Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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Our valuation analysis suggests an implied market cap of US$11.5 billion, representing implied price of $28.67 per share. This would represent an upside of 51% from the high end of the IPO price of $19. Given the strong upside, we would take this IPO deal. We based our valuation based on 9.6x EV/S multiple, which is 150% higher than the average EV/S multiple of its peers in 2022. We have a positive view of the Kanzhun IPO. 
Given the much stronger sales growth of the company combined with impressive improvement in operating losses as a percentage of sales, we believe the company should be valued at much higher valuation multiple than its peers and we believe 9.6x EV/S multiple is appropriate. 
Despite being a late comer, Kanzhun has become the largest online recruitment platform in China, as measured by average MAU in 2020. This is a testament of the company's ability to meet the missing needs of the job seekers and companies that are trying to find new employees. Kanzhun's core product is Boss Zhipin, which is China's leading online recruitment platform app. Boss Zhipin allows employers to interact and connect with job seekers directly through chat rather than simply sending and receiving resumes.
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Our valuation analysis suggests an implied market cap of US$11.5 billion, representing implied price of $28.67 per share. This would represent an upside of 51% from the high end of the IPO price of $19. Given the strong upside, we would take this IPO deal. We based our valuation based on 9.6x EV/S multiple, which is 150% higher than the average EV/S multiple of its peers in 2022. We have a positive view of the Kanzhun IPO. 
Given the much stronger sales growth of the company combined with impressive improvement in operating losses as a percentage of sales, we believe the company should be valued at much higher valuation multiple than its peers and we believe 9.6x EV/S multiple is appropriate. 
Despite being a late comer, Kanzhun has become the largest online recruitment platform in China, as measured by average MAU in 2020. This is a testament of the company's ability to meet the missing needs of the job seekers and companies that are trying to find new employees. Kanzhun's core product is Boss Zhipin, which is China's leading online recruitment platform app. Boss Zhipin allows employers to interact and connect with job seekers directly through chat rather than simply sending and receiving resumes.


Full Truck Alliance   / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> is getting ready to complete its IPO on the NYSE in the coming weeks. The company plans to raise up to $1.5 billion in this IPO. The company is seeking valuation ranging from <a href="https://www.reuters.com/world/china/chinas-full-truck-alliance-files-15-bln-us-ipo-2021-05-28/" target="_blank" rel="noopener">$20 billion </a>to $30 billion. Full Truck Alliance is also known as Manbang Group in China.In 4Q 2020, <a href="https://techcrunch.com/2021/05/31/the-station-rivian-rolls-towards-an-ipo-and-quantumscape-makes-a-big-battery-hire/?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAADdx8mjy6_A1n9ynGk-dK54HhWG3dMFCBLiwA2nATHGBHOIHwnuUVqNAlFX0VyzIlh1C78BZEDtZg3WcdBi00wyLXYSOc54-Kcv4cuC9MdGcR4eUzOgLJ5sGb1zEdhjpanU-HVQEyRR9rJIH4vKDUuYoGm1Glp0CscoW6wo9HF51" target="_blank" rel="noopener">Full Truck Alliance</a> raised $3.6 billion in a private funding, at an $11.7 billion valuation. Key investors of Full Truck Alliance include SoftBank Vision Fund (22.2% pre-IPO stake), Sequoia Capital China (7.2%), Permira, Tencent, Hillhouse Capital, GGV Capital, Lightspeed China Partners and Baillie Gifford. The company's sales increased by 4.4% YoY to reach 2,580.8 million RMB in 2020 and its sales surged by 97.7% YoY to reach 867.2 million RMB in 1Q 2021. Loss from operations as a percentage of revenues worsened from -41.3% in 2019 to -140.1% in 2020. However, the company enjoyed a surging growth in sales with a major improvement in profit margins in 1Q 2021. Loss from operations as a percentage of revenues improved from -28% in 1Q 2020 to -23.3% in 1Q 2021. This was driven by improving G&amp;A and R&amp;D expenses as a percentage of revenues in 1Q 2021.

Full Truck Alliance (YMM US) is getting ready to complete its IPO on the NYSE in the coming weeks. The company plans to raise up to $1.5 billion in this IPO. The company is seeking valuation ranging from $20 billion to $30 billion. Full Truck Alliance is also known as Manbang Group in China.In 4Q 2020, Full Truck Alliance raised $3.6 billion in a private funding, at an $11.7 billion valuation. Key investors of Full Truck Alliance include SoftBank Vision Fund (22.2% pre-IPO stake), Sequoia Capital China (7.2%), Permira, Tencent, Hillhouse Capital, GGV Capital, Lightspeed China Partners and Baillie Gifford. The company's sales increased by 4.4% YoY to reach 2,580.8 million RMB in 2020 and its sales surged by 97.7% YoY to reach 867.2 million RMB in 1Q 2021. Loss from operations as a percentage of revenues worsened from -41.3% in 2019 to -140.1% in 2020. However, the company enjoyed a surging growth in sales with a major improvement in profit margins in 1Q 2021. Loss from operations as a percentage of revenues improved from -28% in 1Q 2020 to -23.3% in 1Q 2021. This was driven by improving G&amp;A and R&amp;D expenses as a percentage of revenues in 1Q 2021. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Smoore International Holdings / Index Rebalance

