Category

IPOs and Placements

Equity Capital Markets: Cloud Village, CarTrade, Devyani International and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • ECM Weekly (1st August 2021) – Cloud Village, Li Auto HK, Asymchem, Acotec, Devyani, Del Monte PH
  • CarTrade Tech IPO Initiation: Shifting Gears
  • Devyani IPO – Still Some Upside on Un-Adjusted EBITDA Basis

ECM Weekly (1st August 2021) – Cloud Village, Li Auto HK, Asymchem, Acotec, Devyani, Del Monte PH

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’s another week of regulatory crackdown in China. This time, Meituan’s share price declined 21% since the start of the week after China issued regulations to tighten oversight of the food delivery sector by asking food delivery operators to respect the rights of delivery staff and to ensure that delivery workers earn at least the local minimum income. 

Then regulators published a statement on Friday afternoon stating that they will look to step up oversight on the property industry and specifically, poor practices like property management fees not being explicitly revealed, or more fees collected than originally stated, will be banned.

In the U.S, it was reported that the SEC has stopped processing registrations of U.S. IPOs and other sales of securities by Chinese companies. This came after CNBC reported on Thursday that China will continue to allow Chinese companies to go public in the U.S. as long as they meet listing requirements, according to people familiar with the matter.

For ongoing IPO coverage, in Hong Kong, we compared Cloud Village (NetEase Music) to peers, mainly Tencent Music, and discussed the impact of the recent regulatory action on Tencent Music. The company is planning to start pre-marketing next week.

Ke Yan continued his coverage of Acotec Scientific with a discussion of assumptions and valuation.

In the U.S, PropertyGuru and Bridgetown 2 announced that they have entered into a business combination agreement which will see PropertyGuru go public at an EV of US$1.35bn and equity value of US$1.78bn.

For A/H-share listings, we took an early look at Shenzhen-listed Asymchem Labs, which is aiming to raise US$1 – 1.5bn. We also shared our thoughts on Li Auto’s Hong Kong dual primary listing which was approved earlier this week and was looking to raise up to US$1.5bn.

In India, Devyani International’s IPO terms were launched. The company is looking to raise US$242m and anchor books will open on 3rd August while the bookbuild for other investors will be open from 4th – 6th August. We have already looked at valuation this week in:

In the Philippines, Del Monte Philippines ended its pre-marketing this week. We looked at peer comparison and shared our thoughts on assumptions and valuation. We also looked at potential proxy trade via Del Monte Pacific.

For placements this week, we covered PointsBet 1 for 9 accelerated, pro rata renouncement entitlement offer and institutional placement that was expected to raise about A$400m. Shares will resume trading on Monday with the company reporting that its institutional offer was well supported by new and existing local and international institutional investors.

Accuracy Rate:

Our overall accuracy rate is 73.8% for IPOs and 67.4% for Placements 

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

New IPO filings this week

  • Imeik Technology  (Hong Kong, US$3bn)
  • Biel Crystal (Hong Kong, US$2bn)
  • HeMo Bioengineering (Hong Kong, >US$100m)
  • ESAF SFB (India, re-file)
  • SJS Enterprise (India, US$108m)

News on Upcoming IPOs

Hong Kong/China

US/China ADRs

India

Japan/Korea

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 

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 

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 
WM Tech WM Tech Pre-IPO – Peer Comparison and Pre-IPO Valuation – Some Signs of Advantage 
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 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food

CarTrade Tech IPO Initiation: Shifting Gears

By Arun George

Cartrade (0056989Z IN) is a leading online destination for auto consumers in India. CarWale and BikeWale, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). 

CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  

India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. 

The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.


Devyani IPO – Still Some Upside on Un-Adjusted EBITDA Basis

By Sumeet Singh

Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$250m via its Indian IPO. The IPO will be a mix of primary and secondary shares. 

DIL operates a chain of quick service restaurants (QSRs) in India. Its core business is to operate KFC, Pizza Hut and Costa Coffee in India. It operated 655 stores across 155 cities in India, as of Mar 2021. These include 264 KFC stores, 297 Pizza Hut stores and 44 Costa Coffee stores. It also operates stores in Nepal and Nigeria for KFC and Pizza Hut. In addition, it also runs its own brands Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar in India. Yum owns over 4% stake in the company.

In this note, we will talk about the IPO pricing.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Cartrade, Cloud Village and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • CarTrade Tech IPO- A Patchy Drive
  • Cloud Village (NetEase Music) Pre-IPO – Initial Thoughts on Valuation

CarTrade Tech IPO- A Patchy Drive

By Nitin Mangal

Internet IPOs are turning out to be the theme of the year in India so far. In yet another instance, Cartrade (0056989Z IN), operator of Carwale, and Bikewale lately received SEBI’s nod of floating the public issue.

Cartrade, along with its subsidiaries, operates an automotive digital ecosystem which connects automobile customers, OEMs, dealers, banks, insurance companies and other stakeholders. The Group owns and operates under several brands: CarTrade, CarWale, Shriram Automall, BikeWale, etc. Through these platforms, the group enables new and used automobile customers, vehicle dealerships, automotive manufacturers and other businesses to buy and sell their vehicles.

While the auto tech platforms have several players in the Industry, CarTrade is the first one in the line to get listed. The company also reported in the DRHP that it is the only competitor to boast a positive net income, while also ranking number one on relative online search popularity when compared to their key competitors over the period from April 2020 to March 2021. 

However, on the flip side CarTrade also undergoes several shortfalls on the balance sheet end. A simple forensic check of DRHP reveal issues like aggressive revenue recognition, worrying cash yield, fragile earnings, etc.


Cloud Village (NetEase Music) Pre-IPO – Initial Thoughts on Valuation

By Sumeet Singh

Cloud Village Inc. (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 and Alibaba, 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.

In this note, we will comment on valuations.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: PointsBet Holdings Pty Ltd, Cloud Village, Krafton Inc, Devyani International, KakaoBank and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • PointsBet Institutional Placement and Entitlement Offer – Worth a Bet
  • Cloud Village (NetEase Music) Pre-IPO – Tencent Music Peer Comp, Regulatory Impact
  • Krafton Bookbuilding: Subscription/Lockup Data & Resulting Implications
  • Trading Strategy of Krafton IPO Post Bookbuilding Results
  • Devyani Pre-IPO – Thoughts on Valuation
  • Kakao Bank: Full Allocation Results, Index Floats, & Fast Entry Possibilities

PointsBet Institutional Placement and Entitlement Offer – Worth a Bet

By Zhen Zhou, Toh

PointsBet Holdings Pty Ltd (PBH AU) is looking to raise A$400m (US$294m) from its institutional placement and entitlement offer. At the same time, Sam Swanell, Nick Fahey, and Andrew Fahey will be selling down a portion of their shares worth about A$29m.

In this note, we will look at the deal structure, discuss its Q4 results, and share our thoughts on the deal.


Cloud Village (NetEase Music) Pre-IPO – Tencent Music Peer Comp, Regulatory Impact

By Sumeet Singh

Cloud Village Inc. (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 and Alibaba, 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.

We covered various aspects of the deal in our previous note, Cloud Village (NetEase Music) Pre-IPO – Was in the slow stream, playing catch-up.

In this note, we compare CVI with its main peer Tencent Music Entertainment (TME) and comment on the recent regulatory announcement with respect to TME.


Krafton Bookbuilding: Subscription/Lockup Data & Resulting Implications

By Sanghyun Park

As expected, Krafton’s IPO price has been confirmed at ₩498,000, the upper end of the indicative price band. So, Krafton gets to raise a total of ₩4.3T through this public offering, and its market cap reaches ₩24.4T.

PricingLowHigh (final)
Price₩400,000₩498,000
Base deal size₩3,461.7B₩4,309.8B
– Institutional allotment₩1,903.9B₩2,370.4B
Implied market cap₩19,559.2B₩24,351.2B
– Discount30.93%14.01%
Source: DART

The competitive rate for institutional subscriptions came out to be 243.2 to 1, similar to what has already been leaked from the market. Compared to the recent mega IPOs that easily exceeded 1,000 to 1, it can be seen that this IPO’s institutional participation rate was low. However, considering that this IPO has a substantially larger offering size and a very aggressive price, it can be concluded that the interest of institutions was higher than expected.

