Category

Consumer

Consumer: Crown Resorts, China Meidong Auto, Cloud Village, Xpeng, Varun Beverages Ltd, Tunas Baru Lampung and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Crown Resorts (CWN AU): Oaktree’s Intriguing Proposal
  • FTSE GEIS Sep Index Rebalance Preview: China To See A Lot of Change
  • Cloud Village (NetEase Music) Pre-IPO – Was in the Slow Stream, Playing Catch-Up
  • Xpeng: P5 Gets Ready for Sale, Potential New Versions Widen Target Market
  • Company Update:Varun Beverages
  • Morning Views Asia: China Aoyuan Property, Tunas Baru Lampung

Crown Resorts (CWN AU): Oaktree’s Intriguing Proposal

By David Blennerhassett

On the 19 April, Oaktree made an $3bn unsolicited proposal to CWN’s board via a then-undetermined debt/equity structure.

The transaction was geared to buy James Packer 37% stake in CWN via “a structured instrument with the proceeds to be used by Crown to buy back some or all of the Crown shares” held by his Packer’s private company, Consolidated Press Holdings (CPH).

It was hardly a clean counter to Blackstone’s cash Offer of $11.85/share. And questions remained as to size of the equity stake and the facility’s interest rate. 

Blackstone subsequently increased its non-binding proposal for CWN by 4% on the 4 May to $12.35. Shortly after, Crown’s domestic rival Star Entertainment Grp (SGR AU) lobbed a non-binding proposal, by way of a Scheme, either via the issuance of 2.68 new Star shares for every Crown share, or a possible cash alternative of A$12.50/share, subject to clawback.

Crown summarily concluded  Blackstone’s Offer undervalued the company, but it required more information from Star to finalise its decisions. There was no comment on Oaktree’s offer.

The New News

This morning Oaktree bumped its proposal/facility to $3.1bn, incorporating a 2bn private term loan and a $1.1bn loan convertible into new shares. 

The facility would be used to selectively buyback CPH’s shares in CWN.

The convertible would be convertible into new shares of CWN at A$13/share, with such conversion capped at 9.99% of Crown’s outstanding shares.

It’s an interesting proposition. Plus it sticks a $13/share handle out there.

More below the fold.


FTSE GEIS Sep Index Rebalance Preview: China To See A Lot of Change

By Brian Freitas

FTSE Russell will announce the changes to the Global Equity Index Series (GEIS) as a part of the September 2021 semi-annual index review (SAIR) on 20 August and the changes will be effective after the close of trading on 17 September.

The SAIR uses price data from the close of trading on 30 June to calculate the market cap to be used in determining the list of inclusions and exclusions, while liquidity testing covers the period from 1 July 2020 to 30 June 2021.

Expected upward migrations from the All-Cap to the All-World index include Hangzhou Silan Microelectronics Co., (600460 CH), Shimge Pump Industry Group (002532 CH), Hygeia Healthcare Group (6078 HK), Wuxi Shangji Automation Co-A (603185 CH), Akeso Biopharma Inc (9926 HK), Shanxi Taigang Stainless A (000825 CH), 360 Finance, Inc. (QFIN US), Joinn Laboratories China Co-A (603127 CH), China Meidong Auto (1268 HK), Jinke Smart Services (9666 HK) and China Education Group (839 HK).

Expected downward migrations from the All-World to the All-Cap index include Beijing Lanxum Technology A (300010 CH), Hangzhou Century Co Ltd A (300078 CH), Thaihot Group Co Ltd A (000732 CH) and Zhejiang Wanma Co Ltd A (002276 CH).

Evergrande Property Services (6666 HK) is an expected inclusion following the lock-up expiry on 1 June and the share placement.

We expect quite a few STAR Board stocks to be included in the GEIS following their inclusion in the SSE180 and SSE380 indices and consequent inclusion in Stock Connect. Potential inclusions to the All-World index are Beijing Kingsoft Office Software-A (688111 CH), Shenzhen Transsion Holding-A (688036 CH), Beijing Roborock Technology-A (688169 CH), Advanced Micro-Fabrication Equipment-A (688012 CH), National Silicon Industry Group-A (688126 CH), Autel Intelligent Technology-A (688208 CH) and Shanghai Friendess Electronic (688188 CH), while potential inclusions to the All-Cap index are Shanghai Medicilon Inc (688202 CH), Zhejiang Orient Gene Biotech-A (688298 CH), Arcsoft Corp Ltd (688088 CH) and Brightgene Bio-Medical Tec-A (688166 CH).

Following President Biden’s Executive Order, there will be stocks deleted from the FTSE (and MSCI) indices in July to comply with the order.


Cloud Village (NetEase Music) Pre-IPO – Was in the Slow Stream, Playing Catch-Up

By Sumeet Singh

Cloud Village (CLV HK) (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu (BIDU US) and Alibaba Group (BABA US), along with other investors.

As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. 

CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020.

However, it remains a distant second player in the market and has yet to make a profit.


Xpeng: P5 Gets Ready for Sale, Potential New Versions Widen Target Market

By Victoria Li

From latest post on MIIT, we noticed Xpeng has applied for permits to sell P5 and N5 models for sale in the market. P5 has been well anticipated by the market, while N5 has not been mentioned in public before. Based on the posted information, this N5 looks like a reduced autonomous driving function version of P5. It might have lower price and target to potential customers who care less about autonomous driving functions than exterior interior design and price.

We estimate the MSRPs and tech specifications of Xpeng P5 and N5 would be announced for sales in July. By targeting to customers with different preferences, monthly sales of P5 and N5 might reach at least 5,000 units, in our view.

Reiterate BUY.


Company Update:Varun Beverages

By Axis Direct

At CMP, the stock trades at 14.7x EV/EBITDA CY23E which is attractive in our view. Maintain a BUY rating with a revised TP of Rs 900/share. Key Risks to our call are a) Resurgence of covid-19 cases, b) Likelihood of the 3rd wave and consequent lockdowns, and c) Sudden spike in RM prices.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Morning Views Asia: China Aoyuan Property, Tunas Baru Lampung

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.


Before it’s here, it’s on Smartkarma

Consumer: Nayuki Holdings, giftee Inc, China Tourism Group Duty Free Corp Ltd, Chongqing Changan Automobile-A, MercadoLibre Inc, Sun Tv Network and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Nayuki Holdings IPO: Valuation First-Look
  • Japan Small Cap Growth: Giftee (4449) – Q1 Wrap
  • CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO
  • Nayuki IPO: Not Our Cup of Tea
  • Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price
  • MercadoLibre:  The Jewel in the Latam Crown
  • Sharp cost savings in a weak environment aid earnings

Nayuki Holdings IPO: Valuation First-Look

By Arun George

Nayuki Holdings (NYK HK) is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC. It is pre-marketing an HKEx IPO to raise up to $500 million, according to press reports.

In Nayuki Holdings IPO Initiation: A New Leaf, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market.

