Category

IPOs and Placements

Equity Capital Markets: Baozun Inc., Genor Biopharma, Sumo Logic Inc, Mitsui Fudosan Logistics Park Inc, Palantir Technologies Inc, ZTO Express and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Baozun HK Secondary Listing – Large Dilution Needs a Large Correction
  • Genor Biopharma IPO: Strong Clinical Pipeline with Some Potential Blockbusters
  • Sumo Logic IPO. Attractive Valuations For Fast-Growing SaaS Unicorn
  • Mitsui Fudosan Logistics Park Placement – Large Deal but Minimal Accretion
  • Palantir DPL Valuation Analysis
  • ZTO Express Secondary Listing: HK-ADS Premium/​(Discount) Views

Baozun HK Secondary Listing – Large Dilution Needs a Large Correction

By Sumeet Singh

Baozun Inc. (BZUN US) plans to raise around US$490m in its secondary listing in Hong Kong.

The company was said to have won approval for listing last week along with ZTO Express (ZTO US) and Zai Lab Ltd (ZLAB US) however, it filed its PHIP only yesterday and launched its deal today.

In this insight, I’ll talk about the deal dynamics and what to do with the ADR during the book build.

Links to my previous notes on the topic on Secondary listings:


Genor Biopharma IPO: Strong Clinical Pipeline with Some Potential Blockbusters

By Shifara Samsudeen, ACMA, CGMA

  • JHBP (CY) Holdings Ltd also known as Genor Biopharma has filed for an IPO on the Hong Kong Stock Exchange to raise about HK$2.48bn (US$320m). The biopharmaceutical company focuses on developing and commercialising oncology and autoimmune drugs.
  • Genor plans to utilise a majority of its IPO proceeds on clinical trials, prepare registration filings, fund planned clinical trials and potential commercialisation of its core products. The company also plans to use part of its IPO proceeds on funding other drug candidates in its pipeline and on expanding its drug pipeline respectively.
  • The company currently does not have any products approved for commercial sale; hence the company does not generate any revenues from product sales. However, the company owns four late stage drug assets and of which the company expects to launch 2-3 drug assets in the second half of 2021, subject to NMPA approval.
  • Two of the company’s key drug candidates, GB491 (potentially best-in-class oral CDK4/6 for HR+/HER2-breast cancer) and GB242 (a biosimilar candidate to infliximab (developed by J&J) for autoimmune diseases) are most likely to have competitive advantage over its competitors and these drugs cater to growing markets with significant growth potential.

Sumo Logic IPO. Attractive Valuations For Fast-Growing SaaS Unicorn

By Andrei Zakharov

Sumo Logic provides best-in-class cloud monitoring, log management, cloud SIEM tools and real-time insights for web and SaaS based apps. Company is looking for innovative ways to reduce costs, exposure to security vulnerabilities and helps organizations at every stage of digital transformation. Sumo Logic has 2,100+ customers, including Airbnb, Anheuser-Busch, Samsung, Fastly, Okta, Sharp, One Medical, Teladoc, Fidelity, Medallia. We have positive view on Sumo Logic despite COVID-19 pandemic and intense competition from Elastic, Splunk and Datadog. Sumo Logic stock currently trades at 10x our FY 2021 revenue estimate of ~$200 million and our Sep 2021 price target of $39 a share implies ~56% upside potential keeping in mind $400 million of cash and cash equivalents after successful IPO.

Sumo Logic offered ~15 million shares at $22 a share (above the range) and we estimate net proceeds from the offering to reach $300 million. Tiger Global Management has indicated an interest in purchasing up to 10% of the shares in this offering at IPO price. Lead underwriters are Morgan Stanley, J.P. Morgan, RBC Capital Markets and Jefferies.


Mitsui Fudosan Logistics Park Placement – Large Deal but Minimal Accretion

By Sumeet Singh

Mitsui Fudosan Logistics Park Inc (3471 JP) (MFLP) is looking to raise about US$450m to partially fund the acquisition of two new assets. 

This will be the second fund raising by the company this year. We covered the earlier deal in Jan 2020 in Mitsui Fudosan Logistics Park Placement – Less Dilutive and More Accretive than the Previous Deal. We also covered the prior Jan 2019 raising in, Mitsui Fudosan Logistics Park Placement – Accretive and Well-Flagged.


Palantir DPL Valuation Analysis

By Douglas Kim

Palantir is ready to complete its Direct Public Listing on September 23rd. 

Our valuation analysis suggests an implied market cap of $29.7 billion and a target price of $13.7 per share for Palantir (49% higher than the base price of $9.2 per share). The IPO price range is from $11.1 (low) to $16.6 per share (high). Assuming Direct Public Listing (DPL) market cap of $20 billion and diluted shares of 2.17 billion, this suggests $9.2 per share. Given the solid upside, we have a positive view of this DPL.

There are three key positives with Palantir which we believe are likely to outweigh its negatives, leading many investors to value this company at nearly $30 billion.

  • First, we believe the company’s accelerating sales growth since the launch of its Foundry product in 2017 is likely to be valued highly. The company’s sales growth is clearly much higher than its peers in 2020. 
  • Second, Palantir has picked a great time to complete its public offering with great investors demand high-quality software-related stocks this year.
  • Third, Palantir has been enjoying a noticeable improvement in its operating margins and the company possesses a strong balance sheet. 

ZTO Express Secondary Listing: HK-ADS Premium/​(Discount) Views

By Arun George

ZTO Express (ZTO US) has launched a $1.6 billion secondary listing in Hong Kong. We previously outlined our views on ZTO Express’ fundamentals and valuation. The H shares will be priced on 22 September (Tuesday) and are scheduled for listing on 29 September.  

In this note, we will look at ZTO Express’ potential HK-ADS premium/(discount). ZTO Express will price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. Overall, we think that ZTO Express pricing its H-shares around a 3% discount to its ADSs will be reasonable.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: ESR Cayman , Ant Financial, ZTO Express, Big Hit Entertainment, Kerry Express Thailand, Computer Age Management Services, Ming Yuan Cloud Group, Genor Biopharma and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • ESR Cayman Placement – Even More to Come Soon
  • Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services
  • ZTO Express Secondary Listing – Smaller than Expected
  • Big Hit Ent. IPO: Valuations & Exit Price Level
  • IPO Radar (Part 1): Kerry Express, the Engine Powering Thai E-Commerce
  • Computer Age Management Services IPO – Appears Fairly Priced
  • Ming Yuan Cloud IPO – In the Right Place at the Right Time
  • Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies
  • ZTO Secondary: Entire Industry Expanding Capacity While Facing Pricing Pressure Is Not a Good Thing
  • JHBP Holdings (Genor Biopharma) IPO Initiation: Hunting for a Cure

ESR Cayman Placement – Even More to Come Soon

By Zhen Zhou, Toh

SK Holdings (034730 KS) is looking to raise around US$326m via selling 3.6% of ESR Cayman (1821 HK). Post-selldown, SK Holdings will still have about 7.4% stake in the company.

We covered the company’s first and second listing attempt extensively, you can find links to our coverage below. 

In this insight, we will briefly look at the 1H 2020 results, discuss deal dynamics and run the deal through our ECM framework.

June placement:

Links to our earlier insights:


Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services

By Ming Lu

  • We believe Ant Group and Tencent have different advantages in direct financial products.
  • AliPay has a digital credit card, but Tencent does not.
  • Tencent provides higher return for cash accounts than AliPay.
  • On cash loan, AliPay’s interest rate is lower, but Tencent’s maturity is longer.

ZTO Express Secondary Listing – Smaller than Expected

By Sumeet Singh

ZTO Express (ZTO US) plans to raise around US$1.4bn in its secondary listing in Hong Kong.

While the company filed its PHIP on Friday, 11th Sep 2020, it has only launched its deal today. The deal size was smaller than what has been rumoured earlier. 