By investor typeInstitution%Demand%
Local publicly raised funds23137.20%445,792,00038.52%
Local brokerages/investment advisories182.90%28,393,0002.45%
Local pensions, funds managing proprietary assets, banks, and insurance companies9415.14%242,965,00020.99%
Local others (mostly discretionary investment companies – local hedge funds)10416.75%234,982,00020.30%
Foreign (foreign IPO funds & hedge funds)14623.51%62,498,4975.40%
Foreign others (mostly local hot money)284.51%142,697,00012.33%
Total621100.00%1,157,327,497100.00%
Subscription rate243.15 to 1
Source: DART

Looking at the application results for each type of institution below, we can find a very interesting fact.

  1. First, a large number of foreign institutions with business relationships (i.e., major foreign investment institutions) participated in this subscription. The share of 23.5% by the number of participating institutions is significantly higher than the typical level for local IPOs. Of course, most of them applied based on actual demand, so their proportion of total subscription volume is only 5.4%. However, considering that all these quantities are actual demand, we can safely say that their participation level is quite high. This is a result consistent with what Mirase Asset (the bookrunner) has continuously leaked to the market about the active participation of many major overseas institutions.
  2. Another point to note is that the number of participating local institutions is remarkably low, consistent with the initial forecast that most small and medium-sized institutions skipped this IPO due to scheduling conflicts with LG Energy Solutions.
  3. Finally, institutions belonging to the category ‘Foreign others’ were quite aggressive in taking orders despite a small number of participating institutions. These are mainly local hot money managers, who are the most active in early profit realization trading. In other words, their aggressive move to secure Krafton IPO shares means that they are heavily betting on a short-term price increase due to the entry of local retailers immediately after Krafton’s listing.
  • The category ‘Foreign’ indicates foreign institutional investors with transaction records. They are foreign institutional investors who have a business relationship with the underwriter or of whom the underwriter acquirer is aware of the identity. So, these foreign institutions can be considered well-established overseas institutions actually based overseas.
  • In contrast, the category ‘Foreign others’ indicates foreign institutional investors without transaction records. Most of them are local hot money only whose legal office is registered overseas.

The “Unspecified” category usually indicates that they want the shares above the high end. With that in mind, 37.4% have gone for the upper end or above. The other 57.5% selected 75-100% of the upper end. So, most of the orders (95%) are priced at 75-100% of the upper end or higher. Unlike the initial concerns, we can say the institutional pricing is quite aggressive.

By priceInstitution%Demand%
Above high end599.50%279,666,00024.16%
75-100% of high end24639.61%665,029,82357.46%
50-75% of high end10.16%1,0000.00%
25-50% of high end00.00%00.00%
0-25% of high end71.13%11,370,0000.98%
Median00.00%00.00%
75-100% of median10.16%1,0000.00%
50-75% of median00.00%00.00%
25-50% of median30.48%77,0000.01%
0-25% of median10516.91%48,077,0004.15%
Low end or below274.35%37,0000.00%
Unspecified17227.70%153,068,67413.23%
Total621100.00%1,157,327,497100.00%
Source: DART

Trading Strategy of Krafton IPO Post Bookbuilding Results

By Douglas Kim

On 29 July, Krafton announced its IPO book building results. The IPO price has been determined at 498,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 243 to 1. Krafton will be raising $4.3 billion in this IPO. There were 621 institutional investors that participated in the IPO survey of which 447 were domestic investors and 174 were overseas investors. 

Institutional Investors Demand Breakdown of Krafton IPO Bookbuilding Results
 
Domestic Investors    
 Asset mgmt companiesBrokeragesPension funds/insurance/banksOthers
No. of companies2311894104
Demand93.76.051.049.4
     
 Overseas Investors   
 (A)*(B)**  
No. of companies14628  
Demand13.130.0  
     
Total (No. of companies)621   
Total Demand243.1   
Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.
(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.
Source: Company data   
  • We continue to have a NEGATIVE view of the Krafton IPO post book building results. Our base case valuation of Krafton remains implied market cap of 23.0 trillion won or implied price of 445,942 won per share, which represents 10% lower than the IPO price of 498,000 won. 

  • Gray market price of Krafton is 530,000 won, which is 6% higher than the IPO price of 498,000 won. 

  • Overall, there were some big institutional investors (both overseas and domestic) that helped to push Krafton’s IPO price to the high end of the lowered IPO price range. Despite this positive, the lock-up periods and the demand ratios were relatively weak as compared to other major IPOs in the past year. 

  • We do not expect any meaningful first day pop for the Krafton IPO. At best, we think there could be a 10-20% increase from the IPO price in the first few hours of trading on August 10th (IPO date). However, over a 6-12 months view, we believe that Krafton’s stock price will decline lower towards our base case intrinsic value of 455,942 won.


Devyani Pre-IPO – Thoughts on Valuation

By Sumeet Singh

Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$200m via its Indian IPO. The IPO will be a mix of primary and secondary shares. 

DIL operates a chain of quick service restaurants (QSRs) in India. Its core business is to operate KFC, Pizza Hut and Costa Coffee in India. It operated 655 stores across 155 cities in India, as of Mar 2021. These include 264 KFC stores, 297 Pizza Hut stores and 44 Costa Coffee stores. It also operates stores in Nepal and Nigeria for KFC and Pizza Hut. In addition, it also runs its own brands Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar in India. Yum owns over 4% stake in the company.

In this note we will talk about valuations.


Kakao Bank: Full Allocation Results, Index Floats, & Fast Entry Possibilities

By Sanghyun Park

Allocation

All the allocation results for the Kakao Bank IPO are now available at DART. Institutional investors took 55% of the total offering, and retail took 25.5%, receiving the forfeited shares from the ESOP subscriptions.

Almost all institutional allocations have gone to local publicly raised funds and pensions known for their long-term holding tendencies. Yes, as expected, those presumably long-term foreign funds also took a substantial portion, which Kakao Bank needs to boost the foreign ownership percentage, often interpreted as a symbolic indicator of popularity.

Allocation by type

Allocated, % of the offeringFinal, % of the offeringFinal, % of post-IPO SO
Institutional55.00%55.00%7.58%
1. Local publicly raised funds16.00%2.21%
2. Local Br/IA1.02%0.14%
3. Local pension, etc.9.83%1.36%
4. Local others0.61%0.08%
5. Foreign27.53%3.80%
6. Foreign, other0.00%0.00%
Retail25.00%25.50%3.51%
ESOP20.00%19.50%2.68%
Total100.00%100.00%13.78%
Source: DART

Below is the classification of institutional investors as defined in KRX statistics.

By investor type
1. Local publicly raised fundsLong-term
2. Local brokerages/investment advisoriesShort-term
3. Local pensions, funds managing proprietary assets, banks, and insurance companiesLong-term
4. Local others: discretionary investment companies, savings banks, real estate trust companies, capital companies, and leasing companies
Mainly, short-term
5. Foreign institutional investors with a transaction record: foreign IPO/hedge funds
Depends
6. Foreign institutional investors without transaction record: local hot money
Mostly, short-term
Source: DART

Lockups

Institutional allocations without lockup account for only 40%. Most of the shares allocated to local publicly raised funds and pensions are locked up for 3-6 months. Foreign funds also locked up about 25% of their allocated shares, which is much higher than usual.

The initial expectation was to take the lockup weight to a minimum considering the immediate float, but it turns out that Kakao Bank has aggressively locked up than originally expected.

