Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Cloopen Group Holding Ltd / Equity Capital Markets

Our base case valuation of Cloopen Group Holdings is EV of $3.0 billion and implied market cap of $3.3 billion. This represents implied price per share of $22.2 per share, representing 48% higher than the high end of the IPO price range of $15 per share. Given the solid upside, we have a positive view of the Cloopen Group Holdings IPO. For the comparable companies analysis of Cloopen Group Holdings, we used five companies including <a href="https://www.smartkarma.com/entities/kingsoft-cloud" target="_blank" data-smartkarma-citation="entities:28835:1" rel="noopener">Kingsoft Cloud (KC US)</a>, <a href="https://www.smartkarma.com/entities/agora-inc" target="_blank" data-smartkarma-citation="entities:29037:1" rel="noopener">Agora Inc. (API US)</a>, <a href="https://www.smartkarma.com/entities/21-vianet-group-inc-adr" target="_blank" data-smartkarma-citation="entities:8489:1" rel="noopener">21Vianet Group (VNET US)</a>, <a href="https://www.smartkarma.com/entities/gds-holdings-adr" target="_blank" data-smartkarma-citation="entities:23649:1" rel="noopener">GDS Holdings (ADR) (GDS US)</a>, and <a href="https://www.smartkarma.com/entities/oneconnect-financial-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:28432:1" rel="noopener">OneConnect Financial Technology (OCFT US)</a>.

Our base case valuation of Cloopen Group Holdings is EV of $3.0 billion and implied market cap of $3.3 billion. This represents implied price per share of $22.2 per share, representing 48% higher than the high end of the IPO price range of $15 per share. Given the solid upside, we have a positive view of the Cloopen Group Holdings IPO. For the comparable companies analysis of Cloopen Group Holdings, we used five companies including Kingsoft Cloud (KC US), Agora Inc. (API US), 21Vianet Group (VNET US), GDS Holdings (ADR) (GDS US), and OneConnect Financial Technology (OCFT US). 

Cloopen Group Holdings IPO Valuation Analysis

<a href="https://www.smartkarma.com/entities/cloopen-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:31315:1" rel="noopener">Cloopen Group Holding Ltd (RAAS US)</a> ("Cloopen") which provides cloud based communication services in China, plans to complete its IPO in the US in the coming days. Founded in 2012 and headquartered in Beijing, Cloopen Group operates the largest multi-capability cloud-based communications solution services in China in terms of 2019 revenue.<a href="https://www.renaissancecapital.com/IPO-Center/News/76061/Chinese-cloud-communication-provider-Cloopen-Group-Holding-sets-terms-for-%24" target="_blank" rel="noopener">Cloopen Group Holding</a> plans to raise $280 million (mid-point of IPO price range) by offering 20 million ADSs at a price range of $13 to $15. At the high point of IPO price range, the company could raise as much as $300 million. At the midpoint of the proposed range, Cloopen Group Holding would command a market value of $2.1 billion, which would represent a P/S multiple of 22x using 2019 sales. Cloopen Group Holdings will likely be compared to companies such as <a href="https://www.smartkarma.com/entities/kingsoft-cloud" target="_blank" data-smartkarma-citation="entities:28835:1" rel="noopener">Kingsoft Cloud (KC US)</a> which have experienced very strong share price appreciation in the past year.

Cloopen Group Holding Ltd (RAAS US) ("Cloopen") which provides cloud based communication services in China, plans to complete its IPO in the US in the coming days. Founded in 2012 and headquartered in Beijing, Cloopen Group operates the largest multi-capability cloud-based communications solution services in China in terms of 2019 revenue.Cloopen Group Holding plans to raise $280 million (mid-point of IPO price range) by offering 20 million ADSs at a price range of $13 to $15. At the high point of IPO price range, the company could raise as much as $300 million. At the midpoint of the proposed range, Cloopen Group Holding would command a market value of $2.1 billion, which would represent a P/S multiple of 22x using 2019 sales. Cloopen Group Holdings will likely be compared to companies such as Kingsoft Cloud (KC US) which have experienced very strong share price appreciation in the past year. 

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

We are no longer recommending an overweight to China (MSCI China) due to recent RS deterioration. Our favorite countries remain Taiwan (TAIEX) and India (SENSEX), while Brazil (Bovespa) and South Korea (KOSPI) display improving price and RS trends -- add exposure. MSCI EM Technology and Materials are our top two Sector overweights. Additionally, the EM Health Care Sector shows bullish price and RS inflections, making it a timely Sector to add exposure to at current levels.

We are no longer recommending an overweight to China (MSCI China) due to recent RS deterioration. Our favorite countries remain Taiwan (TAIEX) and India (SENSEX), while Brazil (Bovespa) and South Korea (KOSPI) display improving price and RS trends -- add exposure. MSCI EM Technology and Materials are our top two Sector overweights. Additionally, the EM Health Care Sector shows bullish price and RS inflections, making it a timely Sector to add exposure to at current levels.

