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

Evergrande Property Services / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Services (EGS HK)</a> is a Chinese property management provider. Evergrande ranked fourth in GFA under management, among the Top 100 property management companies in China in 2019, according to CIA. The controlling shareholder is <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a>. Evergrande is joining the ever-expanding list of property management IPOs by seeking to raise $2 billion, according to press reports.  </p><div class="content-highlight"><p>Property developers continue to spin-off their property management arms due to tight credit conditions. However, investors are spoiled for choice due to the plethora of opportunities to gain exposure to the Chinese property management sector through listed companies and a healthy queue of IPO hopefuls. An IPO hopeful needs to offer a combination of strong fundamentals and/or attractive valuation to grab attention. Overall, Evergrande’s fundamentals are attractive, in our view. </p></div>

Evergrande Services (EGS HK) is a Chinese property management provider. Evergrande ranked fourth in GFA under management, among the Top 100 property management companies in China in 2019, according to CIA. The controlling shareholder is Evergrande Real Estate Group (3333 HK). Evergrande is joining the ever-expanding list of property management IPOs by seeking to raise $2 billion, according to press reports.  Property developers continue to spin-off their property management arms due to tight credit conditions. However, investors are spoiled for choice due to the plethora of opportunities to gain exposure to the Chinese property management sector through listed companies and a healthy queue of IPO hopefuls. An IPO hopeful needs to offer a combination of strong fundamentals and/or attractive valuation to grab attention. Overall, Evergrande’s fundamentals are attractive, in our view. 

Evergrande Property Services IPO Initiation: Standing Out

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/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/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a> and <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 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/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>. Shorts increased in Financials and Health Care stocks, and decreased on Consumer Discretionary, Industrials, Communication Services, Information Technology and Real Estate names.</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/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a>, <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari Inc (4385 JP)</a> and <a href="https://www.smartkarma.com/entities/miura-co-ltd" target="_blank" data-smartkarma-citation="entities:20185:1" rel="noopener">Miura Co Ltd (6005 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/fuji-corp-aichi" target="_blank" data-smartkarma-citation="entities:12942:1" rel="noopener">Fuji Machine Mfg (6134 JP)</a>, <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a> and <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a>. Sectorally, shorts increased on Consumer Discretionary, Real Estate and Financials, while shorts were covered on Consumer Staples.</p></div><div><p>In Korea, the biggest increase in shorts were seen on <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/hyundai-heavy-industries" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Hyundai Heavy Industries (009540 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">Sk Chemicals Co Ltd/New (285130 KS)</a>, <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> and <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a>, <a href="https://www.smartkarma.com/entities/wiwynn-corp" target="_blank" data-smartkarma-citation="entities:27838:1" rel="noopener">Wiwynn Corp (6669 TT)</a>, <a href="https://www.smartkarma.com/entities/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a> and <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> while shorts were covered on <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>, <a href="https://www.smartkarma.com/entities/century-iron-steel-indus" target="_blank" data-smartkarma-citation="entities:8853:1" rel="noopener">Century Iron &amp; Steel Indus (9958 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/formosa-petrochemical-corp" target="_blank" data-smartkarma-citation="entities:20875:1" rel="noopener">Formosa Petrochemical (6505 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 Ping An Insurance (H) (2318 HK), Alibaba Group (9988 HK), Haier Electronics Group Co (1169 HK) and Ping An Healthcare and Technology Company Limited (1833 HK) while there was short covering on Meituan (3690 HK), Tencent Holdings (700 HK), Sunny Optical (2382 HK) and AIA Group Ltd (1299 HK). Shorts increased in Financials and Health Care stocks, and decreased on Consumer Discretionary, Industrials, Communication Services, Information Technology and Real Estate names.In Japan, stocks that saw the most shorts were Itochu Corp (8001 JP), Nippon Building Fund (8951 JP), Mercari Inc (4385 JP) and Miura Co Ltd (6005 JP) while shorts decreased on Toshiba Corp (6502 JP), Fuji Machine Mfg (6134 JP), Casio Computer (6952 JP) and Ricoh Company Ltd (7752 JP). Sectorally, shorts increased on Consumer Discretionary, Real Estate and Financials, while shorts were covered on Consumer Staples.In Korea, the biggest increase in shorts were seen on Hyundai Motor Co (005380 KS), Hyundai Heavy Industries (009540 KS) and Samsung SDI (006400 KS) while shorts were covered on Amorepacific Corp (090430 KS), Sk Chemicals Co Ltd/New (285130 KS), S Oil Corp (010950 KS) and HMM Co., Ltd. (011200 KS). Stocks in Taiwan that saw the highest increase in shorts were Asustek Computer (2357 TT), Wiwynn Corp (6669 TT), Acer Inc (2353 TT) and Largan Precision (3008 TT) while shorts were covered on Unimicron Technology (3037 TT), Century Iron &amp; Steel Indus (9958 TT), Yageo Corporation (2327 TT) and Formosa Petrochemical (6505 TT). 