Lockups by institution type1. Local PO2. Local Br/IA3. Local pension, etc.4. Local others5. Foreign6. Foreign, otherTotal
6 months13.02%0.25%14.84%0.29%8.42%0.00%36.81%
3 months9.63%0.62%1.86%0.29%1.67%0.00%14.07%
1 month4.13%0.23%0.59%0.17%3.61%0.00%8.72%
15 days0.17%0.04%0.01%0.00%0.00%0.00%0.22%
No lockup2.15%0.71%0.58%0.37%36.36%0.00%40.18%
Total29.10%1.85%17.88%1.12%50.06%0.00%100.00%
Source: DART

The amount released to the market immediately after the listing is 22.55% of the total number of outstanding shares. This includes pre-IPO minority shareholders (mostly VC and corporate), which account for 15.99%.

Post-IPO lockup releases, as a % of SOIPO shareholdersMajor shareholderESOPVC/corporate stakeholdersOther pre-IPO minority shareholders (mostly VC/corporate)Total
1 year0.00%0.00%2.68%0.00%0.00%2.68%
6 months2.79%27.26%0.00%39.76%0.00%69.81%
3 months1.07%0.00%0.00%3.20%0.00%4.27%
1 month0.66%0.00%0.00%0.00%0.00%0.66%
15 days0.02%0.00%0.00%0.00%0.00%0.02%
Lock-up4.54%27.26%2.68%42.96%0.00%77.44%
No lock-up6.56%0.00%0.00%0.00%15.99%22.55%
Source: DART

Before it’s here, it’s on Smartkarma

Equity Capital Markets: Krafton Inc, HK inno.N, KakaoBank, Beijing Airdoc Technology and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Krafton Bookbuilding: A Quick Recap of Last Day Craziness
  • HK Inno.N Book Building Results Analysis
  • HK Inno.N Bookbuilding Results: Subscription/Lockup Orders in Detail
  • Kakao Bank – Gray Market Price Declines Sharply By 35% in One Month
  • Pre-IPO Beijing Airdoc Technology – The Strength and the Concerns

Krafton Bookbuilding: A Quick Recap of Last Day Craziness

By Sanghyun Park

The last day of Krafton’s bookbuilding? Well, it was really a crazy day.

A suspicious rumor circulated at noon yesterday

First of all, at noon yesterday, a rumor circulated among local institutions through the messenger mainly used by institutions.

Previously, Yahoo Messenger was the main medium for circulating all sorts of rumors and stories between local institutional investors. But after the Yahoo Messenger service was terminated, NateOn is mainly used now.

The content of this rumor was somewhat provocative. The rumor said that the bankers are currently holding an emergency meeting due to the low competition rate for institutional subscriptions in the Krafton bookbuilding.

When Mirae Asset Securities learned that this rumor was circulating through NateOn, it immediately denied it, which led to an unusual situation where a banker updated the bookbuilding progress even before bookbuilding was closed.

In fact, Mirae Asset explained to local institutions yesterday afternoon that this Krafton bookbuilding was significantly more positive than initially expected and that the rumor of holding an emergency meeting due to the disastrous results simply was not true.

However, it is said that this rumor has caused confusion among some local institutions and has had some effect on the institutional subscription rate on the last day.


HK Inno.N Book Building Results Analysis

By Douglas Kim

HK Inno.N announced its IPO book building results today. The IPO price has been determined at 59,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 1,871 to 1.

There were 13.5% of shares that were applied under a lock-up. This is relatively low and is one of the concerning factors of the bookbuilding results.

We continue to have a POSITIVE view of the HK Inno.N IPO post book building results. Our base case valuation of HK Inno.N remains implied market cap of 2.2  trillion won or implied price of 75,534 won per share. This represents 28% higher than the high end of the IPO price range of 59,000 won. 


HK Inno.N Bookbuilding Results: Subscription/Lockup Orders in Detail

By Sanghyun Park

HK Inno.N’s offering price got fixed at ₩59,000, the upper end of the indicative price band, implying a market cap of ₩1.7T. There is no change in the offering volume.

Indicative price bandLowHigh (final)
Price₩50,000₩59,000
Base deal size₩505.9B₩596.9B
– Institutional allotment₩278.2B₩328.3B
Implied market cap₩1,445.2B₩1,705.4B
– Discount29.54%16.85%
EV/EBITDA15.77x18.02x
Source: DART

The institutional subscription competition rate is 1,871 to 1, nearly hitting the record holder SKIET’s 1,883 to 1. In this bookbuilding, it seems that local institutions have been overbetting quite aggressively. In particular, it seems that local publicly raised funds with long-term holding tendencies have been active in securing the stocks. This proves that many local institutional investors felt that this IPO was price attractive enough for long-term holding.

By investor typeInstitution%Demand%
Local publicly raised funds71343.82%4,795,649,60046.05%
Local brokerages/investment advisories311.91%202,086,7501.94%
Local pensions, funds managing proprietary assets, banks, and insurance companies22013.52%1,434,513,85013.78%
Local others (mostly discretionary investment companies – local hedge funds))39224.09%2,678,313,00025.72%
Foreign (foreign IPO funds & hedge funds)744.55%79,187,1940.76%
Foreign others (mostly local hot money)19712.11%1,223,144,00011.75%
Total1,627100.00%10,412,894,394100.00%
Subscription rate1,871.36
Source: DART

The “Unspecified” category usually indicates that they want the shares above the high end.

With that in mind, about one-third have gone for the upper end or above. The remaining two-thirds selected 75-100% of the upper end. All of the orders are priced at 75-100% of the upper end or higher. So, yes, we can say the institutional pricing is quite aggressive.

By priceInstitution%Demand%
Above high end53632.94%3,597,972,50034.55%
75-100% of high end1,06165.21%6,630,326,89463.67%
50-75% of high end00.00%00.00%
25-50% of high end00.00%00.00%
0-25% of high end00.00%00.00%
Median00.00%00.00%
75-100% of median00.00%00.00%
50-75% of median00.00%00.00%
25-50% of median00.00%00.00%
0-25% of median00.00%00.00%
Low end or below00.00%00.00%
Unspecified301.84%184,595,0001.77%
Total1,627100.00%10,412,894,394100.00%
Source: DART

Kakao Bank – Gray Market Price Declines Sharply By 35% in One Month

By Douglas Kim

The gray market price of Kakao Bank has declined sharply by nearly 35% in the past month. As of 28 July 2021, Kakao Bank’s gray market price is 55,000 won, down from 85,000 won about a month ago. Typically, gray market prices of major Korean IPOs (those that have market caps of more than 1 trillion won) do not change this much within a short period of time. Kakao Bank IPO is scheduled to start trading on August 6th. 

Our base case valuation of Kakao Bank remains market cap of 26.8 trillion won or implied price of 56,144 won per share. This represents 44% higher than the high end of the IPO price range of 39,000 won. We continue to maintain a POSITIVE view of Kakao Bank, given the solid upside relative to the IPO price.

Nonetheless, given the sharp decline in the recent gray market price of Kakao Bank, there is now a reduced likelihood of Kakao Bank’s share price rising significantly to the 75,000 won to 85,000 won level in the first few hours of trading on August 6th. 


Pre-IPO Beijing Airdoc Technology – The Strength and the Concerns

By Xinyao (Criss) Wang

In recent years, the value of AI medical imaging has become increasingly prominent. For example, the application of CT for diagnosis in COVID-19 pandemic has strengthened the importance of imaging and played an immeasurable role in the prevention and treatment of COVID-19. In this context, many players in this industry have planned to start IPO in the capital market. On June 21, Beijing Airdoc Technology (BAT HK) filed its prospectus with the HKEX and officially started its IPO process. Airdoc is a global market leader and pioneer in providing AI-empowered retina-based early detection, diagnosis and health risk assessment solutions. This insight mainly analyzed the business, the financial position and concerns of the Company.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Krafton Inc, Bukalapak, Asymchem Laboratories, Iljin Hysolus, Del Monte Philippines, Paytm, Maruti Suzuki India, Yonghe Medical Group and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Krafton Bookbuilding Last Day: Institutional Mood So Far
  • Bukalapak IPO Valuation
  • Asymchem Labs A/H Listing Early Look – Fast Growing, Relatively Insulated
  • Iljin Hysolus Reduces IPO Price Range
  • Del Monte Philippines Pre-IPO – Peers, Assumptions, Valuations and Deal Dynamics
  • Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order
  • India Channel Insight | Maruti, Hyundai, Tata Motors, Eicher, Ola Electric
  • Pre-IPO Yonghe Medical Group – Here Are the Concerns

Krafton Bookbuilding Last Day: Institutional Mood So Far

By Sanghyun Park

Krafton will close the bookbuilding today, which started on the 14th. Two days later, it will finalize and announce the offering price on the 29th.

