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

<p><a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a> is the first company to successfully commercialise EREVs (extended-range electric vehicles) in China, the Li ONE. Li ONE is a six-seat, large premium electric SUV which began volume production and deliveries in November 2019 and December 2019, respectively. In 2020, Li ONE was the best-selling new energy SUV in China with a sales volume market share of 9.7%, according to CIC. </p><p>Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. The secondary listing comes on the back of a listing on Nasdaq in July 2020 ($1.0 billion net raise at $11.50 per ADS) as well as a follow-on offering in December 2020 ($1.4 billion gross raise at $29.00 per ADS). The secondary listing also follows peer, <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a>, which raised net proceeds of $1.8 billion on 7 July. <a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> H-shares are trading -9% below the offer price largely due to the recent regulatory onslaught which has engulfed Chinese companies with exposure to the technology and education sector along with listing in the US. </p><div class="content-highlight"><p>Despite rising competition from new entrants, Li Auto is delivering on its IPO promise by maintaining a market-leading share in its niche, investing in a roadmap to reduce its single model reliance, a positive gross margin and cash generation trajectory. On balance, for investors willing to brave the current regulatory-driven weak sentiment on Chinese names, Li Auto’s fundamentals and valuation are attractive, in our view. </p></div>

Li Auto Inc. (LI US) is the first company to successfully commercialise EREVs (extended-range electric vehicles) in China, the Li ONE. Li ONE is a six-seat, large premium electric SUV which began volume production and deliveries in November 2019 and December 2019, respectively. In 2020, Li ONE was the best-selling new energy SUV in China with a sales volume market share of 9.7%, according to CIC. Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. The secondary listing comes on the back of a listing on Nasdaq in July 2020 ($1.0 billion net raise at $11.50 per ADS) as well as a follow-on offering in December 2020 ($1.4 billion gross raise at $29.00 per ADS). The secondary listing also follows peer, Xpeng (XPEV US), which raised net proceeds of $1.8 billion on 7 July. XPeng (9868 HK) H-shares are trading -9% below the offer price largely due to the recent regulatory onslaught which has engulfed Chinese companies with exposure to the technology and education sector along with listing in the US. Despite rising competition from new entrants, Li Auto is delivering on its IPO promise by maintaining a market-leading share in its niche, investing in a roadmap to reduce its single model reliance, a positive gross margin and cash generation trajectory. On balance, for investors willing to brave the current regulatory-driven weak sentiment on Chinese names, Li Auto’s fundamentals and valuation are attractive, in our view. 

APAC IPOs & Placements

Zhen Zhou, Toh

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.

<p><a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a>  is looking to raise up to US$1.5bn via a dual primary listing in Hong Kong. News of Chinese EVs exploring their Hong Kong listing option was reported in March 2021.</p><p>We covered Li Auto’s US listing in 2020:</p><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/li-auto-pre-ipo-taking-the-long-way-around" target="_blank" data-smartkarma-citation="insights:41253" rel="noopener">Li Auto (理想汽车) Pre-IPO - Taking the Long Way Around</a> </li>
<li><a href="https://www.smartkarma.com/insights/li-auto-visit-li-auto-store-and-find-out-license-game" target="_blank" data-smartkarma-citation="insights:41299" rel="noopener">Li Auto (理想汽车): A to Visit Li Auto's Store and Find Out about the License Game</a></li>
<li>
<a href="https://www.smartkarma.com/insights/li-auto-pre-ipo-peer-comparison-margins-may-look-like-byd-but-sells-like-nio" target="_blank" data-smartkarma-citation="insights:41515" rel="noopener">Li Auto (理想汽车) Pre-IPO - Peer Comparison - Margins May Look like BYD, but Sells like NIO</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/li-auto-ipo-worth-a-ride-at-the-low-end" target="_blank" data-smartkarma-citation="insights:41596" rel="noopener">Li Auto (理想汽车) IPO - Worth a Ride, at the Low -End</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/li-auto-trading-update-no-mention-of-hillhouse-s-investment" target="_blank" data-smartkarma-citation="insights:41746" rel="noopener">Li Auto (理想汽车) Trading Update - No Mention of Hillhouse's Investment</a> </li>
</ul><p>We also covered its December 2020 follow-on offering:</p><ul><li>
<a href="https://www.smartkarma.com/insights/li-auto-placement-opportunistic-but-still-a-worth-a-bet-among-ev-peers" target="_blank" data-smartkarma-citation="insights:45988" rel="noopener">Li Auto (理想汽车) Placement - Opportunistic but Still a Worth a Bet Among EV Peers</a> </li></ul><p>In this note, we will share our thoughts on fundamentals and discuss deal dynamics.</p>

Li Auto Inc. (LI US)  is looking to raise up to US$1.5bn via a dual primary listing in Hong Kong. News of Chinese EVs exploring their Hong Kong listing option was reported in March 2021.We covered Li Auto’s US listing in 2020:

Li Auto (理想汽车) Pre-IPO - Taking the Long Way Around 
Li Auto (理想汽车): A to Visit Li Auto's Store and Find Out about the License Game

Li Auto (理想汽车) Pre-IPO - Peer Comparison - Margins May Look like BYD, but Sells like NIO 

Li Auto (理想汽车) IPO - Worth a Ride, at the Low -End 

Li Auto (理想汽车) Trading Update - No Mention of Hillhouse's Investment 
We also covered its December 2020 follow-on offering:
Li Auto (理想汽车) Placement - Opportunistic but Still a Worth a Bet Among EV Peers In this note, we will share our thoughts on fundamentals and discuss deal dynamics.

