Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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>
<li>We recently visited Guangzhou city, a tier one city in China, on a vacation trip. </li>
<li>One of the malls that we visited happened to have several listed tea chain stores.</li>
<li>We took a snapshot of the shop traffic and noted the difference in locations of various stores. We also ordered tea drinks from two of these stores.</li>
</ul>


We recently visited Guangzhou city, a tier one city in China, on a vacation trip. 
One of the malls that we visited happened to have several listed tea chain stores.
We took a snapshot of the shop traffic and noted the difference in locations of various stores. We also ordered tea drinks from two of these stores.


Chinese Tea Chain: An Impromptu Snapshot Visit at Sunac Mall - Mixue, Chagee, Goodme, ChaPanda

A Value Investing Journal, Acid Investments

Acid Investments

A Value Investing Journal

I love stonks and I love rambling. Sometimes, I feel it unfair to subject those around me with the inundation of my thoughts, so I tweet and I spill ink on here. Jokes aside, I love investing and edgy ideas; I hope to become a better investor and this is my journal to that end. I will be sharing value/special situations I come across organically or through other blogs/13F and I hope to provide a variant analytical view to said situations. I hope to receive constructive feedback and let’s grab some of dem benjamins together!

<ul><li>Last week, I wrote a quick article flagging the seemingly absurd valuation discrepancy of Chagee vis-a-vis beverage peers on the HK stock exchange i.e. Mixue and Guming, as well as Luckin Coffee on the OTC markets.</li><li>Chagee currently trades around ~31 (doing extremely poorly on a good day), and at the bottom of its recent trading range; there is no analyst coverage and the firm has yet to report its Q1 25 results so it’s just really stuck in no-man’s land.</li><li>I postulated then that delisting risk was an overhang on Chagee, a Chinese ADR, but lo and behold, it appears that the market has shrugged off a large portion of it for the large cap Chinese tech companies.</li></ul>

Last week, I wrote a quick article flagging the seemingly absurd valuation discrepancy of Chagee vis-a-vis beverage peers on the HK stock exchange i.e. Mixue and Guming, as well as Luckin Coffee on the OTC markets.Chagee currently trades around ~31 (doing extremely poorly on a good day), and at the bottom of its recent trading range; there is no analyst coverage and the firm has yet to report its Q1 25 results so it’s just really stuck in no-man’s land.I postulated then that delisting risk was an overhang on Chagee, a Chinese ADR, but lo and behold, it appears that the market has shrugged off a large portion of it for the large cap Chinese tech companies.

Part 2: What Could Go Wrong at Chagee (CHA)

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>The core reason for the success of Chagee lies in the Company finding an effective "shortcut" of business model – “minimalism”, but this model does not imply a high moat.</li>
<li>A likely situation is Chagee's future growth in domestic market would be limited, and the overseas expansion could be unsatisfactory.So, we recommend investors to be cautious about the valuation prospects.</li>
<li>If domestic competition intensifies or overseas expansion falls short of expectations, it is highly likely that the stock price will fall back to the range of US$25-30/share or even lower.</li>
</ul>


The core reason for the success of Chagee lies in the Company finding an effective "shortcut" of business model – “minimalism”, but this model does not imply a high moat.
A likely situation is Chagee's future growth in domestic market would be limited, and the overseas expansion could be unsatisfactory.So, we recommend investors to be cautious about the valuation prospects.
If domestic competition intensifies or overseas expansion falls short of expectations, it is highly likely that the stock price will fall back to the range of US$25-30/share or even lower.


Chagee Holdings - Debut Is the Peak, and Then It Wanes?

<ul><li>As Peter Lynch famously promulgated, one really fun thing about investing is noticing trends, “flowers” that are blooming around you, and finding ways to cash in on that “insight”, the caveat being you have to be right about the trend of course.</li><li>Fad cycles may or may not have legs - see Funko in US and PopMart in HK.</li><li>Not too long ago, I noticed PopMart replacing a local major bank outlet in a central shopping mall near to where I live and heedlessly dismissing it with a mere “wth is this?”, to my chagrin of course as the stock has gone parabolic ever since.</li></ul>

As Peter Lynch famously promulgated, one really fun thing about investing is noticing trends, “flowers” that are blooming around you, and finding ways to cash in on that “insight”, the caveat being you have to be right about the trend of course.Fad cycles may or may not have legs - see Funko in US and PopMart in HK.Not too long ago, I noticed PopMart replacing a local major bank outlet in a central shopping mall near to where I live and heedlessly dismissing it with a mere “wth is this?”, to my chagrin of course as the stock has gone parabolic ever since.