Krafton IPO schedule
Book close2021. 7. 27
Allotment2021. 7. 29
Subscription2021. 8. 2
Payment2021. 8. 5
Listing2021. 8. 10
Source: DART

Online press conference on the 26th

Krafton held an online press conference yesterday, where the CFO extensively commented on the bookbuilding atmosphere.

(Courtesy News 1)

First of all, the CFO said that the response was particularly enthusiastic from overseas institutional investors. He said that they include a number of long-term funds.

This is a direct quote from Bae Dong-geun, CFO of Krafton. He said,

It is difficult to give a clear answer because the institutional bookbuilding has not been completed yet, but at this point (one day left until the bookbuilding deadline), I can confidently say that it was a success.

He further revealed that overseas institutions participated more aggressively in the subscription than local institutional investors, and this somewhat surprising trend was clearly seen in the actual pricing.

What the bankers are saying

Then, below are the actual results of bookbuilding being leaked by the bankers.

The bankers are also saying that the institutional mood confirmed during the two weeks of bookbuilding is obviously hotter than initially expected.

For example, on the first day of bookbuilding alone, overseas institutional investors applied for a quantity that was 20 to 30 times more than the allocated quantity at a price higher than the upper end of the indicative price band (₩498,000)

Indicative price bandLower endUpper end
Price₩400,000₩498,000
Base deal size₩3,461.7B₩4,309.8B
– Institutional allotment₩1,903.9B₩2,370.4B
Implied market cap₩19,559.2B₩24,351.2B
Source: DART

Of course, this news also reached the ears of domestic institutions.

The pricing for local institutional investors started on the 20th. And it is being said (or leaked by the bankers) that local institutions are placing orders using all available funds as their competitive sentiment must have been triggered by the aggressive participation of foreign institutions.


Bukalapak IPO Valuation

By Oshadhi Kumarasiri

Indonesian e-commerce unicorn, Bukalapak (BUKA IJ) is expected to price its IPO at the top end of the offer range, which implies a market cap and EV of $6.0bn and $4.4bn respectively.

We like the way Bukalapak has placed itself in a relatively low competitive subsector within the Indonesian e-commerce market. However, it appears that it is extremely difficult to generate sufficient merchant commissions and advertising revenue from Bukalapak’s subsector of e-commerce. Although we are worried about the fact that Bukalapak may not be profitable in the medium term (inability to generate sufficient revenue), there are plenty of investors willing to invest in Bukalapak based on the company’s revenue potential.

Having said that, we still don’t anticipate Bukalapak to generate generous gains on its trading debut due to the extremely high IPO valuation. Nevertheless, there could be some upside on trading debut, but we think risks rewards are not sufficiently skewed to the upside trade this IPO with any conviction.


Asymchem Labs A/H Listing Early Look – Fast Growing, Relatively Insulated

By Sumeet Singh

Asymchem Laboratories (002821 CH) (AL) aims to raise around US$1-1.5bn in its H-share listing in Hong Kong. The A-shares listed were listed in Shenzhen in 2016.

AL is a provider of outsourced pharmaceutical development and manufacturing solutions and services. AL provides process development and manufacturing services for small molecule drugs throughout the preclinical, clinical and commercial stages. According to Frost & Sullivan, it is the fifth largest drug substance contract development manufacturing organization (CDMO) globally, and the largest China-based commercial stage chemical drug CDMO, as measured by 2020 revenue.

As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics. 


Iljin Hysolus Reduces IPO Price Range

By Douglas Kim

Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.

The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. 

Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO.

Deal Specifics of the Iljin Hysolus IPO (Revised):
 
Lead underwriters of the IPO: 
Mirae Asset Securities, Samsung Securities
Expected IPO price per share: 
25,700 won (low)/34,300 won (high)
Number of Shares for IPO:
10.89m shares (7.26m new shares and 3.63m old shares)
IPO base deal size: 
US$243 mn (low);  US$325 mn (high)
Expected common shares outstanding, fully diluted (post-IPO):  
36.31m shares
Expected market cap after IPO:
933 billion won (low)/1,245 billion won (high)
Book open: 
19-Aug-21
Book closed:
20-Aug-21
Listing date: 
TBD
Source: Company data
 

Del Monte Philippines Pre-IPO – Peers, Assumptions, Valuations and Deal Dynamics

By Zhen Zhou, Toh

Del Monte Philippines (1575316D PM) (DMPI) is looking to raise about US$791m in its upcoming Philippines IPO.

Del Monte Philippines, Inc (DMPI) is a leading food and beverage producer in the Philippines and internationally. DMPI has been in operation in the Philippines for 95 years. It produces, markets, and distributes its products worldwide under brands like Del Monte, S&W, Contadina and it has a dominant market position across a range of products. 

We have previously covered the IPO in:


Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order

By Shifara Samsudeen, ACMA, CGMA

India’s largest payment and financial services platform Paytm (PAYTM IN)  has filed for an IPO to raise about INR166bn (US$2.2bn) through the issuance of new shares as well as through the sale of existing shares. Paytm plans to raise about INR83bn through the sale of new shares while the existing shareholders including the company’s founder Mr. Vijay Shekhar Sharma and other investors plan to offer part of their shareholding in the company.

According to news media outlets, Paytm aims for a valuation of about US$25-30bn and the company’s FY03/2021 revenues of INR28bn (US$364m) implies a trailing EV/Sales of 69-82x.

Paytm’s revenues grew 1.5% YoY in FY03/2020 while it declined 14.6% YoY in FY03/2021 due to the pandemic. We expect the company’s commerce and cloud services business’s top line to further decline in FY03/2022E due to the resurgence of Covid-19 in India in April 2021. Though Paytm has multiple monetisation channels and established itself as a category leader in overall payments sector in India, we believe it will take a few more years for the company to reach profits.

In this insight, we examine Paytm’s business model, segments, revenues and margins. In a follow-up insight, we plan to take a look at the corporate governance related issues of the company and run through our governance framework.


India Channel Insight | Maruti, Hyundai, Tata Motors, Eicher, Ola Electric

By Pranav Bhavsar

In this Insight, we present commentary from our interactions with one of the largest dealers of Maruti Suzuki India (MSIL IN) , Store Manager of Royal Enfield from Eicher Motors (EIM IN) , Dealership owners of Hyundai Motor Co (005380 KS) and an Electric Vehicle (EV) of Greaves Cotton (GRV IN). We also share anecdotal commentary that we have gathered about Tata Motors Ltd (TTMT IN) .

About India Channel Insight 

Our objective with India Channel Insight is to share snippets from our channel interactions that are part of our research process. These snippets emerging out of these interactions and have been aiding us to generate interesting trade ideas and have often proven to be reliable sources of qualitative alpha.


