Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Equity Capital Markets

<ul><li>Three major concerns/questions I'd ask regarding the potential IPO of <a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a>:</li></ul><ol>
<li>
<a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener"></a>Single monetization channel: as the company seeks further growth, can it really compete against the distribution channels of the tech and insurance giants in China?</li>
<li>
Insurance/product development potential: does the company have the expertise to develop its own products without just having to rely on the distribution channels?</li>
<li>
Valuation: if the investment thesis is to ride the growth of healthcare and medical insurance spending in China, isn't it more direct to invest in an online (or even traditional) insurer, which is at a much lower valuation?</li>
</ol>

Three major concerns/questions I'd ask regarding the potential IPO of Waterdrop Inc (WDH US):

Single monetization channel: as the company seeks further growth, can it really compete against the distribution channels of the tech and insurance giants in China?

Insurance/product development potential: does the company have the expertise to develop its own products without just having to rely on the distribution channels?

Valuation: if the investment thesis is to ride the growth of healthcare and medical insurance spending in China, isn't it more direct to invest in an online (or even traditional) insurer, which is at a much lower valuation?


Waterdrop Inc: Can the Water Keep Flowing After Its IPO?

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.

Event-Driven

<ul>
<li>PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.</li>
<li>The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.</li>
<li>In this note, we'll talk about the latest developments, possible outcomes and implications.</li>
</ul>


PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we'll talk about the latest developments, possible outcomes and implications.


China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>The essence of Shouhui's business model is to "sell insurance" rather than provide services with technological attributes. So, Shouhui has relatively single business composition and lacks diversified sources of revenue.</li>
<li>The trend of "disintermediation" is becoming increasingly evident, which may lead to customers deciding to purchase insurance directly from insurance companies not from Shouhui, resulting declining demand for Shouhui’s services/products.</li>
<li>The business nature of insurance is incompatible with the Internet's pursuit of rapid expansion. Cooling "Internet +insurance" investment in recent years proves the decline of market's enthusiasm for this business.</li>
</ul>


The essence of Shouhui's business model is to "sell insurance" rather than provide services with technological attributes. So, Shouhui has relatively single business composition and lacks diversified sources of revenue.
The trend of "disintermediation" is becoming increasingly evident, which may lead to customers deciding to purchase insurance directly from insurance companies not from Shouhui, resulting declining demand for Shouhui’s services/products.
The business nature of insurance is incompatible with the Internet's pursuit of rapid expansion. Cooling "Internet +insurance" investment in recent years proves the decline of market's enthusiasm for this business.


Pre-IPO Shouhui Tech - The Business Outlook and Stock Price Performance Are Not Optimistic

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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/amtd-digital" target="_blank" data-smartkarma-citation="entities:36214:1" rel="noopener">AMTD Digital (HKD US)</a> shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.</li>
<li>
<a href="https://www.smartkarma.com/entities/amtd-idea-group" target="_blank" data-smartkarma-citation="entities:28137:1" rel="noopener">AMTD Idea Group (AMTD US)</a> accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.</li>
<li>AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    </li>
</ul>



AMTD Digital (HKD US) shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.

AMTD Idea Group (AMTD US) accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.
AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    


Silver Point

Thomas J. Monaco

Independent Insight Provider

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

Equity Bottom-Up

<ul>
<li>
Another Weak Number: Waterdrop (WDH.US) reported a third set of losses since its IPO, coming in at a negative CNY 477 mn  - improving CNY 227 mn (32.5%) QOQ; </li>
<li>
High Cumulative Losses: Cumulative losses since its IPO are over CNY 1.5 bn, and represent about 57% of IPO funds raised. Challenges come from weaker revenues and excessive costs; and    </li>
<li>
Notice” To Online Insurers: The CBIRC's roll out of the internet insurance revision plan aims to scrutinize mainland China’s insurance technology platforms. </li>
</ul>



Another Weak Number: Waterdrop (WDH.US) reported a third set of losses since its IPO, coming in at a negative CNY 477 mn  - improving CNY 227 mn (32.5%) QOQ; 

High Cumulative Losses: Cumulative losses since its IPO are over CNY 1.5 bn, and represent about 57% of IPO funds raised. Challenges come from weaker revenues and excessive costs; and    

Notice” To Online Insurers: The CBIRC's roll out of the internet insurance revision plan aims to scrutinize mainland China’s insurance technology platforms. 


United States

Waterdrop Inc. is an insurtech platform headquartered in China. Founded in 2016, with coverage of Waterdrop Insurance Marketplace and Medical Crowdfunding, Waterdrop offers insurance and healthcare service through technology.

Waterdrop Inc (WDH US)

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