I’ve covered most aspects of the deal in my previous insight, ZTO Express Secondary Listing – Fast Growth but It Hasn’t Been Flowing Down to Earnings.

In this insight, I’ll provide a quick overview of the deal. 


Big Hit Ent. IPO: Valuations & Exit Price Level

By Sanghyun Park

We all know the EV/EBITDA approach can be very misleading in the Big Hit IPO.

So, let’s make a more reasonable approach with PER.

Korea has three major entertainment talent agencies. They are often called Big Three.

Below is the PER comparison on FY20 projected earnings. The upper end of the indicative price band sets the PER at 69x, which is much lower than SM and YG. 

PERs/FY20E earnings (₩B) Sales OP Earnings PER (x) OPM NPM
SM Entertainment Co Ltd 569.0 37.3 10.2 87.48 6.56% 1.79%
YG Entertainment Inc 237.0 8.3 10.3 103.04 3.50% 4.35%
JYP Entertainment Corp 137.4 41.0 30.7 46.94 29.84% 22.34%
Big Hit (1H×2/upper) 588.0 99.5 66.3 68.88 16.92% 11.28%
Source: KRX & FnGuide

But this is misleading because SM and YG’s earnings for this year aren’t aligned with a normalized level.

Below is the 12M forward PER comparison, which should be a more normalized picture.

Big Hit’s 12M earnings band is ₩75~90B. At the upper end of the indicative price band, the PER range is 51~61x.

PERs/FY21E earnings (₩B) Earnings PER (x)
Big Hit (12M lower) 75.0 60.92
Big Hit (12M mid) 82.5 55.38
Big Hit (12M upper) 90.0 50.77
Source: KRX & FnGuide

At the mid-level (₩82.5B), the 12M PER range on the indicative price band is 43~55x, which is acceptably higher than the three direct valuation peers.

But things can get crazy once we see the same pattern as the previous two IPOs (SKBP and Kakao G). At 2x the upper end, 12M PER will soar to 111x, which is about 3x the local peer average.

12M PER (₩B) 12M PER (x) Price MC TP Δ Coverage
SM Entertainment Co Ltd 28.78 ₩37,950 891.1 ₩46,800 23.32% 10
YG Entertainment Inc 45.40 ₩58,500 1,068.6 ₩55,250 -5.56% 8
JYP Entertainment Corp 35.99 ₩40,750 1,446.5 ₩43,722 7.29% 9
Big Hit (12M mid)
– Lower 43.08 ₩105,000 3,553.9
– Upper 55.38 ₩135,000 4,569.2
– Upper×2 110.77 ₩270,000 9,138.5
– Upper×2×1.3 144.00 ₩351,000 11,880.0
– Upper×2×1.3×1.3 187.20 ₩456,300 15,444.0
Source: KRX & FnGuide

IPO Radar (Part 1): Kerry Express, the Engine Powering Thai E-Commerce

By Athaporn Arayasantiparb, CFA

One of the year’s most anticipated IPO has arrived. It’s Kerry (Thailand) ‘KEX’, and chances are if you ever ordered a parcel delivered on the Internet, you’ve been their customer. In the first part, we will touch on the following:

  • The IPO is firmly underwritten by MayBank Kim Eng, the country’s biggest broker, and SCB and is good for 300m shrs of 17% of the company’s outstanding.
  • The Business. Kerry is the country’s largest private delivery service (Only the state-owned Thai Post has greater volume) able to deliver 1.2m parcels annually and commanding a fleet of more than 20,000 vehicles. Its logistic partners include ASAP, Phatra Leasing, while some of its largest customers include e-commerce giants Lazada, Shoppee, and Central JD.com.
  • The Sponsors. Its brand comes from Kerry HK, the regional delivery giant controlled by top Malaysian tycoon Robert Kuok, but it includes Thai based partner VGI, a member of BTS Group. KLN Logistics currently controls 63%, and VGI has 23% of the shares pre-IPO.
  • The Industry. As mentioned in the CRC IPO Radar, Thai e-commerce is one of Southeast Asia’s largest, has exceeded Bt200bn, and continued to grow at an accelerated pace following the pandemic. Kerry is four times larger than its next private competitor and 11x larger than the second runner-up!

In the second section, we will address issues such as valuations and risk in greater detail.


Computer Age Management Services IPO – Appears Fairly Priced

By Sumeet Singh

Computer Age Management Services (CAMS) is looking to raise up to US$314m in its Indian IPO. The company is backed by Warburg Pincus and counts National Stock Exchange (NSEIN IN)Housing Development Finance Corporation (HDFC IN) and HDFC Bank (HDFCB IN) amongst its shareholders.

CAMS is India’s largest registrar and transfer agent (RTA) of mutual funds (MFs). As of Jun 2020, it had 70% market share based on its clients average AUM (AAUM). It services four of the five largest mutual funds, as well as nine of the 15 largest mutual funds based on AAUM. Its revenue is linked to its clients AUM and hence, it has been able to ride on the overall growth in the industry, as it services some of the biggest Indian mutual funds. 

I have covered most of the aspects of the deal in my earlier note, Computer Age Management Services Pre-IPO – Quasi Monopoly Status Muddled by Inconsistent Performance.

In this note, I’ll run the deal through our ECM framework and comment on recent updates. 


Ming Yuan Cloud IPO – In the Right Place at the Right Time

By Mio Kato

Examining Ming Yuan Cloud by including its results from when it traded on the Shenzhen stock exchange as Shenzhen MingYuan Software paints a picture of a company that has enjoyed transformative growth after focusing on cloud and SaaS. We have some governance concerns and our in-depth look at the numbers suggests the company’s exposures may not be quite as attractive as they look on the surface, but nevertheless prospects look relatively good and with Snowflake leading the way with extremely slick marketing of its IPO we feel Ming Yuan Cloud could also reap some of the benefit of the excitement that is being generated.


Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies

By Ke Yan, CFA, FRM

Ant Group plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. 

We have provided our early thoughts of Ant Group as early as 2018.  Ant Group the largest third-party payment player in China, it is also the No.1 independent player in each of the three non-payment segments by key operating metrics. Given that Ant has superior growth and margin vs global fintech peer, we would put it at a premium to global fintech players.

PBOC and State Council announced official rules on financial holding companies which will put Ant Group under marginally tighter regulations. We believe the short term impact on the company is minimal as the cost for setting up the financial holding company is manageable based on Ant’s balance sheet. However, there are on-going uncertainties of whether the regulator will continue to place more restrictions on Ant Group which remains to be seen.

Our previous coverage on Ant Group

  • Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors

  • Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News

  • Ant Group (蚂蚁集团) IPO First-take: No. 1 fintech from all angles

  • Ant Group (蚂蚁集团) IPO: Numbers suggest it’s more tech than financials

  • Ant Group (蚂蚁集团) Pre-IPO: Dual listing makes early index inclusion tricky

  • Ant Group (蚂蚁集团) Pre-IPO: Things to clarify/questions to ask

  • Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services

  • AliPay’s Advantage over WeChat Pay in Physical Stores


ZTO Secondary: Entire Industry Expanding Capacity While Facing Pricing Pressure Is Not a Good Thing

By Shifara Samsudeen, ACMA, CGMA

The leading Chinese express delivery company, ZTO Express is looking to raise US$1.56bn (45m shares at a maximum offer price of US$34.58 per share) in its Hong Kong Secondary listing, following in the footsteps of a growing number of US-listed Chinese companies seeking for secondary listings.

The company utilises a “network partner model” (referred as “Tongda operators”) where the mission-critical line-haul transportation and sorting within the express value chain is handled by the company itself, while the network partners operate the outlets that provide first-mile pickup and last-mile delivery services.

We discuss the details below.


