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.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> has entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS. The offer price is a premium of 25.38% to the VWAP during the last 30 days and an 18.82% premium to the VWAP during the last 30 days preceding the original proposal (on 17 September 2020).</p><p>As a reminder, on 17 September 2020, 51job announced a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per ADS. On 4 May 2021, the proposal was updated by disclosing the formation of an initial consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The offer price remained unchanged. Today's announcement notes that <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a>, the largest shareholder which represents 34.8% of outstanding shares, has joined the consortium. </p><p>The privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period. Some shareholders may be reticent about accepting the bid given the stonking share price performance of peer, <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a>, which is trading almost 2x its IPO price. However, we note that the privatisation offer is attractive in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  </p><div class="content-highlight"><p>As 51job is incorporated in the Cayman Islands, for the privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. Rick Yan, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We think that this level of support should be enough to get past the two-thirds shareholder approval threshold. </p></div>

51 Job Inc Adr (JOBS US) has entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS. The offer price is a premium of 25.38% to the VWAP during the last 30 days and an 18.82% premium to the VWAP during the last 30 days preceding the original proposal (on 17 September 2020).As a reminder, on 17 September 2020, 51job announced a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per ADS. On 4 May 2021, the proposal was updated by disclosing the formation of an initial consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The offer price remained unchanged. Today's announcement notes that Recruit Holdings (6098 JP), the largest shareholder which represents 34.8% of outstanding shares, has joined the consortium. The privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period. Some shareholders may be reticent about accepting the bid given the stonking share price performance of peer, Kanzhun (BZ US), which is trading almost 2x its IPO price. However, we note that the privatisation offer is attractive in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  As 51job is incorporated in the Cayman Islands, for the privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. Rick Yan, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We think that this level of support should be enough to get past the two-thirds shareholder approval threshold. 

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its <em>BOSS Zhipin</em> mobile app connects job seekers and enterprise users. </p></div><div><p>Kanzhun has priced its IPO at $19.00 per ADS to raise gross proceeds of $912 million, <a href="https://www.ifre.com/story/2913154/kanzhun-prices-nasdaq-ipo-at-top-to-raise-us912m-smlgvfl3m3" target="_blank" rel="noopener">according to IFR</a>. At the final IPO price of $19 per share, Kanzhun will have a market cap of $7.6 billion. The IPO got off to a strong start due to indications of interest for $375 million worth of ADSs in the offering from existing investors (Sequoia Capital and Tiger Global) and new investors (UBS Asset Management, GIC and Mubadala Investment).</p></div><div><p>In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-initiation-search-and-employ" target="_blank" data-smartkarma-citation="insights:51969" rel="noopener">Kanzhun IPO Initiation: Search and Employ</a>, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. We concluded that the Kanzhun story warrants a closer look. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-growth-margin-trade-off-vs-peers" target="_blank" data-smartkarma-citation="insights:52333" rel="noopener">Kanzhun IPO: Growth/Margin Trade-Off Vs Peers</a>, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:52575" rel="noopener">Kanzhun IPO: Valuation Insights</a> we noted that the IPO price range is attractive. </p></div><div><div><div class="content-highlight"><p>Updating for the final IPO net raise, our base-case DCF derived price target of $21.02 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets for market share and/or terminal EBIT margin. </p></div></div></div>

Kanzhun (BZ US) is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users. Kanzhun has priced its IPO at $19.00 per ADS to raise gross proceeds of $912 million, according to IFR. At the final IPO price of $19 per share, Kanzhun will have a market cap of $7.6 billion. The IPO got off to a strong start due to indications of interest for $375 million worth of ADSs in the offering from existing investors (Sequoia Capital and Tiger Global) and new investors (UBS Asset Management, GIC and Mubadala Investment).In Kanzhun IPO Initiation: Search and Employ, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. We concluded that the Kanzhun story warrants a closer look. In Kanzhun IPO: Growth/Margin Trade-Off Vs Peers, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. In Kanzhun IPO: Valuation Insights we noted that the IPO price range is attractive. Updating for the final IPO net raise, our base-case DCF derived price target of $21.02 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets for market share and/or terminal EBIT margin. 

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.

Renesas Electronics / Equity Capital Markets

<div>
<p>Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. We covered most aspects of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/renesas-placement-very-well-flagged-past-deals-have-done-well-but-large-size-warrants-correction" target="_blank" rel="noopener">Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction.</a></p>
<p>In this note, I'll talk about the updates since then.</p>
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Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. We covered most aspects of the deal in our earlier note, Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction.
In this note, I'll talk about the updates since then.


