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

ANE, an express freight network operator in China for less-than-truckload (LTL) market, aims to raise around US$500m in its Hong Kong IPO. The company is backed by a host of financial investors including Centurium, Carlyle, CDH, CPE, NWS, Ping An, Goldman Sachs and Yili.As per iResearch, ANE’s network was the largest in China in terms of total freight volume over 2017-20 with a market share of 17.2% in 2020.By Dec 2020, it had collaborated with approximately 26,400 freight partners and agents to serve 3.6m shippers across approximately 96% of the counties and townships in China. Both the freight partners and freight agents operate under its brand and are required to adhere to its service guidelines and policies.ANE’s overall volume and top line growth has been decent. However, not all of its offerings have been growing, while some of its revenue growth was driven by accounting changes. Moreover, despite claiming to be the largest player in its segment, it appears to be losing market share and like the rest of the industry, it appears to have little pricing power.

ANE, an express freight network operator in China for less-than-truckload (LTL) market, aims to raise around US$500m in its Hong Kong IPO. The company is backed by a host of financial investors including Centurium, Carlyle, CDH, CPE, NWS, Ping An, Goldman Sachs and Yili.As per iResearch, ANE’s network was the largest in China in terms of total freight volume over 2017-20 with a market share of 17.2% in 2020.By Dec 2020, it had collaborated with approximately 26,400 freight partners and agents to serve 3.6m shippers across approximately 96% of the counties and townships in China. Both the freight partners and freight agents operate under its brand and are required to adhere to its service guidelines and policies.ANE’s overall volume and top line growth has been decent. However, not all of its offerings have been growing, while some of its revenue growth was driven by accounting changes. Moreover, despite claiming to be the largest player in its segment, it appears to be losing market share and like the rest of the industry, it appears to have little pricing power.

ANE Logistics Pre-IPO - Margins Expanding but Appears to Be Falling Behind

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.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>, <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a>, <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:BYD (1211 HK), Alibaba Group (9988 HK), DiDi Global (DIDI US), Pinduoduo (PDD US), TSMC (2330 TT), JD.com Inc. (9618 HK)

Global Emerging Markets Weekly: 27 August 2021

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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

As US investors are forced to exit Chinese tech stocks amidst regulatory uncertainties, this presents an opportunity for long-term investors to buy high growth tech names at bargain prices.The community group-buying platform <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> was one of the stocks on the receiving end of the Chinese government’s regulatory scrutiny, and its shares are currently trading at around 52% below the February 2021 peak level. As the overhang subsides and selling pressure (mainly from US investors) fades, Pinduoduo seems well placed to outperform its peers as the company stands to benefit from the change of direction in the government policy over the next few years.

As US investors are forced to exit Chinese tech stocks amidst regulatory uncertainties, this presents an opportunity for long-term investors to buy high growth tech names at bargain prices.The community group-buying platform Pinduoduo (PDD US) was one of the stocks on the receiving end of the Chinese government’s regulatory scrutiny, and its shares are currently trading at around 52% below the February 2021 peak level. As the overhang subsides and selling pressure (mainly from US investors) fades, Pinduoduo seems well placed to outperform its peers as the company stands to benefit from the change of direction in the government policy over the next few years.

Not Yet an Absolute Bargain, but PDD Is Our First Choice to Bottom Fish Chinese Tech

<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>’s investment track record has been nothing short of remarkable, as is evidenced by the increase in the reported fair value of listed Investees, which has grown by 99%y/y to nearly RMB1.45trn as of 30 June 2021, contributing as much as 31% to Tencent’s market cap. These investments have also driven material income statement gains that account for the bulk of Tencent’s positive operating profit earnings surprises over the past 2 years. However, based on share price weakness experienced post the most recent reporting period, I estimate that the current fair market value of listed associates could have declined by 26%, or RMB378bn, which is also likely to have a materially adverse impact on reported income statement numbers for 3Q21. Given that Tencent is already facing very tough comps from its online gaming revenue segment, a negative impact to “Other gains, net” could provide for significant earnings miss in 3Q21 reported numbers. If we add to that the ongoing uncertainty around the Chinese regulatory environment and economic slowdown, we could see more short-term volatility in Tencent’s share price. The main caveat to this is that, with a resurgence of the Delta-variant and COVID-19 pandemic, we could see a near-term pickup in online gaming revenue as lockdowns intensify in China, which should be positive for Tencent’s near-term earnings outlook. Tencent currently trades on a 22.1x NTM PE ratio, which is roughly 2 standard deviations below its 5-year historical average trading range. Should we exclude Tencent’s Investees at fair value, I estimate that Tencent’s consolidated operations currently trade on only a 12.1x NTM PE ratio which remains an extremely attractive longer-term entry point to the consolidated operations that are expected to grow Net Operating Profit After Tax (NOPAT) at mid-teens levels from next year onwards, even if we factor in further near-term earnings downgrades, economic headwinds to the advertising segment, or an increase in tax rates for the online games segment.

