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.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/missfresh-limited" target="_blank" data-smartkarma-citation="entities:33468:1" rel="noopener">Missfresh (MF US)</a> is an online grocery platform in China. Missfresh notes that it ranked first in China’s on-demand DMW (distributed mini-warehouse) retail industry in 2018 and 2019, respectively, and ranked second in 2020 as measured by GMV (gross merchandise value), according to iResearch. Missfresh is backed by Shunwei China Internet Fund IV (12.4% of outstanding shares, 3.8% of voting power) and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (8.1% of outstanding shares, 2.5% of voting power). </p></div><div><p>At the mid-point of the proposed IPO price range of $13.00-16.00 per ADS, Missfresh will have a market cap of $3.4 billion. At the mid-point of the IPO price range, the net proceeds are $279.2 million, below the rumoured $500 million raise target. Missfresh has received $90 million indications of interest from CIC ($40 million), Tencent ($20 million), Davis Selected Partner Advisors ($10 million), Genesis Capital ($10 million) and Vision Plus Capital ($10 million). </p></div><div><p>In <a href="https://www.smartkarma.com/insights/missfresh-ipo-initiation-no-so-fresh" target="_blank" data-smartkarma-citation="insights:53139" rel="noopener">Missfresh IPO Initiation: No so Fresh</a>, we stated that Missfresh was a beneficiary of the COVID-19 pandemic resulting in an exceptional 1Q20. However, the performance since 1Q20 has been lacklustre as Missfresh is facing the twin challenges of tough competition and a partial reversal of consumer behaviour. While the recent fundraisings to support <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> (Duo Duo Maicai) and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>’s online grocery delivery platforms underscores the opportunity, it also suggests that Missfresh will find it harder to compete and generate shareholder returns. We concluded that Missfresh is a challenged business and we would pass on the IPO.</p></div><div><div><div class="content-highlight"><p>Our valuation analysis suggests that Missfresh is broadly fairly valued on a growth adjusted EV/Sales compared to its peers. For investors looking to play the first-day IPO pops or gain exposure to a pure-play online grocery delivery platform, we think that peer, <a href="https://www.smartkarma.com/entities/dingdong-maicai" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicai (DDL US)</a> which also launched its NYSE IPO, offers a better risk-reward profile.  </p></div></div></div><div><p><strong><em>For readers interested in peer</em></strong>, Dingdong, we highlight our notes - <a href="https://www.smartkarma.com/insights/dingdong-ipo-initiation-an-arms-race-is-brewing" target="_blank" data-smartkarma-citation="insights:53334" rel="noopener">Dingdong IPO Initiation: An Arms Race Is Brewing</a> and <a href="https://www.smartkarma.com/insights/dingdong-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:53568" rel="noopener">Dingdong IPO: Valuation Insights</a>. <a href="https://www.smartkarma.com/entities/wm-tech-corporation" target="_blank" data-smartkarma-citation="entities:32976:1" rel="noopener">WM Tech Corporation (WMT HK)</a> has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in <a href="https://www.smartkarma.com/insights/wm-tech-ipo-initiation-food-for-thought" target="_blank" data-smartkarma-citation="insights:49914" rel="noopener">WM Tech IPO Initiation: Food for Thought</a>. </p></div>

Missfresh (MF US) is an online grocery platform in China. Missfresh notes that it ranked first in China’s on-demand DMW (distributed mini-warehouse) retail industry in 2018 and 2019, respectively, and ranked second in 2020 as measured by GMV (gross merchandise value), according to iResearch. Missfresh is backed by Shunwei China Internet Fund IV (12.4% of outstanding shares, 3.8% of voting power) and Tencent (700 HK) (8.1% of outstanding shares, 2.5% of voting power). At the mid-point of the proposed IPO price range of $13.00-16.00 per ADS, Missfresh will have a market cap of $3.4 billion. At the mid-point of the IPO price range, the net proceeds are $279.2 million, below the rumoured $500 million raise target. Missfresh has received $90 million indications of interest from CIC ($40 million), Tencent ($20 million), Davis Selected Partner Advisors ($10 million), Genesis Capital ($10 million) and Vision Plus Capital ($10 million). In Missfresh IPO Initiation: No so Fresh, we stated that Missfresh was a beneficiary of the COVID-19 pandemic resulting in an exceptional 1Q20. However, the performance since 1Q20 has been lacklustre as Missfresh is facing the twin challenges of tough competition and a partial reversal of consumer behaviour. While the recent fundraisings to support Pinduoduo (PDD US) (Duo Duo Maicai) and Meituan (3690 HK)’s online grocery delivery platforms underscores the opportunity, it also suggests that Missfresh will find it harder to compete and generate shareholder returns. We concluded that Missfresh is a challenged business and we would pass on the IPO.Our valuation analysis suggests that Missfresh is broadly fairly valued on a growth adjusted EV/Sales compared to its peers. For investors looking to play the first-day IPO pops or gain exposure to a pure-play online grocery delivery platform, we think that peer, Dingdong Maicai (DDL US) which also launched its NYSE IPO, offers a better risk-reward profile.  For readers interested in peer, Dingdong, we highlight our notes - Dingdong IPO Initiation: An Arms Race Is Brewing and Dingdong IPO: Valuation Insights. WM Tech Corporation (WMT HK) has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in WM Tech IPO Initiation: Food for Thought. 

