Category

Growth Ideas

Brief Growth Ideas: DiDi Has Merged Its Way Through- Time for an IPO? and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. DiDi Has Merged Its Way Through- Time for an IPO?
  2. Smoore International: Trading Well Over JUUL’s Peak Multiples
  3. Smartkarma Webinar
  4. Perpetual Placement: Attractive Discount and EPS Accretiveness
  5. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June

1. DiDi Has Merged Its Way Through- Time for an IPO?

Image 6623733251595781741151

It was reported on last week that DiDi Chuxing (1284375D CH) plans to go public, allowing existing investors want to cash out during a difficult time for the business. DiDi is backed by Softbank and is regarded as the Chinese version of Uber. Even before the pandemic, the company was struggling to generate profits and also had issues regarding the safety of passengers. The pandemic could have only made things worse for the company. At a time where ridesharing is avoided, DiDi wants to go public. If the news is true, the timing of the IPO indicates that DiDi is desperate for money. In this report, we take a look at the company, its background, growth prospects, and an estimated valuation. In our opinion, it is unlikely that the company will have an IPO in the current economic situation.

We go through the details below.

2. Smoore International: Trading Well Over JUUL’s Peak Multiples

Image 39115896741595747730735

Smoore International (6969 HK) is the global leader in the manufacturing of vaping devices and components, having a market share of 16.5% in 2019. The company raised HK$918 million in an IPO and started trading on 10th July, and in its first nine trading days, the shares have risen by 206.5% from the IPO offer price. On 22nd July, Smoore warned that, as a result of fair value changes for convertible preferred shares and promissory notes and share-based payments as detailed below, net profit for the six months to 30th June will decline by 94.% year-on-year.

It is surprising that these fair-value adjustments were not revealed or anticipated in the prospectus. With Smoore’s multiples now exceeding those of its infamous peer, JUUL during its peak, in the DETAIL below we give the case for taking some profits.

Company Disclosures

3. Smartkarma Webinar

In this Smartkarma Webinar, we speak to David Huggins, CFA, Nutrition Portfolio Manager at Blackrock’s BGF Nutrition Fund. David will discuss current trends in food and nutrition, including plant-based protein, changing consumer behaviour, and the future of food technology.

The webinar will be hosted on Wednesday, 29/July/2020, 5.00pm SGT/HKT.



David is co-portfolio manager of the BGF Nutrition fund, a Blackrock sustainable thematic fund. Areas of expertise include nutrition, food & beverage, agriculture, and cannabis/CBD. He has a solid track record in public equity investing and is skilled in bottom-up investment analysis, modelling, and big-picture thinking. He graduated from the University of Bristol and is a CFA Charterholder.

4. Perpetual Placement: Attractive Discount and EPS Accretiveness

Image 41516035241595816253942

Perpetual Limited launched an AUD 225 million placement and AUD 40 million share purchase plan (SPP) to fund the acquisition of a 75% stake in Barrow Hanley, Mewhinney & Struss LLC (Barrow Hanley). In this note, we will look at the details of the deal, the impact to the company’s financials, and score the deal in our ECM framework. We think the deal provides substantial upside for short term investors given its attractive discount to last close and its EPS accretiveness but we also remind investors that the fund under management has not really grown for both Perpetual and Barrow Hanley.

5. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June

Image 88942528431595741867654

  • The growth rate of China online retail reached 19% YoY in June, higher than 15.6% YoY in May.
  • Chinese retailing e-commerce companies raised funds of RMB28.6 billion in 1H20, decreasing by 74.5% YoY.
  • Ministry of Human Resource and Social Security warned about “employee sharing”, which was started by Alibaba (BABA).

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Smoore International: Trading Well Over JUUL’s Peak Multiples and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Smoore International: Trading Well Over JUUL’s Peak Multiples
  2. Smartkarma Webinar
  3. Perpetual Placement: Attractive Discount and EPS Accretiveness
  4. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June
  5. The Global Autos Break Down, Though Tesla on Full Charge

1. Smoore International: Trading Well Over JUUL’s Peak Multiples

Image 95658997531595747483794

Smoore International (6969 HK) is the global leader in the manufacturing of vaping devices and components, having a market share of 16.5% in 2019. The company raised HK$918 million in an IPO and started trading on 10th July, and in its first nine trading days, the shares have risen by 206.5% from the IPO offer price. On 22nd July, Smoore warned that, as a result of fair value changes for convertible preferred shares and promissory notes and share-based payments as detailed below, net profit for the six months to 30th June will decline by 94.% year-on-year.

It is surprising that these fair-value adjustments were not revealed or anticipated in the prospectus. With Smoore’s multiples now exceeding those of its infamous peer, JUUL during its peak, in the DETAIL below we give the case for taking some profits.

Company Disclosures

2. Smartkarma Webinar

In this Smartkarma Webinar, we speak to David Huggins, CFA, Nutrition Portfolio Manager at Blackrock’s BGF Nutrition Fund. David will discuss current trends in food and nutrition, including plant-based protein, changing consumer behaviour, and the future of food technology.

The webinar will be hosted on Wednesday, 29/July/2020, 5.00pm SGT/HKT.



David is co-portfolio manager of the BGF Nutrition fund, a Blackrock sustainable thematic fund. Areas of expertise include nutrition, food & beverage, agriculture, and cannabis/CBD. He has a solid track record in public equity investing and is skilled in bottom-up investment analysis, modelling, and big-picture thinking. He graduated from the University of Bristol and is a CFA Charterholder.

3. Perpetual Placement: Attractive Discount and EPS Accretiveness

Image 51971484051595817240452

Perpetual Limited launched an AUD 225 million placement and AUD 40 million share purchase plan (SPP) to fund the acquisition of a 75% stake in Barrow Hanley, Mewhinney & Struss LLC (Barrow Hanley). In this note, we will look at the details of the deal, the impact to the company’s financials, and score the deal in our ECM framework. We think the deal provides substantial upside for short term investors given its attractive discount to last close and its EPS accretiveness but we also remind investors that the fund under management has not really grown for both Perpetual and Barrow Hanley.

4. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June

Image 5550758721595741867654

  • The growth rate of China online retail reached 19% YoY in June, higher than 15.6% YoY in May.
  • Chinese retailing e-commerce companies raised funds of RMB28.6 billion in 1H20, decreasing by 74.5% YoY.
  • Ministry of Human Resource and Social Security warned about “employee sharing”, which was started by Alibaba (BABA).

5. The Global Autos Break Down, Though Tesla on Full Charge

Image 747924985231595801980239

  • Auto exposures are in decline among Global active investors.  Average holding weights are towards the lower end of the 9-year range, at 0.83%.  A record low of 49% of the 406 funds in our analysis have exposure to the Autos sector.
  • Fund activity over the last 6-months saw Global managers selling down stakes in Daimler AG (DAI GR) , Toyota Motor (7203 JP) and Ford Motor Co (F US) . Tesla Motors (TSLA US) and Volkswagen (Pref) (VOW3 GY) were the main bright spots as ownership levels grew over the period.
  • Overall, the auto industry is becoming increasingly unattractive to the average Global fund manager, with increases in Tesla Motors (TSLA US) exposure unable to counteract significant declines in ownership across the more traditional auto manufacturers.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Edelweiss: A Deal Is Likely by 2H of July and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Edelweiss: A Deal Is Likely by 2H of July
  2. ECM Weekly (27 June 2020) – Smoore, Ocumension, Hepalink, Immunotech, Sri Trang Gloves, Yum China HK
  3. E&D Co Valuation Analysis
  4. Korea Small Cap Gem #3: New Tree Co

1. Edelweiss: A Deal Is Likely by 2H of July

Image 56655051621593321735571

As per an Economic Times (ET) article on Jun 24, Edelweiss Financial Services (EDEL IN) has already received first stage bidding from various PE investors and Bank of Singapore for acquiring a minority stake in Edelweiss’ advisory business. Second round bidding is likely to happen by mid-July. With SEBI extending the quarterly earnings announcement deadline, we now extend our anticipated timeline for a deal and earnings announcement to 2H of Jul from end of Jun earlier. Edelweiss’ stock has already moved up significantly (about 40% up move over the last 7-8 trading sessions) in anticipation of a deal announcement. We believe that the current valuations remain attractive, despite the up move.

Insight Flow:

  • Earnings Deadline Extended by SEBI
  • Favorable Shareholder Voting
  • Deal Progress & Outlook
  • Valuation

2. ECM Weekly (27 June 2020) – Smoore, Ocumension, Hepalink, Immunotech, Sri Trang Gloves, Yum China HK

Image 48282122531593245598726

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 has been a hectic week in the ECM space. In Hong Kong, Hygeia Healthcare Group (6078 HK) and Kangji Medical (9997 HK) will list on Monday while Shenzhen HepaLink Pharmaceutical (H) (HEPALINK HK) and Immunotech Biopharm (IMMBIO HK) launched their bookbuild earlier this week and will be listing the week after.

In Thailand, Sri Trang Gloves’ bookbuild closed mid-week and will debut next week. 

There are also more than a handful more approvals that have came through with PHIP filed on HKEX. We have covered most of the names in our notes this week:

As if those were not enough, four more property and construction management services companies filed their draft prospectus and, out of which, KWG Living Group and A-City Group stand out in terms of size as they are expecting to raise about US$400m each. Hillhouse-backed Genor Biopharma has also filed its draft prospectus (under the name JHBP (CY) Holdings) and was earlier expected to raise about US$200m in its IPO.

Beyond Hong Kong, we may start to see more listings come through in India soon as we are getting more newsflow of listings in the country. This week there was also the re-filing of Mindspace REIT.

For China ADRs, there was only Agora Inc. (API US)‘s listing on Friday, which did well, to say the least. Agora’s shares closed about 150% above its IPO price, which was already priced 11% above the original range. Clearly, I was wrong to focus on valuation and data disclosure and not see Agora for the potential it could achieve.

It has also been a busy week for placements and we are seeing deals not just from Australia but across Asia Pacific. Here are our coverage for the week:

 Accuracy Rate:

Our overall accuracy rate is 73% for IPOs and 66% for Placements 

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

New IPO filings this week

  • KWG Living Group (Hong Kong, ~US$400m)
  • A-City Group Limited (Hong Kong, ~US$400m)
  • Genor Biopharma (JHBP (CY) Holdings) (Hong Kong, ~US$200m)
  • Roiserv Lifestyle Services (Hong Kong, >US$100m)
  • Jiayuan Services (Hong Kong, ~US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

NameInsight
Hong Kong
Archosaur Archosaur (祖龙娱乐) Pre-IPO – Short Life Cycle, Volatile Revenue, but It May Look Different Soon 
Archosaur Archosaur Games (祖龙娱乐) Pre-IPO – Dragon Raja Will Continue to Drive Revenue – Walkthrough & Thoughts 
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
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 

GTMH

GreenTown Mgt (绿城管理) Pre-IPO – Sacrificed Margins in Pursuit of Growth, Muddled by JVs 

GTMH

GreenTown Mgt (绿城管理) Pre-IPO – Peer Comparison and Preliminary Thoughts on Valuation 

Helenbergh

Helenbergh (海伦堡) Early Thoughts – The Usual Red Flag – Related Party Transactions

