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

<ul>
<li>Cloud Village Inc. (CVI), also known as NetEase Music, now plans to raise around US$500m in its Hong Kong IPO. </li>
<li>The company has also obtained investments from Baidu and Alibaba, along with other investors.</li>
<li>In this note, we will talk about the updates from the revised PHIP filing and relook at valuations.</li>
</ul>


Cloud Village Inc. (CVI), also known as NetEase Music, now plans to raise around US$500m in its Hong Kong IPO. 
The company has also obtained investments from Baidu and Alibaba, along with other investors.
In this note, we will talk about the updates from the revised PHIP filing and relook at valuations.


Cloud Village (NetEase Music) Pre-IPO - Revised PHIP Updates, Along with Revised 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.

Equity Bottom-Up

Several news media outlets reported in September that ByteDance (1439927D CH) has made plans to launch a music streaming app in China later this year. The online music streaming market in China is long dominated by Tencent Music who previously held exclusive music licensing agreements with global music streaming giants Warner Music Group (WMG), Universal Music (UMG) and Sony Music in China. However, TME was ordered to give-up these exclusive music licensing agreements by the country’s market regulator SAMR (state Administration of Market Regulation) and the company announced in August that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators.TME’s shares are currently trading at US$6.87 per ADR at its all-time low and the shares are down 77.4% compared to its peak of US$30.42 per ADR in mid-March.

TME: ByteDance’s Entry into Music Streaming to Further Threaten TME’s Dominance

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Following a period of exceptionally strong performance, driven by the stay-at-home culture during the onset of the COVID-19 pandemic in 2020, the Chinese online games market is again experiencing significant headwinds, not only from very tough comps but from a resurgence in regulatory pressure. Although this forms part of wider scrutiny on various facets of the Chinese tech industry (including online education, payment platforms, ridesharing, etc.) recent regulatory efforts have included a further tightening of regulation limiting youth gamers’ online access which has also now led to a delay in new games approvals. This is very similar to what we saw in 2018 when, after an exceptionally strong 2017 revenue growth period, the Chinese government stepped up regulatory scrutiny specifically targeting youth gamers which ultimately led to a suspension of new games approvals from March 2018 until December 2018. Given the material impact that recent regulatory approvals should have on revenue generation 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> and <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, in this insight, I analyse the potential for negative revenue growth surprises, and further sell-side earnings downgrades, by comparing the current situation to that faced in 2018.

Following a period of exceptionally strong performance, driven by the stay-at-home culture during the onset of the COVID-19 pandemic in 2020, the Chinese online games market is again experiencing significant headwinds, not only from very tough comps but from a resurgence in regulatory pressure. Although this forms part of wider scrutiny on various facets of the Chinese tech industry (including online education, payment platforms, ridesharing, etc.) recent regulatory efforts have included a further tightening of regulation limiting youth gamers’ online access which has also now led to a delay in new games approvals. This is very similar to what we saw in 2018 when, after an exceptionally strong 2017 revenue growth period, the Chinese government stepped up regulatory scrutiny specifically targeting youth gamers which ultimately led to a suspension of new games approvals from March 2018 until December 2018. Given the material impact that recent regulatory approvals should have on revenue generation for Tencent (700 HK) and NetEase (9999 HK), in this insight, I analyse the potential for negative revenue growth surprises, and further sell-side earnings downgrades, by comparing the current situation to that faced in 2018.

NetEase, Tencent: Risk of Negative Games Revenue Surprises Skewed to Tencent, Rather than NetEase

Event-Driven

<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> announced on Tuesday (31st August) that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators. It was reported by several news media outlets in July that that the State Administration of Market Regulation (SAMR) in China is likely to order <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> to give up exclusive rights to music labels and at the same time, impose a fine of RMB500,000 (US$77k) for failing to appropriately report the acquisitions of Kugou and Kuwo in 2016.TME previously had exclusive music licensing agreements with global music streaming giants Warner Music Group (WMG), Universal Music (UMG) and Sony Music in China. The company also previously had exclusive rights to sub-license these catalogs to local rivals in China.TME’s partnerships with these leading music labels have offered the company the content leadership position in music streaming in China. In addition to having exclusive rights to music labels, the company also has established exclusive distribution deals with leading independent artists such as Mandopop Star Jay Chou to further its growth and under the SAMR’s new mandate, TME is allowed to keep its exclusive music deals with these independent artists for a period of 3-years.

