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

<div><p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> (Lufax) aims to raise around US$3bn via its US listing. The company is backed by <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> (Ping An).</p></div><div><p>Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.</p></div><div>
<p>I covered the positive aspects of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-positives-able-to-grow-despite-the-headwinds" target="_blank" rel="noopener">Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds</a> and the negative aspects in<a href="https://www.smartkarma.com/insights/lufax-pre-ipo-the-negatives-remains-in-flux" target="_blank" rel="noopener"> Lufax Pre-IPO - The Negatives - Remains in Flux.</a></p>
<p>In this insight, I'll undertake a peer comparison.</p>
</div>

Lufax Holdings (LU US) (Lufax) aims to raise around US$3bn via its US listing. The company is backed by Ping An Insurance (H) (2318 HK) (Ping An).Lufax is a technology-empowered personal financial services platform in China. The company aims to address the demand for personal lending among small business owners, as well as salaried workers in China. It also provides wealth management solutions to China’s middle class and affluent population.
I covered the positive aspects of the deal in my earlier note, Lufax Pre-IPO - The Positives - Able to Grow Despite the Headwinds and the negative aspects in Lufax Pre-IPO - The Negatives - Remains in Flux.
In this insight, I'll undertake a peer comparison.


Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>We revisit our Ant Group SOTP valuation from August in this report, updating the changes in the market valuations of comparable entities, in each of Ant’s key divisions</li>
<li>We also change our valuation comparables for Ant’s CreditTech division to other Chinese CreditTechs, from the commercial banks previously used in the August report</li>
<li>The breakdown of divisional valuations, relative to our August valuation, has resulted in a shift away from Payments and InvestmentTech, and is now more in favour of CreditTech, where we see “Big Data” enhancing its value</li>
<li>Our SOTP post-money equity valuations, under three scenarios, range from a conservative USD215bn to an ambitious USD300bn, with a base case valuation of USD260bn</li>
<li>The SOTP valuations “sanity check” versus our earnings forecasts are reassuring, with attractive valuations for the base case versus global payments companies and China MegaTechs</li>
<li>Risks to our constructive view on the Ant Group valuation scenarios include increased US-China geo-political tensions leading to increased government action against Chinese payments apps and these tensions adversely impacting the appetite of US based funds at IPO, especially public sector pension funds</li>
</ul>


We revisit our Ant Group SOTP valuation from August in this report, updating the changes in the market valuations of comparable entities, in each of Ant’s key divisions
We also change our valuation comparables for Ant’s CreditTech division to other Chinese CreditTechs, from the commercial banks previously used in the August report
The breakdown of divisional valuations, relative to our August valuation, has resulted in a shift away from Payments and InvestmentTech, and is now more in favour of CreditTech, where we see “Big Data” enhancing its value
Our SOTP post-money equity valuations, under three scenarios, range from a conservative USD215bn to an ambitious USD300bn, with a base case valuation of USD260bn
The SOTP valuations “sanity check” versus our earnings forecasts are reassuring, with attractive valuations for the base case versus global payments companies and China MegaTechs
Risks to our constructive view on the Ant Group valuation scenarios include increased US-China geo-political tensions leading to increased government action against Chinese payments apps and these tensions adversely impacting the appetite of US based funds at IPO, especially public sector pension funds


Ant Group: SOTP Valuation Scenarios Revisited

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.

<p><a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> , the personal financial services platform in China has filed for an IPO in the US. In our previous insights, we examined the company’s business model, its business segments and margins.</p><p>Retail credit facilitation is the company’s largest business which accounted for about 82% of the total operating income in 1H2020. The company discontinued its peer-to-peer lending products in August 2019, and a majority of the company’s loans are funded through third-party funding and credit enhancement partners. Lufax’s microloan and consumer finance subsidiaries’ funding accounted for only 0.7% of the volume of new loans generated during 1H2020.</p><p>In this insight, we have compared the company’s retail credit facilitation business against its CrediTech peers.</p><p><strong>Read our previous insights on Lufax's IPO:</strong></p><p><a href="https://www.smartkarma.com/insights/lufax-ipo-unsecured-loans-drive-top-line-growth-but-risks-remain-despite-capital-light-model" target="_blank" data-smartkarma-citation="insights:44132" rel="noopener">Lufax IPO: Unsecured Loans Drive Top Line Growth but Risks Remain Despite Capital-Light Model</a> </p><p><a href="https://www.smartkarma.com/insights/lufax-ipo-shift-in-product-mix-and-higher-customer-acquisition-cost-eat-into-profits" target="_blank" data-smartkarma-citation="insights:44179" rel="noopener">Lufax IPO: Shift in Product Mix and Higher Customer Acquisition Cost Eat into Profits</a> </p>

