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 19 May, <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a> emerged as the successful bidder for <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>As SAIC will hold 30%+ of the voting rights, it will result in an MGO at a price not less than the auction price of HK$1.294 per H Share.</li>
<li>Dongzheng shares remain in a trading halt. The equity interest will transfer to SAIC and the MGO launched when the Shanghai Financial Court issues an auction sale judgment. </li>
</ul>


On 19 May, SAIC Motor (600104 CH) emerged as the successful bidder for China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK).
As SAIC will hold 30%+ of the voting rights, it will result in an MGO at a price not less than the auction price of HK$1.294 per H Share.
Dongzheng shares remain in a trading halt. The equity interest will transfer to SAIC and the MGO launched when the Shanghai Financial Court issues an auction sale judgment. 


SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming

<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

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/cartrade-tech-ltd" target="_blank" data-smartkarma-citation="entities:33474:1" rel="noopener">Cartrade (0056989Z IN)</a> is a leading online destination for auto consumers in India. CarWale and BikeWale, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. <div class="content-highlight">The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.</div>

Cartrade (0056989Z IN) is a leading online destination for auto consumers in India. CarWale and BikeWale, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.

CarTrade Tech IPO Initiation: Shifting Gears

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> has been a shining example of what can be achieved through both Operating- and Financial leverage as a business scales up. This has been a commendable performance by its management team over the past nearly a decade, balancing gains from operating and financial leverage, whilst prudently, yet aggressively, investing in growth. Over the past 8 years it has delivered expansion at the Gross margin level (through mix change to advertising revenue and scale in 1P), the Operating margin level (lower losses in 3P), and the net margin level (cash generation and lower losses from associates). With lingering concerns around short-term margin expansion, as the group invests more aggressively in group purchasing aimed at the fresh food segment, in this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest direct retailer.

JD.com Inc. (9618 HK) has been a shining example of what can be achieved through both Operating- and Financial leverage as a business scales up. This has been a commendable performance by its management team over the past nearly a decade, balancing gains from operating and financial leverage, whilst prudently, yet aggressively, investing in growth. Over the past 8 years it has delivered expansion at the Gross margin level (through mix change to advertising revenue and scale in 1P), the Operating margin level (lower losses in 3P), and the net margin level (cash generation and lower losses from associates). With lingering concerns around short-term margin expansion, as the group invests more aggressively in group purchasing aimed at the fresh food segment, in this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest direct retailer.

JD.com: A Detailed Look at Long-Term Margins and Valuation

Autohome Inc (Adr) / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/autohome-inc-adr" target="_blank" data-smartkarma-citation="entities:20234:1" rel="noopener">Autohome Inc (Adr) (ATHM US)</a> has launched a $1 billion secondary listing in Hong Kong. The primary/secondary spilt of the offer is 66.7%/33.3%. The selling shareholder is Yun Chen which is a non-wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a>.In <a href="https://www.smartkarma.com/insights/autohome-secondary-listing-motoring-online" target="_blank" data-smartkarma-citation="insights:48751" rel="noopener">Autohome Secondary Listing: Motoring Online</a> outlined our views on Autohome’ fundamentals and valuation. The H shares will be priced on 9 March (Tuesday) and are scheduled for listing on 15 March.  <div class="content-highlight">In this note, we will look at Autohome’s potential HK-ADS premium/(discount). Autohome will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. Overall, we think that Autohome pricing its H-shares around a 2% discount to its ADSs will be reasonable.</div>

Autohome Inc (Adr) (ATHM US) has launched a $1 billion secondary listing in Hong Kong. The primary/secondary spilt of the offer is 66.7%/33.3%. The selling shareholder is Yun Chen which is a non-wholly-owned subsidiary of Ping An Insurance Group Co Of China (601318 CH).In Autohome Secondary Listing: Motoring Online outlined our views on Autohome’ fundamentals and valuation. The H shares will be priced on 9 March (Tuesday) and are scheduled for listing on 15 March.  In this note, we will look at Autohome’s potential HK-ADS premium/(discount). Autohome will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. Overall, we think that Autohome pricing its H-shares around a 2% discount to its ADSs will be reasonable.

Autohome Secondary Listing: HK-ADS Premium/(Discount) Views

China

Yixin Group Limited offers an online automobile finance transaction platform. The Company provides loan facilitation, car rental, and other services. Yixin Group operates in China.

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Yixin Group (2858 HK)

SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming

SAIC, the successful bidder, will hold 30%+ of the voting rights, requiring an MGO at a price not less than the auction price of HK$1.294. Shares...

Arun George

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

CarTrade Tech IPO Initiation: Shifting Gears

CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India. Overall, we think that CarTrade is an attractive play on India’s...

Arun George

JD.com: A Detailed Look at Long-Term Margins and Valuation

In this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest...

Wium Malan, CFA

Autohome Secondary Listing: HK-ADS Premium/(Discount) Views

Autohome will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. We think that a 2% discount...

Arun George

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