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 

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
Megvii Megvii (旷视) Pre-IPO –  Initial Thoughts on Valuation 
Nongfu Nongfu Spring Pre-IPO – The Positives – Leaves One Thirsty for More 
Nongfu Nongfu Spring Pre-IPO – The Negatives – Doesn’t Need to List or Expand Production Facilities 
Nongfu Nongfu Spring Pre-IPO – Peer Comparison – Superior Margins and Growth 
Nongfu Nongfu Spring (农夫山泉) IPO: Beverage for the Young, In-Store Photos 
Ocumension Ocumension (欧康维视) Pre-IPO: All Ready for a Great Listing Except a Block Buster 
Pop Mart Pop Mart Pre-IPO – The Negatives – Is It a Brand Owner or Just a Retailer? 
Pop Mart Pop Mart Pre-IPO – The Positives – Expanding Portfolio+Wider Distribution= Explosive Earnings Growth 
Smoore

Smoore Tech (麦克韦尔) IPO: Hidden E-Cigarette Player Behind the FEELM Technology 

Smoore

Smoore Tech (麦克韦尔) Pre-IPO: 6Y and 1H2019 Financials Show Technology Driven Growth 

Smoore

Smoore Intl (思摩尔国际) Pre-IPO: Tripling Capacity in Three Years 

Smoore

Smoore Intl (思摩尔国际) Pre-IPO: Thoughts on E-Cig Regulation 

Smoore

Smoore Intl (思摩尔国际) Pre-IPO: PHIP Updates, A Slow yet Encouraging Start in 2020 

Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
Zhenro Svc Zhenro Services (正荣服务) Pre-IPO – Diversifying Away from Zhenro Property Group 
Zhenro Svc Zhenro Services (正荣服务) Pre-IPO – Peer Comparison and Thoughts on Valuation 
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 
India
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 

Burger King

Burger King India Pre-IPO – Has Been Growing Fast and Plans to Grow Even Faster 

Burger King

Burger King India Pre-IPO – Peer Comparison Yields Interesting Nuggets on Profitability and Capex 

Bajaj En

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

CAMS CAMS Pre-IPO – Quasi Monopoly Status Muddled by Inconsistent Performance 
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 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
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 
IRFC Indian Railway Finance Pre-IPO – Low Risk, Low Margin Business 
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
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mindspace Mindspace Business Parks REIT Pre-IPO – Decent Growth but Not All Assets Are Equal 
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
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 
UTI AMC

UTI Asset Management Company Pre-IPO – Well past Its Remote Glory Days 

Malaysia
Mr DIY Mr D.I.Y. Pre-IPO – Largest Home Improvement Retailer in Malaysia 
Mr DIY Mr D.I.Y. Pre-IPO – Store Walk-Through and Thoughts on Value Proposition 
Mr DIY Mr D.I.Y. Pre-IPO – Peer Comparison – Small Stores with Dominant Market Share  
Mr DIY Mr D.I.Y. Pre-IPO – Assumptions and Thoughts on Valuation 
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
Thailand
PTTOR PTT Oil and Retail IPO – F&B Business Is the Profit Driver 
SCGP SCGP Pre-IPO – Shift to Packaging Has Been Aiding Margins but Acquisition Drove up Leverage 
The U.S
CDP CDP Holdings Pre-IPO Review – Highly Reliant on Best Inc. 
CloudMindsCloudMinds Inc Early Thoughts – Still Nascent

3. E&D Co Valuation Analysis

E&d 2

Our base case valuation multiple for E&D Co is 19x P/E. Using this multiple and applying to our estimated net profit of 13.8 billion won, this results in an implied market cap of 263 billion won or 25,309 won per share. This represents a 63% upside from current levels. Given the strong upside, we have a positive view of this stock over a one year view.

The 19x P/E valuation multiple represents a 20% discount to the bankers’ valuation multiple of 23.8x. A key reason why the company continues to trade at a steep discount to its peers is that the market is still not uncertain as to how long the company will be able to maintain its excellent sales and profit growth. As such, as the company continues to post excellent results, our 20% valuation discount to its peers may actually be too conservative.

We forecast the company to generate 96.2 billion won in sales (up 65% YoY) and an operating profit of 21.2 billion won (up 116% YoY) in 2020. We estimate the company’s sales growth to decline to 27% YoY in 2021. One of the key catalysts of the company’s surging growth in sales and profits has been the fact that the fine dust issue has emerged one of the biggest social problems in Korea and other parts of the world. There have been increased regulations on diesel and obsolete vehicles, increasing the mandatory installation of the emission reduction devices. 

4. Korea Small Cap Gem #3: New Tree Co

Pandora

New Tree Co is the third company we introduce in our “Korea Small Cap Gem” series. New Tree is one of the best up-and-coming companies in the “inner beauty” product segment, especially for eatable collagen products. They also have some outstanding health and diet food supplement products that should continue to thrive in the next few years.

Millions of people in Korea often believe that eating foods that are rich in collagen such as 족발 (pigs’ feet) helps to beautify their skin. Other foods that help the body to produce collagen include bone broth, chicken, fish, egg whites, and citrus fruits. Because of the positive association with beautifying the skin and producing collagen, this is where the company’s Evercollagen has achieved a big success.

Valuation – We believe that the company’s P/E multiples to rise to the 14 to 16x range over the next 12 months which would be closer to the industry average and as investors attach higher valuation multiple to this company, given the company’s superior sales and net profit growth compared to its competitors. If we assume a 15x P/E based on the net profit of 22.6 billion won, this would suggest an implied market cap of 339 billion won (37,375 won per share), which would be a 32% upside from current levels (28,300 won per share).  

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Smartkarma Webinar and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Smartkarma Webinar
  2. Perpetual Placement: Attractive Discount and EPS Accretiveness
  3. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June
  4. The Global Autos Break Down, Though Tesla on Full Charge
  5. Tencent – Well Timed Transaction

1. Smartkarma Webinar

In this Smartkarma Webinar, we speak to David Huggins, CFA, Nutrition Portfolio Manager at Blackrock’s BGF Nutrition Fund. David will discuss current trends in food and nutrition, including plant-based protein, changing consumer behaviour, and the future of food technology.

The webinar will be hosted on Wednesday, 29/July/2020, 5.00pm SGT/HKT.



