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

Kuaishou Technology / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Beijing Kuaishou Technology Co Ltd (1496219D CH)</a> is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Users access the platform primarily through a family of mobile apps comprising Kuaishou Flagship, Kuaishou Express and Kuaishou Concept, which is collectively referred to as the Kuaishou App. Kuaishou has got approval for a Hong Kong IPO to raise up to $5-6 billion, according to press reports. </p><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/kuaishou-ipo-initiation-dancing-to-its-own-tune" target="_blank" data-smartkarma-citation="insights:45032" rel="noopener">Kuaishou IPO Initiation: Dancing to Its Own Tune</a>, we stated that while Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive. In <a href="https://www.smartkarma.com/insights/kuaishou-ipo-valuation-first-look" target="_blank" data-smartkarma-citation="insights:46787" rel="noopener">Kuaishou IPO: Valuation First Look</a>, we stated that the rumoured IPO valuation of $50 billion can be justified. The PHIP which discloses 9M20 results and key operating data for 11M20 reinforces our view that Kuaishou is worth a look. </p></div>

Beijing Kuaishou Technology Co Ltd (1496219D CH) is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Users access the platform primarily through a family of mobile apps comprising Kuaishou Flagship, Kuaishou Express and Kuaishou Concept, which is collectively referred to as the Kuaishou App. Kuaishou has got approval for a Hong Kong IPO to raise up to $5-6 billion, according to press reports. In Kuaishou IPO Initiation: Dancing to Its Own Tune, we stated that while Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive. In Kuaishou IPO: Valuation First Look, we stated that the rumoured IPO valuation of $50 billion can be justified. The PHIP which discloses 9M20 results and key operating data for 11M20 reinforces our view that Kuaishou is worth a look. 

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.

RLX Technology Inc / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/rlx-technology-inc" target="_blank" data-smartkarma-citation="entities:31113:1" rel="noopener">RLX Technology Inc (RLX US)</a> aims to raise around US$1.1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. </p></div><div><p>RLX only sells its e-vapor products in China. As of Sep 2020, it had over 5,000 branded partner stores and sold its products in over 100,000 other retail outlets, covering over 250 cities in China.</p></div><div><p>Even though the company only started operations in 2018, it was already recording sales of around US$330m by 9M20. Margins too have been on an uptrend and operating cash flows have been robust. Moreover, the founding team and investor backing appear strong.</p></div><div><p>However, sales have mostly grown owing to rapid expansion of its distribution network. Furthermore, the brand also appears to have overseas operations but there has been no mention of that in the company’s filings, leaving one to wonder where these operations are housed and who exactly owns them.</p></div><div><p>In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, we'll run the deal through our ECM framework and comment on updates in the new filing.</p></div><div><p><strong>Links to our previous notes:</strong></p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-positives-fast-growth-low-penetration" target="_blank" data-smartkarma-citation="insights:46797" rel="noopener">RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration</a> </li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-negatives-limited-track-record-and-missing-international-ops" target="_blank" data-smartkarma-citation="insights:46836" rel="noopener">RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-rlx-store-visits-to-relx-and-its-competitors" target="_blank" rel="noopener">RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-peer-comparison-and-valuation" target="_blank" rel="noopener">RLX Technology Pre-IPO - Peer Comparison and Valuation</a></li>
</ul></div>

RLX Technology Inc (RLX US) aims to raise around US$1.1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. RLX only sells its e-vapor products in China. As of Sep 2020, it had over 5,000 branded partner stores and sold its products in over 100,000 other retail outlets, covering over 250 cities in China.Even though the company only started operations in 2018, it was already recording sales of around US$330m by 9M20. Margins too have been on an uptrend and operating cash flows have been robust. Moreover, the founding team and investor backing appear strong.However, sales have mostly grown owing to rapid expansion of its distribution network. Furthermore, the brand also appears to have overseas operations but there has been no mention of that in the company’s filings, leaving one to wonder where these operations are housed and who exactly owns them.In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, we'll run the deal through our ECM framework and comment on updates in the new filing.Links to our previous notes:

RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration 
RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops
RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors
RLX Technology Pre-IPO - Peer Comparison and Valuation


RLX Technology IPO - Valuation Has More than Doubled in Two Months

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a> while there was short covering on <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>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts increased on Real Estate, Consumer Discretionary, Consumer Staples and Materials, and decreased on Financials , Information Technology, Health Care and Communication Services.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/trend-micro-inc" target="_blank" data-smartkarma-citation="entities:13172:1" rel="noopener">Trend Micro Inc (4704 JP)</a>, <a href="https://www.smartkarma.com/entities/seiko-epson-corp" target="_blank" data-smartkarma-citation="entities:16793:1" rel="noopener">Seiko Epson (6724 JP)</a> and <a href="https://www.smartkarma.com/entities/bank-of-kyoto-ltd" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank Of Kyoto (8369 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao Corp (4452 JP)</a> and <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" data-smartkarma-citation="entities:12926:1" rel="noopener">Kubota Corp (6326 JP)</a>. Sectorally, shorts increased on Information Technology and Financials, while decreasing on Consumer Discretionary,  Industrials, Consumer Staples and Real Estate.</p></div><div><p>In Korea, there were short positions put on in <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> and <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/s-oil-corp" target="_blank" data-smartkarma-citation="entities:1667:1" rel="noopener">S Oil Corp (010950 KS)</a>, <a href="https://www.smartkarma.com/entities/mirae-asset-daewoo-co-ltd-b50c4d95-1687-46cb-9b58-f79ce0e72670" target="_blank" data-smartkarma-citation="entities:12061:1" rel="noopener">Mirae Asset Daewoo (006800 KS)</a>, <a href="https://www.smartkarma.com/entities/hanwha-life-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:2163:1" rel="noopener">Hanwha Life Insurance (088350 KS)</a> and <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a>, <a href="https://www.smartkarma.com/entities/foxconn-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:11950:1" rel="noopener">Foxconn Technology (2354 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</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/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> and <a href="https://www.smartkarma.com/entities/delta-electronics-inc" target="_blank" data-smartkarma-citation="entities:12688:1" rel="noopener">Delta Electronics (2308 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Smoore International (6969 HK), Tencent Holdings (700 HK), JD.com (HK) (9618 HK) and Haidilao (6862 HK) while there was short covering on Ping An Insurance (H) (2318 HK), Semiconductor Manufacturing International Corp (SMIC) (981 HK), China Mobile (941 HK) and HSBC Holdings (5 HK). Shorts increased on Real Estate, Consumer Discretionary, Consumer Staples and Materials, and decreased on Financials , Information Technology, Health Care and Communication Services.In Japan, stocks that saw the most shorts were Itochu Corp (8001 JP), Trend Micro Inc (4704 JP), Seiko Epson (6724 JP) and Bank Of Kyoto (8369 JP) while shorts decreased on Honda Motor (7267 JP), Ana Holdings (9202 JP), Kao Corp (4452 JP) and Kubota Corp (6326 JP). Sectorally, shorts increased on Information Technology and Financials, while decreasing on Consumer Discretionary,  Industrials, Consumer Staples and Real Estate.In Korea, there were short positions put on in Samsung Electronics (005930 KS), Hyundai Motor Co (005380 KS), Kakao Corp (035720 KS) and LG Display (034220 KS) while shorts were covered in S Oil Corp (010950 KS), Mirae Asset Daewoo (006800 KS), Hanwha Life Insurance (088350 KS) and Doosan Infracore (042670 KS). Stocks in Taiwan that saw the highest increase in shorts were Pegatron Corp (4938 TT), Foxconn Technology (2354 TT), Yageo Corporation (2327 TT) and Unimicron Technology (3037 TT) while shorts were covered on United Microelectronics Corp (2303 TT), TSMC (2330 TT), Evergreen Marine Corp (2603 TT) and Delta Electronics (2308 TT).