Overweight EM Vs. EAFE; Dollar Weakness Continues

Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. <div class="content-highlight">
Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. 
In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame, 2022 to 2023 could be a "sweet spot" for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. 
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Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. 
Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. 
In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame, 2022 to 2023 could be a "sweet spot" for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. 


Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

APAC IPOs & Placements

Zhen Zhou, Toh

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.

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<a href="https://www.smartkarma.com/entities/kingsoft-cloud" target="_blank" data-smartkarma-citation="entities:28835:1" rel="noopener">Kingsoft Cloud (KC US)</a> is looking to raise about US$286m from 8m new ADS and shareholders of  <a href="https://www.smartkarma.com/entities/kingsoft-cloud" target="_blank" data-smartkarma-citation="entities:28835:1" rel="noopener">Kingsoft Cloud (KC US)</a> is looking to sell about 9.7m ADS which are worth about US$346m.
In this note, we will mainly discuss deal dynamics, past China ADR/ADS offerings, and run the deal through our ECM framework.
Our previous coverage on Kingsoft Cloud:
</div>
<div>
<ul>
<li><a href="https://www.smartkarma.com/insights/kingsoft-cloud-pre-ipo-the-leading-cloud-provider-in-china" target="_blank" rel="noopener">Kingsoft Cloud (金山云) Pre-IPO: The leading cloud provider in China</a></li>
<li><a href="https://www.smartkarma.com/insights/kingsoft-cloud-pre-ipo-video-streaming-exposure-and-aggressive-industry-forecast" target="_blank" rel="noopener">Kingsoft Cloud (金山云) Pre-IPO: Video Streaming Exposure and Aggressive Industry Forecast</a></li>
<li><a href="https://www.smartkarma.com/insights/kingsoft-cloud-pre-ipo-thoughts-on-peers-and-valuation" target="_blank" rel="noopener">Kingsoft Cloud (金山云) Pre-IPO: Thoughts on Peers and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/kingsoft-cloud-ipo-bargain-price-for-china-cloud-service-leader" target="_blank" rel="noopener">Kingsoft Cloud (金山云) IPO: Bargain Price for China Cloud Service Leader</a></li>
<li>
<a href="https://www.smartkarma.com/insights/kingsoft-cloud-ipo-trading-impact-of-gsx-short-report-buy-level" target="_blank" data-smartkarma-citation="insights:39151" rel="noopener">Kingsoft Cloud (金山云) IPO Trading: Impact of GSX Short Report &amp; Buy Level</a> </li>
</ul>
</div>


Kingsoft Cloud (KC US) is looking to raise about US$286m from 8m new ADS and shareholders of  Kingsoft Cloud (KC US) is looking to sell about 9.7m ADS which are worth about US$346m.
In this note, we will mainly discuss deal dynamics, past China ADR/ADS offerings, and run the deal through our ECM framework.
Our previous coverage on Kingsoft Cloud:



Kingsoft Cloud (金山云) Pre-IPO: The leading cloud provider in China
Kingsoft Cloud (金山云) Pre-IPO: Video Streaming Exposure and Aggressive Industry Forecast
Kingsoft Cloud (金山云) Pre-IPO: Thoughts on Peers and Valuation
Kingsoft Cloud (金山云) IPO: Bargain Price for China Cloud Service Leader

Kingsoft Cloud (金山云) IPO Trading: Impact of GSX Short Report &amp; Buy Level 



Kingsoft Cloud (金山云) Placement - Selling Slightly Ahead Lock-Up

China

Kingsoft Cloud manufactures software. The Company mainly produces office software, king dictionary, game software, anti-virus software, and other application software.

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Kingsoft Cloud (KC US)

Cloopen Group Holdings IPO Valuation Analysis

Our base case valuation of Cloopen Group Holdings is an implied price per share of $22.2 per share, representing 48% higher than the high end of...

Douglas Kim

Cloopen Group Holdings IPO Preview

Cloopen Group Holding plans to raise $280 million (mid-point of IPO price range) by offering 20 million ADSs at a price range of $13 to $15.

Douglas Kim

Overweight EM Vs. EAFE; Dollar Weakness Continues

Our favorite countries remain Taiwan (TAIEX) and India (SENSEX), while Brazil (Bovespa) and South Korea (KOSPI) display improving price and RS...

Vermilion Research

Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.

Douglas Kim

Kingsoft Cloud (金山云) Placement - Selling Slightly Ahead Lock-Up

Our previous coverage on Kingsoft Cloud: Kingsoft Cloud (金山云) Pre-IPO: The leading cloud provider in China Kingsoft Cloud (金山云) Pre-IPO: Video...

Zhen Zhou, Toh

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