JHBP Holdings (Genor Biopharma) IPO Initiation: Hunting for a Cure

By Arun George

Genor Biopharma (0883276D CH) aka JHBP Holdings is a biopharmaceutical company focusing on developing and commercializing oncology and autoimmune drugs. Its drug candidates encompass the top three oncology targets and five out of the ten bestselling drugs globally. Genor is backed by Hillhouse Capital, Temasek and Hangzhou Tigermed Consulting (H) (3347 HK). It is seeking a Hong Kong IPO to raise around $300 million, according to press reports. 

Genor has a broad drug pipeline with significant near-term revenue potential from as early as 2021. Overall, we believe that the prospectus for Genor’s late-stage drug assets is favourable. 


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Ming Yuan Cloud Group, Ganfeng Lithium, Ant Financial, iHuman Inc., Neusoft Education, Huazhu Group, JFrog Ltd and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still
  • Ganfeng Lithium Placement – Momentum Play
  • Ant Group IPO: Ant Vs CreditTech Peers
  • Ming Yuan Cloud IPO: Valuation Insights
  • IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue
  • Neuedu (东软教育) Pre-IPO: COVID-19 Updates, Financial Comp, Valuation
  • Huazhu Group Secondary Listing: Consensus Ignores COVID Even as The Business Goes Asset-Heavy
  • JFrog IPO Valuation Analysis

Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still

By Mio Kato

Ming Yuan Cloud offers software dedicated to the real estate industry and is the market leader in China. The company has already secured a bevy of high-class investors as cornerstones with Sequoia, GIC, Fidelity and Blackrock on board. We examine the company’s business model and market exposure below.


Ganfeng Lithium Placement – Momentum Play

By Sumeet Singh

Ganfeng Lithium (1772 HK) aims to raise around US$191m to fund its capacity expansion plans. 

We have covered the H-shares listing in 2018, Ganfeng Lithium IPO (赣锋锂业): Falling Lithium Prices Weigh on the Leading Producer.

The shares have more than doubled on YTD basis, even though earnings have far from kept pace. However, analyst continue to be positive on the stock and are building in much faster growth ahead.


Ant Group IPO: Ant Vs CreditTech Peers

By Supun Walpola

In our previous notes, we suggested that Ant’s medium-term revenue and margins are likely to be driven by its CreditTech business (refer our notes Ant Group: Early Thoughts on the IPO – Alipay Is NOT the Cash Cow Here and Ant Group IPO: CreditTech to Drive Medium-Term Growth and Margins).

However, Ant had left out several key pieces of information about its CreditTech business from the IPO prospectus, including its revenue and cost structures, margins, and even the number of customers. In this insight, we compare Ant’s CreditTech business with its listed peers, Lexinfintech Holdings (LX US) and 360 Finance, Inc. (QFIN US), in an attempt to get an insight into some of these missing pieces of information.    


Ming Yuan Cloud IPO: Valuation Insights

By Arun George

Ming Yuan Cloud Group (MYCG HK) is the leading software solution provider for property developers in China with a market share of 18.5% as measured by revenue in 2019, according to Frost & Sullivan. Ming Yuan has launched its IPO at a price range of $15.00-16.50 per share. At the mid-point of the IPO price range, Ming Yuan will raise net proceeds of HK$5,635.9 million ($727 million). Six cornerstone investors will subscribe for 36.3% of the shares under the global offering, at the mid-point of the IPO price range. The cornerstone investors are Hillhouse Capital, GIC, China Structural Reform Fund, Sequoia Capital, BlackRock and Fidelity International. 

In our initiation note, we stated that Ming Yuan’s fundamentals are attractive due to several factors. Overall, we think that a reasonable PEG valuation, a market-leading business and solid cornerstone support makes Ming Yuan tempting at the proposed pricing range. 


IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue

By Zhen Zhou, Toh

iHuman Inc. (IH US) is looking to raise US$100m in its upcoming IPO in the U.S.

iHuman is a childhood edutainment company in China. The company develops products and services that caters to the education demands of children aged between three and eight. The company has developed and now operates the widely popular app, iHuman Chinese. It also operates other apps such as iHuman English World, iHuman Pinyin, and etc. On top of its app business, the company sells offline products that include learning materials, smart reading pens, building blocks, and learning consoles.

In this note, we will look at the company’s background, analyze its financials and operating metrics, and share our thoughts.


Neuedu (东软教育) Pre-IPO: COVID-19 Updates, Financial Comp, Valuation

By Ke Yan, CFA, FRM

Neuedu, a leading IT higher education service provider in China, is looking to raise up to USD 300m in its Hong Kong listing.

In our previous note, we discussed that Neuedu operated three private universities (Dalian, Chengdu, Foshan) in China with capacity utilization of over 90% in the past three years. Its three universities all have nearly 20 years of operation. We like Neuedu’s long-established reputation of private higher education in IT-related fields. Of the three, Dalian University stands out in terms of ranking among private universities. Having said that, the average graduate salary was marginally better than the respective provincial average by low double-digit. The company is undertaking RMB 2.4 bn expansion plans to increase the campus capacity by 44% by 2023. The company is held by founders, Neusoft, Alps Alpine, PICC, and individual investors.

In this note, we will provide updates with respect to the impact of COVID-19 in the first six months of the year. We compare the company’s financials with other listed peers and provide our thoughts on valuation.

Our previous coverage on Neuedu


Huazhu Group Secondary Listing: Consensus Ignores COVID Even as The Business Goes Asset-Heavy

By Oshadhi Kumarasiri

Founded by Mr. Ji Qi, a co-founder of Trip.com (TCOM US), Huazhu Group (HTHT US) is the second-largest hotel chain in China and the ninth-largest in the world. Huazhu has 17 hotel chain brands covering the entire spectrum from budget to upscale hotels.

Source: Company Disclosures

The company started operations in 2005 as a budget hotel chain and was listed on the NASDAQ stock exchange on 26th March 2010.

Following other US-listed Chinese companies, Huazhu has filed for a secondary listing on the Hong Kong stock exchange to issue 20.4m shares at a maximum offer price of HK$ 368.0 per share.

The offer commenced on 11th September and remains open till 12:00 noon on 16th September 2020.


JFrog IPO Valuation Analysis

By Douglas Kim

In this insight, we provide a valuation analysis of JFrog which raised the IPO price range to $39 to $41 per share from $33 to $37 due to higher investors’ demand. The company and existing shareholders are selling 8 million shares and 3.57 million shares, respectively. At $41 per share, the JFrog IPO could raise $474 million. 

Our valuation analysis suggests an implied market cap of $5.0 billion and a target price of $55.2 per share for JFrog. The IPO price range is from $39 to $41 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 35% upside to this price level. Given the solid upside, we have a positive view of this stock.

The key investment thesis of JFrog is that it is a company has been able to capitalize on its first mover’s advantage in this new product category of Continuous Software Release to scale up its business significantly without spending large sums of money on sales & marketing and this is one of the key reasons why the company has quickly become profitable.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Softbank Corp, Xiaomi Corp, Ming Yuan Cloud Group, Ant Financial, ZTO Express, Zai Lab Ltd, Snowflake Inc, Yukiguni Maitake and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Softbank Corp (9434) – Time To Cover
  • Xiaomi Placement – Run-Up in Share Price, Co-Founder Selling
  • Ming Yuan Cloud (明源云) IPO – Better Disclosure and a Leader in the Industry
  • AliPay’s Advantage over WeChat Pay in Physical Stores
  • ZTO Express Secondary Listing: Home Delivery
  • Zai Lab HK Secondary Listing – Large Deal to Digest but past Deals Have Done Well
  • Snowflake – Extremely Pretty, but Liable to Melt in Amazon’s Sun
  • Yukiguni Maitake IPO: Bain’s Remaining 6.65% Ownership Is an Overhang
  • ZTO Express Secondary Listing – Fast Growth but It Hasn’t Been Flowing Down to Earnings
  • Ming Yuan Cloud IPO Initiation: New Wiring

Softbank Corp (9434) – Time To Cover

By Travis Lundy

When the Softbank Corp (9434 JP) block was announced on 28 August after the close, it was one of the larger secondary blocks ever placed in Japan, and it was underwritten.

