Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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

NetEase Cloud Music / Equity Capital Markets

<p>Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.</p><p>As of Mar 21, it had 183m online music MAUs, 24m online music services monthly paying users, 438,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. </p><p>CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.</p><p>We covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-was-in-the-slow-stream-playing-catch-up" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up ,</a> <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-tencent-music-peer-comp-regulatory-impact" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact </a>and <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-initial-thoughts-on-valuation" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Initial Thoughts on Valuation</a>.</p><p>In this note, we will talk about the PHIP updates.</p>

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.As of Mar 21, it had 183m online music MAUs, 24m online music services monthly paying users, 438,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.We covered various aspects of the deal in our previous notes, Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up , Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact and Cloud Village (NetEase Music) Pre-IPO - Initial Thoughts on Valuation.In this note, we will talk about the PHIP updates.

Cloud Village (NetEase Music) Pre-IPO - Mixed PHIP Update, Updated Thoughts on Valuation

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

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><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> shares have lost 18% to HK$478.80 by the end of today’s close since the beginning of July 2021 and has lost 35.0% since its peak in February this year. Tencent’s shares continue to slide over regulatory scrutiny over Chinese internet stocks. The Chinese regulators have widened their crackdown on the country’s internet sector with the latest crackdown aimed at the county’s education sector.</p><p>Tencent has been making into headlines over the past few days with its music streaming arm <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> being ordered to give up exclusive music licensing rights alongside a fine, its investments in online education and tutoring platforms such as Yuanfudao being targeted by Beijing regulators and the company suspending new user registrations on WeChat.</p><p>As we have discussed in our previous insights, there is no sign that the Chinese regulators are slowing down with its antitrust crackdown on the country’s tech platforms and though the ongoing regulatory crackdown has already been priced into Tencent’s share price, we would strongly recommend being on the side lines as the ongoing probe could have a material impact on the company’s future earnings.</p>

Tencent (700 HK) shares have lost 18% to HK$478.80 by the end of today’s close since the beginning of July 2021 and has lost 35.0% since its peak in February this year. Tencent’s shares continue to slide over regulatory scrutiny over Chinese internet stocks. The Chinese regulators have widened their crackdown on the country’s internet sector with the latest crackdown aimed at the county’s education sector.Tencent has been making into headlines over the past few days with its music streaming arm Tencent Music (TME US) being ordered to give up exclusive music licensing rights alongside a fine, its investments in online education and tutoring platforms such as Yuanfudao being targeted by Beijing regulators and the company suspending new user registrations on WeChat.As we have discussed in our previous insights, there is no sign that the Chinese regulators are slowing down with its antitrust crackdown on the country’s tech platforms and though the ongoing regulatory crackdown has already been priced into Tencent’s share price, we would strongly recommend being on the side lines as the ongoing probe could have a material impact on the company’s future earnings.

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<p>Investors' concerns over increasingly expanding regulatory restrictions and the potential market intervention led to a rout of Chinese tech and education stocks over the last several trading sessions. The select 9 Chinese tech stocks I follow collectively lost USD320 billion in value over 20 July to 27 July.  While some of the regulatory risks were known from March 2021, ramifications of the potential value-destroying restrictions on the education companies, termination of <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)'s</a> exclusive rights, and the suspension of new user registration for <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>'s Wechat spook the market. </p><p>Tencent's market cap has declined 19% during the seven-day period, which cannot be fully explained by the potential value lost from the recently announced regulatory measures, in my view.  Back in April (see <a href="https://www.smartkarma.com/insights/tencent-700-hk-fintech-risk-is-lurking" target="_blank" data-smartkarma-citation="insights:50512" rel="noopener">Tencent (700 HK): Fintech Risk Is Lurking</a>) I pointed out that Tencent shares could be overvalued by 20% on fintech risk alone.  The shares are down nearly 30% since then. <strong>I now believe the shares could be undervalued by 10%, notwithstanding the undefined regulatory risks ahead.  </strong>Having said that, catching a falling knife is not for the faint-hearted. </p><p>These stocks rebounded on the US Wednesday trading session, possibly reflecting the sentiment "enough is enough." Bloomberg reported that the securities regulator assured select investment bankers that the education policies are not to be for other industries.     </p><p><strong>In this report, I summarize the announced regulatory events this year to date and share my thoughts on why the market may be over discounting Tencent's value</strong> by looking at the potential value impact of Tencent's fintech value (a reiteration from the April report) and the impact of the value decline of <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> and Tencent Music.          </p>

