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

Dongzheng Automotive Finance / Event-Driven

<ul>
<li>On 16 April, the Shanghai Financial Court <a href="https://paimai.jd.com/287421325" target="_blank" rel="noopener">published</a> the details for the auction of <a href="https://www.smartkarma.com/entities/china-zhengtong-auto-services" target="_blank" data-smartkarma-citation="entities:17001:1" rel="noopener">China Zhengtong Auto Services Hldg (1728 HK)</a>’s 71.04% stake in <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng Automotive Finance (2718 HK)</a>. </li>
<li>If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.</li>
<li>The base bid implies an MGO price of HK$1.294 per H Share, a 112.1% premium to the last close. The auction will be held from 18 May to 19 May.</li>
</ul>


On 16 April, the Shanghai Financial Court published the details for the auction of China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK). 
If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.
The base bid implies an MGO price of HK$1.294 per H Share, a 112.1% premium to the last close. The auction will be held from 18 May to 19 May.


Auction of China ZhengTong’s Dongzheng Stake Set for 18 May; Potential MGO

Alpha-Centric ESG Research

Kyle Rudden

In <a href="https://www.smartkarma.com/insights/delisting-deceitful-chinese-companies-act-not-a-slam-dunk-and-has-more-bark-than-bite-if-it-passes" target="_blank" data-smartkarma-citation="insights:40025" rel="noopener">"Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes</a>, I made three "predictions." First, the U.S. House of Representatives would not get around to voting on the "delisting act" before the end of the Congressional session. Second, if the House does vote, it would likely pass the bill. Third, if the bill passes, it would have more bark than bite.As a bloke called Meat Loaf once sung, "two out of three ain't bad."On Wednesday, the House voted and passed Senate Bill 945, titled the "Holding Foreign Companies Accountable Act." That the House managed to vote amidst the dual chaos of a raging pandemic and an unhinged President – so close to adjourning this 116th Congress – is a surprise. That it voted to pass S945 is not at all surprising, however, given widespread bi-partisan support for the bill.The real epiphany comes from additional details provided during House testimony just prior to the vote. Not many, but those details that were disclosed (plus the tone in which they were articulated) shed light on how S945 will be implemented and enforced by the SEC, and why foreign issuers and investors should duly-cautious but not overly-concerned. And why this "delisting bill" is ...... more bark than bite.This Insight presents an updated analysis of S945 (general and China/Hong Kong-specific aspects), shares new details provided by Representative Brad Sherman, offers an opinion on the SEC's likely approach to writing and enforcing S945 rules, analyses China/Hong Kong stocks most at risk under S945, and stocks affected by the France/Belgium angle (similar to China/Hong Kong).

In "Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes, I made three "predictions." First, the U.S. House of Representatives would not get around to voting on the "delisting act" before the end of the Congressional session. Second, if the House does vote, it would likely pass the bill. Third, if the bill passes, it would have more bark than bite.As a bloke called Meat Loaf once sung, "two out of three ain't bad."On Wednesday, the House voted and passed Senate Bill 945, titled the "Holding Foreign Companies Accountable Act." That the House managed to vote amidst the dual chaos of a raging pandemic and an unhinged President – so close to adjourning this 116th Congress – is a surprise. That it voted to pass S945 is not at all surprising, however, given widespread bi-partisan support for the bill.The real epiphany comes from additional details provided during House testimony just prior to the vote. Not many, but those details that were disclosed (plus the tone in which they were articulated) shed light on how S945 will be implemented and enforced by the SEC, and why foreign issuers and investors should duly-cautious but not overly-concerned. And why this "delisting bill" is ...... more bark than bite.This Insight presents an updated analysis of S945 (general and China/Hong Kong-specific aspects), shares new details provided by Representative Brad Sherman, offers an opinion on the SEC's likely approach to writing and enforcing S945 rules, analyses China/Hong Kong stocks most at risk under S945, and stocks affected by the France/Belgium angle (similar to China/Hong Kong).

House Passes "Delisting Act" Giving SEC 90 Days to Write Its Rules (And Yes, More Bark Than Bite)

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. In retail credit, Lufax is the second-largest non-traditional financial service providers in China as measured by outstanding balances of retail credit facilitated, according to Oliver Wyman. Lufax has filed for an NYSE IPO to raise an estimated $3 billion, according to press reports. <div class="content-highlight">The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1H20. The sector has proved to be more often than not value destructive for public market investors and continues to remain hostage to regulatory change. While Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile.  </div>

Lufax Holdings (LU US) is a leading personal financial services platform in China with a focus on retail borrowing and wealth management. In retail credit, Lufax is the second-largest non-traditional financial service providers in China as measured by outstanding balances of retail credit facilitated, according to Oliver Wyman. Lufax has filed for an NYSE IPO to raise an estimated $3 billion, according to press reports. The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1H20. The sector has proved to be more often than not value destructive for public market investors and continues to remain hostage to regulatory change. While Lufax has several attractive attributes, it is a business in transition which magnifies the risk profile.  