It was always going to get sold rather than bought, and it appears that it has been sold. For some reason I could not figure out, the shares only fell 3-4% or so on the first day and then stayed stable for a few days. I thought it needed more of a wallop to see pricing come out right. 

It has, in the interim, been walloped. 

Now is the time to cover that sale in the market if you shorted, and to buy back if you sold long. 

The implied dividend yield on the offering is now (as I write) above 7%. Suganomics may not favor telcos but I expect the telcos probably have enough leverage to push back from time to time. 

More below the fold.


Xiaomi Placement – Run-Up in Share Price, Co-Founder Selling

By Sumeet Singh

Xiaomi Corp (1810 HK)‘s co-founder Lin Bin aims to raise around US$1bn via selling some of his stake in the firm.

While he has provided a long lock-up to allay any concerns of an overhang, the shares have run-up a lot going into the index inclusion. 


Ming Yuan Cloud (明源云) IPO – Better Disclosure and a Leader in the Industry

By Zhen Zhou, Toh

Ming Yuan Cloud Group (MYCG HK) (MYCG) is looking to raise up to US$796m in its upcoming Hong Kong IPO.

MYCG is a software solution provider in China with a focus on real estate. The company provides enterprise resource planning (ERP) solutions and SaaS products to property developers and other industry participants in the real estate value chain in China. As per Frost & Sullivan (F&S), the company is ranked first among software providers for property developers in China and has a dominant 24.6% market share in terms of contract value in 2019.

In this note, we will look at updates in the new PHIP filing, do a brief peer comparison, and share our assumptions, and thoughts on valuation.

Our previous coverage of the IPO:


AliPay’s Advantage over WeChat Pay in Physical Stores

By Ming Lu

  • We believe customers prefer AliPay to Tencent (700 HK)’s WeChat Pay when both are available in physical stores.
  • Customers need only 2 steps to pay with AliPay compared to 3~4 steps with WeChat Pay.
  • We believe AliPay has advantage in physical stores before WeChat provides WeChat Pay an access in its homepage.

ZTO Express Secondary Listing: Home Delivery

By Arun George

ZTO Express (ZTO US) is the leading express delivery company in China with a 19.1% market share of China’s express delivery service market as measured by total parcel volume, according to iResearch. ZTO Express passed its Hong Kong listing committee hearing last week and could raise up to $2 billion through a secondary listing, according to press reports. 

ZTO joins the wave of Hong Kong secondary listings set to hit the screens in the coming months. We think that ZTO is an attractive equity story as it is a best-in-class logistics player which can capitalize on the opportunities presented by China’s relatively fragmented logistics industry, in our view. 


Zai Lab HK Secondary Listing – Large Deal to Digest but past Deals Have Done Well

By Sumeet Singh

Zai Lab Ltd (ZLAB US) plans to raise around US$1bn in its secondary listing in Hong Kong.

The company filed its PHIP on Friday, 11th Sep 2020, although it has yet to officially launch the deal. While waiting for the deal to be launched, in this insight, I’ll talk about the deal dynamics.

Links to my previous notes on the topic on Secondary listings:


Snowflake – Extremely Pretty, but Liable to Melt in Amazon’s Sun

By Mio Kato

The Snowflake IPO has attracted significant investor interest including some pretty impressive names such as Warren Buffett and Salesforce. Indeed, the company’s business is impressive, and its sales growth should help drive a successful IPO in our opinion. However, that does not mean the company is without issues and while we suspect this could be a good trade, we are sceptical about its merits as an investment, and not just because of demanding valuations but also because it is unclear how the company will defend its currently attractive position against Amazon and other large players.


Yukiguni Maitake IPO: Bain’s Remaining 6.65% Ownership Is an Overhang

By Oshadhi Kumarasiri

Yukiguni Maitake (1378 JP), the market leader in Maitake mushrooms, has priced its shares at ¥2,200 per share, at the mid-point of the IPO price range (¥2,000-2,400). The book-building period ended on Tuesday, and the final offer price was announced on Wednesday 9th September.

Furthermore, it was also decided that the shares will be listed on the 1st section of the Tokyo Stock Exchange from 17th September 2020 under the Fishery, Agriculture and Forestry sector.

The selling shareholder (Bain Capital) will generate ¥38.8 billion ($366m) by selling 17.7m Yukiguni Maitake (1378 JP) shares- an overallotment option, if exercised, could increase the IPO by ¥5.8 billion.

Before the IPO price range was announced, we expressed our desire to subscribe to the IPO at a reasonable valuation despite an unconvincing growth story, due to stable revenue and operating cash flows alongside attractive operating margins (13.2% in FY2020), even amidst COVID-19.

Yukiguni Maitake: Stable Maitake Mushroom Business With Limited Growth Opportunities

As the price range was announced at ¥2,000-2,400 per share, we expressed that the company is generously valued and there could be little upside potential for IPO investors.

Yukiguni Maitake IPO Valuation: Bain Capital Is Out and Leaving Little Upside for IPO Investors

In this insight, we take a look at the company’s valuation against the Fishery, Agriculture and Forestry sector peer basket, and discuss implications of Topix inclusion and possible overhang from Bain Capital’s remaining 6.65% ownership share.


ZTO Express Secondary Listing – Fast Growth but It Hasn’t Been Flowing Down to Earnings

By Sumeet Singh

ZTO Express (ZTO US) plans to raise around US$2bn in its secondary listing in Hong Kong.

While the company filed its PHIP on Friday, 11th Sep 2020, it has yet to officially launch the deal. While waiting for the deal to be launched, in this insight, I’ll talk about the deal dynamics and what to do with the ADR while waiting for the completion of the Hong Kong listing.


Ming Yuan Cloud IPO Initiation: New Wiring

By Arun George

Ming Yuan Cloud Group (MYCG HK) provides enterprise-grade ERP solutions and SaaS products to property developers and other industry participants along the real estate value chain in China. It is the leading software solution provider for property developers in China with a market share of 18.5% as measured by revenue in 2019, according to Frost & Sullivan. Ming Yuan has launched a Hong Kong IPO to raise as much as HK$6.17 billion ($798 million), according to press reports.

The software solutions market for the real estate industry is growing due to expanding business operations of property developers which increases complexity and the intensifying competition which drives the need for property developers to use technology to lower costs. The key barrier to entry for software developers is deep industry know-how, which Ming Yuan has in spades. Overall, we believe that Ming Yuan is an attractive play on these market dynamics.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Chindata, Unity Software Inc and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Chindata Group IPO Initiation: Where the Cloud Meets the Ground
  • Unity Software IPO Valuation Analysis

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

By Arun George

Chindata (CD US) is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost & Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. 

The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. 


Unity Software IPO Valuation Analysis

By Douglas Kim

Unity Software Inc (U US) plans to complete its IPO in the coming days. The company is seeking to raise $1.05 billion in this IPO selling 25 million shares at $34 to $42 per share. At the high end of the IPO price range, Unity Software would be valued at about $11 billion. Unity Software was valued at about $6 billion in July 2019 in its last round of private funding round so, at the high end of the IPO price range, it would be nearly double its last private market valuation about a year ago.  

Unity Software’s IPO process is using a new bidding process. According to FT, “Prospective institutional investors will be asked how many shares they wish to buy, and at what price, by an online system managed by Goldman Sachs, according to a notice sent out to explain the new process. Investors can place multiple bids at difference prices. Unity will select a price for the offering after the bids are entered, allocating a portion of the shares to all investors who indicated interest above that price level.”

