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.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/credible-labs-inc" target="_blank" data-smartkarma-citation="entities:26658:1" rel="noopener">Credible Labs (CRD AU)</a> is an online loan marketplace. On Monday, Credible Labs entered into a merger agreement with a subsidiary of Fox Corporation. Fox’s proposal of A$2.21 cash per CDI (A$55.25 per common stock). </p><div class="content-highlight"><p>The Board has unanimously recommended the bid, but there are differing views among shareholders. The bid requires approval from the majority of shareholders (excluding Stephen Dash and his affiliates). Overall, we believe that Fox’s bid is unattractive as it does not fully account for Credible Labs’ growth prospects. </p></div>

Credible Labs (CRD AU) is an online loan marketplace. On Monday, Credible Labs entered into a merger agreement with a subsidiary of Fox Corporation. Fox’s proposal of A$2.21 cash per CDI (A$55.25 per common stock). The Board has unanimously recommended the bid, but there are differing views among shareholders. The bid requires approval from the majority of shareholders (excluding Stephen Dash and his affiliates). Overall, we believe that Fox’s bid is unattractive as it does not fully account for Credible Labs’ growth prospects. 

Credible Labs: Seeking a More Credible Fox Bid?

Equity Capital Markets

Jianpu Technology  / Equity Capital Markets

<p>The upcoming IPO of Jianpu Technology reminds me of a subplot from the Despicable Me 3 movie where Agnes, a six-year-old girl, innocently mistakes a one-horned goat for a unicorn. Jianpu Technology is a financial comparison site in China which operates under the "Rong360" brand. The closest international peers are <a href="https://www.smartkarma.com/entities/2802" target="_blank" data-smartkarma-citation="entities:2802:1">Lendingtree Inc (TREE US)</a> and <a href="https://www.smartkarma.com/entities/22049" target="_blank" data-smartkarma-citation="entities:22049:1">Moneysupermarket.com Group PLC (MONY LN)</a>. Jianpu will list on the NYSE on 15 November. At the mid-point of the IPO price range, $8.50-10.50 per ADS share, Jianpu will raise net proceeds of $194 million, resulting in a market cap of $1.6 billion. The proceeds will be used for R&amp;D ($60 million), S&amp;M ($40 million), working capital and M&amp;A. We are cautious on the IPO due to:</p><ol><li>Jianpu claims to work with over 2,500 financial service providers. Our research suggests that Jianpu has high customer concentration with its top four customers accounting for around 42% of revenues.</li><li>Jianpu’s operating losses continue to decline steadily. In theory, the declining operating losses should also be accompanied by a lower cash burn. Surprisingly, the cash burn has worsened with cash outflow from operations materially exceeding adjusted EBITDA in 2016 and the first half of 2017.</li><li>Additional areas of concern are unusual related party transactions, a material weakness in financial controls, regulatory risks, a recent spike in off-balance sheet commitments and overstating funding rounds.</li><li>At the IPO mid-price, Jianpu trades at a material premium (11-36%) to the blended median of its peer group across EV/EBITDA and P/E relative valuation metrics. We believe a premium is unwarranted due to the concerns detailed in the note.</li></ol>

The upcoming IPO of Jianpu Technology reminds me of a subplot from the Despicable Me 3 movie where Agnes, a six-year-old girl, innocently mistakes a one-horned goat for a unicorn. Jianpu Technology is a financial comparison site in China which operates under the "Rong360" brand. The closest international peers are Lendingtree Inc (TREE US) and Moneysupermarket.com Group PLC (MONY LN). Jianpu will list on the NYSE on 15 November. At the mid-point of the IPO price range, $8.50-10.50 per ADS share, Jianpu will raise net proceeds of $194 million, resulting in a market cap of $1.6 billion. The proceeds will be used for R&amp;D ($60 million), S&amp;M ($40 million), working capital and M&amp;A. We are cautious on the IPO due to:Jianpu claims to work with over 2,500 financial service providers. Our research suggests that Jianpu has high customer concentration with its top four customers accounting for around 42% of revenues.Jianpu’s operating losses continue to decline steadily. In theory, the declining operating losses should also be accompanied by a lower cash burn. Surprisingly, the cash burn has worsened with cash outflow from operations materially exceeding adjusted EBITDA in 2016 and the first half of 2017.Additional areas of concern are unusual related party transactions, a material weakness in financial controls, regulatory risks, a recent spike in off-balance sheet commitments and overstating funding rounds.At the IPO mid-price, Jianpu trades at a material premium (11-36%) to the blended median of its peer group across EV/EBITDA and P/E relative valuation metrics. We believe a premium is unwarranted due to the concerns detailed in the note.

Jianpu Tech IPO Preview: Hoped for a Unicorn, Got a One-Horned Goat

United Kingdom

Moneysupermarket.com Group Plc operates finance and travel price comparison websites.

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Moneysupermarket.Com (MONY LN)

Credible Labs: Seeking a More Credible Fox Bid?

Credible Labs (CRD AU) is an online loan marketplace. On Monday, Credible Labs entered into a merger agreement with a subsidiary of Fox...

Arun George

Jianpu Tech IPO Preview: Hoped for a Unicorn, Got a One-Horned Goat

The upcoming IPO of Jianpu Technology reminds me of a subplot from the Despicable Me 3 movie where Agnes, a six-year-old girl, innocently mistakes...

Arun George

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