In Nayuki Holdings IPO: Drinking Habits, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play. In this note, we take the first look at Nayuki’s potential valuation. 


Japan Small Cap Growth: Giftee (4449) – Q1 Wrap

By Mark Chadwick

  • Giftee’s stock price rose 20 percent after strong 1Q results were announced in mid-May. Since then, the stock has fallen back to its 200-day moving average. Now is a good time to revisit the name
  • Giftee for Business remains the primary revenue generator as record numbers of companies join the platform, resulting in a 50% growth in the number of marketing campaigns. 
  • Giftee is a leading distributor of e-gifts for individuals, corporations, and local governments in Japan. As offline activities move online, e-gifts are likely to see continued growth.  

CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO

By Osbert Tang, CFA

We believe China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) will maintain its solid sales momentum in 2Q21, given the positive Hainan duty free sales figures (estimated monthly average of Rmb5bn in Apr and May) as released by the Department of Commerce and good tourist arrival trend in Apr (-1.3% MoM, vs. -13.1% MoM in Apr 2019). We also project an EPS CAGR of 49.2% between FY20 and FY23 with ROE of over 40% consistently.

CTG Duty Free’s Board has approved its proposed H-share issue, with new shares to be issued amounting to 9.2% of existing capital (including greenshoe). We estimate that the issue may raise HK$47-66bn, making it one of the largest IPOs in Hong Kong in this year.  In our view, the stock should attract good interests given its unique consumption exposure, leadership position and sizeable market capitalisation. 


Nayuki IPO: Not Our Cup of Tea

By Oshadhi Kumarasiri

We have a different take on the Nayuki Holdings (NYK HK) IPO to some of the other insight providers on the Smartkarma platform. We think Nayuki is trying to raise money through an IPO just as it approaches the tail end of the bubble tea and fruit tea growth trends that started in 2014-15. We also think that bubble tea and fruit tea lack the ability to encourage consumers to make regular purchases, making them less profitable than coffee, which encourages consumers to walk into coffee shops daily.


Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price

By Victoria Li

We believe Chongqing Changan’s share price has overshot compared to its fundamental outlook. Its local brand contributed first positive operating profit in 1Q2021, which is exciting. However its 24x.3 P/E on 2021E Bloomberg consensus has fully priced in this positive. 

Current valuation may also have priced in positive effect from Changan’s planned brand new EV model with HI(Huawei Inside) system, which is still at very initial stage; and possible IPOs of Avetar Technology (previously known as Changan NIO) and Changan New Energy, whose business plans are still very blurry.

Fundamentally, earnings outlook for Changan Ford, Chongqing Changan’s key earnings contributor, is unclear. Changan Ford’s Acceleration plan started in 2019 would not be able to bring this company’s earnings back to a reasonable level by the end of 2021. While its outlook for the next three years is unclear after latest leadership change.


MercadoLibre:  The Jewel in the Latam Crown

By Steven Holden

MercadoLibre Inc (MELI US) is the most widely held stock in the South American region among active Global managers. 

Though the majority of funds hold less than 1% in MercadoLibre Inc (MELI US) , there are those who hold significantly more, led by Loomis Sayles Global Growth (5.34%) and MFAM Global Opportunities (5.23%).  

The trajectory of ownership growth is tracking a similar path to stocks such as Facebook Inc A (FB US) , Tencent (700 HK) and Alibaba Group (BABA US), who were at a similar point to MercadoLibre Inc (MELI US) some 5-6 years ago.  If the path of returns follows any one of those 3 stocks, then MercadoLibre Inc (MELI US) is one to hold.

Taken from our Global fund research, covering 378 strategies with AUM of $1.1tr.


Sharp cost savings in a weak environment aid earnings

By Motilal Oswal

Production costs were up 23% YoY on the low base of 4QFY20. However, tight cost measures in employee/SG&A; (down 8%/17%) kept the overall operating cost flattish (up just 1.5%). EBITDA subsequently improved 9% YoY to INR5.5b (in-line); EBITDA margins stood at 69.9% (up 140bps YoY). Net profits were flattish (up 2% YoY) at INR4.5b (6% above estimate) on…

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Before it’s here, it’s on Smartkarma

Consumer: Nayuki Holdings, DiDi Chuxing, NIO Inc, ROBLOX Corp, Sun Tv Network, Ozon Holdings PLC and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Nayuki (奈雪) Pre-IPO – Forecast and Thoughts on Valuation
  • ECM Weekly (13th June 2021) – Didi, AiHuiShou, Dingdong Maicai, MissFresh, Full Truck, Nayuki
  • NIO: ES8 Gets Certified as a Prelude to Its Norway Entry in September
  • TMT Weekly:  3 Things that Stood Out The Week of 6/11/​​​​​​2021
  • Sun TV Network
  • Ozon Holdings: Investment Thesis Confirmed After Q1 Results

Nayuki (奈雪) Pre-IPO – Forecast and Thoughts on Valuation

By Zhen Zhou, Toh

Nayuki Holdings (NYK HK) is looking to raise US$500m in its upcoming Hong Kong IPO. 

Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.

We had previously covered the IPO in:


ECM Weekly (13th June 2021) – Didi, AiHuiShou, Dingdong Maicai, MissFresh, Full Truck, Nayuki

By Zhen Zhou, Toh

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

It was a busy week for the ECM space where multiple IPOs were filed the past week. Topping in deal size was Didi Chuxing. The company is looking to raise up to US$10bn in the US which would be one of the largest IPOs globally this year. We published a preliminary tearsheet discussing their background, financial overview, along with a follow-up piece looking at the revenue accounting and touching on valuations: 

On-demand e-commerce and groceries firms, Dingdong Maicai and MissFresh, both filed for their US IPO, looking to raise US$500m. We initiated coverage on these two firms and compared their performance. 

Boutique hotel operator, Atour Lifestyle Holdings, also filed for its US$300m IPO in the US. There were two new filings in India namely, integrated diagnostics chain Vijaya Diagnostic Centre, and component manufacturer, Sansera Engineering, where both are seeking US$225m and US$200m, respectively. This is the latter’s second attempt to go public.

Hong Kong’s new IPO filings this week include surgical robotic solutions, Microport Medbot, Chinese medicine clinic chain, Gushengtang, and pharmacy chain, Quanyuantang Pharmacy,looking to raise US$1bn, US$400m, US$300m, respectively.

For ongoing IPOs, in the U.S, AiHuiShou launched its bookbuild on Friday. The company is looking to raise up to US$243m, which is significantly lower than the US$500 – 1bn deal size that was reported earlier. 

In Hong Kong, Clear aligner player, Angelalign, closed its books a day earlier and was priced at the top end. The deal raised US$375m and comes off the back of overwhelming demand from institutional and retail investors. Shares will debut on Wednesday. 

PAG-backed dairy producer, China Youran Dairy, launched their bookbuild over the week and was priced at the bottom end. Shares will begin trading on Friday. 

Biopharmeceutical company, CARsgen, closed its books early and was reportedly priced at the top end, where nine cornerstones took up 58% of the deal. Shares will also debut on Friday. 