David is co-portfolio manager of the BGF Nutrition fund, a Blackrock sustainable thematic fund. Areas of expertise include nutrition, food & beverage, agriculture, and cannabis/CBD. He has a solid track record in public equity investing and is skilled in bottom-up investment analysis, modelling, and big-picture thinking. He graduated from the University of Bristol and is a CFA Charterholder.

2. Perpetual Placement: Attractive Discount and EPS Accretiveness

Image 51971484051595817240452

Perpetual Limited launched an AUD 225 million placement and AUD 40 million share purchase plan (SPP) to fund the acquisition of a 75% stake in Barrow Hanley, Mewhinney & Struss LLC (Barrow Hanley). In this note, we will look at the details of the deal, the impact to the company’s financials, and score the deal in our ECM framework. We think the deal provides substantial upside for short term investors given its attractive discount to last close and its EPS accretiveness but we also remind investors that the fund under management has not really grown for both Perpetual and Barrow Hanley.

3. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June

Image 88942528431595741867654

  • The growth rate of China online retail reached 19% YoY in June, higher than 15.6% YoY in May.
  • Chinese retailing e-commerce companies raised funds of RMB28.6 billion in 1H20, decreasing by 74.5% YoY.
  • Ministry of Human Resource and Social Security warned about “employee sharing”, which was started by Alibaba (BABA).

4. The Global Autos Break Down, Though Tesla on Full Charge

Image 139425777161595801121797

  • Auto exposures are in decline among Global active investors.  Average holding weights are towards the lower end of the 9-year range, at 0.83%.  A record low of 49% of the 406 funds in our analysis have exposure to the Autos sector.
  • Fund activity over the last 6-months saw Global managers selling down stakes in Daimler AG (DAI GR) , Toyota Motor (7203 JP) and Ford Motor Co (F US) . Tesla Motors (TSLA US) and Volkswagen (Pref) (VOW3 GY) were the main bright spots as ownership levels grew over the period.
  • Overall, the auto industry is becoming increasingly unattractive to the average Global fund manager, with increases in Tesla Motors (TSLA US) exposure unable to counteract significant declines in ownership across the more traditional auto manufacturers.

5. Tencent – Well Timed Transaction

*Another Material Developments At Afterpay: Afterpay Touch (APT.AU) confirmed another material development. The launch of its global rewards system called “Pulse” commenced in the US, and is set to be launched in the United Kingdom, Australia, and New Zealand in the coming months. In short, Afterpay is looking to reward regular users who pay on time (five purchases every six months) which turns the credit card model on its head, as it relies solely on increasing customer spend for points; 

*Other Recently Announced Positives: In addition to the update provided on Pulse, Afterpay has provided a solid update on its growth and traction post-deal; expressed its interest in a capital raise; and onboarded Apple Pay (AAPL.US) and Alphabet (GOOG.US) Google Pay; and

*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Korea Small Cap Gem #3: New Tree Co and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Korea Small Cap Gem #3: New Tree Co

1. Korea Small Cap Gem #3: New Tree Co

Pandora

New Tree Co is the third company we introduce in our “Korea Small Cap Gem” series. New Tree is one of the best up-and-coming companies in the “inner beauty” product segment, especially for eatable collagen products. They also have some outstanding health and diet food supplement products that should continue to thrive in the next few years.

Millions of people in Korea often believe that eating foods that are rich in collagen such as 족발 (pigs’ feet) helps to beautify their skin. Other foods that help the body to produce collagen include bone broth, chicken, fish, egg whites, and citrus fruits. Because of the positive association with beautifying the skin and producing collagen, this is where the company’s Evercollagen has achieved a big success.

Valuation – We believe that the company’s P/E multiples to rise to the 14 to 16x range over the next 12 months which would be closer to the industry average and as investors attach higher valuation multiple to this company, given the company’s superior sales and net profit growth compared to its competitors. If we assume a 15x P/E based on the net profit of 22.6 billion won, this would suggest an implied market cap of 339 billion won (37,375 won per share), which would be a 32% upside from current levels (28,300 won per share).  

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: The Global Autos Break Down, Though Tesla on Full Charge and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. The Global Autos Break Down, Though Tesla on Full Charge
  2. Tencent – Well Timed Transaction
  3. ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges
  4. ECM Weekly (26 July 2020) – Li Auto, Ant Financial, Tigermed, Mindspace, Blue Moon
  5. Hamamatsu Photonics (6965 JP): Set Up for Disappointment

1. The Global Autos Break Down, Though Tesla on Full Charge

Image 56399334581595800417738

  • Auto exposures are in decline among Global active investors.  Average holding weights are towards the lower end of the 9-year range, at 0.83%.  A record low of 49% of the 406 funds in our analysis have exposure to the Autos sector.
  • Fund activity over the last 6-months saw Global managers selling down stakes in Daimler AG (DAI GR) , Toyota Motor (7203 JP) and Ford Motor Co (F US) . Tesla Motors (TSLA US) and Volkswagen (Pref) (VOW3 GY) were the main bright spots as ownership levels grew over the period.
  • Overall, the auto industry is becoming increasingly unattractive to the average Global fund manager, with increases in Tesla Motors (TSLA US) exposure unable to counteract significant declines in ownership across the more traditional auto manufacturers.

2. Tencent – Well Timed Transaction

*Another Material Developments At Afterpay: Afterpay Touch (APT.AU) confirmed another material development. The launch of its global rewards system called “Pulse” commenced in the US, and is set to be launched in the United Kingdom, Australia, and New Zealand in the coming months. In short, Afterpay is looking to reward regular users who pay on time (five purchases every six months) which turns the credit card model on its head, as it relies solely on increasing customer spend for points; 

*Other Recently Announced Positives: In addition to the update provided on Pulse, Afterpay has provided a solid update on its growth and traction post-deal; expressed its interest in a capital raise; and onboarded Apple Pay (AAPL.US) and Alphabet (GOOG.US) Google Pay; and

*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. 

