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

<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a> plans to raise up to USD 30bn (now said to be US$35bn) via a dual listing on both Hong Kong Exchange and Shanghai STAR board. </p>
<p>Ant Group is not only the largest third-party payment player in China, it is also the no.1 independent player in each of the three non-payment segments by key operating metrics. </p>
<p>We have provided our thoughts on Ant Group from as early as 2018. We have since looked at the company’s past performance, individual segments and some of the regulatory issues. In this note, I’ll compare the company with some of its peers in the payments segment. </p>
<p></p>
<div>
<div>
<h3>Our previous coverage on Ant Group</h3>
</div>
</div>
<div>
<ul>
<li dir="ltr">
<p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-what-s-new-about-the-listing-news" target="_blank" rel="noopener">Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors</a></p>
</li>
<li dir="ltr">
<p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-understand-the-fintech-empire-growth-and-risk-factors" target="_blank" rel="noopener">Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News</a></p>
</li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-first-take-no-1-fintech-from-all-angles" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-numbers-suggest-it-s-more-tech-than-financials" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-things-to-clarify-questions-to-ask-falling-fees-margins-cash-flow" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/​Questions to Ask - Falling Fees, Margins, Cash Flow</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-dual-listing-makes-early-index-inclusion-tricky" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Dual Listing Makes Early Index Inclusion Tricky</a></li>
<li><a href="https://www.smartkarma.com/insights/alipay-s-advantage-over-wechat-pay-in-physical-stores" target="_blank" rel="noopener">AliPay’s Advantage over WeChat Pay in Physical Stores</a></li>
</ul>
</div>
<ul>
<li><a href="https://www.smartkarma.com/insights/ant-group-running-neck-and-neck-with-tencent-in-direct-financial-services" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-impact-assessment-of-the-new-rule-for-financial-holding-companies" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies</a></li>
</ul>

Ant Financial (1051260D CH) plans to raise up to USD 30bn (now said to be US$35bn) via a dual listing on both Hong Kong Exchange and Shanghai STAR board. 
Ant Group is not only the largest third-party payment player in China, it is also the no.1 independent player in each of the three non-payment segments by key operating metrics. 
We have provided our thoughts on Ant Group from as early as 2018. We have since looked at the company’s past performance, individual segments and some of the regulatory issues. In this note, I’ll compare the company with some of its peers in the payments segment. 



Our previous coverage on Ant Group





Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors


Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News

Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles
Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials
Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/​Questions to Ask - Falling Fees, Margins, Cash Flow
Ant Group (蚂蚁集团) Pre-IPO: Dual Listing Makes Early Index Inclusion Tricky
AliPay’s Advantage over WeChat Pay in Physical Stores



Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services
Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies


Ant Group Pre-IPO: Peer Comparison - Payments - Baffling Scale, Small Tweaks for Large Profits

<div>
<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a> plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. </p>
<p>We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. </p>
<p>In our previous notes, links to which are below, we have covered the company's background and its performance.</p>
<p>In this note, we will focus on some of the finer points of the financial statements. </p>
<p><strong><em>I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.</em></strong></p>
</div><div><div><h3>Our previous coverage on Ant Group</h3></div></div><div><ul style="list-style-type: disc;">
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-what-s-new-about-the-listing-news" target="_blank" rel="noopener">Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors</a></p></li>
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-understand-the-fintech-empire-growth-and-risk-factors" target="_blank" rel="noopener">Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News</a></p></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-first-take-no-1-fintech-from-all-angles" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-numbers-suggest-it-s-more-tech-than-financials" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials</a></li>
</ul></div>


Ant Financial (1051260D CH) plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. 
We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. 
In our previous notes, links to which are below, we have covered the company's background and its performance.
In this note, we will focus on some of the finer points of the financial statements. 
I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.
Our previous coverage on Ant Group
Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors
Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News
Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles
Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials


Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

<p><strong><em>* Solid Result:</em></strong> Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics: sales improved AUD 5.9 bn (112%) YOY to AUD 11.1 bn in FY 2020; gross losses to sales declined 20 bp (24%) to 0.9%; EBITDA improved AUD 18.7 mn (73%) to AUD 44.4 mn; active customers increased 5.3 mn (116%) to 9.9 mn; and active merchants increased 23.1 thousand (72%) 55.4 thousand;  </p><p><strong><em>*Asian Launch Underway: </em></strong>The earnings announcement was also chock full of recent positive developments as well, which include its Asia expansion. Afterpay is set to acquire a Singapore’s, Empatkali, which is a small buy now pay later provider in Indonesia and will be used as Afterpay’s Asia launching pad with Tencent (700.HK) providing further regional expansion guidance; and</p><p><em><strong>*Magic Fairy Dust:</strong></em> While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. </p>

* Solid Result: Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics: sales improved AUD 5.9 bn (112%) YOY to AUD 11.1 bn in FY 2020; gross losses to sales declined 20 bp (24%) to 0.9%; EBITDA improved AUD 18.7 mn (73%) to AUD 44.4 mn; active customers increased 5.3 mn (116%) to 9.9 mn; and active merchants increased 23.1 thousand (72%) 55.4 thousand;  *Asian Launch Underway: The earnings announcement was also chock full of recent positive developments as well, which include its Asia expansion. Afterpay is set to acquire a Singapore’s, Empatkali, which is a small buy now pay later provider in Indonesia and will be used as Afterpay’s Asia launching pad with Tencent (700.HK) providing further regional expansion guidance; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. 

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>Ant Group, the leading Chinese FinTech, has announced that it is preparing for its IPO which could come as soon as October</li>
<li>Press reports suggest a company valuation in the range of USD200-300bn, with management aiming to raise approximately USD30bn</li>
<li>In this report, we look at comparable listed FinTechs and financials and their valuations to construct a Sum Of The Parts (SOTP) valuation for Ant Group</li>
<li>We explore conservative, ambitious and base case valuation scenarios to arrive at a range of SOTP valuations; we see wealth management (InvestmentTech) as the biggest contributor to Ant Group’s over-all value</li>
<li>We then “sanity check” these SOTP scenarios against our initial Ant group financial forecasts, which we believe reflect the growth opportunity</li>
<li>Our SOTP metrics indicate that an IPO valuation of USD200-260bn should be very attractive to investors, in our view, given the relatively low PEG ratio; and an IPO valuation in the range USD260-300bn – although less compelling – would still be attractive, in our view</li>
<li>Risks to our positive view on Ant Group include a worsening of political tensions between the US and China which could act adversely impact US institutional investor appetite at the IPO, especially public employee pension funds; a key fundamental risk would be a slower-than-expected growth in digital payments, wealth asset gathering and consumer and SMB loan growth</li>
</ul>


Ant Group, the leading Chinese FinTech, has announced that it is preparing for its IPO which could come as soon as October
Press reports suggest a company valuation in the range of USD200-300bn, with management aiming to raise approximately USD30bn
In this report, we look at comparable listed FinTechs and financials and their valuations to construct a Sum Of The Parts (SOTP) valuation for Ant Group
We explore conservative, ambitious and base case valuation scenarios to arrive at a range of SOTP valuations; we see wealth management (InvestmentTech) as the biggest contributor to Ant Group’s over-all value
We then “sanity check” these SOTP scenarios against our initial Ant group financial forecasts, which we believe reflect the growth opportunity
Our SOTP metrics indicate that an IPO valuation of USD200-260bn should be very attractive to investors, in our view, given the relatively low PEG ratio; and an IPO valuation in the range USD260-300bn – although less compelling – would still be attractive, in our view
Risks to our positive view on Ant Group include a worsening of political tensions between the US and China which could act adversely impact US institutional investor appetite at the IPO, especially public employee pension funds; a key fundamental risk would be a slower-than-expected growth in digital payments, wealth asset gathering and consumer and SMB loan growth


