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

<a href="https://www.smartkarma.com/entities/huifu-payment-ltd" target="_blank" data-smartkarma-citation="entities:27145:1" rel="noopener">Huifu Payment Limited (1806 HK)</a> is a leading Chinese independent third-party payment service provider which listed on 15 June 2018 to raise net proceeds of HK$1,592.5 million ($205 million) at a market cap of HK$9,386 ($1.2 billion). However, the IPO proved to be disastrous with the shares never trading above the IPO price. On Wednesday, Huifu announced a management-led privatisation offer. The offer includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative (2.709677 new shares in the offeror per scheme share). The cash offer price of HK$3.50 per share is a 26.81% premium to the last trading price of HK$2.76 per share (17 December prior to the trading halt). However, the cash offer price is 53% below the IPO price of HK$7.50 per share. <div class="content-highlight">The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 229.6 million shares or 17.61% of shares outstanding. Disinterested scheme shareholders represent 1,073.6 million shares or 82.39% of shares outstanding which implies the 10% blocking stake is 107.4 million shares or 8.24% of shares outstanding. Due to the combination of the irrecovables and the opportunity for shareholders to exit a poorly performing IPO investment, we believe that the privatisation bid will succeed.  </div>

Huifu Payment Limited (1806 HK) is a leading Chinese independent third-party payment service provider which listed on 15 June 2018 to raise net proceeds of HK$1,592.5 million ($205 million) at a market cap of HK$9,386 ($1.2 billion). However, the IPO proved to be disastrous with the shares never trading above the IPO price. On Wednesday, Huifu announced a management-led privatisation offer. The offer includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative (2.709677 new shares in the offeror per scheme share). The cash offer price of HK$3.50 per share is a 26.81% premium to the last trading price of HK$2.76 per share (17 December prior to the trading halt). However, the cash offer price is 53% below the IPO price of HK$7.50 per share. The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 229.6 million shares or 17.61% of shares outstanding. Disinterested scheme shareholders represent 1,073.6 million shares or 82.39% of shares outstanding which implies the 10% blocking stake is 107.4 million shares or 8.24% of shares outstanding. Due to the combination of the irrecovables and the opportunity for shareholders to exit a poorly performing IPO investment, we believe that the privatisation bid will succeed.  

Huifu Payments’ Management Led Privatisation Bid

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

Many investors worried about a few things on <a href="https://www.smartkarma.com/entities/my-eg-services-bhd" target="_blank" data-smartkarma-citation="entities:19765:1" rel="noopener">My E.G. Services (MYEG MK)</a> including ties with the previous administration that will potentially cause loss of concession (corporate governance), and whether earnings stability is sustainable. 
The company's valuation is still undervalued compared to its peers when the management has taken a dynamic and active approach to launch new initiatives such as online groceries and health screening services for COVID-19. 
Investors should book some profit on the recent share price strengthening but I will suggest selling a part or 50% of the current position as the company and management offers an excellent long-term prospect across the market cycle and when the hype is done and stock will weaken a little, take that opportunity for a better entry point. 
This insight is labeled as bearish to reflect the action that investors should take given the share price increase. The insight provider is still bullish on the long-term's company's prospect.

Many investors worried about a few things on My E.G. Services (MYEG MK) including ties with the previous administration that will potentially cause loss of concession (corporate governance), and whether earnings stability is sustainable. 
The company's valuation is still undervalued compared to its peers when the management has taken a dynamic and active approach to launch new initiatives such as online groceries and health screening services for COVID-19. 
Investors should book some profit on the recent share price strengthening but I will suggest selling a part or 50% of the current position as the company and management offers an excellent long-term prospect across the market cycle and when the hype is done and stock will weaken a little, take that opportunity for a better entry point. 
This insight is labeled as bearish to reflect the action that investors should take given the share price increase. The insight provider is still bullish on the long-term's company's prospect.