Online recruitment platform, Kanzhun, priced its IPO at the top-end and almost doubled on its Friday debut, closing 95% higher. This brought an end to the China ADR listing slump.

For upcoming IPOs, we discussed forecasts, assumptions and valuation of digital freight platform, Full Truck Alliance.

Continuing our  coverage on Nayuki, we compared the company to industry and listed peers and shared our thoughts on assumptions and valuation. 

We also initiated on Keymed Biosciences Inc. The firm focuses on therapeutic areas of autoimmune and oncology and is seeking US$300m from its planned float. 

Ophthalmic medical services group, Chaoju Eye Care, and biopharmaceutical company, Hutchison Med, both secured listing approval for their respective US$300m and US$500m IPOs. The duo will begin pre-marketing next week. Our coverage from earlier:

Chinese property management companies, SCE Intelligent Commercial Management and Ronshine, are also currently in the midst of pre-marketing their respective US$300m and US$100m IPOs. 

In India, automotive technology company Sona Comstar launched its US$761m IPO (downsized from US$829m), where anchor books opened on Friday and the rest of the offer will last this coming Monday to Wednesday. This will be India’s first EV-related IPO..

We also followed up on the Holding Foreign Companies Accountable act, which seeks to stop China ADRs from being traded on the US exchanges. We discussed the implications in:

For placements, in Japan, semiconductor manufacturer, Renesas Electronics, raised US$3.6bn from a global follow-on. It was priced at a 3% discount to Wednesday’s close price. Books were multiple times oversubscribed, consisting of mainly long-only funds and sovereign wealth funds. 

Ganfeng Lithium raised US$628m in Hong Kong to fund capacity expansion plans and for potential investment. Shares were sold at a 5% discount to undisturbed price and closed 10.1% above deal price. 

Convertible bond holders of Pharmaron, sold shares to hedge their exposure, raising just US$67m (initially US$125m). It has since traded higher to close 10.6% above deal price on Friday. 

Up Fintech (Tiger Brokers) raised US$159min its follow-on offering. Shares were priced at 2.35% discount to undisturbed price and have since traded higher to close 16.4% above deal price on Friday. 

Accuracy Rate:

Our overall accuracy rate is 73.9% for IPOs and 67.6% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings this week

  • Microport Medbot (Hong Kong, US$1bn)
  • Gushengtang (Hong Kong, US$400m)
  • Chengdu Quanyuantang Pharmacy (Hong Kong, US$300m)
  • Vijaya Diagnostic Centre (India, US$225m)
  • Sansera Engineering (India, US$200m)
  • Didi Chuxing (US, US$10bn)
  • Dingdong Maicai (US, US$500m)
  • MissFresh (US, US$500m)
  • Atour Lifestyle Holdings (US, US$300m)

News on Upcoming IPOs

Hong Kong/China

US/China ADRs

India

Others

Analysis on Upcoming IPOs

NameInsight
Hong Kong
Anjuke

Anjuke Pre-IPO – Mixed (Positive and Negative) Developments 

Betta Pharma

Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 

Broncus

Broncus (堃博医疗) Pre-IPO: Big Potential to Be Tested 

ByteDance

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)

ByteDance

ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 

ByteDance

ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 

ByteDance

ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 

ByteDance

ByteDance (字节跳动) Pre-IPO – Globally the Most Downloaded App for Jan 2020 Driven by India 

ByteDance

ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 

Chaoju

Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive 

Dida

Dida Pre-IPO – Making Hay While Big Brother Retreats 

Dida

Dida Pre-IPO – Earnings Forecast and First Stab at Valuation 

Dida

Dida Pre-IPO – Peer Comparison – Lagging in Scale, Leading in Profitability 

Edding Grp

Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 

Edding Grp

Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 

Hanyu

Shanghai Hanyu (捍宇医疗) Pre-IPO: Not a Straight-A but Listing at Right Time 

Intco Med

Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 

Kilcoy

Kilcoy Global Foods Pre-IPO – Rapid Earnings Growth on the Back of Margin Improvement 

Kilcoy

Kilcoy Global Foods Pre-IPO – A Lot of Things Still Remain Unexplained 

Keymed

Keymed (康诺亚生物) Pre-IPO: Differentiated Products but Far from Commercialization 

Kindstar

Kindstar (康圣环球) Pre-IPO: Issues with Scalability 

Kindstar

Kindstar (康圣环球) Pre-IPO: Is It Worth the Premium? 

Novotech

Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation 

RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
SH Bio-heart Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
WeDoctor We Doctor (微医) Pre-IPO – Peer Comparison – Picking Its Battles Wisely 
WeDoctor We Doctor (微医) Pre-IPO – Forecasts, Early Thoughts on Valuation, and Acquisition Gripes 
Weilong Weilong Delicious Global Pre-IPO – The Positives – Fast Growth, Strong Backers 
Weilong Weilong Delicious Global Pre-IPO – The Negatives – Spicy Valuation 
WM Tech WM Tech Pre-IPO – Digitalization Efforts Coming Through but Not Well Substantiated 
India
Aadhar Housing Aadhar Housing Finance Pre-IPO – Decent past Growth but Comes with Weird Disclosures 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Sona Comstar Sona Comstar Pre-IPO – Inconsistent Growth, Patchy Disclosures 
Zomato Zomato Pre-IPO – Filings Lack Narrative, a Little Bit of History Helps 
Zomato Zomato Pre-IPO – Food Delivery Revenue Was Probably up 16x 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S.
Dingdong MC Dingdong Maicai Pre-IPO – Increasing Market Share, Fast Growth but No Signs of Profit 
ForU ForU Worldwide Pre-IPO – Mostly Negatives 
Full Truck All Full Truck Alliance Pre-IPO – The Positives – Category Leader 
Full Truck All Full Truck Alliance Pre-IPO – The Negatives – Still a Mixed Bag 
Hello Inc Hello Inc (哈罗出行) Pre-IPO – Nowhere near Being Sustainable 
MissFresh Missfresh Limited (每日优鲜) Pre-IPO – Worrying and Unsustainable Trend 
Soulgate Soulgate Pre-IPO – Unsustainable Virtual Connection 
Qiniu Qiniu Cloud (七牛云) Pre-IPO: PaaS Doesn’t Warrant a Premium 
Ximalaya Ximalaya Pre-IPO – The Positives – A Whole Lot of Listening 
Ximalaya Ximalaya Pre-IPO – The Negatives 
Ximalaya Ximalaya Pre-IPO – Peer Comparison 
Ximalaya Ximalaya Pre-IPO – Earnings Forecast and Valuation 
Ximalaya Ximalaya (XIMA): Has Large Market Share, But Small Competitors Have Big Bosses. 

NIO: ES8 Gets Certified as a Prelude to Its Norway Entry in September

By Henry Kwon

On June 11, Nio announced that it received European Whole Vehicle Type Approval (EWVTA) for the ES8, which will begin selling in Norway in September, with plans to expand to other parts of Europe thereafter. NIO’s shares closed at $45.68 (+6.83%) on the news on Friday.