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

Image?1595752031

ByteDance IPO is one of the major listings by Chinese TMT companies that we are looking forward to. The company was valued at USD 75 billion in a pre-IPO round in October 2018 and was valued at USD 100 billion in the private transactions in May 2020. 

In our previous reports, we covered the company’s main products and its recent financials and user data in China. Although ByteDance records most of its revenues from China, one should not underestimate its potential from overseas expansion. ByteDance’s flagship app, TikTok, has become a global phenomenon. Competitors such as Facebook have not been successful in taking market shares from TikTok. In our opinion, ByteDance is the most successful Chinese TMT company in the overseas market. 

In this note, we will look at the latest numbers of the company. It set an ambitious target for its overseas operation but is now facing challenges in two of its biggest markets. We will discuss recent events and what to look forward to after the success of TikTok. 

Our previous coverage on ByteDance

4. ECM Weekly (26 July 2020) – Li Auto, Ant Financial, Tigermed, Mindspace, Blue Moon

Image 62328104621595742174568

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

The number of deals coming to market have slowed down as compared to the mad rush in June but we are now getting wind of larger IPOs that are looking to come to the market soon. Most notably, Ant Financial (1051260D CH) confirmed its plan to list on STAR and Hong Kong Exchange whereas Hangzhou Tigermed Consulting (300347 CH)‘s dual listing is said to be aiming to raise about US$1bn. Ke Yan, CFA, FRM covered the two IPOs in his notes this week:

We also covered other upcoming IPOs that have recently filed their application proof with HKEX such as Blue Moon and Jiayuan Services.

In India, Mindspace Business Parks REIT (MBP IN) launched its bookbuild and has already counted various reputable institutional investors as strategic (cornerstone) investors. Sumeet Singh shared his thoughts on valuation and deal dynamics.

China ADR listing has also been picking up some momentum despite political tensions between China and the US. KE Holdings, which is backed by Tencent Holdings (700 HK) and Softbank Group (9984 JP) and owns Lianjia and Beike, filed its prospectus with the SEC. We will share our thoughts on the IPO next week. Also, Li Auto Inc. (LI US) launched its IPO  and is expecting to raise up to US$950m. 

There were only two sell downs by investors this week as global markets looked a little shaky. Asian Development Bank partially sold its investments in Gulf Energy Development Public Company (GULF TB) and B Grimm Power (BGRIM TB) on the same day and, strangely enough, GULF announced that it plans to raise about US$1bn via a rights issue, right after the selldown was completed. 

Accuracy Rate:

Our overall accuracy rate is 73% for IPOs and 65.8% for Placements 

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

New IPO filings this week

  • KE Holdings (the U.S., US$1bn)
  • Everest Medicine (Hong Kong, ~US$300m)
  • Strawbear Entertainment (Hong Kong, ~US$100m)
  • E-Star Commercial Management (Hong Kong, ~US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

NameInsight
Hong Kong
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
Ant Financial Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News 
Blue Moon

Blue Moon Group Pre-IPO – The Positives – Dominant Market Share, Strong Online Sales 

Blue Moon

Blue Moon Group Pre-IPO – The Negatives – Flagging Offline Sales, Not Really a Primary Raising 

Blue Moon

Blue Moon: No. 1 But No Exclusive Advantage, Observation on the Ground 

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 

Genor

Genor (嘉和生物) Pre-IPO: Slow R&D Progress in the past but that Might Change 

Jiayuan Svcs

Jiayuan Services (佳源服务) Pre-IPO – Another Small Property Management Company 

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 

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
Megvii Megvii (旷视) Pre-IPO –  Initial Thoughts on Valuation 
Nongfu Nongfu Spring Pre-IPO – The Positives – Leaves One Thirsty for More 
Nongfu Nongfu Spring Pre-IPO – The Negatives – Doesn’t Need to List or Expand Production Facilities 
Nongfu Nongfu Spring Pre-IPO – Peer Comparison – Superior Margins and Growth 
Nongfu Nongfu Spring (农夫山泉) IPO: Beverage for the Young, In-Store Photos 
Ocumension Ocumension (欧康维视) Pre-IPO: All Ready for a Great Listing Except a Block Buster 
Pop Mart Pop Mart Pre-IPO – The Negatives – Is It a Brand Owner or Just a Retailer? 
Pop Mart Pop Mart Pre-IPO – The Positives – Expanding Portfolio+Wider Distribution= Explosive Earnings Growth 
Radiance Radiance Holdings (金辉控股) Pre-IPO – Property Mgt Svc Sold Out at a Ridiculously Cheap Valuation 
Shimao Svcs Shimao Services (世茂服务) Pre-IPO – Community VAS Segment Is the Star 
Simcere Simcere (先声制药) Pre-IPO: Long History but Products Concentrated 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
Tigermed Tigermed (泰格医疗) A+H: PHIP Updates and Thoughts on Valuation 
Weihai Bank Weihai City Commercial Bank Pre-IPO – More of an Asset Manager Rather than a Lender 
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 
India
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 

Burger King

Burger King India Pre-IPO – Has Been Growing Fast and Plans to Grow Even Faster 

Burger King

Burger King India Pre-IPO – Peer Comparison Yields Interesting Nuggets on Profitability and Capex 

Bajaj En

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

CAMS CAMS Pre-IPO – Quasi Monopoly Status Muddled by Inconsistent Performance 
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 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
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 
IRFC Indian Railway Finance Pre-IPO – Low Risk, Low Margin Business 
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
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mindspace Mindspace Business Parks REIT Pre-IPO – Decent Growth but Not All Assets Are Equal 
Mindspace Mindspace Business Parks REIT Pre-IPO – Updates Aren’t so Great 
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
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 
UTI AMC