Our valuation analysis suggests an implied market cap of $15.6 billion and a target price of $58.60 per share for Unity Software. The IPO price range is from $34 to $42 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 39% upside to this level. In fact, given the strong global demand for excellent software and game-related companies, there is a higher probability that Unity Software IPO trades in the mid-high end of our valuation range ($58.60 to $70.90 per share).


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Ant Financial, Chindata and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • ECM Weekly (13 September 2020) – Ant Group, Joy Spreader, Chindata, Huazhu Secondary, Converge ICT
  • Chindata Group Holdings Pre-IPO – Patchy Data but Is Growing Fast in a Hot Sector

ECM Weekly (13 September 2020) – Ant Group, Joy Spreader, Chindata, Huazhu Secondary, Converge ICT

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.

Hong Kong IPO activity is still looking busy. Joy Spreader Interactive Technology (6988 HK) and Huazhu Group (HTHT US) launched their respective US$225m and US$900m bookbuilds this week. 

On top of that, there were news reports that ZTO Express, Zai Lab and Baozun, Ming Yuan Cloud Group, and, Genor Biopharma, have gotten approval from HKEx. The first three names are secondary listings and, out of them, two have already filed their PHIP with HKEx as of Friday. We are also hearing that Genor Biopharma (0883276D CH) is looking to kickstart pre-marketing next week for its US$300m IPO.

We continued our coverage of Ant Group. This week, Sumeet Singh looked into implications of dual listing on index inclusion. There were also news reporting that Temasek and GIC are looking to participate in Ant Group’s IPO. 

In other parts of Asia, there seemed to be a wave of IPOs coming. We continue to look at Converge ICT Solutions Inc (ITC PM), this time, comparing the company with established peers in the Philippines. 

We are also hearing that, in India, UTI Asset Management (UTIAMC IN) and Computer Age Management Services (CAMS IN) are looking to launch their IPO next week. We have earlier covered the companies in:

Last, but not least, there were a handful of China ADR filings with the SEC. We took a look at Bain Capital-backed Chindata (CD US)‘s potential US$400m IPO.

Also, as mentioned last week, MR D.I.Y. Group (1706769D MK) is returning to market and it was pre-marketing during the week, likely to seek up to US$400m and, in Thailand, there were reports that SCG Packaging (SCGP TB) is targeting to launch its US$1.5bn IPO next month.

For placements, we share updates on Softbank Corp (9434 JP)‘s mega selldown by Softbank Group (9984 JP) which is looking to price on Monday.

Accuracy Rate:

Our overall accuracy rate is 73.0% for IPOs and 66.1% for Placements 

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

New IPO filings this week

  • SciClone Pharma (Hong Kong, ~US$500m)
  • Sino-Ocean Services (Hong Kong, >US$100m)
  • Chindata Group (the U.S., US$400m)
  • Boqii (the U.S., US$115m)
  • iHuman (the U.S., 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

Analysis on Upcoming IPOs

Name Insight
Hong Kong
Ant Group Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles 
Ant Group Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials 
Ant Group Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask – Falling Fees, Margins, Cash Flow 
Ant Group Ant Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
Ant Group Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News 
Ant Group Ant Group – Index Inclusion Possibilities & Timeline 
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 

Blue Moon

Blue Moon Group Pre-IPO – Online Reviews and Peer Comparison 

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 

E-Star Comm

E-Star Commercial Management Pre-IPO – Better Disclosure in New Prospectus 

E-Star Comm

E-Star Commercial Management Pre-IPO – Still Largely Reliant on Galaxy, Poor Disclosure Doesn’t Help 

Excellence Comm

Excellence Commercial Property (卓越商企服务) Pre-IPO – Diversifying Away from Excellence Group 

Everest Med

Everest Medicines (云顶新耀) Pre-IPO: License-In Specialist Led by Biotech Investors 

Genor

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

Huazhu

Huazhu HK Secondary Listing – Early Look – Needs the Cash More than Most Secondary Candidates 

Jiayuan Svcs

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

Jinke Svcs

Jinke Smart Services (金科智慧服务) Pre-IPO – GFA Growth at the Expense of Fees 

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 

KWG Living

KWG Living (合景悠活) Pre-IPO – Strong Growth and Margin Expansion but Overly Reliant on KWG Group 

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 
MIngyuan Cloud Ming Yuan Cloud (明源云) Pre-IPO – Leaning on Regional Partners for Growth but Hefty Commissions Paid 
Neusoft Neusoft Edu (东软教育) Pre-IPO: Long Established Name on IT Education 
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 
Pop Mart Pop Mart Pre-IPO – Peer Set and Valuation 
Pop Mart Pop Mart Pre-IPO Quick Note – On the Ground – Pop-Up Stores Are Effective 
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 
Sunac Svcs Sunac Services (融创服务) Pre-IPO – Promising Growth & Diversifying Away from Sunac Via Acquisitions 
RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Simcere Simcere (先声制药) Pre-IPO: Long History but Products Concentrated 
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 
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 Ind Anmol 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 Info CMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal Crop Crystal 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 
NSE NSE IPO Preview- Not Only Fast..its Risky and Expensive
NSE National Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
Mazagon Mazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mrs. Bector Mrs. 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
Lodha Lodha 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 Met PNB 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 
QSR QSR 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. 
CloudMinds CloudMinds Inc Early Thoughts – Still Nascent
Japan
Kioxia Kioxia IPO Early Thought: Inventor of the NAND Flash 

Chindata Group Holdings Pre-IPO – Patchy Data but Is Growing Fast in a Hot Sector

By Sumeet Singh

Chindata Group Holdings aims to raise around US$400m in its US listing. Chindata is a data centre solution provider in Asia-Pacific with a focus on China. It currently operates six data centers in China and one in Malaysia and has numerous more data centers under construction.

The company is backed by Bain Capital and is almost like a startup, in the sense that it was recently formed via the merger of a China and Asia-Pac entity. Given the relative freshness of the firm, the company has taken the liberty of providing financials just for the past 18 months, which of course show rapid growth. Also, it doesn’t provide a whole lot of details about its individual assets. Furthermore, its two large clients account for a huge chunk of its revenue, one of which is Bytedance, the other being Wangsu.

On the positive side, Chindata has plans to more than double its capacity by the end of 2021, which will ensure that growth remains strong. Moreover, its Chairman and founder appear to have ample experience in the sector. It operates in a sector which has only seen investor demand increase during COVID-19 and hence, despite its lack of financials will probably still be hot. 

In this note, I’ll talk about the company’s background, its past performance and the above issues.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: JFrog Ltd, Unity Software Inc, Palantir Technologies Inc and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • JFrog IPO. Profitable Tech Unicorn With Substantial Post-IPO Upside
  • Unity IPO Valuation – Disappointingly Un-Epic
  • Major Highlights of the Palantir Investors Day Presentation

JFrog IPO. Profitable Tech Unicorn With Substantial Post-IPO Upside

By Andrei Zakharov

JFrog is one of the leaders in the software update industry. Tech unicorn helps developers and organizations to be more agile, faster, secure in the software release lifecycle and offers a universal set of DevOps tools that work with all major software technologies to accelerate the delivery of software packages or binaries through delivery pipeline. DevOps affects healthcare, politics, social interaction, food & water, transportation and energy. Just imagine, Facebook, LinkedIn and Netflix update software 7 times a day. That is why releasing and updating software is especially important in the era of digital transformation and the transition to cloud. Number of devices and applications is growing at unimagined rate as well as data – 175 ZB globally by 2025, mostly cloud.

JFrog is offering ~12 million shares at valuation range of $33-37 and we estimate net proceeds from the offering to reach $255 million at midpoint. Lead underwriters are Morgan Stanley, BofA Securities and J.P. Morgan


Unity IPO Valuation – Disappointingly Un-Epic

By Mio Kato

When we initially heard about Unity’s plans to IPO, we were quite excited and felt some anticipation. Given the positioning serving mobile game customers and emerging trends using game engines in movies and other 3D modelling software we felt that market prospects were good and on hearing that gross margins were about 80% we imagined that operating margins could be 40 or 50% and were starting to rub our hands in expectation. Thus, we were stunned to see that the company was loss-making and analysing its financials caused any optimism we had to evaporate. The company plays a nice role democratising game development but as an investment it totally underwhelms.


