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

<div><p>Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.</p></div><div><p>As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. </p></div><div><p>CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.</p></div><div><p>We covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-was-in-the-slow-stream-playing-catch-up" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up </a>and <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-tencent-music-peer-comp-regulatory-impact" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact</a>.</p></div><div><p>In this note, we will comment on valuations.</p></div>

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.We covered various aspects of the deal in our previous notes, Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up and Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact.In this note, we will comment on valuations.

Cloud Village (NetEase Music) Pre-IPO - Initial Thoughts on Valuation

<p>Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.</p><p>As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. </p><p>CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.</p><p>We covered various aspects of the deal in our previous note, <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-pre-ipo-was-in-the-slow-stream-playing-catch-up" target="_blank" rel="noopener">Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up</a>.</p><p>In this note, we compare CVI with its main peer Tencent Music Entertainment (TME) and comment on the recent regulatory announcement with respect to TME.</p>

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.We covered various aspects of the deal in our previous note, Cloud Village (NetEase Music) Pre-IPO - Was in the slow stream, playing catch-up.In this note, we compare CVI with its main peer Tencent Music Entertainment (TME) and comment on the recent regulatory announcement with respect to TME.

Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact

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.

Event-Driven

<p>Reuters and other news media outlets reported today 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$30,912) for failing to appropriately report the acquisitions of Kugou and Kuwo in 2016.</p><p>It was speculated earlier that <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>  would be asked to sell Kuwo and Kugou for not promptly reporting the two acquisitions.</p>

Reuters and other news media outlets reported today 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$30,912) for failing to appropriately report the acquisitions of Kugou and Kuwo in 2016.It was speculated earlier that Tencent Music (TME US)  would be asked to sell Kuwo and Kugou for not promptly reporting the two acquisitions.

TME: May Have to Giveup Exclusive Rights to Music Labels but Unlikely to Be Ordered to Sell Key Apps

<div>
<p>In our previous notes <a href="https://www.smartkarma.com/insights/china-adrs-kanzhun-full-truck-and-didi-regulators-sending-a-message" target="_blank" rel="noopener">China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message </a>and <a href="https://www.smartkarma.com/insights/china-adrs-now-the-message-is-loud-and-getting-clearer" target="_blank" rel="noopener">China ADRs - Now the Message Is Loud and Getting Clearer, </a>we spoke about the recent crackdown on the three US listed firms along with the general crackdown on overseas listings for Chinese companies. </p>
<p>The Cyberspace Administration of China (CAC) came out with draft cyber security review measures. </p>
</div><div><p>We have looked at the ADRs in the past, in our previous notes:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang,</a> published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. </li>
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a> published in May 2020, we looked at the recent developments and provided an revised short-list</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a>, published in May 2020, we spoke about the implication of the act which had made its way through the senate.</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-pipeline-looks-rich-have-three-years-to-move" target="_blank" rel="noopener">China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move</a>, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-sec-notice-instead-of-three-probably-have-four-years-till-2025-correction-overdone" target="_blank" rel="noopener">China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone, </a> we spoke about the new SEC notice and its implications. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-a-new-act-aims-to-put-an-end-to-china-adr-ipos" target="_blank" rel="noopener">China ADRs - A New Act Aims to Put an End to China ADR IPOs</a>, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies.</li>
</ul></div>


In our previous notes China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message and China ADRs - Now the Message Is Loud and Getting Clearer, we spoke about the recent crackdown on the three US listed firms along with the general crackdown on overseas listings for Chinese companies. 
The Cyberspace Administration of China (CAC) came out with draft cyber security review measures. 
We have looked at the ADRs in the past, in our previous notes:

China ADRs Secondary Listing Deep-Dive: Yin and Yang, published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. 

In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List published in May 2020, we looked at the recent developments and provided an revised short-list
In China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home, published in May 2020, we spoke about the implication of the act which had made its way through the senate.
In China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. 
In China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone,  we spoke about the new SEC notice and its implications. 
In China ADRs - A New Act Aims to Put an End to China ADR IPOs, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies.