UTI Asset Management Company Pre-IPO – Well past Its Remote Glory Days 

Malaysia
Mr DIY Mr D.I.Y. Pre-IPO – Largest Home Improvement Retailer in Malaysia 
Mr DIY Mr D.I.Y. Pre-IPO – Store Walk-Through and Thoughts on Value Proposition 
Mr DIY Mr D.I.Y. Pre-IPO – Peer Comparison – Small Stores with Dominant Market Share  
Mr DIY Mr D.I.Y. Pre-IPO – Assumptions and Thoughts on Valuation 
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
Thailand
PTTOR PTT Oil and Retail IPO – F&B Business Is the Profit Driver 
SCGP SCGP Pre-IPO – Shift to Packaging Has Been Aiding Margins but Acquisition Drove up Leverage 
The U.S
CDP CDP Holdings Pre-IPO Review – Highly Reliant on Best Inc. 
CloudMindsCloudMinds Inc Early Thoughts – Still Nascent
Li Auto Li Auto (理想汽车) Pre-IPO – Taking the Long Way Around 
Li Auto Li Auto (理想汽车): Visit Li Auto Store and Find Out License Game 
Li Auto Li Auto (理想汽车) Pre-IPO – Peer Comparison – Margins May Look like BYD, but Sells like NIO 

5. Hamamatsu Photonics (6965 JP): Set Up for Disappointment

Hamamatsu%20op

  • Guidance was cut after disappointing 1H results, but management’s new forecast for FY Sep-20 does not include the impact of COVID-19.
  • Instead, management notes that the pandemic could reduce 2H sales by another 10% – 15%. In our estimation, this would lead to a 25% – 34% decline in FY Sep-20 net profit.
  • Management’s plan for the following two years remains unchanged. It implies a sharp rebound taking operating profit well above its FY Sep-18 peak.
  • This plan is based on capacity expansion and demand forecasts made before the outbreak of COVID-19. But capital spending is now being postponed.
  • The share price has rebounded by 47% since March. The projected P/E ratios implied by management’s plan are 33x for FY Sep-22 and 28x for FY Sep-23. The 5-year historical P/E range is 22x – 38x. 
  • As infections continue to rise and lockdowns are reimposed, management’s plan looks over-optimistic, at least for the coming syear.
  • 3Q results should be announced in early August.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Korea Small Cap Gem #3: New Tree Co and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Korea Small Cap Gem #3: New Tree Co
  2. Unity Technologies Pre-IPO – Unlikely to Dethrone Unreal Engine in AAA But Watch the M&A Strategy

1. Korea Small Cap Gem #3: New Tree Co

Pandora

New Tree Co is the third company we introduce in our “Korea Small Cap Gem” series. New Tree is one of the best up-and-coming companies in the “inner beauty” product segment, especially for eatable collagen products. They also have some outstanding health and diet food supplement products that should continue to thrive in the next few years.

Millions of people in Korea often believe that eating foods that are rich in collagen such as 족발 (pigs’ feet) helps to beautify their skin. Other foods that help the body to produce collagen include bone broth, chicken, fish, egg whites, and citrus fruits. Because of the positive association with beautifying the skin and producing collagen, this is where the company’s Evercollagen has achieved a big success.

Valuation – We believe that the company’s P/E multiples to rise to the 14 to 16x range over the next 12 months which would be closer to the industry average and as investors attach higher valuation multiple to this company, given the company’s superior sales and net profit growth compared to its competitors. If we assume a 15x P/E based on the net profit of 22.6 billion won, this would suggest an implied market cap of 339 billion won (37,375 won per share), which would be a 32% upside from current levels (28,300 won per share).  

2. Unity Technologies Pre-IPO – Unlikely to Dethrone Unreal Engine in AAA But Watch the M&A Strategy

Image?1593164512

Unity Technologies is in the process of prepping for an IPO this year. The company develops the Unity game engine which is widely used to develop video games, particularly mobile and indie games. The market for game engines is mostly split between Unity and Epic Games’ Unreal Engine though larger game developers can use their own in-house developed engines. With this attractive situation on offer to the two companies, we examine below whether the market is likely to be bifurcated or result in clash for market share. We also highlight the moves both companies have been making to strengthen their online gaming functionality.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Tencent – Well Timed Transaction and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Tencent – Well Timed Transaction
  2. ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges
  3. ECM Weekly (26 July 2020) – Li Auto, Ant Financial, Tigermed, Mindspace, Blue Moon
  4. Hamamatsu Photonics (6965 JP): Set Up for Disappointment
  5. Nidec (6594): Key Man Risk

1. Tencent – Well Timed Transaction

*Another Material Developments At Afterpay: Afterpay Touch (APT.AU) confirmed another material development. The launch of its global rewards system called “Pulse” commenced in the US, and is set to be launched in the United Kingdom, Australia, and New Zealand in the coming months. In short, Afterpay is looking to reward regular users who pay on time (five purchases every six months) which turns the credit card model on its head, as it relies solely on increasing customer spend for points; 

*Other Recently Announced Positives: In addition to the update provided on Pulse, Afterpay has provided a solid update on its growth and traction post-deal; expressed its interest in a capital raise; and onboarded Apple Pay (AAPL.US) and Alphabet (GOOG.US) Google Pay; and

*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 146% on this stake. 

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

Image?1595752031

ByteDance IPO is one of the major listings by Chinese TMT companies that we are looking forward to. The company was valued at USD 75 billion in a pre-IPO round in October 2018 and was valued at USD 100 billion in the private transactions in May 2020. 

In our previous reports, we covered the company’s main products and its recent financials and user data in China. Although ByteDance records most of its revenues from China, one should not underestimate its potential from overseas expansion. ByteDance’s flagship app, TikTok, has become a global phenomenon. Competitors such as Facebook have not been successful in taking market shares from TikTok. In our opinion, ByteDance is the most successful Chinese TMT company in the overseas market. 

In this note, we will look at the latest numbers of the company. It set an ambitious target for its overseas operation but is now facing challenges in two of its biggest markets. We will discuss recent events and what to look forward to after the success of TikTok. 