Pre-IPO Yonghe Medical Group – Here Are the Concerns

By Xinyao (Criss) Wang

Modern fast pace of life and huge work pressure make hair loss anxiety spread to all kinds of groups. As people pay more attention to hair, the awareness of hair health and management is gradually awakening, and hair transplantation is one of the solutions. On June 17, Yonghe Medical Group (YMG HK) formally submitted its prospectus to the HKEX and planned to be listed on the main board. If everything goes well, Yonghe will be the first listed company in the field of hair transplantation in China. However, despite the promising market potential, there are some concerns of the Company that deserve investors’ attention.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Paytm, Krafton Inc, Li Auto Inc., Acotec Scientific Holdings, KakaoBank, D&D Platform REIT, Dingdang Health Technology Group and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Paytm IPO Initiation: A Payments-Led Super-App
  • Krafton IPO – A Few Thoughts on Its IP and the Tencent Relationship
  • Major Highlights of Krafton’s Online Press Conference & Focus on Overseas M&As Post IPO
  • Li Auto HK Listing – Needs to Be Done at Discount Given XPeng’s Poor Debut
  • Acotec (先瑞达) Pre-IPO: Thoughts on Valuation
  • Li Auto Secondary Listing: Volts Wagons
  • A Classic Long/Short Approach for an IPO: Kakao Bank Vs. Korea Investment Holdings
  • D&D Platform REIT IPO Preview
  • Pre-IPO Dingdang Health Technology – The Future Looks Challenging

Paytm IPO Initiation: A Payments-Led Super-App

By Arun George

Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm’s shareholders include Ant Financial Services Group (6688 HK) (29.6% of outstanding shares), Softbank Vision Fund (18.3%), Alibaba Group (BABA US) (7.2%) and Berkshire Hathaway Inc Cl B (BRK/B US) (2.8%).  

Paytm plans to raise up to Rs166.0 billion ($2.2 billion) with a primary/secondary split of 50%/50%, according to the DHRP filing. 

The Indian Government is highly supportive of digital payments and in 2016, introduced demonetisation efforts through the launch of Unified Payment Interface (UPI) to reduce the reliance on cash. However, India continues to be a cash-driven economy which underscores the opportunity. Due to government initiatives, improving technology, growing awareness, digital payments by value in India are expected to more than double from $20 trillion in FY21 to $40-50 trillion by FY26, according to RedSeer. 

As India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. The advent of UPI has increased competition (Google Pay, PhonePe, MobiKwik) but Paytm is also leveraging its dominance in digital payments to build a synergistic ecosystem of complementary services, resulting in a strong claim to the “super-app” tag. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. Overall, we think that Paytm’s fundamentals are attractive. 


Krafton IPO – A Few Thoughts on Its IP and the Tencent Relationship

By Mio Kato

Krafton appears to be doing the PR rounds regarding investor interest in its IPO. The Nikkei and various other news outlets had some positive sounding stories. If Krafton does indeed manage to price at the top end of its range or above we think that would be a fantastic opportunity for investors…


Major Highlights of Krafton’s Online Press Conference & Focus on Overseas M&As Post IPO

By Douglas Kim

Krafton held an online press conference today. The key focus of the online press conference was that Krafton will be aggressive in overseas M&As. The company could receive nearly 2.5 trillion won in cash from the IPO proceeds. Plus, the company had net cash of 390 billion won at the end of 1Q 2021. Consequently, Krafton could have nearly 3.0 trillion won in net cash post the IPO which the company can use to make big overseas acquisitions.

Krafton IPO = PUBG + SPAC? In some ways, the key thesis of the Krafton IPO is the continued success of PUBG + emphasis on M&As to grow the business in overseas markets. In that respect, Krafton is telling the investors to trust the company to make excellent acquisitions that could add long-term value for the company. This is probably a tough sell for many investors and this remains a major reason on the poor investors’ response on the Krafton IPO.

In addition, Chinese government’s huge crackdown on the US listed Internet companies and the for-profit education sector further raise significant concerns that this crackdown could expand to other sectors such as games which would negatively impact Krafton. Overall, continue to maintain an AVOID rating of this IPO. 



Acotec (先瑞达) Pre-IPO: Thoughts on Valuation

By Ke Yan, CFA, FRM

Acotec, a leading China-based peripheral-vascular interventional device company, is looking to raise up to USD 300m via a Hong Kong listing.  

In our previous note, we looked at two core drug coated balloon products of the company, namely the AcoArt Orchid & Dhalia for the above the knee artery stenosis and AcoArt Tulip & Litos for the below the knee stenosis. Both AcoArt Orchid & Dhalia, and AcoArt Tulip & Litos reported efficacy that could be potentially better than its benchmark product. Thanks to its early mover advantage, the AcoArt Orchid & Dhalia had a dominant market share. The main growth driver of the company’s core product will be increasing penetration rate and indication expansion. Besides the DCB products, we think the company’s product pipeline is not exciting. The company has a good management team but the pre-IPO investors are overall mediocre.

In this note, we will provide our thoughts on the company’s valuation.


Li Auto Secondary Listing: Volts Wagons

By Arun George

Li Auto Inc. (LI US) is the first company to successfully commercialise EREVs (extended-range electric vehicles) in China, the Li ONE. Li ONE is a six-seat, large premium electric SUV which began volume production and deliveries in November 2019 and December 2019, respectively. In 2020, Li ONE was the best-selling new energy SUV in China with a sales volume market share of 9.7%, according to CIC. 

Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. The secondary listing comes on the back of a listing on Nasdaq in July 2020 ($1.0 billion net raise at $11.50 per ADS) as well as a follow-on offering in December 2020 ($1.4 billion gross raise at $29.00 per ADS). The secondary listing also follows peer, Xpeng (XPEV US), which raised net proceeds of $1.8 billion on 7 July. XPeng (9868 HK) H-shares are trading -9% below the offer price largely due to the recent regulatory onslaught which has engulfed Chinese companies with exposure to the technology and education sector along with listing in the US. 

Despite rising competition from new entrants, Li Auto is delivering on its IPO promise by maintaining a market-leading share in its niche, investing in a roadmap to reduce its single model reliance, a positive gross margin and cash generation trajectory. On balance, for investors willing to brave the current regulatory-driven weak sentiment on Chinese names, Li Auto’s fundamentals and valuation are attractive, in our view. 


A Classic Long/Short Approach for an IPO: Kakao Bank Vs. Korea Investment Holdings

By Sanghyun Park

Of the classic approaches to trading with an IPO stock, the most widespread is to sell the major shareholder stock before or after the listing date.

Among the recent major IPOs, the IPOs in which the majority shareholder is a listed company are as follows.

Recent IPOs in KoreaSK BiopharmaceuticalsSK BioscienceSK IE TechnologyKakao Games
– Ticker326030302440361610293490
– Listing date2020. 7. 22021. 3. 182021. 5. 112020. 9. 10
Major shareholderSK IncSK ChemicalsSK InnovationKakao
– Ticker034730285130096770035720
– Major shareholding %64.02%68.42%61.20%45.19%
Source: KRX

Among these, the most dramatic share price movement (or correction) for a major shareholder before and after the listing date belongs to SK Chemicals, the largest shareholder of SK Bioscience.

The reason for this seems clear. This is because the value of the SK Bioscience stake held by SK Chemicals accounted for 250% of its own market cap, the highest by a huge margin. Therefore, SK Chemicals must have been most affected by the expectation of SK Bioscience IPO and subsequently the well-anticipated cross-trading before and after listing.

Recent IPOs in KoreaSK BiopharmaceuticalsSK BioscienceSK IE TechnologyKakao Games
Market cap on the listing day₩9,945.8B₩12,928.5B₩11,015.5B₩4,657.2B
Major shareholderSK IncSK ChemicalsSK InnovationKakao
– Market cap on the listing day₩19,595.3B₩3,537.2B₩24,873.2B₩34,267.9B
– Subsidiary stake value as a % of the market cap32.49%250.08%27.10%6.14%
Source: KRX

D&D Platform REIT IPO Preview

By Douglas Kim

D&D Platform REIT IPO is expected to be completed in August. The expected IPO price per share is 5,000 won and there are 35 million shares offered in the IPO. The IPO deal size is 175 billion won and the expected market cap after the IPO is 322 billion won. The book building for the institutional investors starts on 26 July and ends on 28 July.

More than 90% of rental income from the D&D Platform REIT will be distributed to investors. The goal of this REIT is to provide an average annual dividend yield of 6.14% for the next six years. The company will focus its efforts on expanding its portfolio of real estate assets in the logistics and office buildings going forward. 