Tencent (700 HK)’s investment track record has been nothing short of remarkable, as is evidenced by the increase in the reported fair value of listed Investees, which has grown by 99%y/y to nearly RMB1.45trn as of 30 June 2021, contributing as much as 31% to Tencent’s market cap. These investments have also driven material income statement gains that account for the bulk of Tencent’s positive operating profit earnings surprises over the past 2 years. However, based on share price weakness experienced post the most recent reporting period, I estimate that the current fair market value of listed associates could have declined by 26%, or RMB378bn, which is also likely to have a materially adverse impact on reported income statement numbers for 3Q21. Given that Tencent is already facing very tough comps from its online gaming revenue segment, a negative impact to “Other gains, net” could provide for significant earnings miss in 3Q21 reported numbers. If we add to that the ongoing uncertainty around the Chinese regulatory environment and economic slowdown, we could see more short-term volatility in Tencent’s share price. The main caveat to this is that, with a resurgence of the Delta-variant and COVID-19 pandemic, we could see a near-term pickup in online gaming revenue as lockdowns intensify in China, which should be positive for Tencent’s near-term earnings outlook. Tencent currently trades on a 22.1x NTM PE ratio, which is roughly 2 standard deviations below its 5-year historical average trading range. Should we exclude Tencent’s Investees at fair value, I estimate that Tencent’s consolidated operations currently trade on only a 12.1x NTM PE ratio which remains an extremely attractive longer-term entry point to the consolidated operations that are expected to grow Net Operating Profit After Tax (NOPAT) at mid-teens levels from next year onwards, even if we factor in further near-term earnings downgrades, economic headwinds to the advertising segment, or an increase in tax rates for the online games segment.

Tencent: Investees, the Potential for ST Earnings Miss, and an Attractive LT Entry Point

Forensic Analyst

Jason Yap, CFA

Forensic Accounting

PDD posted its first quarterly profit since listing and committed to re-invest net profits towards a newly launched RMB10 billion Agriculture Initiative.
Revenue and active buyers recorded strong growth but otherwise confirmed signs of decelerating growth compared with prior quarters.  Further, PDD's management confirmed that its profitability going forward is likely to be affected both by investments in the Agriculture Initiative and intensifying competition in an evolving China e-commerce landscape.
Notwithstanding the above, US investors read PDD's significant profit milestone positively, with PDD's share price up 22.3% by US trade closing (24 Aug 2021).  
We previously discussed deteriorating sequential quarter on quarter financial and operating metrics and operating cashflows, PDD's pivot to asset heavy strategy, and decelerating GMV and revenue growth.  To its credit, PDD's strong Q2 2021 results has debunked some of these concerns although PDD's latest disclosures and management representations indicate that the strong performance may not repeat in H2 2021. 
We provide updates on the Q2 2021 results and discuss the relevant issues in this article.

PDD posted its first quarterly profit since listing and committed to re-invest net profits towards a newly launched RMB10 billion Agriculture Initiative.
Revenue and active buyers recorded strong growth but otherwise confirmed signs of decelerating growth compared with prior quarters.  Further, PDD's management confirmed that its profitability going forward is likely to be affected both by investments in the Agriculture Initiative and intensifying competition in an evolving China e-commerce landscape.
Notwithstanding the above, US investors read PDD's significant profit milestone positively, with PDD's share price up 22.3% by US trade closing (24 Aug 2021).  
We previously discussed deteriorating sequential quarter on quarter financial and operating metrics and operating cashflows, PDD's pivot to asset heavy strategy, and decelerating GMV and revenue growth.  To its credit, PDD's strong Q2 2021 results has debunked some of these concerns although PDD's latest disclosures and management representations indicate that the strong performance may not repeat in H2 2021. 
We provide updates on the Q2 2021 results and discuss the relevant issues in this article.

PDD - Strong (And First Ever) Profit in Q2 2021 but Likely Transient

China

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

PDD Holdings (PDD US)

ANE Logistics Pre-IPO - Margins Expanding but Appears to Be Falling Behind

ANE, an express freight network operator in China for less-than-truckload (LTL) market, aims to raise around US$500m in its Hong Kong IPO.

Sumeet Singh

Global Emerging Markets Weekly: 27 August 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Not Yet an Absolute Bargain, but PDD Is Our First Choice to Bottom Fish Chinese Tech

What started as a targeted attack on Alibaba, with the government intervening to halt the Ant Group IPO late last year, quickly turned into a full...

Oshadhi Kumarasiri

Tencent: Investees, the Potential for ST Earnings Miss, and an Attractive LT Entry Point

In this insight, we take a detailed look at Tencent’s listed Investees, their impact on valuation, and the potential for a near-term negative...

Wium Malan, CFA

PDD - Strong (And First Ever) Profit in Q2 2021 but Likely Transient

PDD posted its first quarterly profit since listing and committed to re-invest net profits towards a new RMB10bn Agriculture Initiative. We discuss...

Jason Yap, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)