Investors' concerns over increasingly expanding regulatory restrictions and the potential market intervention led to a rout of Chinese tech and education stocks over the last several trading sessions. The select 9 Chinese tech stocks I follow collectively lost USD320 billion in value over 20 July to 27 July.  While some of the regulatory risks were known from March 2021, ramifications of the potential value-destroying restrictions on the education companies, termination of Tencent Music (TME US)'s exclusive rights, and the suspension of new user registration for Tencent (700 HK)'s Wechat spook the market. Tencent's market cap has declined 19% during the seven-day period, which cannot be fully explained by the potential value lost from the recently announced regulatory measures, in my view.  Back in April (see Tencent (700 HK): Fintech Risk Is Lurking) I pointed out that Tencent shares could be overvalued by 20% on fintech risk alone.  The shares are down nearly 30% since then. I now believe the shares could be undervalued by 10%, notwithstanding the undefined regulatory risks ahead.  Having said that, catching a falling knife is not for the faint-hearted. These stocks rebounded on the US Wednesday trading session, possibly reflecting the sentiment "enough is enough." Bloomberg reported that the securities regulator assured select investment bankers that the education policies are not to be for other industries.     In this report, I summarize the announced regulatory events this year to date and share my thoughts on why the market may be over discounting Tencent's value by looking at the potential value impact of Tencent's fintech value (a reiteration from the April report) and the impact of the value decline of DiDi Chuxing (DIDI US) and Tencent Music.          

Tencent (700 HK): When to Catch a Falling Knife

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

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<p>Recently the Chinese regulator National Press and Publication Administration (NPPA) announced the July batch of approvals for domestic games. </p>
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<p>In this insight, we will have a close look at the trend of domestic game approval for both Tencent and its key competitor, Netease. We will also have a review of domestic games approved in 2021 YTD. </p>
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<p>We are of the view that <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">Netease Inc (Adr) (NTES US)</a> has done better than <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> in terms of games approved. </p>
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Recently the Chinese regulator National Press and Publication Administration (NPPA) announced the July batch of approvals for domestic games. 


In this insight, we will have a close look at the trend of domestic game approval for both Tencent and its key competitor, Netease. We will also have a review of domestic games approved in 2021 YTD. 


We are of the view that Netease Inc (Adr) (NTES US) has done better than Tencent Holdings (700 HK) in terms of games approved. 



Tencent/NetEase: July Game Approval Analysis

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p>Nearly a year after Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>  <a href="http://ir.sogou.com/2020-07-27-Sogou-Announces-Receipt-of-a-Preliminary-Non-Binding-Proposal-to-Acquire-the-Company" target="_blank" rel="noopener">announced</a> a preliminary non-binding proposal from <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, and around 9.5 months since <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entering</a> into a definitive agreement for a Going-Private Transaction, the Offer has been granted unconditional approval by the State Administration for Market Regulation (SAMR). </p>
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<p>This Merger is in the form of a short-form merger as per section 233(7) of the <a href="https://www.cima.ky/upimages/commonfiles/CompaniesLaw2020Revision_1579811065.pdf" target="_blank" rel="noopener">Companies Law of the Cayman Islands</a> - there is no vote. With SAMR sign-off in the bag, this deal should become effective very shortly, and accordingly, is trading tight to terms.</p>
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<p>Separately, <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> will pocket ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$933mn. <em>And that is after yesterday's 28% jump in price.</em></p>
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<p>More below the fold.</p>
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Nearly a year after Chinese search-engine Sogou Inc (SOGO US)  announced a preliminary non-binding proposal from Tencent (700 HK), and around 9.5 months since entering into a definitive agreement for a Going-Private Transaction, the Offer has been granted unconditional approval by the State Administration for Market Regulation (SAMR). 


This Merger is in the form of a short-form merger as per section 233(7) of the Companies Law of the Cayman Islands - there is no vote. With SAMR sign-off in the bag, this deal should become effective very shortly, and accordingly, is trading tight to terms.


Separately, Sohu.com Inc (SOHU US) will pocket ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$933mn. And that is after yesterday's 28% jump in price.



More below the fold.



Tencent/Sogou: And That's (Finally) A Wrap

United States

HUYA Inc. operates as a game live streaming platform. The Company offers interactive video broadcast services including e-sports, music, reality show, entertainment genres, talent shows, and anime and outdoor activities. HUYA serves customers in China.

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HUYA (HUYA US)

Cloud Village (NetEase Music) Pre-IPO - Mixed PHIP Update, Updated Thoughts on Valuation

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments...

Sumeet Singh

Tencent: All Bets Are Off

Tencent’s shares went down quickly where it dropped 13.0% over the last few days and were oversold as investors reacted harshly to the ongoing...

Shifara Samsudeen, FCMA, CGMA

Tencent (700 HK): When to Catch a Falling Knife

Chinese tech stocks are reeling from the latest regulatory announcements. Tencent fell 19% in 7 days. Is the time ripe to catch a falling knife?...

Mitchell Kim

Tencent/NetEase: July Game Approval Analysis

We analysed the games approved by regulator in July and note that Tencent is tracking behind NetEase in terms of pace of obtaining approved.

Ke Yan, CFA, FRM

Tencent/Sogou: And That's (Finally) A Wrap

The gross spread to terms is only 1%, but this is a done deal. I think this can become effective in a matter of weeks. Sohu's NAV discount is at...

David Blennerhassett

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