Major Highlights of the Palantir Investors Day Presentation

By Douglas Kim

Palantir is expected to complete its Direct Public Listing (DPL) on 23 September. Although the valuation pricing levels of Palantir’s DPL are yet to be announced, it appears that they will be lower than the implied valuation of $20 billion that the company received in the private round funding in 2015. The company’s updated prospectus, which includes the latest shares outstanding and average shares price, sets the company’s valuation at about $10.5 billion.

With the company’s financials now publicly available, there is a strong probability that the DPL will NOT price the company at close to $20 billion. This is a distinctly different case than Snowflake where its IPO valuation is much higher than the private market valuation Snowflake received in early 2020. Overall, there could be more interested investors in Palantir if the DPL valuation is set close to about $15 billion, in our view.

In this insight, we provide the key highlights of the Palantir Investor Day presentation which was held on 9 September. (Source: https://vimeo.com/palantir) It is always good to hear directly from the key members of the senior management team. We provide 13 key highlights from the presentation. 


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Snowflake Inc, Yum China Holdings Inc, Nongfu Spring, Huazhu Group, Palantir Technologies Inc, Boqii Holding, Joy Spreader Interactive Technology, Converge ICT Solutions Inc, Softbank Corp and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Snowflake IPO – Approved by the Oracle of Omaha
  • Yum China Secondary Listing – Is There More Downside?
  • Nongfu Spring’s Sparkling Debut: Opened 85% Up- Is It Time to Short?
  • Huazhu HK Secondary Listing – Needs the Money but Looks Toppish
  • Palantir – The Anti-WeWork and Updates From Its Presentation
  • Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms
  • Joy Spreader (乐享互动) IPO – Fairly Valued at Best
  • Converge ICT Pre-IPO – Peer Comparison – Not a Clear Cut Winner
  • Softbank Corp Placement – Quick Update – Wide Discount from Undisturbed but Don’t Expect Much
  • Joy Spreader IPO Initiation: For the Joy of It

Snowflake IPO – Approved by the Oracle of Omaha

By Douglas Kim

In this insight, we provide a valuation analysis of Snowflake which has set its IPO price range of $75 to $85 per share. At these prices, Snowflake’s market cap would range between $20.9 billion and $23.7 billion. Snowflake could raise more than $2.7 billion in this IPO and this would be one of the biggest IPOs in the U.S. stock market this year. The valuation range is a big jump from the valuation the company received earlier this year when it was valued at about $12.5 billion (raising $479 million in its Series G funding round).

It was also announced that Berkshire Hathaway will invest $573 million in the Snowflake IPO, which is likely to have a big positive impact on this IPO, especially among the value-oriented investors globally. Salesforce.Com Inc (CRM US)also plans to invest $250 million in the Snowflake IPO. The private placement investments by Berkshire Hathaway and Salesforce.com will be equal to the IPO price. For Berkshire Hathaway, it plans to purchase 3.125 million new shares of the company’s Class A common stock (assuming $80 per share, this would represent $250 million) and an additional 4.042 million shares of the company’s Class A common stock from one of the existing shareholders (assuming $80 per share, this would represent $323 million).

Our valuation analysis suggests an EV of $37.1 billion, a market cap of $40.4 billion, and a target price of $145 per share for Snowflake. The IPO price range is from $75 to $85 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 70% upside to this price level. We used fully diluted shares outstanding of 278.8 million post IPO and this resulted in a target price of $145 per share. Given the strong upside, we would take this IPO deal. In fact, we are including Snowflake in our model portfolio.


Yum China Secondary Listing – Is There More Downside?

By Rickin Thakrar

Yum China (9987 HK) had a tough debut for its secondary listing, with the shares closing down c5%. We have been cautious on the secondary listing (note here) and the HK shares currently trade at a c5% discount to the ADR last close price and flat vs the ADR pre-market price. We give our updated thoughts on the secondary listing below.


Nongfu Spring’s Sparkling Debut: Opened 85% Up- Is It Time to Short?

By Aqila Ali

As expected Nongfu Spring (9633 HK) had a successful IPO. Nongfu’s stock opened at HKD 39.8 per share up 85% from its issue price. The stock ended the day at HKD 33.1 per share, 54% above the IPO price. The IPO was oversubscribed 1,148 times. The share price performance shows investor demand for defensive stocks amidst the ongoing COVID-19 crisis. 
During the second day of trading, the share price increased another 2.3%, closing at HKD 34.1 per share. At the current share price (HKD 35.9), Nongfu is trading at FY+2 EV/EBIT and PE of 43.6x and 47.6x respectively. 
The company’s valuation looks expensive – the question is, should you take profits, keep it in the radar to short, or hold on?
We go through the details below.


Huazhu HK Secondary Listing – Needs the Money but Looks Toppish

By Sumeet Singh

Huazhu Group (HTHT US) plans to raise around US$900m in its secondary listing in Hong Kong.

I have covered the background of the deal in my earlier note, Huazhu HK Secondary Listing – Early Look – Needs the Cash More than Most Secondary Candidates.

In this insight, I’ll talk about the deal dynamics and what to do with the ADR while waiting for the completion of the Hong Kong listing.


Palantir – The Anti-WeWork and Updates From Its Presentation

By Mio Kato

According to Palantir CEO Alex Karp talking about security and data integration

“If you think that we are going to reduce the complexity of these issues to some weird soundbite that makes sense to somebody in marketing hired by a consultancy you should not invest in Palantir.”

Alex, don’t you believe in the POWER OF WE???!!!

Also

“If you think that we will doggedly build the best software in the world years before anyone else and that we will supply the software at the world’s perfect macro timing we want your support because that’s what we’ve done in the past and that’s what we’re going to do in the future.”

It’s almost as if Alex Karp believes that long-term thinking and actual innovation are more important than enormous losses, slick marketing and Masayoshi Son sensing the force in you… lunatic.


Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms

By Shifara Samsudeen, ACMA, CGMA

  • Boqii is one of the largest pet-focused platforms in China who offers a one-stop destination for pet parents to get everything they need for their pets including pet food, toys, vitamins and toiletries. The company operates an online platform as well as an offline retail network.
  • The company has filed for an IPO in the US and has a placeholder indication to raise US$115m and plans to use part of the IPO proceeds on further enhancing content, R&D, big data technology and develop private label brands.
  • China’s pet economy is still in its infant stages as the market is significantly underpenetrated and this presents a huge potential for industry participants. The young millennials are driving the growth in the market and the pet goods retail market is shifting largely towards online channels in the country.
  • Boqii earns a majority of its revenue through online platforms (self-operated Boqii Mall and other third-party platforms) and at the same time, the third-party platforms bring in almost two-third of the company’s revenues.
  • The online pet good retail market in China is highly competitive and are dominated by large and established online retail platforms, including generic e-commerce platforms.
  • In this insight, we examine the company’s business model, the industry and the revenue channels. Boqii is the largest pet-focused online retail platform in China and the company has taken several initiatives including M&A deals to expand its presence in the market. The company is operating in a growing market and it seems that the company has a strong business model.
  • In a follow-up insight, we will be discussing the company’s financials (revenue, margins and balance sheet) in detail.

Joy Spreader (乐享互动) IPO – Fairly Valued at Best

By Zhen Zhou, Toh

Joy Spreader Interactive Technology (6988 HK) (JST) is looking to raise up to US$225m in its upcoming Hong Kong IPO.

JST is a performance-based we-media marketing service provider in China. JST connects marketers and we-media publishers via its technology and platforms. The services provided to marketers include analyzing and distributing their products on the we-media network which will help marketers acquire users.