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/360-finance-inc" target="_blank" data-smartkarma-citation="entities:27756:1" rel="noopener">360 Finance, Inc. (QFIN US)</a> is a leading online consumer lending platform and the finance partner of the 360 Group. <a href="https://www.smartkarma.com/entities/9f-inc" target="_blank" data-smartkarma-citation="entities:28238:1" rel="noopener">9F Inc (JFG US)</a>, a P2P lending platform, is the largest online consumer finance platform among the independent marketplace lending platforms in China, as measured by outstanding loan balance as of 31 December 2018.<div class="content-highlight">The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1Q20. While the industry remains hostage to regulations, we believe that the long 360 Finance/short 9F is an attractive pair trade for investors keen on exposure to the Chinese online consumer finance industry. </div>

360 Finance, Inc. (QFIN US) is a leading online consumer lending platform and the finance partner of the 360 Group. 9F Inc (JFG US), a P2P lending platform, is the largest online consumer finance platform among the independent marketplace lending platforms in China, as measured by outstanding loan balance as of 31 December 2018.The Chinese consumer finance sector has gone through a corona-induced extreme stress test in 1Q20. While the industry remains hostage to regulations, we believe that the long 360 Finance/short 9F is an attractive pair trade for investors keen on exposure to the Chinese online consumer finance industry. 

China Consumer Finance Pair Trade: Long 360 Finance/Short 9F

<a href="https://www.smartkarma.com/entities/home-credit-bv" target="_blank" data-smartkarma-citation="entities:28198:1" rel="noopener">Home Credit (HC HK)</a> is a leading emerging market consumer finance provider. Home Credit has started a two-week pre-marketing roadshow for a Hong Kong IPO to raise around $1.5 billion, according to press reports.<div class="content-highlight">In this note, we outline our initial thoughts on valuation. While we believe that Home Credit is a top-tier business, it will struggle to justify an "up round" valuation amidst the current negative sentiment surrounding the Chinese consumer finance sector.</div>For reference, our previous notes on Home Credit Initiation note: <a href="https://www.smartkarma.com/insights/home-credit-ipo-initiation-credit-where-credit-s-due" target="_blank" data-smartkarma-citation="insights:31156" rel="noopener">Home Credit IPO Initiation: Credit Where Credit’s Due</a>   Segmental analysis: <a href="https://www.smartkarma.com/insights/home-credit-ipo-whole-is-greater-than-the-sum-of-the-parts" target="_blank" data-smartkarma-citation="insights:31178" rel="noopener">Home Credit IPO: Whole Is Greater than the Sum of the Parts</a>  Benchmarking study: <a href="https://www.smartkarma.com/insights/home-credit-ipo-benchmarking-study" target="_blank" data-smartkarma-citation="insights:32146" rel="noopener">Home Credit IPO: Benchmarking Study</a>  PHIP update: <a href="https://www.smartkarma.com/insights/home-credit-ipo-2q-a-quality-vs-quantity-quarter" target="_blank" data-smartkarma-citation="insights:32162" rel="noopener">Home Credit IPO: 2Q a Quality Vs Quantity Quarter</a>

Home Credit (HC HK) is a leading emerging market consumer finance provider. Home Credit has started a two-week pre-marketing roadshow for a Hong Kong IPO to raise around $1.5 billion, according to press reports.In this note, we outline our initial thoughts on valuation. While we believe that Home Credit is a top-tier business, it will struggle to justify an "up round" valuation amidst the current negative sentiment surrounding the Chinese consumer finance sector.For reference, our previous notes on Home Credit Initiation note: Home Credit IPO Initiation: Credit Where Credit’s Due   Segmental analysis: Home Credit IPO: Whole Is Greater than the Sum of the Parts  Benchmarking study: Home Credit IPO: Benchmarking Study  PHIP update: Home Credit IPO: 2Q a Quality Vs Quantity Quarter 

China

Weidai Ltd. provides auto-backed financing solution in China. The Company's platform connects borrowers, the majority of which are small and micro enterprise owners, with both online investors and institutional funding partners. Weidai maintains a risk management system spanning from borrower acquisition to loan collection.

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Weidai Ltd (WEI US)

Auction of China ZhengTong’s Dongzheng Stake Set for 18 May; Potential MGO

The auction of China Zhengtong’s 71.04% stake in Dongzheng will be held from 18 to 19 May. A successful auction will imply an MGO price (at the...

Arun George

House Passes "Delisting Act" Giving SEC 90 Days to Write Its Rules (And Yes, More Bark Than Bite)

The U.S. House of Representatives passed Senate Bill 945, the "Holding Foreign Companies Accountable Act." New details support the notion that S945...

Kyle Rudden

Lufax IPO Initiation: Lost in Transition

We find it hard to be enthused by the Lufax story as its heavily reliant on a sector that has repeatedly been subject to regulatory blows which led...

Arun George

China Consumer Finance Pair Trade: Long 360 Finance/Short 9F

360 Finance, Inc. (QFIN US) is a leading online consumer lending platform and the finance partner of the 360 Group. 9F Inc (JFG US), a P2P lending...

Arun George

Home Credit IPO: Valuation a Tough Sell

Home Credit (HC HK) is a leading emerging market consumer finance provider. Home Credit has started a two-week pre-marketing roadshow for a Hong...

Arun George

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