NIO’s DNA as a marketer rather than OEM producer is likely to help. In any event, with strong domestic sales and improving financials, there is likely to be little fundamentally based impediments to NIO’s share price performance other than valuations or some unforeseen event until 2Q earnings release.

  • Bullish short term share price scenario: NIO broke through its 50% Fibonacci Retracement of $44.08 and 100 DMA of $43.89. If momentum remains strong, shares are likely to try to test its 38.2% Fibonacci Retracement of $49.49 this week.
  • Bearish short term share price scenario: RSI is now at 70, a level the shares have not seen since January 12-13 when they reached all-time high. A corrective pullback at this point would be healthy. The 100 DMA and the 50% Fibonacci Retracement which used to be resistance has now become support but if the shares fail to hold this level, the 10-day EMA of $42.18 and the 21-day EMA of $40.22 should be looked to as the next support zone.

A long term issue that NIO investors may not be recognizing at this point is the challenging nature of European market profitability for Asian brands. However, this is not something that is likely to come into play as a stock theme in the next 3 months for NIO in my view.


TMT Weekly:  3 Things that Stood Out The Week of 6/11/​​​​​​2021

By Aaron Gabin

Roblox got sued…thats great news…to us. Says the platform’s power is growing. Gamestop intriguing and IAC being IAC. 

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  


Sun TV Network

By ICICI Securities Limited

Sun TV, in its key market of Tamil, has improved its prime time fiction market share from 37% to 42% in the last three quarters, albeit it remains well below that earlier levels. The company envisages to take it to 50% in the medium term. Sun TV also intends to launch five to six shows including two big ticket shows (with total spend of Rs 50 crore for both shows) in Telugu and Malayalam in Q1FY22, which were delayed due to second wave that halted shootings. We expect the overall impact of the second wave and higher presence of local ad to push back ad revenue recovery.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Ozon Holdings: Investment Thesis Confirmed After Q1 Results

By Moat Investing

  • The number of orders reached 34.1 million (up 161% YoY);
  • GMV reached RUB 74.2 bln (up 135% YoY);
  • Adjusted EBITDA was RUB – 4.9 bln, equal to 6.5% of GMV, pretty much in line with Q1 2020 (RUB 4.5 bln equal to 14.2% of GMV) despite volumes.
  • Operating cash flow was RUB – 12.1 bln (RUB – 2.4 bln in Q1 2020).

Before it’s here, it’s on Smartkarma

Consumer: Snack Empire Holdings Ltd, Alibaba Group, Mitsubishi Shokuhin, Bata India Ltd, DiDi Chuxing and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Snack Empire: One of The Few Restaurant Businesses That I Would Own
  • Index Rebalance & ETF Flow Recap: KOSPI2, KQ150, R3000, STAR50, ASX200, KBANK, Alibaba, Exec Order
  • Japan’s Governance: TOB of Own Stock
  • Result Update:Bata India
  • DiDi Chuxing Pre-IPO – Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

Snack Empire: One of The Few Restaurant Businesses That I Would Own

By Steven Chen

  • I am reluctant to own a restaurant business;
  • But Snack Empire can be an exceptional hidden gem in this challenging space;
  • Given the high-quality fundamentals and attractive pricing, the stock can be a decent candidate for multi-bagger collectors.

Index Rebalance & ETF Flow Recap: KOSPI2, KQ150, R3000, STAR50, ASX200, KBANK, Alibaba, Exec Order

By Brian Freitas

In this weeks recap, we look at:

There have been large outflows from Korea focused ETFs during the week as well as the iShares MSCI Japan ETF (EWJ US), while inflows continue into the MSCI EM ex China ETF iShares MSCI Emerging Markets (EMXC US)

Events This Week

Click on the link under Detail to go to the Insight.

Date

Index

Detail

18 June

FTSE GEIS

18 June

FTSE China 50

18 June

FTSE China A50

18 June

FTSE Taiwan 50

18 June

KLCI

18 June

ASX 200

18 June

SENSEX


Japan’s Governance: TOB of Own Stock

By Aki Matsumoto

In my previous article, “Parent-Subsidiary Listing and Investment Strategy,” I pointed out that the parent company is likely to adopt such a management strategy because it can use its excess cash reserves to boost its profitability by making a highly profitable subsidiary a wholly owned subsidiary. In fact, in a previous article, “NTT Docomo TOB and Aftermath,” it was thought that the aforementioned management strategy would be effective for the parent company, NTT, but given the company’s history as a public company and the legal environment, there seemed hurdles that must be overcome to make NTT Docomo a wholly owned subsidiary, and it is not likely to be easy. However, the TOB was successful. In the unique Japanese practice of parent-subsidiary listings, there have been a number of moves to eliminate this practice. As I mentioned above, the conditions for a parent company to make a subsidiary its wholly owned subsidiary are (1) the subsidiary’s profitability is higher (than that of the parent company), and (2) the parent company has a very large amount of excess cash reserves (there are no effective investment opportunities to use the cash). In this article, I would like to consider the opposite of these management strategies.


Result Update:Bata India

By Axis Direct

We trim our FY22/23E estimates given subdued discretionary demand due to extended lockdown in Q1FY22 and continue to maintain HOLD rating with a revised TP of Rs. 1500/share (Rs. 1600 earlier) we roll forward our target PE multiple of 45x to its FY23E EPS.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

DiDi Chuxing Pre-IPO – Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

By Sumeet Singh

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank Group (9984 JP) and Tencent (700 HK), along with other investors.

It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  

We provided a brief background and financials overview in our previous note, DiDi Chuxing Pre-IPO – One of Asia’s Largest IPOs This Year – Tearsheet.

In this note, we will look at the financials and talk about the rumoured valuation.


Before it’s here, it’s on Smartkarma

Consumer: DiDi Chuxing and more

By | Consumer, Daily Briefs

In today’s briefing:

  • DiDi Chuxing Pre-IPO – One of Asia’s Largest IPOs This Year – Tearsheet

DiDi Chuxing Pre-IPO – One of Asia’s Largest IPOs This Year – Tearsheet

By Sumeet Singh

DiDi Chuxing (Didi), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank and Tencent, along with other investors.

It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  

In this note, we provide a brief background and financials overview.