MYEG: Vaccine and Concession - Worries Unfounded

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.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/yeahka-limited" target="_blank" data-smartkarma-citation="entities:28436:1" rel="noopener">Yeahka Limited (9923 HK)</a> is looking to raise about US$100m from a top-up placement and, concurrently, Longwood Capital is looking to sell 3.8m shares. This is likely a cleanup trade for Longwood Capital.In total, the deal size is about US$125m and the total shares offered represents 5.5% of total enlarged outstanding shares.We have previously covered the IPO in:<ul>
<li><a href="https://www.smartkarma.com/insights/yeahka-pre-ipo-review-growing-in-an-increasingly-competitive-space" target="_blank" rel="noopener">Yeahka (移卡) Pre-IPO Review - Growing in an Increasingly Competitive Space</a></li>
<li>
<a href="https://www.smartkarma.com/insights/yeahka-pre-ipo-phip-updates-and-peer-valuation" target="_blank" data-smartkarma-citation="insights:39253" rel="noopener">Yeahka (移卡) Pre-IPO - PHIP Updates and Peer Valuation</a> </li>
<li><a href="https://www.smartkarma.com/insights/yeahka-pre-ipo-peer-analysis-and-early-thoughts-on-valuation" target="_blank" rel="noopener">Yeahka (移卡) Pre-IPO - Peer Analysis and Early Thoughts on Valuation</a></li>
<li>
<a href="https://www.smartkarma.com/insights/yeahka-ipo-expensive-small-payments-player" target="_blank" data-smartkarma-citation="insights:39566" rel="noopener">Yeahka (移卡) IPO - Expensive Small Payments Player</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/yeahka-trading-update-max-claw-back-triggered-again" target="_blank" data-smartkarma-citation="insights:39867" rel="noopener">Yeahka (移卡) Trading Update - Max Claw Back Triggered Again</a> </li>
</ul>

Yeahka Limited (9923 HK) is looking to raise about US$100m from a top-up placement and, concurrently, Longwood Capital is looking to sell 3.8m shares. This is likely a cleanup trade for Longwood Capital.In total, the deal size is about US$125m and the total shares offered represents 5.5% of total enlarged outstanding shares.We have previously covered the IPO in:
Yeahka (移卡) Pre-IPO Review - Growing in an Increasingly Competitive Space

Yeahka (移卡) Pre-IPO - PHIP Updates and Peer Valuation 
Yeahka (移卡) Pre-IPO - Peer Analysis and Early Thoughts on Valuation

Yeahka (移卡) IPO - Expensive Small Payments Player 

Yeahka (移卡) Trading Update - Max Claw Back Triggered Again 


Yeahka (移卡) Placement - Selling Just as Lock-Up Expires

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

The role of lock-ups in IPOs is, as one journal <a href="https://www.jstor.org/stable/1262724?seq=1" target="_blank" rel="noopener">put it</a>, a "commitment device to alleviate moral hazard problems".
Lock-ups can be entered into and negotiated with underwriters, as is the case for secondary listings for <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, amongst others. For primary listings in Hong Kong, there are standard rules as to the lock-up duration.
According to <a href="https://en-rules.hkex.com.hk/rulebook/1007-0" target="_blank" rel="noopener">Main Board Rule 10.07(1)</a> (or <a href="https://en-rules.hkex.com.hk/rulebook/1316a" target="_blank" rel="noopener">GEM rule 13.16A(1)</a>), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, shall not (apart from any offer of shares for sale discussed in the listing document):
<ol>
<li>dispose of shares (nor enter into agreements) in a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder is made in the listing document and ending on the date which is 6 months from the date of listing (the “First Six-month Period”); and</li>
<li>dispose of shares in the period of 6 months commencing on the date on which the First Six-month Period expires, if immediately following such disposal that person or group of persons would cease to be a controlling shareholder (the “Second Six-month Period”).</li>
</ol>
An example of such wording can be found in Yadong's Group (1795 HK)'s (the most recent Main Board listing) "<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/9515120/2020111700040.pdf" target="_blank" rel="noopener">Share Offer - Announcement of allotment results</a>".
For cornerstone investors, the following is often stated in the share offer document:
<blockquote>
Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date, dispose of any of the Offer Shares it has purchased pursuant to the relevant Cornerstone Investment Agreement, save for certain limited circumstances ...
</blockquote>
Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 
Large movement(s) concerning recently listed companies are likely lock-up related. 
This insight looks at companies that have been listed for nearly six months or 12 months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially depressing prices and creating an overhang.
A summary of Main Board listings in 2020 is attached at the bottom of this insight.

The role of lock-ups in IPOs is, as one journal put it, a "commitment device to alleviate moral hazard problems".
Lock-ups can be entered into and negotiated with underwriters, as is the case for secondary listings for NetEase (9999 HK), JD.com (HK) (9618 HK), amongst others. For primary listings in Hong Kong, there are standard rules as to the lock-up duration.
According to Main Board Rule 10.07(1) (or GEM rule 13.16A(1)), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, shall not (apart from any offer of shares for sale discussed in the listing document):

dispose of shares (nor enter into agreements) in a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder is made in the listing document and ending on the date which is 6 months from the date of listing (the “First Six-month Period”); and
dispose of shares in the period of 6 months commencing on the date on which the First Six-month Period expires, if immediately following such disposal that person or group of persons would cease to be a controlling shareholder (the “Second Six-month Period”).