<div><p><a href="https://www.smartkarma.com/entities/dingdong-maicai" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicai (DDL US)</a> is an online grocery platform in China. The <em>Dingdong Fresh</em> mobile app and mini-programs enable Chinese consumer to shop online for groceries and other products. Dingdong notes that its market share in the on-demand e-commerce industry as measured by GMV (gross merchandise value) was 10.1% in 2020, according to CIC. Dingdong is backed by Shunwei China Internet Fund V (5.7% of outstanding shares), General Atlantic (5.6%), SoftBank Vision Fund (5.6%), CMC Capital (5.3%) and DST Asia (5.1%). </p></div><div><p>At the mid-point of the proposed IPO price range of $23.50-25.50 per ADS, Dingdong will have a market cap of $6.0 billion. At the mid-point of the IPO price range, the net proceeds are $314.9 million, below the rumoured $500 million raise target. Dingdong has received $200 million indications of interest from existing shareholders Aspex Master Fund ($50 million), Coatue ($50 million), SoftBank Vision Fund ($50 million) and Tiger Global ($500 million). </p></div><div><p>In <a href="https://www.smartkarma.com/insights/dingdong-ipo-initiation-an-arms-race-is-brewing" target="_blank" data-smartkarma-citation="insights:53334" rel="noopener">Dingdong IPO Initiation: An Arms Race Is Brewing</a>,  we stated that t<span>he current frenzy around the online grocery delivery market in China is reminiscent of the bike-sharing frenzy a few years.</span><span> The resulting arms race has led to specialists (such as Dingdong and <a href="https://www.smartkarma.com/entities/missfresh-limited" target="_blank" data-smartkarma-citation="entities:33468:1" rel="noopener">Missfresh (MF US)</a>), tech goliaths (<a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>) and traditional offline stores (such as <a href="https://www.smartkarma.com/entities/wm-tech-corporation" target="_blank" data-smartkarma-citation="entities:32976:1" rel="noopener">WM Tech Corporation (WMT HK)</a>) reporting heavy losses for their online grocery segments in the quest to grab market share. </span><span>The online grocery delivery market is set for a shakeout which means that like bike-sharing, it will result in significant shareholder value destruction. We concluded that we would pass on the IPO and wait on the sidelines to see how this plays out.</span></p></div><div><div class="content-highlight"><p>Our valuation analysis suggests that Dingdong trades at attractive multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. The strong indications of interest suggest ongoing support from shareholders. While the fundamentals are less than ideal, the undemanding rating implied by the IPO price range offers a reasonable risk-reward profile. We think that Dingdong is worth a punt for investors seeking to play the first-day IPO pops or gain exposure to a pure-play online grocery delivery platform. </p></div></div><div><p><strong><em>For readers interested in peer</em></strong>, Missfresh, which also launched its Nasdaq IPO, we highlight our note - <a href="https://www.smartkarma.com/insights/missfresh-ipo-initiation-no-so-fresh" target="_blank" data-smartkarma-citation="insights:53139" rel="noopener">Missfresh IPO Initiation: No so Fresh</a>. WM Tech has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in <a href="https://www.smartkarma.com/insights/wm-tech-ipo-initiation-food-for-thought" target="_blank" data-smartkarma-citation="insights:49914" rel="noopener">WM Tech IPO Initiation: Food for Thought</a>. </p></div>

