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

Sichuan Languang Justbon Services / Event-Driven

Sichuan Languang Justbon Services (2606 HK)

<p>On Thursday after market close, <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> announced that Languang Hejun, the controlling shareholder, entered a memorandum of understanding (MOU) with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> to sell 115.1 million H shares (64.62% of the outstanding shares) at a price of RMB42.1105 per H share. If the potential transaction materialises it may lead to a general offer at the higher of (i) the price paid to Languang Hejun, and (ii) the HK$ equivalent of RMB42.1105 (HK$50.62 per share at an FX rate of 0.8319).</p><p>The possible general offer price of HK$50.62 per share is a 30.0% premium to the unaffected price of HK$38.95 per share (22 February prior to the trading halt) and a 36.8% premium to the IPO price of HK$37 per H Share (listed on 18 October 2019). </p><div class="content-highlight"><p>We believe that the transaction will proceed as Country Garden Services is acquiring Languang Justbon at an attractive multiple and <a href="https://www.smartkarma.com/entities/sichuan-languang-development-co-ltd" target="_blank" data-smartkarma-citation="entities:7403:1" rel="noopener">Sichuan Languang Development (600466 CH)</a> (through Languang Hejun) is cashing out at a healthy premium to the IPO price and last close price. Overall, we think that at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a general offer).  </p></div>

On Thursday after market close, Sichuan Languang Justbon Service Group (2606 HK) announced that Languang Hejun, the controlling shareholder, entered a memorandum of understanding (MOU) with Country Garden Services Holdings (6098 HK) to sell 115.1 million H shares (64.62% of the outstanding shares) at a price of RMB42.1105 per H share. If the potential transaction materialises it may lead to a general offer at the higher of (i) the price paid to Languang Hejun, and (ii) the HK$ equivalent of RMB42.1105 (HK$50.62 per share at an FX rate of 0.8319).The possible general offer price of HK$50.62 per share is a 30.0% premium to the unaffected price of HK$38.95 per share (22 February prior to the trading halt) and a 36.8% premium to the IPO price of HK$37 per H Share (listed on 18 October 2019). We believe that the transaction will proceed as Country Garden Services is acquiring Languang Justbon at an attractive multiple and Sichuan Languang Development (600466 CH) (through Languang Hejun) is cashing out at a healthy premium to the IPO price and last close price. Overall, we think that at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a general offer).  

Languang Justbon Possible General Offer from Country Garden Services

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Property management service provider <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Languang Justbon Services (2606 HK)</a> is currently <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0223/2021022300073.pdf" target="_blank" rel="noopener">suspended</a> "<em>pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers</em>".</p>
<p>Listed on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1008/ltn20191008009.pdf" target="_blank" rel="noopener">18 October 2019</a> at <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1017/02606_3890184/e102.pdf" target="_blank" rel="noopener">$37/share</a>, shares last closed at $38.95. The IPO was covered by <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh</a> beginning with <em><a href="https://www.smartkarma.com/insights/languang-justbon-services-pre-ipo-review-weaning-off-its-parent" target="_blank" data-smartkarma-citation="insights:32940" rel="noopener">Languang Justbon Services (蓝光嘉宝) Pre-IPO Review - Weaning off Its Parent</a></em>.</p>
<p>Justbon is 65.04%-held by Yang Keng, the founder. Yang holds no senior management role in the company, although his son, Yang Wuzheng,  is a NED following the EGM <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0218/2021021800818.pdf" target="_blank" rel="noopener">last week</a>. </p>
<p>Reportedly <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS), China's largest PM service provider (by market cap), is kicking the tyres.</p>
<p>More below the fold.</p>

Property management service provider Languang Justbon Services (2606 HK) is currently suspended "pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers".
Listed on the 18 October 2019 at $37/share, shares last closed at $38.95. The IPO was covered by Zhen Zhou, Toh beginning with Languang Justbon Services (蓝光嘉宝) Pre-IPO Review - Weaning off Its Parent.
Justbon is 65.04%-held by Yang Keng, the founder. Yang holds no senior management role in the company, although his son, Yang Wuzheng,  is a NED following the EGM last week. 
Reportedly Country Garden Services Holdings (6098 HK) (CGS), China's largest PM service provider (by market cap), is kicking the tyres.
More below the fold.

Languang Justbon (2606 HK): Country Gardens Offer?