Hang Seng Indexes should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.With the major capping changes scheduled to be completed at the June rebalance tomorrow, there could be up to 8 inclusions at the September review while still keeping the one-way index turnover lower than 5%. The actual number of inclusions could be lower to spread the turnover over the next few reviews.We see <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a>, <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> as higher probability inclusions in the index, while there is a lower probability of <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a> and <a href="https://www.smartkarma.com/entities/xinyi-glass-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11940:1" rel="noopener">Xinyi Glass Holdings (868 HK)</a> being included in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.<a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> could be added to increase the coverage of Group 5 where Utilities are a part. This is less of a priority though with the market cap coverage of the group in excess of 60% as compared to the other groups that are much lower.There may not be any deletions at the current time. If the Index Committee decides to delete stocks, the two names most at risk are <a href="https://www.smartkarma.com/entities/china-life-insurance-co-ltd-9f877d22-7cf7-4b00-b525-cec71139f369" target="_blank" data-smartkarma-citation="entities:5794:1" rel="noopener">China Life Insurance Co H (2628 HK)</a> and <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a>.These changes will increase the market cap coverage of the index from 60.1% to 64.3% and the turnover coverage from 53.75% to 57.75%. One-way index turnover is estimated at 4.79% and would result in a one-way trade of HK$9.2bn.

Hang Seng Indexes should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).With the major capping changes scheduled to be completed at the June rebalance tomorrow, there could be up to 8 inclusions at the September review while still keeping the one-way index turnover lower than 5%. The actual number of inclusions could be lower to spread the turnover over the next few reviews.We see JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK), Smoore International (6969 HK), Fosun International (656 HK) and Evergrande Property Services (6666 HK) as higher probability inclusions in the index, while there is a lower probability of JD.com Inc. (9618 HK), Nongfu Spring (9633 HK) and Xinyi Glass Holdings (868 HK) being included in the Hong Kong Hang Seng Index (HSI INDEX).China Gas Holdings (384 HK) could be added to increase the coverage of Group 5 where Utilities are a part. This is less of a priority though with the market cap coverage of the group in excess of 60% as compared to the other groups that are much lower.There may not be any deletions at the current time. If the Index Committee decides to delete stocks, the two names most at risk are China Life Insurance Co H (2628 HK) and Hengan Intl Group (1044 HK).These changes will increase the market cap coverage of the index from 60.1% to 64.3% and the turnover coverage from 53.75% to 57.75%. One-way index turnover is estimated at 4.79% and would result in a one-way trade of HK$9.2bn.

HSI Index Rebalance Preview: Potential Inclusions in September

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

Headline Developments It’s a big edition this week, so settle in! Elon Musk’s Boring Company (private) broke ground this week, shooting Tesla (TSLA) passengers through a high-speed tunnel under Las Vegas.  The loop comprises 2.7km of tunnels, built 30 feet under the Las Vegas Convention Center.

Headline Developments It’s a big edition this week, so settle in! Elon Musk’s Boring Company (private) broke ground this week, shooting Tesla (TSLA) passengers through a high-speed tunnel under Las Vegas.  The loop comprises 2.7km of tunnels, built 30 feet under the Las Vegas Convention Center.

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.

<a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a>, known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is seeking to raise $1.5 billion through an NYSE listing, according to press reports. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. FTA joins peer <a href="https://www.smartkarma.com/entities/foru-worldwide-inc" target="_blank" data-smartkarma-citation="entities:33314:1" rel="noopener">ForU Worldwide (FOYO US)</a> which also recently filed for a $500 million Nasdaq IPO. Confusingly, ForU notes that it is the largest technology-driven road freight transportation platform in China as measured by revenue in 2020, according to CIC. However, comparing FTA and ForU based on reported revenue is an apples-to-oranges comparison due to differing revenue recognition policies. In <a href="https://www.smartkarma.com/insights/foru-worldwide-ipo-initiation-not-foru" target="_blank" data-smartkarma-citation="insights:51888" rel="noopener">ForU Worldwide IPO Initiation: Not ForU</a>, we opined that ForU faces several challenges and the financials on a normalised basis appears to be middling at best.    <div class="content-highlight">At first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. In an environment where sentiment on high-growth stocks and in particular Chinese US tech listings is weak, IPO hopefuls should not provide ready ammunition to the bears. Consequently, we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   </div>

Full Truck Alliance (YMM US), known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is seeking to raise $1.5 billion through an NYSE listing, according to press reports. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and Tencent (700 HK). FTA joins peer ForU Worldwide (FOYO US) which also recently filed for a $500 million Nasdaq IPO. Confusingly, ForU notes that it is the largest technology-driven road freight transportation platform in China as measured by revenue in 2020, according to CIC. However, comparing FTA and ForU based on reported revenue is an apples-to-oranges comparison due to differing revenue recognition policies. In ForU Worldwide IPO Initiation: Not ForU, we opined that ForU faces several challenges and the financials on a normalised basis appears to be middling at best.    At first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. In an environment where sentiment on high-growth stocks and in particular Chinese US tech listings is weak, IPO hopefuls should not provide ready ammunition to the bears. Consequently, we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   

Full Truck Alliance IPO Initiation: A Less than Perfect Delivery

China

JD Logistics, Inc. offers logistics services. The Company provides cargo transportation, cargo distribution, warehousing, and other services. JD Logistics is located in China.

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JD Logistics (2618 HK)

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Arun George

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