An example of such wording can be found in Yadong's Group (1795 HK)'s (the most recent Main Board listing) "Share Offer - Announcement of allotment results".
For cornerstone investors, the following is often stated in the share offer document:

Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date, dispose of any of the Offer Shares it has purchased pursuant to the relevant Cornerstone Investment Agreement, save for certain limited circumstances ...

Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 
Large movement(s) concerning recently listed companies are likely lock-up related. 
This insight looks at companies that have been listed for nearly six months or 12 months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially depressing prices and creating an overhang.
A summary of Main Board listings in 2020 is attached at the bottom of this insight.

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.

<ul>
<li>Boqii is one of the largest pet-focused platforms in China who offers a one-stop destination for pet parents to get everything they need for their pets including pet food, toys, vitamins and toiletries. The company operates an online platform as well as an offline retail network.</li>
<li>The company has filed for an IPO in the US and has a placeholder indication to raise US$115m and plans to use part of the IPO proceeds on further enhancing content, R&amp;D, big data technology and develop private label brands.</li>
<li>China’s pet economy is still in its infant stages as the market is significantly underpenetrated and this presents a huge potential for industry participants. The young millennials are driving the growth in the market and the pet goods retail market is shifting largely towards online channels in the country.</li>
<li>Boqii earns a majority of its revenue through online platforms (self-operated Boqii Mall and other third-party platforms) and at the same time, the third-party platforms bring in almost two-third of the company’s revenues.</li>
<li>The online pet good retail market in China is highly competitive and are dominated by large and established online retail platforms, including generic e-commerce platforms.</li>
<li>In this insight, we examine the company’s business model, the industry and the revenue channels. Boqii is the largest pet-focused online retail platform in China and the company has taken several initiatives including M&amp;A deals to expand its presence in the market. The company is operating in a growing market and it seems that the company has a strong business model.</li>
<li>In a follow-up insight, we will be discussing the company’s financials (revenue, margins and balance sheet) in detail.</li>
</ul>


Boqii is one of the largest pet-focused platforms in China who offers a one-stop destination for pet parents to get everything they need for their pets including pet food, toys, vitamins and toiletries. The company operates an online platform as well as an offline retail network.
The company has filed for an IPO in the US and has a placeholder indication to raise US$115m and plans to use part of the IPO proceeds on further enhancing content, R&amp;D, big data technology and develop private label brands.
China’s pet economy is still in its infant stages as the market is significantly underpenetrated and this presents a huge potential for industry participants. The young millennials are driving the growth in the market and the pet goods retail market is shifting largely towards online channels in the country.
Boqii earns a majority of its revenue through online platforms (self-operated Boqii Mall and other third-party platforms) and at the same time, the third-party platforms bring in almost two-third of the company’s revenues.
The online pet good retail market in China is highly competitive and are dominated by large and established online retail platforms, including generic e-commerce platforms.
In this insight, we examine the company’s business model, the industry and the revenue channels. Boqii is the largest pet-focused online retail platform in China and the company has taken several initiatives including M&amp;A deals to expand its presence in the market. The company is operating in a growing market and it seems that the company has a strong business model.
In a follow-up insight, we will be discussing the company’s financials (revenue, margins and balance sheet) in detail.


Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms

China

Yeahka is a leading payment-based technology platform that provides one-stop payment services and technology-enabled business services to merchants and consumers. Its offerings include aggregated QR code payment solutions, merchant Software-as-a-Service (SaaS) products for digital operations, precision marketing, and in-store e-commerce services. The company was founded in Shenzhen, China, in 2011.

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Yeahka (9923 HK)

Huifu Payments’ Management Led Privatisation Bid

Huifu announced a privatisation offer which includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative. We believe that...

Arun George

MYEG: Vaccine and Concession - Worries Unfounded

Many investors worried about a few things on My E.G. including ties with the previous government that will cause loss of concession (corporate...

Henry Soediarko

Yeahka (移卡) Placement - Selling Just as Lock-Up Expires

Yeahka is looking to raise about US$100m from a top-up placement. Concurrently, Longwood Capital is looking to sell 3.8m shares. This is likely a...

Zhen Zhou, Toh

Hong Kong IPOs: Lock-Up Expiries

A look at companies that have been listed for nearly six/12 months, as a guide to when insiders/controlling shareholders are permitted to sell,...

David Blennerhassett

Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms

Boqii is one of the largest pet-focused platforms in China who offers a one-stop destination for pet parents to get everything they need for their...

Shifara Samsudeen, FCMA, CGMA

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