Lufax Holdings (LU US) , the personal financial services platform in China has filed for an IPO in the US. In our previous insights, we examined the company’s business model, its business segments and margins.Retail credit facilitation is the company’s largest business which accounted for about 82% of the total operating income in 1H2020. The company discontinued its peer-to-peer lending products in August 2019, and a majority of the company’s loans are funded through third-party funding and credit enhancement partners. Lufax’s microloan and consumer finance subsidiaries’ funding accounted for only 0.7% of the volume of new loans generated during 1H2020.In this insight, we have compared the company’s retail credit facilitation business against its CrediTech peers.Read our previous insights on Lufax's IPO:Lufax IPO: Unsecured Loans Drive Top Line Growth but Risks Remain Despite Capital-Light Model Lufax IPO: Shift in Product Mix and Higher Customer Acquisition Cost Eat into Profits 

Lufax IPO: Peer Comparison Reveals Change in Strategy Weighs Heavy on Company Performance

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/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. In retail credit, Lufax is the second-largest non-traditional financial service providers in China as measured by outstanding balances of retail credit facilitated, according to Oliver Wyman. Lufax has filed for an NYSE IPO to raise an estimated $3 billion, according to press reports. </p><div class="content-highlight"><p>The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1H20. The sector has proved to be more often than not value destructive for public market investors and continues to remain hostage to regulatory change. While Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile.  </p></div>

Lufax Holdings (LU US) is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. In retail credit, Lufax is the second-largest non-traditional financial service providers in China as measured by outstanding balances of retail credit facilitated, according to Oliver Wyman. Lufax has filed for an NYSE IPO to raise an estimated $3 billion, according to press reports. The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1H20. The sector has proved to be more often than not value destructive for public market investors and continues to remain hostage to regulatory change. While Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile.  

Supun Walpola

<p>In our previous notes, we suggested that Ant’s medium-term revenue and margins are likely to be driven by its CreditTech business (refer our notes <a href="https://www.smartkarma.com/insights/ant-group-early-thoughts-on-the-ipo-alipay-is-not-the-cash-cow-here" target="_blank" data-smartkarma-citation="insights:41591" rel="noopener">Ant Group: Early Thoughts on the IPO – Alipay Is NOT the Cash Cow Here</a> and <a href="https://www.smartkarma.com/insights/ant-group-ipo-credittech-to-drive-medium-term-growth-and-margins" target="_blank" data-smartkarma-citation="insights:43010" rel="noopener">Ant Group IPO: CreditTech to Drive Medium-Term Growth and Margins</a>).</p><p>However, Ant had left out several key pieces of information about its CreditTech business from the IPO prospectus, including its revenue and cost structures, margins, and even the number of customers. In this insight, we compare Ant’s CreditTech business with its listed peers, <a href="https://www.smartkarma.com/entities/lexinfintech-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26036:1" rel="noopener">Lexinfintech Holdings (LX US)</a> and <a href="https://www.smartkarma.com/entities/360-finance-inc" target="_blank" data-smartkarma-citation="entities:27756:1" rel="noopener">360 Finance, Inc. (QFIN US)</a>, in an attempt to get an insight into some of these missing pieces of information.    </p>

In our previous notes, we suggested that Ant’s medium-term revenue and margins are likely to be driven by its CreditTech business (refer our notes Ant Group: Early Thoughts on the IPO – Alipay Is NOT the Cash Cow Here and Ant Group IPO: CreditTech to Drive Medium-Term Growth and Margins).However, Ant had left out several key pieces of information about its CreditTech business from the IPO prospectus, including its revenue and cost structures, margins, and even the number of customers. In this insight, we compare Ant’s CreditTech business with its listed peers, Lexinfintech Holdings (LX US) and 360 Finance, Inc. (QFIN US), in an attempt to get an insight into some of these missing pieces of information.    

China

LexinFintech Holdings Ltd. operates as a holding company. The Company, through its subsidiaries, provides online consumer finance services. LexinFintech Holdings offers installments, money loans, wealth management, and other financial services. LexinFintech Holdings serves customers in China.

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Lexinfintech Holdings (LX US)

Lufax Pre-IPO - Peer Review - Bigger than Ant’s CreditTech, in Revenue

Lufax Holdings (LU US) aims to raise around US$3bn via its US listing. The company is backed by Ping An Insurance (2318 HK).

Sumeet Singh

Ant Group: SOTP Valuation Scenarios Revisited

Our updated SOTP valuation for Ant Group is an essential divisional yardstick by which to assess valuation pre-IPO, with our proprietary estimates...

Victor Galliano

Lufax IPO: Peer Comparison Reveals Change in Strategy Weighs Heavy on Company Performance

In this insight, we compare and contrast Lufax's retail credit business against its peers Ant, 360 Finance and LexinFintech to examine the...

Shifara Samsudeen, FCMA, CGMA

Lufax IPO Initiation: Lost in Transition

We find it hard to be enthused by the Lufax story as its heavily reliant on a sector that has repeatedly been subject to regulatory blows which led...

Arun George

Ant Group IPO: Ant Vs CreditTech Peers

In our previous notes, we suggested that Ant’s medium-term revenue and margins are likely to be driven by its CreditTech business (refer our notes...

Supun Walpola

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