Our previous coverage on ByteDance

3. ECM Weekly (26 July 2020) – Li Auto, Ant Financial, Tigermed, Mindspace, Blue Moon

Image 62328104621595742174568

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

The number of deals coming to market have slowed down as compared to the mad rush in June but we are now getting wind of larger IPOs that are looking to come to the market soon. Most notably, Ant Financial (1051260D CH) confirmed its plan to list on STAR and Hong Kong Exchange whereas Hangzhou Tigermed Consulting (300347 CH)‘s dual listing is said to be aiming to raise about US$1bn. Ke Yan, CFA, FRM covered the two IPOs in his notes this week:

We also covered other upcoming IPOs that have recently filed their application proof with HKEX such as Blue Moon and Jiayuan Services.

In India, Mindspace Business Parks REIT (MBP IN) launched its bookbuild and has already counted various reputable institutional investors as strategic (cornerstone) investors. Sumeet Singh shared his thoughts on valuation and deal dynamics.

China ADR listing has also been picking up some momentum despite political tensions between China and the US. KE Holdings, which is backed by Tencent Holdings (700 HK) and Softbank Group (9984 JP) and owns Lianjia and Beike, filed its prospectus with the SEC. We will share our thoughts on the IPO next week. Also, Li Auto Inc. (LI US) launched its IPO  and is expecting to raise up to US$950m. 

There were only two sell downs by investors this week as global markets looked a little shaky. Asian Development Bank partially sold its investments in Gulf Energy Development Public Company (GULF TB) and B Grimm Power (BGRIM TB) on the same day and, strangely enough, GULF announced that it plans to raise about US$1bn via a rights issue, right after the selldown was completed. 

Accuracy Rate:

Our overall accuracy rate is 73% for IPOs and 65.8% for Placements 

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

New IPO filings this week

  • KE Holdings (the U.S., US$1bn)
  • Everest Medicine (Hong Kong, ~US$300m)
  • Strawbear Entertainment (Hong Kong, ~US$100m)
  • E-Star Commercial Management (Hong Kong, ~US$100m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

NameInsight
Hong Kong
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
Ant Financial Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News 
Blue Moon

Blue Moon Group Pre-IPO – The Positives – Dominant Market Share, Strong Online Sales 

Blue Moon

Blue Moon Group Pre-IPO – The Negatives – Flagging Offline Sales, Not Really a Primary Raising 

Blue Moon

Blue Moon: No. 1 But No Exclusive Advantage, Observation on the Ground 

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 

Genor

Genor (嘉和生物) Pre-IPO: Slow R&D Progress in the past but that Might Change 

Jiayuan Svcs

Jiayuan Services (佳源服务) Pre-IPO – Another Small Property Management Company 

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 

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
Megvii Megvii (旷视) Pre-IPO –  Initial Thoughts on Valuation 
Nongfu Nongfu Spring Pre-IPO – The Positives – Leaves One Thirsty for More 
Nongfu Nongfu Spring Pre-IPO – The Negatives – Doesn’t Need to List or Expand Production Facilities 
Nongfu Nongfu Spring Pre-IPO – Peer Comparison – Superior Margins and Growth 
Nongfu Nongfu Spring (农夫山泉) IPO: Beverage for the Young, In-Store Photos 
Ocumension Ocumension (欧康维视) Pre-IPO: All Ready for a Great Listing Except a Block Buster 
Pop Mart Pop Mart Pre-IPO – The Negatives – Is It a Brand Owner or Just a Retailer? 
Pop Mart Pop Mart Pre-IPO – The Positives – Expanding Portfolio+Wider Distribution= Explosive Earnings Growth 
Radiance Radiance Holdings (金辉控股) Pre-IPO – Property Mgt Svc Sold Out at a Ridiculously Cheap Valuation 
Shimao Svcs Shimao Services (世茂服务) Pre-IPO – Community VAS Segment Is the Star 
Simcere Simcere (先声制药) Pre-IPO: Long History but Products Concentrated 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
Tigermed Tigermed (泰格医疗) A+H: PHIP Updates and Thoughts on Valuation 
Weihai Bank Weihai City Commercial Bank Pre-IPO – More of an Asset Manager Rather than a Lender 
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 
India
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 

Burger King

Burger King India Pre-IPO – Has Been Growing Fast and Plans to Grow Even Faster 

Burger King

Burger King India Pre-IPO – Peer Comparison Yields Interesting Nuggets on Profitability and Capex 

Bajaj En

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

CAMS CAMS Pre-IPO – Quasi Monopoly Status Muddled by Inconsistent Performance 
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 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
Equitas SFB Equitas Small Finance Bank Pre-IPO – Another Forced Small Finance Bank Listing 
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 
IRFC Indian Railway Finance Pre-IPO – Low Risk, Low Margin Business 
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
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mindspace Mindspace Business Parks REIT Pre-IPO – Decent Growth but Not All Assets Are Equal 
Mindspace Mindspace Business Parks REIT Pre-IPO – Updates Aren’t so Great 
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta

LIC

Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 

Lodha

Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
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 
UTI AMC

UTI Asset Management Company Pre-IPO – Well past Its Remote Glory Days 

Malaysia
Mr DIY Mr D.I.Y. Pre-IPO – Largest Home Improvement Retailer in Malaysia 
Mr DIY Mr D.I.Y. Pre-IPO – Store Walk-Through and Thoughts on Value Proposition 
Mr DIY Mr D.I.Y. Pre-IPO – Peer Comparison – Small Stores with Dominant Market Share  
Mr DIY Mr D.I.Y. Pre-IPO – Assumptions and Thoughts on Valuation 
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
Thailand
PTTOR PTT Oil and Retail IPO – F&B Business Is the Profit Driver 
SCGP SCGP Pre-IPO – Shift to Packaging Has Been Aiding Margins but Acquisition Drove up Leverage 
The U.S
CDP CDP Holdings Pre-IPO Review – Highly Reliant on Best Inc. 
CloudMindsCloudMinds Inc Early Thoughts – Still Nascent
Li Auto Li Auto (理想汽车) Pre-IPO – Taking the Long Way Around 
Li Auto Li Auto (理想汽车): Visit Li Auto Store and Find Out License Game 
Li Auto Li Auto (理想汽车) Pre-IPO – Peer Comparison – Margins May Look like BYD, but Sells like NIO 