Asia Short Interest Weekly: Haier, Sunny Optical, Itochu, Mercari, Toshiba, HMM, Asustek, Acer

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> just released its 3Q2020 numbers and yet again hit the ball out of the park on revenue growth, with +110% growth in its digital entertainment (DE) revenues to US$944.7m and +173% growth in its e-commerce (EC) revenues to US$618.7m.</p>
<p>Digital Entertainment revenues grew by +31.9% QoQ in 3Q2020, whilst e-commerce expanded by +39.7% QoQ. Total group revenues for 3Q2020 grew by +98.7% YoY to US$1,212.2m.</p>
<p>The company also registered a positive EBITDA of US$120.4m in 3Q2020 versus (US$30.8m) loss for 3Q2019 and US$7.7m in 2Q2020 but it still booked a net loss of (US$346m) after share-based compensation and changes in the value of the 2017 convertible notes versus (US$175m) in 3Q2019.</p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> booked a +99% growth rate in total GAAP revenue US$1.2bn, whilst gross profits grew by +100.6% YoY in 3Q2020 to US$407.6m. Gross merchandise value (GMV) increased +103% to US$9.3bn in 3Q2020. </p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> has yet again demonstrated its ability to lead the pack both through Garena in gaming and Shopee for e-commerce in terms of extraordinary rates of revenue growth, with its digital entertainment effectively bankrolling its e-commerce business.</p>
<p>E-commerce is also marching in the right direction with the EBITDA loss per order continuing to decline QoQ as it winds its way towards profitability, although that will not happen until 2023.</p>
<div class="content-highlight">
<p>Looking out to FY21E, the average EV/Sales for the company's peers stands at 5.5x versus <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> on 9.45x but it is forecast to grow sales at +43.6%, twice the average growth rate of peers. Investors will pay a premium for this growth and its market leadership, with an increasing focus on profitability. </p>
</div>

Sea Ltd (SE US) just released its 3Q2020 numbers and yet again hit the ball out of the park on revenue growth, with +110% growth in its digital entertainment (DE) revenues to US$944.7m and +173% growth in its e-commerce (EC) revenues to US$618.7m.
Digital Entertainment revenues grew by +31.9% QoQ in 3Q2020, whilst e-commerce expanded by +39.7% QoQ. Total group revenues for 3Q2020 grew by +98.7% YoY to US$1,212.2m.
The company also registered a positive EBITDA of US$120.4m in 3Q2020 versus (US$30.8m) loss for 3Q2019 and US$7.7m in 2Q2020 but it still booked a net loss of (US$346m) after share-based compensation and changes in the value of the 2017 convertible notes versus (US$175m) in 3Q2019.
Sea Ltd (SE US) booked a +99% growth rate in total GAAP revenue US$1.2bn, whilst gross profits grew by +100.6% YoY in 3Q2020 to US$407.6m. Gross merchandise value (GMV) increased +103% to US$9.3bn in 3Q2020. 
Sea Ltd (SE US) has yet again demonstrated its ability to lead the pack both through Garena in gaming and Shopee for e-commerce in terms of extraordinary rates of revenue growth, with its digital entertainment effectively bankrolling its e-commerce business.
E-commerce is also marching in the right direction with the EBITDA loss per order continuing to decline QoQ as it winds its way towards profitability, although that will not happen until 2023.

Looking out to FY21E, the average EV/Sales for the company's peers stands at 5.5x versus Sea Ltd (SE US) on 9.45x but it is forecast to grow sales at +43.6%, twice the average growth rate of peers. Investors will pay a premium for this growth and its market leadership, with an increasing focus on profitability. 


Sea Ltd (SE US) - Gaming the E-Commerce Epiphany

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

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.