Before it’s here, it’s on Smartkarma

Consumer: Mcdonald’s Holdings Co Japan, Ijm Plantations, Missfresh, Alibaba Group, Nayuki Holdings, Tesla Motors, Nitori Holdings, Gajah Tunggal, Wonderla Holidays and more

By | Consumer, Daily Briefs

In today’s briefing:

  • McDs Japan (2702) Update: Parent Selldown 80% Done, or 63.6% Done.
  • IJM Plantations’ Potential MGO From KLK
  • Missfresh Limited (每日优鲜) Pre-IPO – Worrying and Unsustainable Trend
  • Alibaba: Cloud Is on the Offence to Secure Its Dominant Status in APAC Through an $1.0bn Investment
  • Nayuki Holdings IPO: Drinking Habits
  • What The Market Is Missing About Tesla’s Rebound in China Sales in May
  • More Diversification to Come as Nitori Chases ¥1 Trillion
  • Gajah Tunggal – Event Flash – Proposed Issuance Of 5NC2 Notes – Lucror Analytics
  • WONDERLA: Wonderla Holidays reported a strong recovery in earnings post reopening of parks at Ben…
  • BATAINDIA: We trim our FY22/23E estimates given subdued discretionary demand due to extended lock…

McDs Japan (2702) Update: Parent Selldown 80% Done, or 63.6% Done.

By Travis Lundy

Ten months ago, in the 2020FQ2 earnings call for Mcdonald’s Corp (MCD US), CFO Kevin Ozan brought up the subject of Mcdonald’s Holdings Co Japan (2702 JP) a bit over 22 minutes into the call, saying that McDs fully supported McDs Japan, but they would be selling down their stake from ~49% and would in any case retain a stake of at least 35%. 

They started selling in the market. 

On 20 August, MCD announced it had sold a bit over 3% of McD J, selling 4.2mm shares at ¥5,340/share on 19 August 2020. On 20 November 2020, they announced they had sold another 4,000,000 shares at ¥5,370/share on 19 November. On 1 March, another tranche of 4,000,000 shares was transacted at ¥5,280/share (reported 4 March). 

Today, with half an hour to the close, McDs announced it had reduced its stake to 37.95%, which meant they sold 3.8mm shares. 

There is a pattern to these transactions which was not subtle at the beginning but may be becoming more flexible as time goes on. It is reasonable for those who understand how these things work in the U.S. And understanding how they work tells you what the supply looks like going forward. 

And the timing of other parts of the context will tell you about McDs and TSE Prime.


IJM Plantations’ Potential MGO From KLK

By David Blennerhassett

Palm oil play Kuala Lumpur Kepong (KLK MK) has made an Offer for Ijm Corp Bhd (IJM MK)‘s 56.2% stake in Ijm Plantations (IJMP MK).

The RM3.10/share Offer price, a 26% premium to last close, values IJMP at RM2.7bn, or US$0.65bn.

Should the transaction conclude – and there appears no reason why it won’t – KLK will be obligated to make an unconditional mandatory general offer for all shares in IJMP not held.

The transaction is subject to shareholder approval at EGMs for both IJM Corp and KLK. The SPA is also conditional on the consent from the lenders of IJM Corp and IJMP. 

IJM Corp is required to confirm on or before 5pm on June 11, if it wishes to proceed. IJM Corp said its board is in principle agreeable to finalise the terms and conditions with KLK.

This looks done.

More below the fold.


Missfresh Limited (每日优鲜) Pre-IPO – Worrying and Unsustainable Trend

By Zhen Zhou, Toh

Missfresh (MF US) (MFL) is looking to raise US$500m in its upcoming U.S. IPO.

Missfresh Limited (MFL) is a leading online and offline neighbourhood retail platform with three main businesses, on-demand distributed mini warehouse (DMW) business, intelligent fresh market, and retail cloud services. As per iResearch, MFL was the company that pioneered the DMW model in 2015 before any player in the industry. As of March 31, 2021, the company had a network of 631 DMWs in 16 cities in China.

In this note, we discuss the company’s business model, operational and financial data, and share our initial thoughts on the IPO.


Alibaba: Cloud Is on the Offence to Secure Its Dominant Status in APAC Through an $1.0bn Investment

By Oshadhi Kumarasiri

Earlier this week, Alibaba Group (9988 HK) unveiled a plan to invest US$ 1.0bn in Alibaba Cloud, focusing on the development of the cloud business in the APAC region. This comes after Byte Dance dropped Alibaba cloud services from its international businesses amidst concerns over data security and privacy raised by the US government. According to Ciaxin, the lost contract is worth around US$ 800m per year, around 9% of Alibaba Cloud’s annual revenue in FY21.


Nayuki Holdings IPO: Drinking Habits

By Arun George

Nayuki Holdings (NYK HK) is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC. Nayuki also has the most extensive teahouse network in China as measured by the number of cities covered, among premium modern teahouse chains in China in 2020, according to CIC. It is pre-marketing an HKEx IPO to raise up to $500 million, according to press reports.

In Nayuki Holdings IPO Initiation: A New Leaf, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market. 

In this note, we look at the PHIP which discloses the 2020 results and recent developments. We think that recent results show that Nayuki is well-positioned as a post-COVID-19 recovery play. Overall, we continue to think that Nayuki is worth a look.  


What The Market Is Missing About Tesla’s Rebound in China Sales in May

By Vicki Bryan

Tesla Motors (TSLA US)investors were encouraged that demand in China is back on track after the China Passenger Car Association reported May sales jumped versus disappointing April results, especially after troubling rumors about falling orders.

They should look deeper.


More Diversification to Come as Nitori Chases ¥1 Trillion

By Michael Causton

Nitori Holdings (9843 JP) had its 34th straight year of record results in FY2020 – and that’s before it has even begun to integrate its recent acquisition of Shimachu Co Ltd (8184 JP).

Last month, the largest furniture retailer confirmed further expansion into fashion and a new IKEA-like restaurant concept due to roll out in many of its larger stores.

Nitori is making progress online too; in FY2020, online membership grew 73% to 9.03 million users and Nitori expects to see 13 million users by the end of the current year.

It also plans to open more stores overseas after a pause in 2020 where the potential remains untapped.


Gajah Tunggal – Event Flash – Proposed Issuance Of 5NC2 Notes – Lucror Analytics

By Leonard Law, CFA

We view Gajah Tunggal’s proposed tender offer and Notes issuance positively, as these will extend the company’s debt maturity profile. More importantly, the smaller issuance size should reduce future refinancing risks, when the Notes come due in 2026. The transactions should also reduce FX risks, as there will be a more balanced mix of USD and IDR debt in the capital structure. We also view positively the amortising nature of Gajah Tunggal’s secured credit facilities, which might help contain the company’s debt level going forward.

The proposed Notes will have a smaller collateral pool than the existing Notes. That said, S&P estimates that the value of the collateral is worth c. 1.6x of the amount for the proposed Notes. 

We expect the proposed issuance to succeed, given the reduced size (compared to the existing ‘22s), improved post-issuance capital structure, as well as the company’s improved leverage in FY 2020. We see fair pricing for the proposed 5NC2 Notes at 8.0-8.5%.