Li Auto HK Listing - Needs to Be Done at Discount Given XPeng’s Poor Debut

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Xpeng (9868 HK) listed in Hong Kong on 7 July was added to the Hang Seng Composite Index (HSCI) at the close of trading on 20 July. However, being a WVR security, the stock will not be eligible for Southbound Stock Connect till early 2022.</p><p>Subject to passing the velocity test, we see Xpeng (9868 HK) as an inclusion in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the December rebalance, replacing <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>.</p><p>With Hang Seng Indexes treating the stock as a primary listing, HSCEI passive trackers will need to buy a large part of the stock that was offered in Hong Kong. This could push Xpeng (9868 HK) to trade at a premium to <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> and there will be arb opportunities which could result in conversion from the ADS to the HK listing.</p><p>The inclusion of Xpeng (9868 HK) in the index will push the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> 2022 dividend futures lower. With the recent changes in China to companies looking to list on a foreign exchange, the HFCAA, and other structural changes to the index, we prefer a short position in the HSCEI 2022 dividend futures.</p>

Xpeng (9868 HK) listed in Hong Kong on 7 July was added to the Hang Seng Composite Index (HSCI) at the close of trading on 20 July. However, being a WVR security, the stock will not be eligible for Southbound Stock Connect till early 2022.Subject to passing the velocity test, we see Xpeng (9868 HK) as an inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, replacing Evergrande Real Estate Group (3333 HK).With Hang Seng Indexes treating the stock as a primary listing, HSCEI passive trackers will need to buy a large part of the stock that was offered in Hong Kong. This could push Xpeng (9868 HK) to trade at a premium to Xpeng (XPEV US) and there will be arb opportunities which could result in conversion from the ADS to the HK listing.The inclusion of Xpeng (9868 HK) in the index will push the Hang Seng China Enterprises Index (HSCEI INDEX) 2022 dividend futures lower. With the recent changes in China to companies looking to list on a foreign exchange, the HFCAA, and other structural changes to the index, we prefer a short position in the HSCEI 2022 dividend futures.

Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends

Consumer Discretionary / Industrials

Henry Kwon

Equity Bottom-Up

<p>TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.</p><p>To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.</p><p>In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.</p><p>The short term trading implications for TSP's shares that we see are:</p><ul>
<li>
<strong>Bullish Short Term Scenario</strong>: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.</li>
<li>
<strong>Bearish Short Term Scenario</strong>: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.</li>
</ul><p>Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.</p>

TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.The short term trading implications for TSP's shares that we see are:

Bullish Short Term Scenario: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.

Bearish Short Term Scenario: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.
Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p>For our next Webinar, we are excited to host Insight Provider <a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" data-smartkarma-citation="accounts:4" rel="noopener">Sumeet Singh</a>, Head of IPOs &amp; Placements for Aequitas Research, to give us an overview of Equity Capital Markets activity during busy 1H21 and take us through the 2H21 pipeline, highlighting IPOs to look out for.</p><div><h3>The webinar will be hosted on Wednesday, 28 July 2021, 17:00 SGT/HKT.</h3></div><div>
<div><div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=83136671874" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div></div>
<p>Sumeet Singh is Head of IPOs &amp; Placements for Aequitas Research. Aequitas covers all IPOs and Placements across Asia-Pacific with a deal size of at least US$100m. As of June 2021, the team had covered 581 IPOs with a hit rate of 73.8% and 752 placements with a hit rate of 67.6%. Prior to Aequitas, Sumeet was heading Content Strategy for Smartkarma, along with covering IPOs &amp; Placements, and in an earlier life covered ASEAN property and the banking space in India.</p>
</div>

For our next Webinar, we are excited to host Insight Provider Sumeet Singh, Head of IPOs &amp; Placements for Aequitas Research, to give us an overview of Equity Capital Markets activity during busy 1H21 and take us through the 2H21 pipeline, highlighting IPOs to look out for.The webinar will be hosted on Wednesday, 28 July 2021, 17:00 SGT/HKT.
Register for the Webinar here
Sumeet Singh is Head of IPOs &amp; Placements for Aequitas Research. Aequitas covers all IPOs and Placements across Asia-Pacific with a deal size of at least US$100m. As of June 2021, the team had covered 581 IPOs with a hit rate of 73.8% and 752 placements with a hit rate of 67.6%. Prior to Aequitas, Sumeet was heading Content Strategy for Smartkarma, along with covering IPOs &amp; Placements, and in an earlier life covered ASEAN property and the banking space in India.


China

XPeng Inc. designs, produces, and distributes electric vehicles. The Company designs, develops, manufactures and markets smart smart electric vehicles, as well as finance, parts, and maintenance services. XPeng serves customers in China.

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XPeng (XPEV US)

Li Auto Secondary Listing: Volts Wagons

Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. Li Auto’s fundamentals and...

Arun George

Li Auto HK Listing - Needs to Be Done at Discount Given XPeng’s Poor Debut

Li Auto Inc. (LI US) is looking to raise up to US$1.5bn via a dual primary listing in Hong Kong. News of Chinese EVs exploring their Hong Kong...

Zhen Zhou, Toh

Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends

Xpeng (9868 HK) could be added to the HSCEI in December. Limited liquidity in HK could create arb opportunities with XPEV US. Xpeng index inclusion...

Brian Freitas

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making

TSP is a U.S. domiciled American company, with the U.S. as its core value creation center. However, its China-centric narrative did not help as the...

Henry Kwon

Smartkarma Webinar | 2021 IPO Pipeline

On July 28, 5PM SGT, join us and Sumeet Singh, Head of IPOs & Placements for Aequitas Research, for an overview of 2021's IPO pipeline with an...

Smartkarma Research

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