Ant Group: SOTP Scenarios on Potential IPO Valuation

<ul>
<li>2Q20 results from <a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a> were a mixed bag and reflect the challenges as much as the opportunities of Covid-19</li>
<li>The big positive of the quarter, which is reflected in the positive EBIT, is the marked reduction in marketing expenses, and earnings ahead of consensus; yet in a note of caution management states that marketing spend is starting to rise again in 3Q, which could well erode EBIT</li>
<li>MELI has seen strong revenue YoY growth in Argentina and Mexico; but in the Brazil YoY growth rate slowed markedly, especially in the case of Brazil fintech where it is more reliant on foot traffic for revenue generation; regionwide, the payment “take rate” on TPV was markedly down</li>
<li>We believe that domestic Brazilian e-commerce players, as well as global tech, represent real competitive challenges to MELI in its largest market</li>
<li>MELI shares had been on a tear, like other tech stocks, but still we believe that the shares have run ahead of themselves, and yesterday’s correction reflects that its current valuation is vulnerable</li>
<li>In more general terms, we think this is the start of an investor rotation away from higher growth, higher valuation shares in favour of value shares; still, in the FinTech space we continue to recommend <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a> and we believe that <a href="https://www.smartkarma.com/entities/nexi-spa" target="_blank" data-smartkarma-citation="entities:28921:1" rel="noopener">Nexi SpA (NEXI IM)</a>  in Italy is one to watch</li>
<li>Risks to our view include an acceleration to the shift to digital in fintech and e-commerce especially in Brazil</li>
</ul>


2Q20 results from MercadoLibre Inc (MELI US) were a mixed bag and reflect the challenges as much as the opportunities of Covid-19
The big positive of the quarter, which is reflected in the positive EBIT, is the marked reduction in marketing expenses, and earnings ahead of consensus; yet in a note of caution management states that marketing spend is starting to rise again in 3Q, which could well erode EBIT
MELI has seen strong revenue YoY growth in Argentina and Mexico; but in the Brazil YoY growth rate slowed markedly, especially in the case of Brazil fintech where it is more reliant on foot traffic for revenue generation; regionwide, the payment “take rate” on TPV was markedly down
We believe that domestic Brazilian e-commerce players, as well as global tech, represent real competitive challenges to MELI in its largest market
MELI shares had been on a tear, like other tech stocks, but still we believe that the shares have run ahead of themselves, and yesterday’s correction reflects that its current valuation is vulnerable
In more general terms, we think this is the start of an investor rotation away from higher growth, higher valuation shares in favour of value shares; still, in the FinTech space we continue to recommend Paypal Holdings (PYPL US) and we believe that Nexi SpA (NEXI IM)  in Italy is one to watch
Risks to our view include an acceleration to the shift to digital in fintech and e-commerce especially in Brazil


MercadoLibre (MELI US): Chinks in the Digital Armour

United States

PayPal Holdings, Inc. operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants. The Company offers online payment solutions. PayPal Holdings serves customers worldwide.

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Paypal Holdings (PYPL US)

Ant Group Pre-IPO: Peer Comparison - Payments - Baffling Scale, Small Tweaks for Large Profits

Our previous coverage on Ant Group Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors Ant Financial...

Sumeet Singh

Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

Ant Group filed its prospectus and kick-started its IPO to raise up to USD 30 billion to list on both Hong Kong Exchange and Shanghai STAR...

Sumeet Singh

Tencent - We’re Down With APT

* Solid Result: Despite the net transaction loss increase of AUD 20.6 mn (93%), we note particular improvement in Afterpay’s fundamental metrics:...

Thomas J. Monaco

Ant Group: SOTP Scenarios on Potential IPO Valuation

Ant Group, the leading Chinese FinTech, has announced that it is preparing for its IPO which could come as soon as October Press reports suggest a...

Victor Galliano

MercadoLibre (MELI US): Chinks in the Digital Armour

2Q20 results from MercadoLibre Inc (MELI US) were a mixed bag and reflect the challenges as much as the opportunities of Covid-19 The big positive...

Victor Galliano

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