WONDERLA: Wonderla Holidays reported a strong recovery in earnings post reopening of parks at Ben…

By ICICI Securities Limited

Wonderla Holidays reported a strong recovery in earnings post reopening of parks at Bengaluru, Kochi and Hyderabad in Q4FY21. Revenue for the quarter improved sharply from Rs 4.9 crore to Rs 33.3 crore QoQ though revenue remained down 21.4% YoY as parks were functional only during Thursday-Sunday till February 2021 while they remained open all seven days in March. The company achieved total footfalls of 3.11 lakh against 4.05 lakh last year. Thus, Wonderla managed to clock EBITDA of Rs 2.5 crore vs.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

BATAINDIA: We trim our FY22/23E estimates given subdued discretionary demand due to extended lock…

By Axis Direct

We trim our FY22/23E estimates given subdued discretionary demand due to extended lockdown in Q1FY22 and continue to maintain HOLD rating with a revised TP of Rs. 1500/share (Rs. 1600 earlier) we roll forward our target PE multiple of 45x to its FY23E EPS.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Before it’s here, it’s on Smartkarma

Consumer: Alibaba Group, Yamada Denki, Nayuki Holdings, Ijm Plantations, China Youran Dairy Group Ltd, Coupang, Gajah Tunggal and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Alibaba (9988 HK): Potential Passive Inflow Post MSCI Listing Switch
  • Yamada Denki and Otsuka Kagu Do The Deed – A Quick Merger
  • Nayuki (奈雪) Pre-IPO – PHIP Updates – 4Q20 Results Shows Improvement
  • IJM Plantations’ Potential MGO from Kuala Lumpur Kepong
  • China Youran Dairy IPO: Peer Comparison
  • Nayuki (奈雪) Pre-IPO – Industry Landscape and Peer Comparison
  • CPNG: Some Thoughts on Coupang’s Cost Structure
  • Morning Views Asia: China SCE, Gajah Tunggal

Alibaba (9988 HK): Potential Passive Inflow Post MSCI Listing Switch

By Brian Freitas

Post the switch in listing from Alibaba Group (BABA US) to Alibaba Group (9988 HK) in the MSCI Standard indices, the number of shares registered in Hong Kong CCASS has continued to increase and last night crossed the threshold for an ad hoc index rebalance that will be implemented at the close of trading on 16 July. The announcement of the ad hoc rebalance should be made on 13 July.

We estimate passive trackers indexed to the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and the Hang Seng Tech Index (HSTECH INDEX) will need to buy 46.05m shares (HK$9.58bn; 2 days of ADV) at the close on 16 July.

Based on current numbers, there will be no recapping done at the July rebalancing but there could be outflows from the stock at the September review when the stocks are capped.

The passive inflow in July could keep the stock supported versus its peers and the main indices, but the stock could trade weaker in August on expected passive outflows due to capping.


Yamada Denki and Otsuka Kagu Do The Deed – A Quick Merger

By Travis Lundy

Otsuka Kagu Ltd (8186 JP) had cash problems in 2019 which required a saviour. Yamada Denki (9831 JP) stepped in as that saviour, injecting cash and buying shares, leaving Kumiko Otsuka in charge of the previous family battleground company.

As Michael Causton wrote six months ago in Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs, that family control did not last as the recovery and rebound did not work as well as it might have, despite the substantial rebound in furniture sales in the WFH era.  

Back then, Michael said, 

The departure of the founding family signals that Otsuka will likely become a wholly owned subsidiary sooner rather than later. On acquisition, Yamada provided a large cash injection to help with the chain’s operations, but with Otsuka having sold off most of its major assets, reducing fixed assets to just ¥164 million compared to ¥3.1 billion in 2010, and with sales still only growing slowly, it now looks as if Yamada will need to inject even more. Delisting the company and taking over complete control of strategy and operations is the only option left.

That was prescient. 

Today, Yamada Denki and Otsuka Kagu announced plans to merge. The Otsuka Kagu shareholder meeting is in 7 weeks (record date was 30 April), and the merger is scheduled to be effective in 12 weeks. 

A foreshortened timeframe on an ‘easy’ smallcap deal. 


Nayuki (奈雪) Pre-IPO – PHIP Updates – 4Q20 Results Shows Improvement

By Zhen Zhou, Toh

Nayuki Holdings (NYK HK) is looking to raise US$500m in its upcoming Hong Kong IPO. 

Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.

We had previously covered the IPO in:


IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

By Arun George

Kuala Lumpur Kepong (KLK MK) made an offer to acquire Ijm Corp Bhd (IJM MK)/IJMC’s entire stake in Ijm Plantations (IJMP MK)/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).

IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. 

IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  

A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  


China Youran Dairy IPO: Peer Comparison

By Oshadhi Kumarasiri

China Youran Dairy Group Ltd (9858 HK) announced the indicative price range of its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.

China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first choice when it comes to exposure to this attractive investment theme.


Nayuki (奈雪) Pre-IPO – Industry Landscape and Peer Comparison

By Zhen Zhou, Toh

Nayuki Holdings (NYK HK) is looking to raise US$500m in its upcoming Hong Kong IPO. 

Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.

We had previously covered the IPO in:


CPNG: Some Thoughts on Coupang’s Cost Structure

By Henry Kwon

CPNG’s business model is based on speedy delivery to its customers with a focus on top line growth. Margin deterioration in 1Q21 should be understandable given that room for further individual employee productivity improvements at this point is likely to be little. Questions regarding CPNG’s cost pressures and the ability to expand margins is likely to linger in the back of investors’ minds, however, so 2Q earnings is likely to become a focal point on this issue.

Since June 1, CPNG’s shares have declined by 8.55% while the S&P 500 has risen by 0.42%, underperforming the index by 8.96% in the same time frame. After declining to an intra-day low of $30.65 on May 13, CPNG initially broke above its 78.6% Fibonacci retracement level of $38.86 on May 24 but failed to reach its 61.8% retracement of $45.30. It has currently retreated to below the 78.6% retracement level. Given CPNG’s short listing history, charting technical support/resistance levels represents a challenge, but a close above $39.00 would be constructive in the short term.


Morning Views Asia: China SCE, Gajah Tunggal

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.


Before it’s here, it’s on Smartkarma

Consumer: Sony Corp, Zomato, Cosmax Inc, Nayuki Holdings, Tesla Motors, Izumi Co Ltd and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Sony Bull Bet off Trendline Nearing First Resistance
  • Zomato (ZOM IN) | Merchant Surveys – Operating Metrics and a Hidden Predator
  • Cosmax Rights Offering Details & Trading Opportunities
  • Nayuki Holdings IPO: ‘New Style’ Teahouses Are Failing to Encourage Customers to Make Regular Visits
  • Tesla’s Pending China Sales and Model S Plaid—with an Asterisk
  • Izumi Focus on Food and Online Should Improve Margins

Sony Bull Bet off Trendline Nearing First Resistance

By Thomas Schroeder

Sony Corp (6758 JP) rally off of 10k trendline buy support is nearing the first key resistance at 11,400  (to reduce) with intermediate resistance at 11,700. Rally is due for a rest with risk of re testing the key trendline support that if broken would cause mid cycle damage (a must hold level).

Dual tops to weigh on rally attempts.

Trendline support currently lies near 10,250 and the trend pivot.