Tencent Music (TME US) announced on Tuesday (31st August) that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators. It was reported by several news media outlets in July that that the State Administration of Market Regulation (SAMR) in China is likely to order Tencent Music (TME US) to give up exclusive rights to music labels and at the same time, impose a fine of RMB500,000 (US$77k) for failing to appropriately report the acquisitions of Kugou and Kuwo in 2016.TME previously had exclusive music licensing agreements with global music streaming giants Warner Music Group (WMG), Universal Music (UMG) and Sony Music in China. The company also previously had exclusive rights to sub-license these catalogs to local rivals in China.TME’s partnerships with these leading music labels have offered the company the content leadership position in music streaming in China. In addition to having exclusive rights to music labels, the company also has established exclusive distribution deals with leading independent artists such as Mandopop Star Jay Chou to further its growth and under the SAMR’s new mandate, TME is allowed to keep its exclusive music deals with these independent artists for a period of 3-years.

TME Facing the Music; Ends Exclusive Music Licensing Deals

<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> reported its 2Q2021 results on Monday (16th August) which saw revenues growing 15.5% YoY driven by increases in revenue from both Online Music Services and Social Entertainment Services. The adjusted operating profit for the second quarter dropped 31.3% YoY to RMB760m due to a 39.2% YoY increase in general and administrative expenses during the period.In our previous insight <a href="https://www.smartkarma.com/insights/tencent-all-bets-are-off" target="_blank" data-smartkarma-citation="insights:55269" rel="noopener">Tencent: All Bets Are Off</a> , we discussed about the ongoing regulatory probe on TME and the regulatory order to give-up its exclusive music licensing agreements. Refer the extract below from our previous insight:<div class="content-highlight">TME has been ordered to relinquish its exclusive licensing agreements with world’s leading music labels including Warner Music Group (WMG), Universal Music Group (UMG) and Sony Music. TME is allowed to keep its exclusive deals with independent artists with a period of about 3-years. According to news media outlets, TME is given a period of 30 days to end these deals.</div>In its 2Q2021 earnings announcement, TME has said that the regulatory order above will have some impact on its business operations, but we have observed that the company’s user matrices and ARPPU have already come under pressure.

Tencent Music (TME US) reported its 2Q2021 results on Monday (16th August) which saw revenues growing 15.5% YoY driven by increases in revenue from both Online Music Services and Social Entertainment Services. The adjusted operating profit for the second quarter dropped 31.3% YoY to RMB760m due to a 39.2% YoY increase in general and administrative expenses during the period.In our previous insight Tencent: All Bets Are Off , we discussed about the ongoing regulatory probe on TME and the regulatory order to give-up its exclusive music licensing agreements. Refer the extract below from our previous insight:TME has been ordered to relinquish its exclusive licensing agreements with world’s leading music labels including Warner Music Group (WMG), Universal Music Group (UMG) and Sony Music. TME is allowed to keep its exclusive deals with independent artists with a period of about 3-years. According to news media outlets, TME is given a period of 30 days to end these deals.In its 2Q2021 earnings announcement, TME has said that the regulatory order above will have some impact on its business operations, but we have observed that the company’s user matrices and ARPPU have already come under pressure.

TME: Says Order on Music Rights Have Some Impact but User No’s and ARPPU Already Under Pressure

China

NetEase Cloud Music operates as one of China's leading online music platforms, offering music streaming, membership subscriptions, digital music sales, and social entertainment services including live streaming and online karaoke. It provides an interactive content community for music enthusiasts with personalized recommendations. The company is headquartered in Hangzhou, China, and was launched in 2013.

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NetEase Cloud Music (9899 HK)

Cloud Village (NetEase Music) Pre-IPO - Revised PHIP Updates, Along with Revised Valuation

Cloud Village Inc. (CVI), also known as NetEase Music, now plans to raise around US$500m in its Hong Kong IPO. In this note, we talk about the...

Sumeet Singh

TME: ByteDance’s Entry into Music Streaming to Further Threaten TME’s Dominance

ByteDance has made plans to launch a music streaming app in China later this year which is likely to further threaten TME's market dominance as it...

Shifara Samsudeen, FCMA, CGMA

NetEase, Tencent: Risk of Negative Games Revenue Surprises Skewed to Tencent, Rather than NetEase

In this insight, I analyse the potential for negative revenue growth surprises, and further earnings downgrades, for NetEase and Tencent, by...

Wium Malan, CFA

TME Facing the Music; Ends Exclusive Music Licensing Deals

TME announced that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators. These music...

Shifara Samsudeen, FCMA, CGMA

TME: Says Order on Music Rights Have Some Impact but User No’s and ARPPU Already Under Pressure

TME has said that the regulatory order to give-up music rights will have some impact on its business operations, but we have observed that the...

Shifara Samsudeen, FCMA, CGMA

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