In this note, we will look at assumptions and share our thoughts on valuation.

Our previous coverage of the IPO:


Converge ICT Pre-IPO – Peer Comparison – Not a Clear Cut Winner

By Sumeet Singh

Converge ICT aims to raise around US$500m in its Philippines listing later this year.

Converge ICT (CICT) is the largest high-speed fixed broadband operator in the Philippines, by high-speed residential fixed broadband subscriptions. It has a 54% market share as of Mar 2020, according to MPA. It also claims to be the fastest growing fixed broadband operator in both the residential and enterprise market.

CICT owns and operates an end-to-end fiber network in the Philippines, with over 30,000 kilometers of fiber as of Mar 2020. Its network covers 200 cities and municipalities across Luzon. As of Mar 2020, it reached approximately 4.1m homes.

CICT’s revenue has grown at 69% CAGR over FY16-19, with growth being led by its residential business whose revenue has increased at 95% CAGR over the same time frame. Gross profit grew at 56% CAGR, EBITDA at 91% CAGR and Net profit at 60% CAGR. In other words, most of the revenue growth has flowed down to the bottom line.

In my previous note, Converge ICT Pre-IPO – Fast growth, low penetration, COVID resistant, I covered the company’s background and performance. In this note, I’ll compare it to some of its listed peers.


Softbank Corp Placement – Quick Update – Wide Discount from Undisturbed but Don’t Expect Much

By Zhen Zhou, Toh

Softbank Group (9984 JP) (SBG) is looking to raise about US$11bn by selling some of its shares (10%) in Softbank Corp (9434 JP) (SBC). Post sell down, SBG will still hold about 2bn shares (about 42% stake) in SBC.

In this insight, we will look at the deal dynamics, recent performance of the company, and run the deal through our deal framework.

We have previously looked at the May placement, the potential selldown (post announcement selling assets to fund buyback) and its 2018 IPO in:


Joy Spreader IPO Initiation: For the Joy of It

By Arun George

Joy Spreader Interactive Technology (6988 HK) is an ad tech company which connect marketers (namely, product providers and merchants) with we-media publishers. Joy Spreader has launched a Hong Kong IPO to raise around net proceeds of $140-210 million. 

The post-IPO performance of Chinese ad tech companies has been mixed. Consequently, backing the winners is crucial to generate investment returns in the Chinese ad tech sector. For investors seeking Chinese ad tech exposure, we think Joy Spreader’s fundamentals are attractive. We will discuss the IPO valuation in our next piece. 


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Yum China Holdings, Inc, Ant Financial, Yum China Holdings Inc, Big Hit Entertainment, Kakao Games, QuantumScape Corp and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • Yum China HK IPO Trading – Index Flows to the Rescue
  • Smartkarma Flash Webinar | Ant Group IPO: The World’s Greatest?
  • Ant Group IPO: Key Takeaways from the Response to SSE’s Queries
  • Yum China Secondary Listing: Trading Debut
  • Big Hit Ent. IPO: KOSPI 200 Inclusion Event
  • Revise up Kakao G Exit Price: Local Retail Insanity, Hot Money Float, & Valuation Pressure
  • QuantumScape: VW-Backed EV Battery Player to Take SPAC Route for an IPO

Yum China HK IPO Trading – Index Flows to the Rescue

By Sumeet Singh

In this insight, I’ll talk about the deal dynamics and updates over the past week.

Links to my previous notes on China ADRs secondary listing:


Smartkarma Flash Webinar | Ant Group IPO: The World’s Greatest?

By Smartkarma Research

In this flash Webinar, we are joined by Insight Providers Arun George and Victor Galliano to discuss the upcoming IPO of Ant Financial (1051260D CH). The Chinese fintech giant is slated for a dual listing in Shanghai and Hong Kong to raise US$30 billion, making it potentially the largest IPO ever.

The flash webinar will be hosted on Thursday, 10/September/2020, 5.00 pm SGT/HKT.

Arun George has over 13 years’ experience covering the Technology sector. During this time, he has worked with technology startups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group, and Clear Capital. 

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering Italian banks and Fintech. He has worked in sell-side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings, and NatWest.


Ant Group IPO: Key Takeaways from the Response to SSE’s Queries

By Arun George

On 30 August, the Shanghai Stock Exchange (SSE) posed 21 questions to Ant Financial (1051260D CH) in relation to its IPO filing. Ant responded to the questions in a Chinese regulatory filing on 3 September. As a reminder, Ant has submitted its IPO applications for simultaneous dual-listing in Hong Kong and on the Shanghai stock exchange’s STAR board. Ant is floating no less than 10% of its total share capital to raise around $30 billion, at a valuation of $200-300 billion, according to various press reports.

In this note, we highlight the key questions posed by the SSE and Ant’s response. Notably, several of the questions result in new disclosures by Ant. We examine the new disclosures and provide our take on the responses.


Yum China Secondary Listing: Trading Debut

By Arun George

Yum China Holdings Inc (9987 HK) will commence trading in Hong Kong on Thursday, 10 September. Yum China Holdings, Inc (YUMC US) priced its Hong Kong secondary listing at HK$412 per share. Yum China raised net proceeds of HK$17,002 million ($2.2 billion).

Yum China priced its H-shares at a 4.9% discount to its ADS. In comparison, Alibaba, NetEase and JD.com priced their H-shares at a 2.9%, 2.0% and 3.9% discount to its ADSs, respectively. At the last close price of $52.32 per ADS, the H-share offer price of HK$412 implies a 1.6% premium. We believe that JD.com’s H-share will likely trade to a slight premium to the ADS on average, broadly similar to the last three secondary listings.


Big Hit Ent. IPO: KOSPI 200 Inclusion Event

By Sanghyun Park

KOSPI 200 inclusion for a newly listed stock is as follows:

If the average daily market cap of an IPO stock stays in the top 50 ordinary shares on KOSPI for the first 15 trading days since listing, it will become eligible to join KOSPI 200 through fast track.

The ceiling of the IPO price gives a ₩4.85tril, which then places Big Hit at the 51st largest stock on KOSPI.

The opening price range on a listing day is 90~200%. If it hits the upper end (like SK Biopharm), it will reach a company value of ₩9.7tril, which is enough to be sitting at 32nd.

Then, if it hits the daily limit (30%), again just like SK Biopharm, its MC will be ₩12.6tril, which is right above Samsung Life at the 27th spot.

So, we can safely say that Big Hit has a real shot at an early inclusion.


Revise up Kakao G Exit Price: Local Retail Insanity, Hot Money Float, & Valuation Pressure

By Sanghyun Park

Today is the first trading day of Kakao Games.

The latest OTC price is ₩78,000, which gives a market cap of ₩5.9tril.

More importantly, Kakao Games’ trading volume in the OTC market is astonishingly high, suggesting an insanely high level of interest by local retail.

But the street consensus is substantially lower.

Three local brokerages gave an earnings estimate for FY2020. They range from ₩68.7bil (Hanwha) to ₩81.4bil (Daishin).

It is pretty much in line with my projected range (₩60.6~73.2bil).

The PER range is 22.34~26.47x at the offering price of ₩24,000.

If we see the opening price hit the upper end (200%), it will be 44.68~52.94x on FY2020 projected earnings.

Then, it reaches the daily ceiling (+30%), we will have a 58.08~69.82x. 


QuantumScape: VW-Backed EV Battery Player to Take SPAC Route for an IPO

By Aqila Ali

It was reported last week that QuantumScape Corp (QSC US) QuantumScape, a 10-year old battery start-up, plans to go public through a reverse merger with Kensington Capital Acquisition Corp. Recently, Canoo Inc (1816619D US), an EV player, also reported that it wants to take the SPAC route for an IPO ( Canoo Pre-IPO(Business Model and Growth Prospects): Interesting, Though Still in the Planning Stage). In this insight, we take a look at QuantumScape and how successful it can be with its solid-state battery technology (yet to be commercialised) competing with EV battery leaders like CATL, Panasonic, LG Chem, and Samsung SDI, which are all continuously fighting for market share.