Zomato (ZOM IN) | Merchant Surveys – Operating Metrics and a Hidden Predator

By Pranav Bhavsar

In our quest to value Zomato (ZOM IN, in this insight, we identify key operating metrics that would aid in the revenue build-up. To understand the core drivers behind these operating metrics, we speak to predominantly urban dominated restaurateurs in Mumbai, Hyderabad, Visakhapatnam (Vizag) and Bangalore.  

This insight focuses on building Gross Order Value (GOV), Revenue and Margins will be subject of subsequent insights, post additional channel checks. 


Cosmax Rights Offering Details & Trading Opportunities

By Douglas Kim

Trading Opportunity for the Rights Offering – For the short term investors, we think that there could be an attractive trading opportunity regarding Cosmax. Given the relatively high upside (current price vs expected rights offering price), we would participate in the rights offering.

We also think that there is a relatively solid probability of the COVID-19 cases declining in Korea in the next several weeks and that Xi Jinping could come to South Korea sometime in August/September. As a result, we believe that there is a good chance that the Korean cosmetics stocks continue to outperform in the 2-3 months. 

In this insight, we discuss the details of the Cosmax Inc (192820 KS) rights offering details and potential trading opportunities. Cosmax is one of the top five listed cosmetics companies in Korea. It currently has a market cap of 1.3 trillion won ($1.2 billion).

On 26 April 2021 (after market close), Cosmax announced that it will issue 1.3 million shares to raise 144.3 billion won. After this announcement, the stock fell 11.5% on the following day. Since then, the stock price has recovered nicely. From 26 April to 8 June 2021, Cosmax’s share price is down 3%. 

The expected rights offering price is 103,000 won and based on the current price of 130,000 won, it represents a 26.2% upside. Given this solid upside and the recent recovery of the stock price, there is likely to be relatively solid demand for this rights offering. 

The rights offering subscription dates for the existing shareholders are from 17 to 18 June 2021. The new shares listing date is on 8 July. There is a 11.5% shares dilution associated with this rights offering. 

Currently, Cosmax BTI is the largest controlling shareholder with a 26.2% in Cosmax Inc (192820 KS)


Nayuki Holdings IPO: ‘New Style’ Teahouses Are Failing to Encourage Customers to Make Regular Visits

By Oshadhi Kumarasiri

  • Nayuki Holdings (NYK HK), the operator of Nayuki teahouses, has had a successful hearing with the Hong Kong Stock Exchange about proceeding with the proposed US$500m IPO, which could value the company in excess of US$2.0bn. The company was valued at nearly US$2.0bn at its latest funding round in December 2020.
  • Nayuki is growing rapidly on the back of ‘new style’ tea growth in China, but these bubble and fruit infused teas do not contain sufficient caffeine to produce enough dopamine to cause an addiction that could encourage consumers to walk into these ‘new style’ teahouses on a daily basis. We think bubble tea/new style tea is a temporary bubble. Thus, Nayuki’s medium term growth prospects might be weaker than what they appear to be on the surface. 

Tesla’s Pending China Sales and Model S Plaid—with an Asterisk

By Vicki Bryan

The first “refreshed”Tesla Motors (TSLA US) Model S will roll out in a “delivery event” on Thursday, unless it gets delayed again.

Either way, it’s not likely to move the needle much on second quarter deliveries.

For that we look to China, arguably Tesla’s most important market. This week we find out how well Tesla’s monthly deliveries recovered in May versus dismal April results (see Tesla’s Troubles in China Are Heating Up on 5/12/21).


Izumi Focus on Food and Online Should Improve Margins

By Michael Causton

Izumi Co Ltd (8273 JP) is Japan’s largest retailer in the South and, at least until 2018, was the last GMS to maintain a growth trajectory. Now, with the popularity of the Cosmos Pharmaceutical (3349 JP)  discount food chain eating into Izumi’s profits in Kyushu and the same lack of enthusiasm for the GMS format also spreading as it has elsewhere, Izumi last month announced a wide-ranging and ambitious plan to reinvent itself over the next five years. Izumi’s alliance with Seven & I Holdings (3382 JP) will also grow in importance.

These plans include expansion online and investment in discount retailing. The problem with the former is that there are already many more and better organised competitors and in the latte, Izumi has no experience in the kind of supply chain expertise required to build a discount retail business of any scale.

While Izumi has been one of the few well-run GMS operators in the past five years, there is increasing concern that it will fall victim to pressures from discounters on one side and e-commerce competitors on the other.


Before it’s here, it’s on Smartkarma

Consumer: China Youran Dairy Group Ltd, Kao Corp, Discovery, Inc., Galaxy Entertainment Group, Tata Motors Ltd, Mahindra & Mahindra, Rupa & Company, Bharat Forge and more

By | Consumer, Daily Briefs

In today’s briefing:

  • China Youran Dairy(悠然牧业) IPO – Reasonable Valuation but There Will Be Significant Overhang
  • China Youran Dairy Group IPO: Valuation Insights
  • Priced At a Premium, But Preferred Over Peers As a Thematic Investment
  • China’s Three Child Policy Beneficiaries Part 2 Kao Corporation: Finally Off The Leash?
  • MergerTalk: Why Market Apathy To Discovery’s Merger With WarnerMedia Is A Gift To Value Investors
  • Interminable Delays in Japan Casinos Have Reduced Cannibalization Threat to Macau’s Long Term Growth
  • Pick of the Week – Tata Motors Limited
  • Autos: Into the twilight zone; single digit growth ahead
  • RUPA: Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa w…
  • BHARATFORG: BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the …

China Youran Dairy(悠然牧业) IPO – Reasonable Valuation but There Will Be Significant Overhang

By Zhen Zhou, Toh

China Youran Dairy Group Ltd (1836774D CH) is looking to raise up to US$799m in its upcoming Hong Kong IPO. 

CYD is an integrated provider of products and services in the upstream dairy industry. The company is a leader in the various upstream industries that it operates in even though they are mostly fragmented.

In this note, we will share our forecast and assumptions and discuss valuation and other deal dynamics of the IPO.

We have previously covered the IPO in:


China Youran Dairy Group IPO: Valuation Insights

By Arun George

China Youran Dairy Group Ltd (9858 HK) is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost & Sullivan. Youran was once a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (A) (600887 CH) until PAG Capital’s investment in 2015.

At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.

The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.

In China Youran Dairy Group IPO Initiation: Ecownomics, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.

Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to China Modern Dairy (1117 HK), an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. 


Priced At a Premium, But Preferred Over Peers As a Thematic Investment

By Oshadhi Kumarasiri

China Youran Dairy Group Ltd (9858 HK) announced the indicative price range to its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.

At 9.5x implied 2022 EV/EBIT, Youran is priced at a 34% premium to its closest competitor China Modern Dairy (1117 HK). However, we still prefer Youran over China Modern as a thematic pick based on China’s upstream dairy market consolidation trend.


China’s Three Child Policy Beneficiaries Part 2 Kao Corporation: Finally Off The Leash?