China ADRs - Draft Cyber Security Review Measures - ADRs Listing Likely Shut, HK Might Face Delay

<p><a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a>  is a leading music streaming platform in China and the company is backed-by <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">NetEase Inc (NTES US)</a> , one of the largest games and entertainment company in China. The company has filed for an IPO to list its shares on the Hong Kong Stock Exchange (HKEx) and according to news media outlets, the company plans to raise proceeds of about US$1bn.</p><p>Cloud Village generates revenues from online music services and social entertainment services (live streaming) and the competes with <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>  in China and the two companies operate similar business models and are backed by two large internet companies in China.</p><p><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> has a large paid user base compared to Cloud Village and generates operating profits whereas Cloud Village has not yet been able to make gross margins though gross losses are declining. However, TME is currently probed by the State Administration of Market Regulation (SAMR) in China over its past deals. TME is formed by the acquisition of Kugou and Kuwo apps and the regulators have informed TME should expect to give up exclusive music rights and may even be forced to sell its previously acquired businesses of Kugou and Kuwo in 2016. Kugou and Kuwo account for about 64% of the total MAUs of TME’s online music streaming business and having to let go of these two businesses will wipe out a significant portion of TME’s users and revenues.</p><p>In this insight, we examine Cloud Village’s business model, its segments and financials. We plan to compare the company’s financials and KPIs against TME in a follow-up insight.</p>

Cloud Village (CLV HK)  is a leading music streaming platform in China and the company is backed-by NetEase Inc (NTES US) , one of the largest games and entertainment company in China. The company has filed for an IPO to list its shares on the Hong Kong Stock Exchange (HKEx) and according to news media outlets, the company plans to raise proceeds of about US$1bn.Cloud Village generates revenues from online music services and social entertainment services (live streaming) and the competes with Tencent Music (TME US)  in China and the two companies operate similar business models and are backed by two large internet companies in China.Tencent Music (TME US) has a large paid user base compared to Cloud Village and generates operating profits whereas Cloud Village has not yet been able to make gross margins though gross losses are declining. However, TME is currently probed by the State Administration of Market Regulation (SAMR) in China over its past deals. TME is formed by the acquisition of Kugou and Kuwo apps and the regulators have informed TME should expect to give up exclusive music rights and may even be forced to sell its previously acquired businesses of Kugou and Kuwo in 2016. Kugou and Kuwo account for about 64% of the total MAUs of TME’s online music streaming business and having to let go of these two businesses will wipe out a significant portion of TME’s users and revenues.In this insight, we examine Cloud Village’s business model, its segments and financials. We plan to compare the company’s financials and KPIs against TME in a follow-up insight.

Cloud Village IPO: Improving Financials and Less Fear of Regulatory Crackdowns for Investors

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 - Initial Thoughts on Valuation

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments...

Sumeet Singh

Cloud Village (NetEase Music) Pre-IPO - Tencent Music Peer Comp, Regulatory Impact

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments...

Sumeet Singh

TME: May Have to Giveup Exclusive Rights to Music Labels but Unlikely to Be Ordered to Sell Key Apps

Though TME could get away with a fine for improper disclosure of its acquisitions of Kugou and Kuwo, having to give up exclusive music label rights...

Shifara Samsudeen, FCMA, CGMA

China ADRs - Draft Cyber Security Review Measures - ADRs Listing Likely Shut, HK Might Face Delay

In our previous notes we spoke about the recent crackdown on the three US listed firms. The Cyberspace Administration of China (CAC) recently came...

Sumeet Singh

Cloud Village IPO: Improving Financials and Less Fear of Regulatory Crackdowns for Investors

Cloud Village competes with TME who is currently probed by the SAMR over its past deals involving the acquisition of Kugou and Kuwo who account for...

Shifara Samsudeen, FCMA, CGMA

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