Dingdong Maicai (DDL US) is an online grocery platform in China. The Dingdong Fresh mobile app and mini-programs enable Chinese consumer to shop online for groceries and other products. Dingdong notes that its market share in the on-demand e-commerce industry as measured by GMV (gross merchandise value) was 10.1% in 2020, according to CIC. Dingdong is backed by Shunwei China Internet Fund V (5.7% of outstanding shares), General Atlantic (5.6%), SoftBank Vision Fund (5.6%), CMC Capital (5.3%) and DST Asia (5.1%). At the mid-point of the proposed IPO price range of $23.50-25.50 per ADS, Dingdong will have a market cap of $6.0 billion. At the mid-point of the IPO price range, the net proceeds are $314.9 million, below the rumoured $500 million raise target. Dingdong has received $200 million indications of interest from existing shareholders Aspex Master Fund ($50 million), Coatue ($50 million), SoftBank Vision Fund ($50 million) and Tiger Global ($500 million). In Dingdong IPO Initiation: An Arms Race Is Brewing,  we stated that the current frenzy around the online grocery delivery market in China is reminiscent of the bike-sharing frenzy a few years. The resulting arms race has led to specialists (such as Dingdong and Missfresh (MF US)), tech goliaths (Pinduoduo (PDD US) and Meituan (3690 HK)) and traditional offline stores (such as WM Tech Corporation (WMT HK)) reporting heavy losses for their online grocery segments in the quest to grab market share. The online grocery delivery market is set for a shakeout which means that like bike-sharing, it will result in significant shareholder value destruction. We concluded that we would pass on the IPO and wait on the sidelines to see how this plays out.Our valuation analysis suggests that Dingdong trades at attractive multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. The strong indications of interest suggest ongoing support from shareholders. While the fundamentals are less than ideal, the undemanding rating implied by the IPO price range offers a reasonable risk-reward profile. We think that Dingdong is worth a punt for investors seeking to play the first-day IPO pops or gain exposure to a pure-play online grocery delivery platform. For readers interested in peer, Missfresh, which also launched its Nasdaq IPO, we highlight our note - Missfresh IPO Initiation: No so Fresh. WM Tech has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in WM Tech IPO Initiation: Food for Thought. 

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<p>China online physical goods retail sales growth for April and May is tracking well below the 1Q21 level.  While this is largely an optics phenomenon due to unfavorable comparisons with the COVID fueled 2Q20, the upcoming 2Q21 earnings are unlikely to provide a catalyst for ecommerce platforms, in my view. However, with a sharp share price fall in the last 3 months, Vipshop shares now stand out as a value play. </p><h3>Key takeaways from the China retail sales data for May: </h3><ul>
<li>China overall retail sales growth YoY for May drops to 12.4% from 34% in 1Q21, but it is at near par with 1Q21 on a two-year CAGR basis.     </li>
<li>Online physical goods sales growth YoY for April and May combined is 7.3% YoY, well below the 26% in 1Q21 but at a similar 15% 2 YR CAGR rate.  </li>
<li>The apparel category sales showed relatively stronger growth in April and May.</li>
<li>Overall, Chinese online shopping platform share prices are down 11% to 60% in the last 3 months.  <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener"><strong>Vipshop Holdings (VIPS US)</strong></a><strong>is now back in the value category with the stock trading at 9-10x FY21 earnings (based on consensus EPS and my own estimate)</strong>. </li>
<li>Consensus estimates for VIPS are likely to continue to fall to rationalize the share price drop.  I see potential value emerging once the revision is complete. </li>
<li>I estimate Vipshop's 2Q21 revenue growth to be 29% YoY, beating consensus estimate and the company's upper range guidance.  <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/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>, and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> will see revenue growth deceleration as well with PDD likely to see largest growth deceleration (excluding direct sales).   </li>
</ul>

China online physical goods retail sales growth for April and May is tracking well below the 1Q21 level.  While this is largely an optics phenomenon due to unfavorable comparisons with the COVID fueled 2Q20, the upcoming 2Q21 earnings are unlikely to provide a catalyst for ecommerce platforms, in my view. However, with a sharp share price fall in the last 3 months, Vipshop shares now stand out as a value play. Key takeaways from the China retail sales data for May: 
China overall retail sales growth YoY for May drops to 12.4% from 34% in 1Q21, but it is at near par with 1Q21 on a two-year CAGR basis.     
Online physical goods sales growth YoY for April and May combined is 7.3% YoY, well below the 26% in 1Q21 but at a similar 15% 2 YR CAGR rate.  
The apparel category sales showed relatively stronger growth in April and May.
Overall, Chinese online shopping platform share prices are down 11% to 60% in the last 3 months.  Vipshop Holdings (VIPS US)is now back in the value category with the stock trading at 9-10x FY21 earnings (based on consensus EPS and my own estimate). 
Consensus estimates for VIPS are likely to continue to fall to rationalize the share price drop.  I see potential value emerging once the revision is complete. 
I estimate Vipshop's 2Q21 revenue growth to be 29% YoY, beating consensus estimate and the company's upper range guidance.  Pinduoduo (PDD US), Alibaba Group (BABA US), and JD.com Inc (ADR) (JD US) will see revenue growth deceleration as well with PDD likely to see largest growth deceleration (excluding direct sales).   