Flagging a Recent IPO - Chagee (CHA) - Orphaned Security Trading at a Large Spread to Peers

<ul>
<li>Chagee may think that US IPO will help it gain greater imagination space/higher valuation. Although the tariff war is “a big surprise”, conservative IPO pricing still secure a good debut.</li>
<li>If Chagee can successfully achieve internationalization and reverse the trend of declining performance, its market value could reach US$10.9 billion. However, Chinese concept stocks would still face valuation discounts.</li>
<li>If same store GMV fails to stabilize, or overseas market penetration is lower-than-expected, or conflict between China and the US escalates, share price would face correction, with valuation falling below Starbucks.</li>
</ul>


Chagee may think that US IPO will help it gain greater imagination space/higher valuation. Although the tariff war is “a big surprise”, conservative IPO pricing still secure a good debut.
If Chagee can successfully achieve internationalization and reverse the trend of declining performance, its market value could reach US$10.9 billion. However, Chinese concept stocks would still face valuation discounts.
If same store GMV fails to stabilize, or overseas market penetration is lower-than-expected, or conflict between China and the US escalates, share price would face correction, with valuation falling below Starbucks.


Chagee Holdings - Thoughts on the IPO Debut and the Valuation Outlook

United States

Chagee Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides a wide range of freshly-made tea drinks. Chagee Holdings serves customers worldwide.

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Chagee Holdings (CHA US)

Chinese Tea Chain: An Impromptu Snapshot Visit at Sunac Mall - Mixue, Chagee, Goodme, ChaPanda

We recently visited stores of 4 listed tea chains in a mall, noting the differentiation of the stores in terms of their positioning.

Ke Yan, CFA, FRM

Part 2: What Could Go Wrong at Chagee (CHA)

Chagee currently trades around ~31 (doing extremely poorly on a good day), and at the bottom of its recent trading range; there is no analyst...

Acid Investments

Chagee Holdings - Debut Is the Peak, and Then It Wanes?

Chagee's success is attributed to a minimalist business model, but caution is advised for investors due to limited growth potential/uncertain...

Xinyao (Criss) Wang

Flagging a Recent IPO - Chagee (CHA) - Orphaned Security Trading at a Large Spread to Peers

As Peter Lynch famously promulgated, one really fun thing about investing is noticing trends, “flowers” that are blooming around you, and finding...

Acid Investments

Chagee Holdings - Thoughts on the IPO Debut and the Valuation Outlook

Chagee aims for US IPO to boost valuation, but tariff war is a big surprise.Market value may reach $10.8bn if internationalization succeeds, but...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Chinese Tea Chain: An Impromptu Snapshot Visit at Sunac Mall - Mixue, Chagee, Goodme, ChaPanda

We recently visited stores of 4 listed tea chains in a mall, noting the differentiation of the stores in terms of their positioning.

Ke Yan, CFA, FRM

Part 2: What Could Go Wrong at Chagee (CHA)

Chagee currently trades around ~31 (doing extremely poorly on a good day), and at the bottom of its recent trading range; there is no analyst...

Acid Investments

Chagee Holdings - Debut Is the Peak, and Then It Wanes?

​Chagee's success is attributed to a minimalist business model, but caution is advised for investors due to limited growth potential/uncertain...

Xinyao (Criss) Wang

Flagging a Recent IPO - Chagee (CHA) - Orphaned Security Trading at a Large Spread to Peers

As Peter Lynch famously promulgated, one really fun thing about investing is noticing trends, “flowers” that are blooming around you, and finding...

Acid Investments

Chagee Holdings - Thoughts on the IPO Debut and the Valuation Outlook

​Chagee aims for US IPO to boost valuation, but tariff war is a big surprise.Market value may reach $10.8bn if internationalization succeeds, but...

Xinyao (Criss) Wang

Chagee's success is attributed to a minimalist business model, but caution is advised for investors due to limited growth potential/uncertain...

Chagee aims for US IPO to boost valuation, but tariff war is a big surprise.Market value may reach $10.8bn if internationalization succeeds, but...