Event-Driven

<ul>
<li>On 16<sup>th</sup> November, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  announced that it has entered into a definitive agreement with <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a>  to acquire its domestic video-based entertainment live streaming business in China (known as YY Live). JOYY will retain its overseas business.</li>
<li>The deal includes YY mobile app, YY.com website and PC YY, among others, for an aggregate purchase price of approximately US$3.6bn in cash and the transaction is expected to occur in 1H2021 subject to certain conditions.</li>
<li>According to Baidu, YY Live stands to benefit from the company’s large traffic and thriving mobile ecosystem while Baidu will receive immediate operational experience and knowhow for large-scale video-based social media development, as well as a creator network that will further strengthen Baidu's massive content provider network.</li>
<li>Baidu has been a late entrant to the thriving short video app market in China which is currently dominated by Douyin and Kuaishou. Baidu has been attempting to reduce its dependence on core advertising revenues, however, these efforts are yet to make any meaningful impact on the company’s top line and margins.</li>
</ul>


On 16th November, Baidu (BIDU US)  announced that it has entered into a definitive agreement with JOYY (YY US)  to acquire its domestic video-based entertainment live streaming business in China (known as YY Live). JOYY will retain its overseas business.
The deal includes YY mobile app, YY.com website and PC YY, among others, for an aggregate purchase price of approximately US$3.6bn in cash and the transaction is expected to occur in 1H2021 subject to certain conditions.
According to Baidu, YY Live stands to benefit from the company’s large traffic and thriving mobile ecosystem while Baidu will receive immediate operational experience and knowhow for large-scale video-based social media development, as well as a creator network that will further strengthen Baidu's massive content provider network.
Baidu has been a late entrant to the thriving short video app market in China which is currently dominated by Douyin and Kuaishou. Baidu has been attempting to reduce its dependence on core advertising revenues, however, these efforts are yet to make any meaningful impact on the company’s top line and margins.


Baidu: Acquisition of YY Live Is More Beneficial to JOYY than Baidu

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*More Transformation To Come:</em></strong> What a magnificent amazing six months this has been for Tencent Holding’s (700.HK) [Tencent] Afterpay Touch (APT.AU) [Afterpay]. Afterpay provided positive commentary at its Annual General Meeting (AGM) where the next six months look to be even more transformational with operations beginning in the European Union, launches of banking products, and potentially the launch of the business in Asia (likely under the tutelage of Tencent); and</p><p><strong><em>*More Magic Fairy Dust:</em></strong> Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology Buy Now Pay Later (BNPL) company is paying dividends to Tencent in numerous other ways.</p>

*More Transformation To Come: What a magnificent amazing six months this has been for Tencent Holding’s (700.HK) [Tencent] Afterpay Touch (APT.AU) [Afterpay]. Afterpay provided positive commentary at its Annual General Meeting (AGM) where the next six months look to be even more transformational with operations beginning in the European Union, launches of banking products, and potentially the launch of the business in Asia (likely under the tutelage of Tencent); and*More Magic Fairy Dust: Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology Buy Now Pay Later (BNPL) company is paying dividends to Tencent in numerous other ways.

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)

Evergrande Property Services IPO Initiation: Standing Out

Evergrande is joining the ever-expanding list of property management IPOs by seeking to raise $2 billion, according to press reports. Overall,...

Arun George

Asia Short Interest Weekly: Haier, Sunny Optical, Itochu, Mercari, Toshiba, HMM, Asustek, Acer

This Insight looks at short interest movements in stocks across Asian markets and highlights stocks that have seen large increase/ decrease in...

Brian Freitas

Sea Ltd (SE US) - Gaming the E-Commerce Epiphany

Sea Ltd (SE US) continues to generate increasingly robust cashflows from its gaming business, which is used to bankroll the growth in its e...

Angus Mackintosh

Baidu: Acquisition of YY Live Is More Beneficial to JOYY than Baidu

Baidu announced that it has entered into a definitive agreement with JOYY to acquire its domestic video-based entertainment live streaming business...

Shifara Samsudeen, FCMA, CGMA

Tencent Holdings - After The AGM

TENCENT HOLDING: Afterpay Touch AGM Exhibits Strength Of Franchise Post-Tencent Stake. Next Six Months To Be Transformational.

Thomas J. Monaco

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