Pre-IPO Dingdang Health Technology – The Future Looks Challenging

By Xinyao (Criss) Wang

On June 22, 2021, Dingdang Health Technology Group (DDH HK) submitted the prospectus to HKEX and officially started its IPO process. If all goes well, Dingdang would become another listed digital healthcare service provider after Alibaba Health Information Technology (241 HK), Ping An Healthcare and Technology Company Limited (1833 HK) and JD Health (6618 HK). However, in the face of fierce competition, Dingdang’s future looks challenging. This insight mainly analyzed the concerns of the Company that worth investors’ attention.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Zomato, BeiGene Ltd and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • ECM Weekly (25th July 2021) – China Tourism, APM Monaco, Paytm, CTOS, Zomato, Kuaishou Lock-Up
  • Pre-IPO BeiGene Ltd – Concerns on Commercialization

ECM Weekly (25th July 2021) – China Tourism, APM Monaco, Paytm, CTOS, Zomato, Kuaishou Lock-Up

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.

Tencent Music was the latest victim of China’s regulatory crackdown. The company was fined and had to relinquish its exclusive music licensing rights with global record labels in the next 30 days. Daojia also announced that it would halt its US$300m US IPO following similar announcements by Lalamove, Xiaohongshu, and others. 

China ADRs took another leg down on Friday led by education companies falling by more than 50%. This was due to policies that will seek to ban companies that teach the school curriculum from raising capital, going public, and converting them into non-profit entities. Needless to say, China ADR market will take a back seat for a while.

Hong Kong IPO activity remains subdued and we are taking this time to cover upcoming IPOs. This week, we initiated on China Tourism Group Duty Free Corp Ltd. and its secondary listing of up to US$10bn. The firm is the largest travel retail operator in the world and is currently listed in Shanghai. 

We also covered APM Monaco’s US$300m IPO. The company is a contemporary fashion jewelry brand that is popular in China. It designs, manufactures and sells fashion jewelry products such as earrings, necklaces, rings, and bracelets.

We continued our coverage on Transcenta and Shanghai HeartCare which are looking to raise US$200m and US$100m, respectively.

In India, Zomato’s strong debut on Friday should help pave the way for other upcoming large IPOs like PayTM’s which we covered this week. The company boasts an impressive list of pre-IPO investors such as Ant Financial, Softbank and Berkshire Hathaway. The deal will be a combination of both primary and secondary shares. 

We continued our coverage on Yum Brand’s largest franchisor in India, Devyani International, comparing it to other listed competitors. The IPO was approved by SEBI last week.

In Korea, we initiated on Lotte Rental’s US$740m IPO. The company was the largest car rental provider in South Korea. Bookbuild will run between 3-4 August, and shares are expected to list on 19 August. 

Kakao Bank, South Korea’s largest digital bank, priced its books at the top end of the IPO price range. It was reported that its institutional tranche was about 1,700x covered. Shares will debut on 6 August and we have covered the deal earlier.

In Malaysia, Creador-backed CTOS Digital debuted on Monday and closed 47.2% above deal price. Share price has been tapered off from its first day high but still held up well, closing 39% above IPO price on Friday. 

For lock-up expiry, we circled back to Kuaishou which was listed on 5th Feb 2021. Lock-up will expire on 5th August and there had been large CCASS movement that saw JPM holding 638m shares, worth about US$10bn.

On placements this week, Wuxi Biologics Holdings raised US$1.3bn from selling 1.8% of its stake in Wuxi Biologics. The deal had been widely anticipated since this was not its first selldown. Shares were priced at a 6.5% discount but share price struggled to stay above deal price, closing just 0.5% above deal price. 

In Australia, Evolution Mining raised US$294m to acquire assets from its rival, Northern Star Resources. Strong interests came from existing shareholders and new investors. Shares closed 10.4% above deal price on Friday.

In Korea, TongYang Life Insurance raised around US$261m from selling its 3.7% stake in Woori Financial Group. This was a clean-up trade but we think that KDIC could come to market to sell as well. The deal was priced at a 4.29% discount and has traded flat, closing just 0.4% above deal price on Friday. 

Accuracy Rate:

Our overall accuracy rate is 73.8% for IPOs and 67.4% for Placements 

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

New IPO filings this week

  • Adlai Nortye Ltd. (Hong Kong, >US$100m)
  • Huayuan Medical Group Holding (Hong Kong, >US$100m)
  • Star Health and Allied Insurance Company (India, US$1bn)
  • Anand Rathi Wealth Limited (India, US$135m)

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 

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 

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 
WM Tech WM Tech Pre-IPO – Peer Comparison and Pre-IPO Valuation – Some Signs of Advantage 
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 
Malaysia
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S.
ForU ForU Worldwide Pre-IPO – Mostly Negatives 
Qiniu Qiniu Cloud (七牛云) Pre-IPO: PaaS Doesn’t Warrant a Premium 

Pre-IPO BeiGene Ltd – Concerns on Commercialization

By Xinyao (Criss) Wang

After listing on NASDAQ and HKEX, BeiGene Ltd (6160 HK) will be listed on the SSE STAR market again in the near future. Meanwhile, after successive years of losses, BeiGene finally turned profitable for the first time in the first quarter of 2021. By the end of July 23, 2021, the market value of BeiGene in HKEX and NASDAQ was about HK$226.5 billion and US$29.2 billion, respectively. It is highly probable that the market value of the BeiGene in the SSE STAR market would exceed RMB200 billion after its listing as well. Behind the successful capital operation, what challenges would BeiGene face in the future?


Before it’s here, it’s on Smartkarma

Equity Capital Markets: APM Monaco and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • APM Monaco Pre-IPO – China’s Resilience Shines

APM Monaco Pre-IPO – China’s Resilience Shines

By Zhen Zhou, Toh

APM Monaco (1700441D MN) is looking to raise about US$300m in its upcoming Hong Kong IPO. 

APM Monaco (APM) is a contemporary fashion jewelry brand. The company designs, manufactures and sells fashion jewelry products under its APM Monaco brand which includes earrings, necklaces, rings, and bracelets. The company releases a new collection of about 30 fashion jewelry products every month.

In this note, we look at financials and operating metrics of the company.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: KakaoBank, China Tourism Group Duty Free Corp Ltd, Del Monte Philippines, Zomato, Evolution Mining, Woori Financial Group , AJU Steel and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Kakao Bank Bookbuilding: What’s Really Happened Among Local Institutions?
  • China Tourism Group A/H Listing Early Look – Over US$5bn Raising for a Monopoly on Chinese Tourists
  • Del Monte Philippines IPO: Valuation First-Look
  • Zomato IPO Trading – Ample Demand for Unique Exposure
  • Kakao Bank: Trading Strategy Post Bookbuilding Results
  • Evolution Mining Placement – Past Deals Have Held up Well
  • Kakao Bank Bookbuilding Results: Disclosing Subscription/Lockup Orders in Detail
  • Woori Financials Placement – Tong Yang Cleans up but KDIC Could Sell More
  • Aju Steel IPO Valuation Analysis

Kakao Bank Bookbuilding: What’s Really Happened Among Local Institutions?

By Sanghyun Park

Kakao Bank’s official bookbuilding results will be released after the market closes this afternoon. However, most of the important information has already been leaked to the market.

First, more than ₩2,500T of subscription orders were poured into the bookbuilding. In addition, it was confirmed that the competition ratio of institutional investors for subscriptions was over 1,700 to 1. The competition ratio of 1,000 to 1 was already recorded on the first day, and a significant number of subscriptions were made on the second day as well.

The total value of subscription orders surpassed SKIET’s ₩2,417T, which was the largest amount in history for an IPO in Korea.

As a result, the offering price was also almost decided at ₩39,000, which is the upper end of the indicative price band.

 The market capitalization based on ₩39,000 is ₩18.6T. This is close to that of KB Financial Group (₩21.6T) and Shinhan Financial Group (₩19.9T). So, it is likely that Kakao Bank will become the largest market cap bank in Korea after its listing.

Market capKB Financial GroupShinhan Financial GroupKakao Bank
Ticker105560055550323410
Market cap₩21,580.4B₩19,940.7B₩18,633.1B
Source: KRX & DART

The general view of institutions on the public offering price of Kakao Bank, which has been proven in this bookbuilding, is that it is NOT ridiculously high.