4. Hamamatsu Photonics (6965 JP): Set Up for Disappointment

Screen%20shot%202020 07 25%20at%2014.07.40

  • Guidance was cut after disappointing 1H results, but management’s new forecast for FY Sep-20 does not include the impact of COVID-19.
  • Instead, management notes that the pandemic could reduce 2H sales by another 10% – 15%. In our estimation, this would lead to a 25% – 34% decline in FY Sep-20 net profit.
  • Management’s plan for the following two years remains unchanged. It implies a sharp rebound taking operating profit well above its FY Sep-18 peak.
  • This plan is based on capacity expansion and demand forecasts made before the outbreak of COVID-19. But capital spending is now being postponed.
  • The share price has rebounded by 47% since March. The projected P/E ratios implied by management’s plan are 33x for FY Sep-22 and 28x for FY Sep-23. The 5-year historical P/E range is 22x – 38x. 
  • As infections continue to rise and lockdowns are reimposed, management’s plan looks over-optimistic, at least for the coming syear.
  • 3Q results should be announced in early August.

5. Nidec (6594): Key Man Risk

Nidec%20region

  • Nidec founder, Chairman and CEO NAGAMORI Shigenobu has created the world’s leading producer of small precision electric motors and related products through a combination of organic growth and M&A. Since founding the company in 1973, he has made 67 acquisitions in Asia, the Americas and Europe, almost all of them successful. In FY Mar-20, Nidec’s consolidated sales exceeded ¥1.5 trillion ($14.4 billion).
  • In Japan, Mr. Nagamori is regarded as a corporate hero. Last Friday night, he was featured in a one-hour special on NHK, the national TV broadcaster. He is mentally sharp and extremely energetic, working long hours and taking almost no days off. But his age is starting to show. On August 28, Mr. Nagamori will turn 76. This concerns some investors.
  • Also, as Campbell Gunn wrote in 🇯🇵 JAPAN • Results & Revisions 21st July – Disco Dances & The Nagamori Premium:

Nidec’s Relative Price Score is a new post-listing high following the 45% share price increase since April, although the shares are not yet Overbought. Shareholders’ Equity is the same ¥0.95 trillion as in FY18-Q3. Trailing Return on Equity, Residual Core Return and the CITC margin are all below 1%, and the market-implied perpetual growth rate is an unrealistic 5.9%. The ‘Nagamori premium’ has never been higher. We would not add to it.  

  • Nidec’s share price has rebounded from the COVID-19 sell-off and is nearly back to its January 2018 high, which discounted a future untroubled by the U.S. – China trade war, the pandemic and the possibility of a change in top management at Nidec. 
  • On April 1, that change was made when Nagamori formally appointed SEKI Jun, previously the third ranking executive at Nissan, President of Nidec. Mr. Seki brings knowledge of the auto industry and electric vehicles to the job. Since these are likely to be the company’s growth drivers for the foreseeable future, the choice seems appropriate. 
  • Seki replaced Yoshimoto Hiroyuki, who was demoted to Executive Vice President. Mr. Yoshimoto had introduced a management-by-committee system, which Nagamori now says “…was the biggest mistake since the company was founded.” Mr. Seki reports only to Mr. Nagamori.
  • Nidec is unlikely to make that mistake again, greatly reducing the risk of succession, in our estimation. 
  • Over the years, through numerous meetings with management at Nidec and its subsidiaries, we have come to believe that the Nagamori management style – fast, efficient, flexible, profitable – has been thoroughly adopted by the entire Nidec Group. 
  • For this reason, and because a successor has apparently been found, we expect no major disruption to Nidec’s business when Nagamori passes from the scene. Steve Jobs was also irreplaceable, but Tim Cook has done a good job.
  • Rather, we are concerned that valuations are at the top of their historical ranges at a time of great uncertainty. With earnings bouncing back, we would not short the stock, but after a 70% run-up since March, we would be inclined to take some profit. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Unity Technologies Pre-IPO – Unlikely to Dethrone Unreal Engine in AAA But Watch the M&A Strategy and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Unity Technologies Pre-IPO – Unlikely to Dethrone Unreal Engine in AAA But Watch the M&A Strategy

1. Unity Technologies Pre-IPO – Unlikely to Dethrone Unreal Engine in AAA But Watch the M&A Strategy

Image?1593164512

Unity Technologies is in the process of prepping for an IPO this year. The company develops the Unity game engine which is widely used to develop video games, particularly mobile and indie games. The market for game engines is mostly split between Unity and Epic Games’ Unreal Engine though larger game developers can use their own in-house developed engines. With this attractive situation on offer to the two companies, we examine below whether the market is likely to be bifurcated or result in clash for market share. We also highlight the moves both companies have been making to strengthen their online gaming functionality.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Growth Ideas: Goldwin Climbs Further in Japan Health and Wellness Boom and more

By | Daily Briefs, Growth Ideas

In this briefing:

  1. Goldwin Climbs Further in Japan Health and Wellness Boom

1. Goldwin Climbs Further in Japan Health and Wellness Boom

Goldwinsf

While lifestyle outdoor brands look like one of the more vulnerable categories in the current crisis, Goldwin Inc (8111 JP)’s renaissance continues.

The sports/outdoor firm remains overly dependent on The North Face for the bulk of sales and profits but the potential to grow other brands, including its own, and a healthy balance sheet, suggest Goldwin has enough to ride out this crisis and continue to build.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.