Renesas Placement Update - Doing Much Better than Its past Deals. Could Impact Post-Deal Performance

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>Our valuation analysis suggests an implied market cap of US$11.5 billion, representing implied price of $28.67 per share. This would represent an upside of 51% from the high end of the IPO price of $19. Given the strong upside, we would take this IPO deal. We based our valuation based on 9.6x EV/S multiple, which is 150% higher than the average EV/S multiple of its peers in 2022. <strong>We have a positive view of the Kanzhun IPO. </strong></p>
<p>Given the much stronger sales growth of the company combined with impressive improvement in operating losses as a percentage of sales, we believe the company should be valued at much higher valuation multiple than its peers and we believe 9.6x EV/S multiple is appropriate. </p>
<p><strong>Despite being a late comer, Kanzhun has become the largest online recruitment platform in China, as measured by average MAU in 2020.</strong> This is a testament of the company's ability to meet the missing needs of the job seekers and companies that are trying to find new employees. Kanzhun's core product is Boss Zhipin, which is China's leading online recruitment platform app. Boss Zhipin allows employers to interact and connect with job seekers directly through chat rather than simply sending and receiving resumes.</p>
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Our valuation analysis suggests an implied market cap of US$11.5 billion, representing implied price of $28.67 per share. This would represent an upside of 51% from the high end of the IPO price of $19. Given the strong upside, we would take this IPO deal. We based our valuation based on 9.6x EV/S multiple, which is 150% higher than the average EV/S multiple of its peers in 2022. We have a positive view of the Kanzhun IPO. 
Given the much stronger sales growth of the company combined with impressive improvement in operating losses as a percentage of sales, we believe the company should be valued at much higher valuation multiple than its peers and we believe 9.6x EV/S multiple is appropriate. 
Despite being a late comer, Kanzhun has become the largest online recruitment platform in China, as measured by average MAU in 2020. This is a testament of the company's ability to meet the missing needs of the job seekers and companies that are trying to find new employees. Kanzhun's core product is Boss Zhipin, which is China's leading online recruitment platform app. Boss Zhipin allows employers to interact and connect with job seekers directly through chat rather than simply sending and receiving resumes.


<div><p><a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its <em>BOSS Zhipin</em> mobile app connects job seekers and enterprise users. </p></div><div>
<p>At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, Kanzhun will have a market cap of $7.2 billion. At the mid-point of the IPO price range, the net proceeds are $817.2 million. New and existing shareholders have indicated a total of $375 million of the IPO (43.4% of the ADSs at the mid-point of the IPO price range). The indications of interest from new investors are from UBS Asset Management ($100 million), GIC ($100 million) and Mubadala Investment ($75 million). The indications of interest from existing investors are from Sequoia Capital and Tiger Global.</p>
<p>In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-initiation-search-and-employ" target="_blank" data-smartkarma-citation="insights:51969" rel="noopener">Kanzhun IPO Initiation: Search and Employ</a>, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. We concluded that the Kanzhun story warrants a closer look. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-growth-margin-trade-off-vs-peers" target="_blank" data-smartkarma-citation="insights:52333" rel="noopener">Kanzhun IPO: Growth/Margin Trade-Off Vs Peers</a>, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. </p>
<div class="content-highlight"><p>In this note, we present our forecasts and valuation analysis. On a relative valuation basis and at the IPO price range, Kanzhun is fairly valued on growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Our base-case DCF value is $20.84 per ADS which is a 16% upside to the mid-point of the IPO price range. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we think that the IPO price range is attractive. </p></div>
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Kanzhun (BZ US) is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users. 
At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, Kanzhun will have a market cap of $7.2 billion. At the mid-point of the IPO price range, the net proceeds are $817.2 million. New and existing shareholders have indicated a total of $375 million of the IPO (43.4% of the ADSs at the mid-point of the IPO price range). The indications of interest from new investors are from UBS Asset Management ($100 million), GIC ($100 million) and Mubadala Investment ($75 million). The indications of interest from existing investors are from Sequoia Capital and Tiger Global.
In Kanzhun IPO Initiation: Search and Employ, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. We concluded that the Kanzhun story warrants a closer look. In Kanzhun IPO: Growth/Margin Trade-Off Vs Peers, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. 
In this note, we present our forecasts and valuation analysis. On a relative valuation basis and at the IPO price range, Kanzhun is fairly valued on growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Our base-case DCF value is $20.84 per ADS which is a 16% upside to the mid-point of the IPO price range. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we think that the IPO price range is attractive. 


Japan

Recruit Holdings Co. Ltd. operates information providing services in human resource, housing, bridal, travel, restaurants, beauty, automobiles, and education and more. The company also operate staffing services and advertising business.

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Recruit Holdings (6098 JP)

51job Enters into a Definite Agreement

51 job has entered into a definitive agreement for privatisation at $79.05 in cash per ADS. We think that the current level of support should be...

Arun George

Kanzhun IPO: Trading Debut

Kanzhun has priced its IPO at $19 per ADS to raise $912 m. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets...

Arun George

Renesas Placement Update - Doing Much Better than Its past Deals. Could Impact Post-Deal Performance

Renesas and INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. We covered most aspects of the deal in our...

Sumeet Singh

Kanzhun IPO Valuation Analysis

Our valuation analysis of Kanzhun suggests an implied market cap of US$11.5 billion, representing implied price of $28.67 per share. We would take...

Douglas Kim

Kanzhun IPO: Valuation Insights

At the mid-point, Kanzhun will raise net proceeds of $817.2 m. For investors willing to brave the risk that the market selloff in high growth...

Arun George

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