By Oshadhi Kumarasiri

China has announced that it will allow couples to have up to three children, after census data showed a steep decline in birth rates. Previously, we analysed the possible impact on the Japanese baby and childcare company Pigeon Corp (7956 JP) as a result of the above policy shift. This time around, we analyse the impact on the Japanese personal care company Kao Corp (4452 JP), whose share price rose 1.5% in the last two trading days.


MergerTalk: Why Market Apathy To Discovery’s Merger With WarnerMedia Is A Gift To Value Investors

By Robert Sassoon

We believe that the proposed merger of At&T Inc (T US) ‘s  media assets with Discovery, Inc. (DISCA, DISCK, DISCB US)  via a Reverse Morris Trust transaction promises to unlock substantial value for Discovery shareholders. Our insight discusses why the transaction has been beset by investor apathy, why we think this creates an excellent value creating opportunity and how best to take advantage of the opportunity.


Interminable Delays in Japan Casinos Have Reduced Cannibalization Threat to Macau’s Long Term Growth

By Howard J Klein

  • The passage of Japan Integrated Casino Resort legislation in 2016 initially targeted the 2020 Olympics for launch of properties. Now, even 2027/29 is earliest feasible debut.
  • The projected US$25b Japan marker would have cannibalized existing Macau revenues considering that pre-pandemic, Japan welcomed 9.5m Chinese tourists–without casinos.
  • Macau operators have an ongoingUS$8.5b investment in expansion there. A possible opening of Japan in the originally envisioned years is no longer operative.

Pick of the Week – Tata Motors Limited

By Edelweiss

Tata Motors is India’s largest commercial vehicle company and fourth-largest PV player.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Autos: Into the twilight zone; single digit growth ahead

By HDFC Securities

Based on our assessment, replacement sales will account for ~50% (half) of total sales as penetration has already risen to quite an extent, particularly in north India. After having witnessed 10% CAGR in the past 15+ years, we believe that tractors growth will moderate to 5-6% over the next decade. Additionally, during this period, tractor penetration in the country increased to 45-50 tractors per 000 hectares, which is higher than the world average (~30). Meanwhile, Indias landholding remains highly fragmented, with 86% (majority) of the farmers owning under 2 hectares of land.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

RUPA: Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa w…

By ICICI Securities Limited

Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa with highest ever revenue and net profit with revenue growth of 35% to Rs 1313 crore and net profit of Rs 175 crore. To cater to latest customer demands, the company has added newer varieties under its existing brands. Also, it is focussing on enhancing its distribution reach both in existing and newer markets by appointing new distributors to garner a higher share of consumer demand for its product categories.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

BHARATFORG: BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the …

By ICICI Securities Limited

BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the recent past), (ii) BFL has recently won an order from Government of India in the defence domain (non-automotive) wherein BFL will start supplying components in a month’s timeframe (quantum not disclosed); (iii) BFL will be acquiring land to the tune of ~70 hectares at Khed (Maharashtra, near Pune) at an outlay of ~Rs 240 crore (over the next two to three years) wherein they intend to construct two new plants in the domain of e-mobility and defence.

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Before it’s here, it’s on Smartkarma

Consumer: WH Group, Xpeng, Fuyao Glass Industry Group, Bharat Forge, Nexteer Automotive and more

By | Consumer, Daily Briefs

In today’s briefing:

  • WH Group Buyback Offer Announced – Strong Accretion Creates Accretion Risk
  • Xpeng: Short Term Negative Priced In, Positive Momentum Is Back
  • Fuyao Glass Vs Xinyi Glass: Which One?
  • Bharat Forge (4QFY21): Outlook upbeat; simplifying group structure. Maintain BUY
  • Nexteer (1316): Positive Sentiment and Exciting 2H 2021

WH Group Buyback Offer Announced – Strong Accretion Creates Accretion Risk

By Travis Lundy

Alternate Title: Today’s Pig is Tomorrow’s Pig, Only Leaner.

On 2 June at mid-day, WH Group (288 HK) shares were halted “pending the release of an announcement which contains inside information of the Company pursuant to the Codes on Takeovers and Mergers and Share Buy-backs.”

David Blennerhassett covered the run-up to the situation and some comps in WH Group (288 HK): Today’s Pig Is Tomorrow’s Bacon? while speculating on a fair price should an Offer eventuate. 

It wasn’t a Takeover Offer. 

It turns out to be a Buyback Offer.

Today (6 June 2021) the company announced a Voluntary Offer through BoAML and Morgan Stanley to buy back 1,916,937,202 shares (13% of shares outstanding) at a price of HK$7.80/share. 

This is a 17.29% premium to the close on 1 June and a 12.6% premium to the last trade before the suspension (the stock was up 4.2% on the 2nd before being suspended).

Because the Controlling Shareholders (Heroic Zone, Chang Yun, Sure Pass, High Zenith, Mr. Wan Long, Mr. Wan Hongwei, Mr. Guo Lijun and Mr. Ma Xiangjie) has irrevocably undertaken that shares under their control will not be tendered, and they own 34.14%, pursuant to Rule 32.1 of the Takeovers Code and Rule 6 of the Buybacks Code, the increase in voting rights would constitute an “acquisition” for purposes of the Code, so Heroic Zone, controlling 34.11%, will make an application to the Executive for a Whitewash Waiver which would require approval at an EGM by 75% of independent shareholders in attendance.

Lots of details to consider. More below the fold. 


Xpeng: Short Term Negative Priced In, Positive Momentum Is Back

By Victoria Li

With its share price hit YTD low of US$22.73 at mid-May, short term negative, mainly the uncertainty of its coming P5 model, has been fully digested by the market, in our view. Looking forward, positive momentums are expected. Xpeng’s car delivery would be boosted by

1) increasing delivery of  LFP version and wing version of P7;

2) rising market interest triggered by valet parking assist function coming with latest OTA;

3) G3 facelift in Q3;

4) new P5 model, whose MSRP and technical specifications might be available in July-August;

5) easing of chip shortage. 


Fuyao Glass Vs Xinyi Glass: Which One?

By Henry Soediarko

source: Reuters

The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. 

However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass’s largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities. 


Bharat Forge (4QFY21): Outlook upbeat; simplifying group structure. Maintain BUY

By HDFC Securities

We maintain BUY with a revised target price of INR 860 at 34.5x FY23E EPS (vs 32x earlier) the multiple has been raised to factor in the reorganised group structure, emerging opportunities in defence and PV segments, and stronger-than-expected demand. The stock is our preferred pick in the CV segment. Key risks: delayed defence orders; any sudden lockdowns due to COVID Bharat Forges (BFL) 4QFY21 results were a significant beat with APAT coming in at INR 2.06bn (vs 0.98bn QoQ). The management is upbeat on the outlook for Class-8 trucks and expects its volume to reach 300k (+50%) in FY22E.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

By Henry Soediarko

Nexteer’s share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue (around 9x) although the reality could be different, nevertheless, it presents growth potential for Nexteer Automotive (1316 HK) .


Before it’s here, it’s on Smartkarma