China Online Retail Sales Tracker: April and May Sales Growth Slows on Unfavorable Comps

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.

<div><p><a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>, the world’s largest mobility technology platform, aims to raise up to US$10bn in its US listing. It is backed by <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, along with other investors.</p></div><div><p>It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  </p></div><div><p>We provided the deal background and financials overview in our previous notes<a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-one-of-asia-s-largest-ipos-this-year-tearsheet" target="_blank" rel="noopener"></a>:</p></div><div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-one-of-asia-s-largest-ipos-this-year-tearsheet" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet</a>.</li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-has-a-principal-agent-problem-rumoured-target-valuation-is-a-stretch" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-pre-ipo-competitive-in-car-hailing-uncompetitive-in-others-generally-valuable" target="_blank" rel="noopener">DIDI (滴滴) Pre-IPO: Competitive in Car Hailing, Uncompetitive In “Others”, Generally Valuable</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-peer-comparison" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Peer Comparison</a></li>
</ul>
<p>In this note we will talk about our earnings estimates and valuations. </p>
</div>

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise up to US$10bn in its US listing. It is backed by Softbank Group (9984 JP) and Tencent (700 HK), along with other investors.It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  We provided the deal background and financials overview in our previous notes:


DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet.
DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch
DIDI (滴滴) Pre-IPO: Competitive in Car Hailing, Uncompetitive In “Others”, Generally Valuable
DiDi Chuxing Pre-IPO - Peer Comparison

In this note we will talk about our earnings estimates and valuations. 


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.

<ul>
<li>A pioneer in China’s online discount retail, <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> is currently trading at US$ 17.52 per share, down 62% from the March 2021 peak. Vipshop’s share price momentum unraveled in March 2021 as investors started shifting from growth to value stocks. Vipshop’s decline was further aggravated by the fall of Archegos (held an outsized long position) and weaker than expected Q2 guidance.</li>
<li>At 0.44x FY+2 EV/Sales (past five-year median 0.62x) with around 13.5% revenue CAGR, we think further downside to Vipshop is limited. Moreover, at 6.9x FY+2 EV/EBIT with 19% EBIT CAGR and 8.9x FY+2 PE with 42% EPS CAGR, Vipshop seems to offer more value than most value names in the market.</li>
</ul>


A pioneer in China’s online discount retail, Vipshop Holdings (VIPS US) is currently trading at US$ 17.52 per share, down 62% from the March 2021 peak. Vipshop’s share price momentum unraveled in March 2021 as investors started shifting from growth to value stocks. Vipshop’s decline was further aggravated by the fall of Archegos (held an outsized long position) and weaker than expected Q2 guidance.
At 0.44x FY+2 EV/Sales (past five-year median 0.62x) with around 13.5% revenue CAGR, we think further downside to Vipshop is limited. Moreover, at 6.9x FY+2 EV/EBIT with 19% EBIT CAGR and 8.9x FY+2 PE with 42% EPS CAGR, Vipshop seems to offer more value than most value names in the market.


Vipshop: A Summer Bargain After Archegos Caused a Long Squeeze

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.

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PDD Holdings (PDD US)

Missfresh IPO: Valuation Insights

Our valuation analysis suggests that Missfresh is broadly fairly valued on a growth adjusted EV/Sales compared to its peers. We think that Dingdong...

Arun George

Dingdong IPO: Valuation Insights

The undemanding rating offers a reasonable risk-reward profile. Dingdong is worth a punt for investors seeking to play the first-day pops or gain...

Arun George

China Online Retail Sales Tracker: April and May Sales Growth Slows on Unfavorable Comps

Online retail sales growth for April and May is tracking well below the 1Q21 level. This is due to optics, but 2Q21 earnings are unlikely to be a...

Mitchell Kim

DiDi Chuxing Pre-IPO - Valuation

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise up to US$10bn in its US listing. It is backed by Softbank...

Sumeet Singh

Vipshop: A Summer Bargain After Archegos Caused a Long Squeeze

Vipshop’s share price momentum unraveled in March 2021 as investors started shifting from growth to value stocks. Vipshop’s decline was further...

Oshadhi Kumarasiri

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