They seem to have paid attention to the growth potential of Kakao Bank as a platform business and the rapid growth that supports it.

In fact, the price accepted as the ceiling by local street is PBR 4x, but since the upper end of the indicative price band stays at 3.5x, it is said that they generally did not feel any objection to the price.

Indicative price bandLower endUpper end
Price₩33,000₩39,000
Implied market cap₩15,766.5B₩18,633.1B
Equity, including capital inflow from IPO₩5,009.4B₩5,402.1B
PBR3.15x3.45x
Source: DART

To clarify Kakao Bank’s PBR calculations:

  1. Implied market cap by the indicative price band / Equity as of 1Q21 gives a 5.53~6.54x.
  2. (Implied market cap by the indicative price band – Capital inflow from IPO) / Equity as of 1Q21 gives a 4.78~5.64x.
  3. Implied market cap by the indicative price band / (Equity as of 1Q21 + Capital inflow from IPO) gives you a 3.15~3.45x.

The bankers used No. 2 to derive the indicative price band in the IPO prospectus. And many in the local street seem to be using No. 3 to get a sense of Kakao Bank’s actual PBR post IPO.

In particular, local institutional investors paid attention to the fact that Kakao Bank opened 6.2 million new accounts within one year. This is 40 times the total number of non-face-to-face accounts opened by 16 commercial banks in Korea over the past four years. Kakao Bank also achieved a market share of 7% in the personal credit loan market within four years of its establishment. 

In other words, although Kakao Bank still provides simple banking services, the market acknowledges the actual capabilities of Kakao Bank’s online platform in that it has achieved a huge customer base expansion in a short period of time.


China Tourism Group A/H Listing Early Look – Over US$5bn Raising for a Monopoly on Chinese Tourists

By Sumeet Singh

China Tourism Group Duty Free Corp Ltd (601888 CH) (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. 

CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost & Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.

As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.


Del Monte Philippines IPO: Valuation First-Look

By Arun George

Del Monte Philippines (1575316D PM)/DMPI is a leading producer, distributor and marketer of premium quality, healthy food and beverage products. It is a market leader in the packaged pineapple and mixed fruit, ready-to-drink juices (excluding stand-up-pouches), tomato sauce and spaghetti sauce categories in the Philippines. DMPI has the rights to the Del Monte trademark for the Philippines for processed products and also sells products under the brands of S&W, Contadina and Today’s.

The parent company is Del Monte Pacific (DELM PM) which holds 87.0% of outstanding shares. Del Monte Pacific had previously tried to list DMPI on the PSE in 2018 by selling a 20% stake to raise up to $324 million at the maximum offer price of PHP29.88 per share but deferred the IPO due to market volatility.

Currently, DMPI is pre-marketing for an IPO to raise up to PHP44 billion ($0.9 billion) at the maximum offer price of PHP54.80. The IPO price range, which is generally lower than the maximum IPO price, will be set during the book building process. The pricing date is 12 August and the offer period runs from 16 to 20 August. 

In Del Monte Philippines IPO Initiation: Tempting Fruit, we opined that DMPI is a play on the healthy packaged and convenient packaged food and beverage categories that benefit from long-term secular tailwinds in the Philippines. DMPI’s financial track record shows it has been able to leverage its market-leading position to combine solid top-line growth with improving margins and cash generation. We concluded that DMPI’s fundamentals are attractive. In this note, we present our forecasts and take the first look at DMPI’s potential valuation. 


Zomato IPO Trading – Ample Demand for Unique Exposure

By Sumeet Singh

Zomato (ZOM IN) raised US$1.3bn in its India IPO, making it the the largest listing in India from the technology sector.

We have covered various aspects of the deal in our earlier notes  

In this note, we will talk about the updates and the trading dynamics.


Kakao Bank: Trading Strategy Post Bookbuilding Results

By Douglas Kim

Kakao Bank announced its IPO book building results today. The IPO price has been determined at 39,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 1,733 to 1. Kakao Bank will be raising 2.5 trillion won ($2.2 billion) in this IPO. 

There were 1,667 institutional investors that participated in the IPO survey of which 1,287 were domestic institutions and 380 were overseas investors. According to Kakao Bank, the ratio of investors with lock-up applications was 45% which was a healthy rate but lower than the lockup ratios of SK Bioscience (59.92%) and SK IE Technology (62.3%).

Institutional Investors Demand Breakdown of Kakao Bank IPO Bookbuilding Results
 
Domestic Investors    
 Asset mgmt companiesBrokeragesPension funds/insurance/banksOthers
No. of companies581258243205
Demand700.1322.2276.4234.6
     
 Overseas Investors   
 (A)*(B)**  
No. of companies194186  
Demand37.9161.7  
     
Total (No. of companies)1,667   
Total Demand1,732.8   
Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.
(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.
Source: Company data   

We continue to have a POSITIVE view of the Kakao Bank IPO post book building results. Our base case valuation of Kakao Bank remains implied market cap of 26.8 trillion won or implied price of 56,144 won per share. This represents 44% higher than the high end of the IPO price range of 39,000 won but 25% lower than the current private market value of 75,000 won. 



Kakao Bank Bookbuilding Results: Disclosing Subscription/Lockup Orders in Detail

By Sanghyun Park

Kakao Bank’s bookbuilding results are out. As already leaked to the market earlier today, the offering price got finalized at ₩39,000, the upper end of the indicative price band, implying a market cap of ₩18.6T. There is no change in the offering volume.

Indicative price bandLowHigh (Final)
Price₩33,000₩39,000
Base deal size₩2,159.9B₩2,552.6B
– Institutional allotment₩1,187.9B₩1,403.9B
Implied market cap₩15,766.5B₩18,633.1B
– Discount31.33%18.85%
Equity, including capital inflow from IPO₩5,009.4B₩5,402.1B
Capital inflow from IPO₩2,159.9B₩2,552.6B
Source: DART

The institutional subscription competition rate is 1,733 to 1, only slightly below the record holder SKIET’s 1,883 to 1.

NameTickerIPO dateOffering sizeInstitutional subscription competition rate
Kakao Bank3234102021. 08. 05₩2,552.6B1,732.83 to 1
SD Biosensor3616102021. 07. 16₩776.4B1,143.76 to 1
SK IE Technology3616102021. 05. 11₩2,246.0B1,882.88 to 1
SK Bioscience Co Ltd3024402021. 03. 18₩1,491.8B1,274.50 to 1
HYBE Co Ltd3528202020. 10. 15₩962.6B1,117.00 to 1
Kakao Games Corp2934902020. 09. 10₩384.0B1,478.50 to 1
SK Biopharmaceuticals Co Ltd3260302020. 07. 02₩959.3B835.00 to 1
Source: DART

₩2.433 quadrillion (thousand trillion) worth of subscription orders were poured into the bookbuilding. How large is this? Well, Kakao Bank’s total value of subscription orders surpassed SKIET’s ₩2.417 quad, which was the largest amount in history for an IPO in Korea.

Compared to SD Biosensor, which was an IPO just before this listing, the participation of local institutional investors (local investment advisories and hedge funds) who are active in short-term trading was higher in this listing. It can be inferred that many investors believe that the short-term share price of Kakao Bank is more likely to rise immediately after listing.

By investor typeInstitution%Demand%
Local publicly raised funds58134.85%25,201,600,00040.40%
Local brokerages/investment advisories25815.48%11,597,306,00018.59%
Local pensions, funds managing proprietary assets, banks, and insurance companies24314.58%9,949,064,00015.95%
Local others (mostly discretionary investment companies – local hedge funds)20512.30%8,444,119,00013.54%
Foreign (foreign IPO funds & hedge funds)19411.64%1,364,938,0002.19%
Foreign others (mostly local hot money)18611.16%5,820,409,0009.33%
Total1,667100.00%62,377,436,000100.00%
Subscription rate1,732.83
Source: DART

The “Unspecified” category usually indicates that they want the shares above the high end. With that in mind, more than half must have priced Kakao Bank at the upper end or above. The remaining 46.01% went for a 75-100% of the upper end, so it isn’t that far either.