Asia Short Interest: Smoore, JD, SMIC, China Mobile, Itochu, Honda, Ana, Samsung, Pegatron, TSMC

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>Exports surge with global virus needs </li>
<li>Bonds and defaults in 2021</li>
<li>Rejuvenate China with rural revitalisation</li>
<li>US blacklists more Chinese firms</li>
<li>US and UK ban Xinjiang “forced labour” products </li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
Exports surge with global virus needs 
Bonds and defaults in 2021
Rejuvenate China with rural revitalisation
US blacklists more Chinese firms
US and UK ban Xinjiang “forced labour” products 
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Exports/ Bonds/ Rural/ US-China/ Xinjiang

<p><a href="https://www.smartkarma.com/entities/linklogis" target="_blank" data-smartkarma-citation="entities:31126:1" rel="noopener">Linklogis (LINK HK)</a> is a leading technology solution provider for supply chain finance in China. Its solutions optimise the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. Linklogis was the leading technology solution providers in China with a 20.5% market share of supply chain finance transactions processed in 9M20, according to CIC. Linklogis is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, CITIC Capital, GIC and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a>. Linklogis has filed for a Hong Kong IPO to raise as much as $500 million, according to press reports.</p><p>Linklogis is a play on China’s supply chain finance market. SMEs in China had an average of 92 days of accounts receivable outstanding in 2019, higher than 51 days on average in the US. It could also take up to 6 to 12 months for SMEs to receive final payments. The Chinese government has introduced a series of supportive policies to direct funding towards small businesses, including imposing SME lending growth targets for banks. Supply chain finance has proven to be a useful way to bridge the financing gap of SMEs, as it allows SMEs to get quick access to payment and funding at low costs. In 9M20, Linklogis’ customers helped their SME suppliers obtain low-cost financing at an average financing cost of 5.4%, significantly lower than the cost of financing extended to SMEs relying on their own creditworthiness that ranges from 10% to 20%, according to CIC.</p><div class="content-highlight"><p>Linklogis is an attractive play on these market dynamics by combining an attractive monetisation model, high customer retention rate (strong revenue visibility) and good operating leverage.</p></div>

Linklogis (LINK HK) is a leading technology solution provider for supply chain finance in China. Its solutions optimise the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. Linklogis was the leading technology solution providers in China with a 20.5% market share of supply chain finance transactions processed in 9M20, according to CIC. Linklogis is backed by Tencent Holdings (700 HK), CITIC Capital, GIC and Standard Chartered (STAN LN). Linklogis has filed for a Hong Kong IPO to raise as much as $500 million, according to press reports.Linklogis is a play on China’s supply chain finance market. SMEs in China had an average of 92 days of accounts receivable outstanding in 2019, higher than 51 days on average in the US. It could also take up to 6 to 12 months for SMEs to receive final payments. The Chinese government has introduced a series of supportive policies to direct funding towards small businesses, including imposing SME lending growth targets for banks. Supply chain finance has proven to be a useful way to bridge the financing gap of SMEs, as it allows SMEs to get quick access to payment and funding at low costs. In 9M20, Linklogis’ customers helped their SME suppliers obtain low-cost financing at an average financing cost of 5.4%, significantly lower than the cost of financing extended to SMEs relying on their own creditworthiness that ranges from 10% to 20%, according to CIC.Linklogis is an attractive play on these market dynamics by combining an attractive monetisation model, high customer retention rate (strong revenue visibility) and good operating leverage.

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Kuaishou IPO: Thrill Seekers

Kuaishou has got approval for a Hong Kong IPO to raise up to $5-6 billion, according to press reports. The PHIP which discloses new data points...

Arun George

RLX Technology IPO - Valuation Has More than Doubled in Two Months

RLX Technology (RLX US) aims to raise around US$1.1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of...

Sumeet Singh

Asia Short Interest: Smoore, JD, SMIC, China Mobile, Itochu, Honda, Ana, Samsung, Pegatron, TSMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Exports/ Bonds/ Rural/ US-China/ Xinjiang

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

Linklogis IPO Initiation: ISupply

Linklogis is an attractive play on China’s supply chain finance market by combining an attractive monetisation model, high customer retention rate...

Arun George

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