We go through the details below.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: Asahi Group Holdings, Palantir Technologies Inc, Big Hit Entertainment, Korea Investment Holdings Co, Ltd., Fourace Industries, Ant Financial, Joy Spreader Interactive Technology and more

By | Daily Briefs, IPOs and Placements

In today’s briefing:

  • 🇯🇵 Japan • Asahi Group Holdings (2502 JP) – A Return & Valuation Perspective
  • Palantir – Quantamentals Suggest Profitability Could Surge with Revenue Growth
  • Interest Comparisons of Upcoming Korean Large-Cap IPOs: Kakao Games & Big Hit Entertainment
  • Kakao Bank (One of the Biggest IPOs in Korea in 2021) – Big Boost to Korea Investment & Holdings
  • Fourace IPO (Valuation): Attractive Earnings Profile and Valuation Relative to Peers
  • Ant Group IPO: Jack Ma Is Still “Very Much” in Control
  • Joy Spreader (乐享互动) Pre-IPO – Found a Niche in Games but Still Just a Middleman

🇯🇵 Japan • Asahi Group Holdings (2502 JP) – A Return & Valuation Perspective

By Campbell Gunn

Source for all charts: Japan Analytics

Asahi Group Holdings (2502 JP)– Following AGH’s successful share placement to finance the CUB acquisition, this Insight provides new and long-suffering shareholders with an evaluation of the company’s performance and valuation. Where relevant, we shall compare AGH with its domestic rival Kirin Holdings (2503 JP).  The thirty-year correlation between the two company’s share prices is 0.89.


Palantir – Quantamentals Suggest Profitability Could Surge with Revenue Growth

By Mio Kato

Much has been made in the press of Palantir’s history of losses. Unfortunately, in its S-1 Palantir only disclosed six quarters of operating history making a deep analysis difficult, but nevertheless, based on our analysis of those financials we believe that the company’s underlying profitability potential is high, very high. Leaving valuations aside, from an operational standpoint this is one of the most attractive looking tech stocks we have seen among the new wave and we do not consider it impossible for the company to become one of the biggest companies in the world as the data revolution gathers steam.


Interest Comparisons of Upcoming Korean Large-Cap IPOs: Kakao Games & Big Hit Entertainment

By Douglas Kim

Based on the Smartkarma’s platform interest rates comparison, there is overwhelming evidence that suggests the LACK of interest in the Big Hit Entertainment IPO as compared to the Kakao Games and SK Biopharm IPOs. In fact, the IPO interest levels of Kakao Games and SK Biopharm are similar (100 for Kakao Games and 97 for SK Biopharm). However, the interest levels for the Big Hit Entertainment is much lower (36) than those for Kakao Games and SK Biopharm.

In other words, the viewers of our insights already have figured out that the IPO price range of Big Hit Entertainment is TOO HIGH and as a result, there is not much to gain from this IPO. The bookbuilding for the Big Hit Entertainment IPO starts on September 24th and based on the Smartkarma interest level comparisons combined with our own valuation assessment, the institutional investors’ interest in the Big Hit’s IPO will be much lower than those for Kakao Games and SK Biopharm. 


Kakao Bank (One of the Biggest IPOs in Korea in 2021) – Big Boost to Korea Investment & Holdings

By Douglas Kim

Kakao Bank is one of the Kakao Corp (035720 KS) affiliates which is expected to complete its IPO in 1H 2021. Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. The local media have mentioned the value of Kakao Bank to be about 8 trillion won to 9 trillion won.

Korea Investment Holdings (KIH) has a 33.5% stake in Kakao Bank (indirectly owned through KIH’s subsidiaries Korea Investment & Securities and Korea Value Asset Management. Korea Investment Holdings Co, Ltd. (071050 KS) currently has a market cap of 4.4 trillion won so this 2.7 trillion won (33.5% stake in Kakao Bank at a value of 8 trillion won) would be worth 61% of Korea Investment Holding’s market cap.


Fourace IPO (Valuation): Attractive Earnings Profile and Valuation Relative to Peers

By Aqila Ali

In our earlier reports, we covered Fourace Industries (FOUR HK)’s background, its business model, growth prospects, the risks it faces in the market, and its financial performance. We concluded that the company’s 30 years of expertise in the business, along with its attractive margins and strategic business plans, make it an attractive business. Customer concentration risk is still our main concern, but as we mentioned, the company’s move to OBM business should negate such concerns.  

Fourace revealed that it aims to raise around HKD91.7m or more, offering 312.5 million shares at a price range of HKD 0.4- HKD0.6 per share. This insight covers Fourace’s valuation in relation to its peers. Our views are:

  • Most of the peers are still private companies.
  • We selected a range of companies (OEM/ODMs as well as OBM) that cater to similar products to Fourace and serve similar markets (Japan, US, Europe, China).
  • Based on double-digit revenue growth (27%) and OPM (17%), the company is likely to trade at an FY2 EV/EBIT and a PE of 8.4x and 16.2x respectively at the high end of the IPO price range. At these multiples, Fourace appears fairly valued in comparison to selected peers.
  • Fourace also has better fundamentals than its peers and thus, we feel it deserves a slight premium to certain peers.
  • Moreover, as earnings improve, which is likely as the OBM model is adopted, the company could trade at a higher multiple similar to OBM peers.

Deal Specifics of Fourace’s Offering

Details:

Price Determination Date

September 4th, 2020

Announcement of Final Offer Price

September 14th 2020

Expected IPO price per share:  

Between HKD0.4 and HKD0.6

Number of Shares for IPO:

312,500,000 Shares

No. of International Placing Shares

 

281,250,000 Shares

No. of HK Offer Shares

31,250,000 Shares

IPO base deal size: 

Approx. HKD 91.7m

Expected market cap after IPO:

Between HKD 500m – HKD 750 m

Use of Proceeds

* HKD49.9m (54.5%) – Expanding and upgrading facilities;

* HKD 22.7m (24.8%) – Research and development;

* HKD 11.9m (11.9%) – Introduction of new products under its own “IHA” brand;

* HKD 3.2m (3.5%) – Sales and marketing;

* HKD 4m (4.3%) – Upgrading IT systems and Design-aided software

Source: Company Disclosures


Ant Group IPO: Jack Ma Is Still “Very Much” in Control

By Supun Walpola

There was some speculation that Ant Financial (1051260D CH)’s IPO would have been partly motivated by Jack Ma’s plans to further distance himself from Alibaba Group (9988 HK). However, Ant’s preliminary prospectus suggests that Jack Ma, through the Concert Party Agreement signed between the shareholders of Yunbo immediately prior to the release of the prospectus, would continue to have control of Ant even after the IPO.

Meanwhile, the rushed inclusion of ant-dilutive rights into its Share and Asset Purchase Agreement (SAPA) with Ant suggests that it would be unlikely for Alibaba to increase its stake in Ant during the IPO. Nevertheless, we believe Alibaba has significant influence over Ant’s affairs, with a majority of Ant’s BOD also holding positions as Alibaba’s senior management.


Joy Spreader (乐享互动) Pre-IPO – Found a Niche in Games but Still Just a Middleman

By Zhen Zhou, Toh

Joy Spreader Interactive Technology (JST HK) is looking to raise US$200m in its upcoming Hong Kong IPO.

JST is a performance-based we-media marketing service provider in China. JST connects marketers and we-media publishers via its technology and platforms. The services provided to marketers include analyzing and distributing their products on the we-media network which will help marketers acquire users.

In this note, we will share our thoughts on the company’s business model, financials and operating data.


Before it’s here, it’s on Smartkarma