By priceInstitution%Demand%
Above high end64038.39%26,259,108,00042.10%
75-100% of high end76746.01%32,312,440,00051.80%
50-75% of high end00.00%00.00%
25-50% of high end00.00%00.00%
0-25% of high end00.00%00.00%
Median00.00%00.00%
75-100% of median00.00%00.00%
50-75% of median00.00%00.00%
25-50% of median00.00%00.00%
0-25% of median00.00%00.00%
Low end or below00.00%00.00%
Unspecified26015.60%3,805,888,0006.10%
Total1,667100.00%62,377,436,000100.00%
Source: DART


Aju Steel IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Aju Steel is implied market cap of 377 billion won or target price of 14,240 won per share, which would represent just 2% above the mid-point of the IPO price range (13,900 won). Given the lack of upside versus the IPO price range, we would AVOID this IPO. 


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Del Monte Philippines, Robinhood Markets, Kakao Pay, Lotte Rental, Paytm, Transcenta Holding and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Del Monte Philippines IPO Initiation: Tempting Fruit
  • Robinhood Markets IPO Preview
  • Accurate Facts About the Application of Kakao Pay’s 135-Day Listing Date Rule
  • Lotte Rental IPO – Peers and Valuation
  • Paytm IPO: Few Bugs on the Show
  • Robinhood IPO Valuation Analysis
  • Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns

Del Monte Philippines IPO Initiation: Tempting Fruit

By Arun George

Del Monte Philippines (1575316D PM)/DMPI is a leading producer, distributor and marketer of premium quality, healthy food and beverage products. It is a market leader in the packaged pineapple and mixed fruit, ready-to-drink juices (excluding stand-up-pouches), tomato sauce and spaghetti sauce categories in the Philippines. DMPI has the rights to the Del Monte trademark for the Philippines for processed products and also sells products under the brands of S&W, Contadina and Today’s. The parent company is Del Monte Pacific (DELM PM) which holds 87.0% of outstanding shares.

DMPI is pre-marketing for an IPO to raise up to PHP44 billion ($0.9 billion) at the maximum offer price of PHP54.80, according to press reports. The base offer of 699.3 million shares is entirely a secondary offering by the selling shareholders, Del Monte Pacific (DELM SP) and Singapore-based SEA Diner Holdings. 

DMPI is a play on the healthy packaged and convenient packaged food and beverage categories that benefit from long-term secular tailwinds in the Philippines. DMPI’s financial track record shows it has been able to leverage its market-leading position to combine solid top-line growth with improving margins and cash generation. The growth strategy sensibly revolves around leveraging the strong brand to enter adjacent categories, the expansion of domestic distribution in underpenetrated regions and increasing share in North Asia, particularly China (premium fresh pineapples). Overall, we believe that DMPI’s fundamentals are attractive.


Robinhood Markets IPO Preview

By Douglas Kim

Robinhood Markets (HOOD US) is getting ready to complete its IPO next week. Currently, Robinhood is expected to start trading on 29 July. The IPO price range is between $38 to $42 per share. At the high end of the IPO price range, Robinhood would be valued at $35 billion, which would be a big jump from its private market valuation of $11.7 billion in September 2020. The lead underwriters of this IPO include Goldman Sachs and JP Morgan. 

Despite excellent sales growth and improving profitability, there will likely be a lot more skeptical investors on the company’s valuation of nearly $35 billion. The following are the five major risk factors that are likely to be emphasized on the Robinhood IPO:

  • Cryptocurrency trading based revenues to decline
  • Lost faith by some retail customers after Gamestop incident in January
  • No major extended bear market since the company’s inception
  • Potential concerns about customer related risks
  • Significant decline in revenue growth rate on a QoQ basis in 2Q 2021

Accurate Facts About the Application of Kakao Pay’s 135-Day Listing Date Rule

By Sanghyun Park

It has been reported that Kakao Pay is considering delaying its listing to September. This is because of the 135-day rule that a company undergoing an IPO must complete the listing procedure within 135 days from the date of preparation of the financial statements.

According to this regulation, Kakao Pay must complete the listing within August 13, 135 days from the date of the 1Q21 financial statements.

What is the 135-day rule?

The 135-day rule is a rule on the expiration date of accounting settlement data reflected in the IPO prospectus and the securities declarations for overseas investors.

The important point here is that KRX does not have any rule similar to the 135 rule.

On the other hand, the US Securities and Exchange Commission stipulates that all listing schedules, including payment, be completed within 135 days from the time the financial statements stated in the IPO prospectus are prepared.

So why should Kakao Pay care about the 135-day rule?

This rule does not apply to domestic investors, but it inevitably applies when a newly listed company with a large IPO size needs to raise funds abroad that are within the jurisdiction of the SEC.

When is the deadline for the initial IPO prospectus?

If listing proceeds based on the financial statements at the end of the first quarter, March 31 will become the base date. So, the last business day of the 135-day rule will be August 13.

For this reason, Kakao Pay’s listing date was set for August 12, despite concerns about overlapping demand with Kakao Bank.

That is, August 12, the scheduled listing date of Kakao Pay, was a really tight schedule. Therefore, the fact that the Financial Supervisory Service requested a revised report was risking that the listing schedule would be significantly pushed back.

How long will the schedule be delayed?

In the end, the 135-day rule was not met based on the 1Q financial statements, so the IPO prospectus has to be rewritten based on the 2nd quarter financial statements.

This means that the IPO schedule has to be adjusted in line with the submission of the 2Q financial report to be published in mid-August.

In this case, considering that it will take at least a month or more to complete the listing process, including the FSS review period, it is expected that the company will be listed at the end of September at the earliest. In other words, at this point, the possibility of an October listing should remain open.


Lotte Rental IPO – Peers and Valuation

By Zhen Zhou, Toh

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. 

Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.

Our previous coverage of the IPO:


Paytm IPO: Few Bugs on the Show

By Nitin Mangal

Paytm (PAYTM IN), run by One97 Communications Ltd is one of India’s leading start-ups engaged in building a digital ecosystem for consumer and merchants throughout the country. Paytm offers a two sided ecosystem and offers a range of payment, financial, cloud and commerce services. It is backed by some of the marquee investors like Ant Financial Services Group (6688 HK), Alibaba Group (9988 HK), Berkshire Hathaway Inc Cl A (BRK/A US), Elevation Capital, etc. 

Paytm had filed its DRHP few days ago, as the company stages up for further growth. Given the behemoth of a brand and the immense popularity among the public, Paytm however does exhibit several shortfalls on the forensic end as far as financials are concerned. Although the company has still not entered the green zone of profitability, the annual report checks have denoted further issues like poor investment and asset quality, working capital gimmick and unrecognised DTA. There are also several red herrings seen from the regulatory side too.


Robinhood IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Robinhood is implied market cap of US$25.1 billion or US$29.8 per share, which is 25% lower than the mid-point of the IPO price range (US$40). Given the downside risk, we would AVOID this IPO. 

  • Our valuation of Robinhood is based on an EV/S multiple of 10.7x using our estimated sales of US$2.1 billion in 2022.
    • The EV/S multiple of 10.7x is based on the average multiple of the comps in 2022.
    • The valuation multiple is higher than the those of online brokers Charles Schwab and Interactive Brokers Group.
    • However, it is lower than the valuation multiples of the fintech comps including Coinbase and Affirm.

Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns

By Xinyao (Criss) Wang

Recently, Transcenta Holding (THL HK) has passed the listing hearing of the HKEX and is expected to be listed on the main board in the near future. Transcenta is a clinical stage global biopharmaceutical company that integrates the capacities of discovery, research, development, manufacturing and business development, with nine product candidates in the pipeline, eight of which are oncology drug candidates. This insight mainly analyzed the important product candidates (such as MSB2311, TST001, TST005 and MSB0254) in the pipeline and related concerns. 


Before it’s here, it’s on Smartkarma