considering its profitability and valuation multiples.</p>

As the partial removal of the mask mandate signaled an end to the US’s COVID-19 troubles, investors started to aggressively reposition their portfolios to take advantage of the reopening of the economy. Chinese tech stocks listed on the US exchanges were among the hardest-hit by this trend, as inflation plays (with no sign of decreasing government spending) surged.This sell-off has brought back the tech valuations from their peaks to a more than desirable level, especially the valuations of companies like Alibaba Group (BABA US), which can be considered a value stock in the tech space considering its profitability and valuation multiples.

Chinese Tech Pair Trade: Value Tech Stocks Seems Attractive, Especially with a Short Hedge

Shifara Samsudeen, FCMA, CGMA

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  announced 1Q2021 results on Tuesday (18<sup>th</sup> May) and this marked the company’s first results post its secondary listing on HKEx. Baidu’s revenue for the quarter grew 24.8% YoY to RMB28bn driven by a 34.2% YoY increase in revenue from Baidu Core. The company reported an operating profit of RMB2.8bn (an OPM 9.9%) whereas Baidu made operating losses of RMB437m in the same quarter a year ago due to the pandemic.</p><p>Baidu’s 1Q revenues beat consensus estimates by 2.7% while reported operating profit for the quarter beat consensus by a huge 70.2% margin.  </p>

Baidu (BIDU US)  announced 1Q2021 results on Tuesday (18th May) and this marked the company’s first results post its secondary listing on HKEx. Baidu’s revenue for the quarter grew 24.8% YoY to RMB28bn driven by a 34.2% YoY increase in revenue from Baidu Core. The company reported an operating profit of RMB2.8bn (an OPM 9.9%) whereas Baidu made operating losses of RMB437m in the same quarter a year ago due to the pandemic.Baidu’s 1Q revenues beat consensus estimates by 2.7% while reported operating profit for the quarter beat consensus by a huge 70.2% margin.  

Baidu 1Q21: Post-Pandemic Recovery in Online Marketing and New Initiatives Drive Earnings Beat

<div><p><a href="https://www.smartkarma.com/entities/ximalaya-inc" target="_blank" data-smartkarma-citation="entities:33232:1" rel="noopener">Ximalaya (XIMA US)</a> is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China. <br>Ximalaya is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (5.4% of outstanding shares), <a href="https://www.smartkarma.com/entities/tal-education-group" target="_blank" data-smartkarma-citation="entities:1124:1" rel="noopener">TAL Education (TAL US)</a>, Sony Music Entertainment and <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a>. Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   </p></div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ximalaya-ipo-initiation-out-of-tune" target="_blank" data-smartkarma-citation="insights:51169" rel="noopener">Ximalaya IPO Initiation: Out of Tune</a>, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. </p></div></div>

Ximalaya (XIMA US) is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China.  Ximalaya is backed by Tencent (700 HK) (5.4% of outstanding shares), TAL Education (TAL US), Sony Music Entertainment and China Literature (772 HK). Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   In Ximalaya IPO Initiation: Out of Tune, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. 

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)

WM Tech Pre-IPO: Wumart as Main Brand, Marginalized on the Ground

Here in Shanghai Wumart convenience stores have already been closed.Wumart supermarkets do not have advantageous locations.We have not seen home...

Ming Lu

Cloud Village (NetEase Music) IPO Initiation: Musical Shares

Cloud Village has filed for HKEx IPO to raise $1 billion, according to press reports. We think that Cloud Village has the potential to shed its...

Arun George

Chinese Tech Pair Trade: Value Tech Stocks Seems Attractive, Especially with a Short Hedge

Alibaba is currently trading at new all-time low EV/Sales and EV/EBIT multiples offering limited downside risks. However, the sector could drift...

Oshadhi Kumarasiri

Baidu 1Q21: Post-Pandemic Recovery in Online Marketing and New Initiatives Drive Earnings Beat

Baidu’s revenue for 1Q21 grew 24.8% YoY to RMB28bn driven by a 34.2% YoY increase in revenue from Baidu Core. 1Q revenues beat consensus estimates...

Shifara Samsudeen, FCMA, CGMA

Ximalaya IPO: Valuation First-Look

Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion. In this note, we present our forecasts and take the first look at...

Arun George

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