APAC IPOs & Placements

Zhen Zhou, Toh

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

Sino-Ocean Service / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/sino-ocean-service" target="_blank" data-smartkarma-citation="entities:31037:1" rel="noopener">Sino-Ocean Service (6677 HK)</a> is looking to raise US$256m in its upcoming Hong Kong IPO.</p><p>Sino-Ocean Services (SOS) is the property management arm of Sino-Ocean Group. The company focuses on managing properties in first and second-tier cities in China.</p><p>Valuation isn’t exactly compelling considering SOS didn’t really stand out among peers as per our previous note.  Revenue growth has been decelerating, gross margin was mostly stagnant between FY2017 to FY2019 before expanding in 1H FY2020. Reserved GFA also indicates a short growth runway. The company, at best, is fairly valued at the low-end.</p><p>In this note, we will look at deal dynamics, assumptions, and share our thoughts on valuation.</p><p>Our previous coverage of the IPO:</p><ul><li dir="ltr"><p><a href="https://www.smartkarma.com/insights/sino-ocean-services-pre-ipo-nothing-stands-out" target="_blank" data-smartkarma-citation="insights:45646" rel="noopener">Sino-Ocean Services (远洋服务) Pre-IPO - Nothing Stands Out</a> </p></li></ul>

Sino-Ocean Service (6677 HK) is looking to raise US$256m in its upcoming Hong Kong IPO.Sino-Ocean Services (SOS) is the property management arm of Sino-Ocean Group. The company focuses on managing properties in first and second-tier cities in China.Valuation isn’t exactly compelling considering SOS didn’t really stand out among peers as per our previous note.  Revenue growth has been decelerating, gross margin was mostly stagnant between FY2017 to FY2019 before expanding in 1H FY2020. Reserved GFA also indicates a short growth runway. The company, at best, is fairly valued at the low-end.In this note, we will look at deal dynamics, assumptions, and share our thoughts on valuation.Our previous coverage of the IPO:Sino-Ocean Services (远洋服务) Pre-IPO - Nothing Stands Out 

Sino-Ocean Services (远洋服务) IPO - Fairly Valued, at Best

China Resources Mixc Lifestyle Services / Equity Capital Markets

China Resources Mixc Lifestyle Services (1209 HK)

<div><p><a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is <a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a>. </p></div><div><p>At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). </p></div><div><p>Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>,  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-resources-mixc-lifestyle-ipo-initiation-the-paradox-of-plenty" target="_blank" data-smartkarma-citation="insights:45244" rel="noopener">China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty</a>, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. </p></div></div></div>

China Resources Mixc Lifestyle Services (1209 HK)/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is China Resources Land (1109 HK). At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, Ping An Insurance (H) (2318 HK),  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. In China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. 

China Resources Mixc Lifestyle IPO: Valuation Insights

Jinke Smart Services / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/jinke-smart-services" target="_blank" data-smartkarma-citation="entities:29214:1" rel="noopener">Jinke Smart Services (9666 HK)</a> is a Chinese property management company which is a subsidiary of <a href="https://www.smartkarma.com/entities/jinke-property-group-co-ltd" target="_blank" data-smartkarma-citation="entities:13291:1" rel="noopener">Jinke Property Group (000656 CH)</a>. At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/jinke-smart-services-ipo-initiation-street-smart" target="_blank" rel="noopener">our initiation note</a>, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. </p></div></div></div>

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. In our initiation note, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. 

Jinke Smart Services IPO: Valuation Insights

China

Sichuan Languang Justbon Services is a property management service provider primarily engaged in property management and commercial operations. The company offers services for various real estate types, including residential, commercial, office, urban complexes, headquarters bases, and tourism properties, along with consultancy and community value-added services. It was founded on December 7, 2000, and its headquarters are located in Chengdu, Sichuan Province, PRC.

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Sichuan Languang Justbon Services (2606 HK)

Languang Justbon Possible General Offer from Country Garden Services

The controlling shareholder entered an MOU with CG Services to sell a 64.62% stake at RMB42.1105 per H share. The downside is low (close to break...

Arun George

Languang Justbon (2606 HK): Country Gardens Offer?

Shares are suspended so there is nothing to do here. I think the Offer needs to be pitched closer to $54/share, around a 39% premium to last close,...

David Blennerhassett

Sino-Ocean Services (远洋服务) IPO - Fairly Valued, at Best

Sino-Ocean Services (SOS) is the property management arm of Sino-Ocean Group. The company focuses on managing properties in first and second-tier...

Zhen Zhou, Toh

China Resources Mixc Lifestyle IPO: Valuation Insights

At the mid-point of the IPO price range, CR Mixc will raise net proceeds of $1.4 billion. We label this insight bearish as we would participate at...

Arun George

Jinke Smart Services IPO: Valuation Insights

Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on...

Arun George

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