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

Shanghai Dongzheng Automotive Finance / Event-Driven

Shanghai Dongzheng Automotive Finance (DAF HK)

<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

<p><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. <em>CarWale</em> and <em>BikeWale</em>, 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%). </p><p>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.  </p><p>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. </p><div class="content-highlight"><p>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.</p></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

<p><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). </p><p>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.</p>

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

<p><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>.</p><p>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.  </p><div class="content-highlight"><p>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.</p></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

<p><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> is a leading online destination for auto consumers in China, ranking first among automotive service platforms as measured by mobile daily active users as of 31 December 2020 according to QuestMobile. Autohome passed its Hong Kong listing committee hearing and could raise up to $1 billion through a secondary listing, according to press reports. </p><div class="content-highlight"><p>Autohome joins the second wave of Hong Kong secondary listings set to hit the screens in the coming months. Autohome like several companies which pursued secondary listings in the past, does not require the funds as its cash-rich and highly cash generative. Autohome is an attractive equity story as it is a leading online auto platform that can capitalise on the opportunities presented by China’s recovering auto market, in our view. </p></div>

Autohome Inc (Adr) (ATHM US) is a leading online destination for auto consumers in China, ranking first among automotive service platforms as measured by mobile daily active users as of 31 December 2020 according to QuestMobile. Autohome passed its Hong Kong listing committee hearing and could raise up to $1 billion through a secondary listing, according to press reports. Autohome joins the second wave of Hong Kong secondary listings set to hit the screens in the coming months. Autohome like several companies which pursued secondary listings in the past, does not require the funds as its cash-rich and highly cash generative. Autohome is an attractive equity story as it is a leading online auto platform that can capitalise on the opportunities presented by China’s recovering auto market, in our view. 

Autohome Secondary Listing: Motoring Online

Hong Kong

Yixin Group operates as an online automobile finance transaction platform in China. It provides auto loans, financing leases, and fintech/SaaS services to consumers and dealerships. The company was founded in 2014 and is headquartered in Shanghai, China.

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Yixin (2858 HK)

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

Autohome Secondary Listing: Motoring Online

Autohome passed its HK listing hearing for a $1 billion secondary listing. Autohome is an attractive equity story that can capitalise on the...

Arun George

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