Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

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Equity Capital Markets

Zhejiang Cangnan Instrument / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27212" target="_blank" data-smartkarma-citation="entities:27212:1">Zhejiang Cangnan Instrument (1743 HK)</a> plans to raise up to US$114m in its IPO via an issuance of primary shares.Over FY15-17, sales grew at 36% CAGR while adjusted PATMI grew at nearly a 100% CAGR. Its growth record makes the asking multiples look cheap. However, its margins seem very high for an equipment manufacturer, even more so when one considers that it sells mostly to companies and not to retail. To add to that the stupendous growth in FY17 hasn't flown through to operating cash flow as receivables have ballooned, with some being due for well over a year. There are also a few corporate governance issues.Given the smallish size of the deal and a tight deadline, this is a very quick note of mostly bullet points along with charts, tables and snippets, with minimal additional writing.

Zhejiang Cangnan Instrument (1743 HK) plans to raise up to US$114m in its IPO via an issuance of primary shares.Over FY15-17, sales grew at 36% CAGR while adjusted PATMI grew at nearly a 100% CAGR. Its growth record makes the asking multiples look cheap. However, its margins seem very high for an equipment manufacturer, even more so when one considers that it sells mostly to companies and not to retail. To add to that the stupendous growth in FY17 hasn't flown through to operating cash flow as receivables have ballooned, with some being due for well over a year. There are also a few corporate governance issues.Given the smallish size of the deal and a tight deadline, this is a very quick note of mostly bullet points along with charts, tables and snippets, with minimal additional writing. 

Zhejiang Cangnan Instrument IPO - Quick Thoughts - Probably at Peak Growth and Peak Margins

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Wasion Group Holdings / Equity Capital Markets

Wasion is a leading provider of energy measurement instrument, system and services (It primarily operates in three segments: Advanced Metering Infrastructure, Advanced Distribution Operations, and&nbsp;Smart Meters). The company&nbsp;is placing 68 million shares, consisting of 61 million by the company as top-up placement and 7 million shares by 20 R&amp;D staffs of the company.&nbsp;<ul><li>Wasion is in a good position to capture the China's next phase of growth - greener economic development, productivity growth, and global expansion ambition.&nbsp;</li><li>Positive development for the company include: 1) China's reform on the electricity distribution market (automated measurement and distribution devices are needed), 2) China's push in the green energy (smart measure helps the grid source the electricity, and measure it correctly), and 3) China's ambition of going global ("one-belt, one road". Wasion is already present in Tanzania, Egypt, Indonesia, Bangladesh). The stock is in a favorable position to benefit from government support.</li><li>The company also has solid financials&nbsp;and is a consensus Buy.&nbsp;</li></ul>Conclusion:&nbsp;Although our framework rates the placement marginally below threshold, &nbsp;we reckon that there are limitations in our framework (owing to lack of peers and previous placement done around&nbsp;GFC with lacklustre long term returns), we like the fundamentals of the company and would take the deal.&nbsp;

Wasion is a leading provider of energy measurement instrument, system and services (It primarily operates in three segments: Advanced Metering Infrastructure, Advanced Distribution Operations, and&nbsp;Smart Meters). The company&nbsp;is placing 68 million shares, consisting of 61 million by the company as top-up placement and 7 million shares by 20 R&amp;D staffs of the company.&nbsp;Wasion is in a good position to capture the China's next phase of growth - greener economic development, productivity growth, and global expansion ambition.&nbsp;Positive development for the company include: 1) China's reform on the electricity distribution market (automated measurement and distribution devices are needed), 2) China's push in the green energy (smart measure helps the grid source the electricity, and measure it correctly), and 3) China's ambition of going global ("one-belt, one road". Wasion is already present in Tanzania, Egypt, Indonesia, Bangladesh). The stock is in a favorable position to benefit from government support.The company also has solid financials&nbsp;and is a consensus Buy.&nbsp;Conclusion:&nbsp;Although our framework rates the placement marginally below threshold, &nbsp;we reckon that there are limitations in our framework (owing to lack of peers and previous placement done around&nbsp;GFC with lacklustre long term returns), we like the fundamentals of the company and would take the deal.&nbsp;

Wasion Placement: Well positioned for China's reform, take the deal

Hong Kong

Wasion Group Holdings Limited is engaged in the provision of Advanced Metering Infrastructure solutions, Advanced Distribution Operations solutions; and development, manufacturing and sale of smart power, water, heat and gas meters and smart power distribution devices.

Wasion Group Holdings (3393 HK)

Zhejiang Cangnan Instrument IPO - Quick Thoughts - Probably at Peak Growth and Peak Margins

Zhejiang Cangnan Instrument (1743 HK) plans to raise up to US$114m in its IPO via an issuance of primary shares.Over FY15-17, sales grew at 36%...

Sumeet Singh

Wasion Placement: Well positioned for China's reform, take the deal

Wasion is a leading provider of energy measurement instrument, system and services (It primarily operates in three segments: Advanced Metering...

Ke Yan, CFA, FRM