Category

IPOs and Placements

Brief IPOs & Placements: Cloudflare IPO Valuation: Dark Shadows Over Cloud (Part II) and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. Cloudflare IPO Valuation: Dark Shadows Over Cloud (Part II)
  2. We Work! We Play! We Destroy Shareholder Value, EVERY SINGLE DAY!
  3. Shanghai Henlius Biotech IPO: Valuation Prescribed at Low-End
  4. Shanghai Henlius (复宏汉霖) IPO: Thoughts on Price Range, Cornerstone, Valuation Trap

1. Cloudflare IPO Valuation: Dark Shadows Over Cloud (Part II)

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Cloudflare (NET US) offers a global cloud platform that delivers a broad range of network services to businesses of all sizes globally.  In our previous insight on Cloudflare, we covered the company’s background, its business model and an analysis of the company’s financials. We have discussed mainly the company’s valuation in this insight. Our view on the company has not changed, rather the current high valuation makes this deal less interesting from an investor point of view.

Cloudflare has set its IPO price in the range of USD10-12 per share and intends to raise net proceeds of USD357m, resulting in a valuation of about USD2.8bn. Preliminary indications are that the Cloudflare IPO will be priced at the top of the range or even above it. The tech unicorns which went public recently including Slack and Crowdstrike have performed well during the first day of trading and for some time post their IPO debut. However, these stocks have also tended to go down after some time and at times very quickly. The signs are that this IPO might be worth a trade on the first day (sell) but does not look like a good investment. It should be noted however that the market seems less favourable towards these names now given the negativity around recent tech IPOs such as Slack, Crowdstrike, Uber, WeWork, etc.

We discuss the details below.

2. We Work! We Play! We Destroy Shareholder Value, EVERY SINGLE DAY!

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As the drama between Softbank Group (9984 JP) and its increasingly less favoured child, The We Company (WeWork) (WE US), rolls on with requests for private capital infusions bump against requests for a delay to the IPO, we find ourselves asking, “Who is more desperate here, WeWork or Softbank?”

3. Shanghai Henlius Biotech IPO: Valuation Prescribed at Low-End

Shanghai Henlius Biotech (2696 HK) is a biopharmaceutical company and a non-wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group) (2196 HK), a 61% shareholder. Henlius has launched a Hong Kong IPO to raise up to $477 million. It is the first large IPO after weeks of protests in Hong Kong.

In our initiation note, we stated that most of the core products have strong prospects. Overall, the combination of decent cornerstone support and a reasonable valuation makes Henlius tempting particularly at the low-end of the pricing range.  

For reference, our previous notes:
Initiation note: Shanghai Henlius Biotech IPO Initiation: Going Large 
Cash-breakeven study: Shanghai Henlius Biotech IPO: Cash Breakeven Analysis 

4. Shanghai Henlius (复宏汉霖) IPO: Thoughts on Price Range, Cornerstone, Valuation Trap

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Shanghai Henlius, a biotech subsidiary of Fosun Pharma, launched book building today to raise up to USD 477 million.

In our previous insights covering Shanghai Henlius, we have covered the company’s key drug pipelines, the management, shareholders, investors, and a SOTP based valuation.

In this insight, we will provide our final thoughts on the deal based on the price range. We think the company is overvalued and would avoid the deal. 

Our coverage on Shanghai Henlius Biotech

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Brief IPOs & Placements: Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It and more

By | Daily Briefs, IPOs and Placements

In this briefing:

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

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

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Bajaj Energy (BEL IN) (BEL) aims to raise up to US$750m in its India listing. The company plans to use the proceeds to increase its stake in one of its associates. Post completion of that transaction BEL will have a total installed capacity of 2,430MW.

BEL has a power purchase agreement with Uttar Pradesh Power Corporation Limited (UPPCL) for selling its entire output. In addition, it has a fixed fuel supply agreement in place with Coal India. Thus, in an ideal world it’s expected to generate regulated returns. 

However, UPPCL doesn’t seem to be very fond of BEL as per the various actions taken by it over the past few years. Hence, BEL has a lot of pending issues which it needs to resolve before attempting to list.

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Brief IPOs & Placements: ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants
  2. FangDD (房多多) IPO: Reminiscence of SFUN?
  3. IPO Radar: CRC (Part 2), Valuation and Risks
  4. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About
  5. Topsports International: Trading Debut, Valuation Scenario Analysis

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

Appendix

  • ByteDance started as a news app Toutiao, but turned to short videos and gained more active users than the news app.
  • Douyin has the highest user base among all short video apps in China. We believe the success was due to the internal competition among ByteDance’s three video apps.
  • Douyin’s user base has the largest proportion of female users and users below 30 years old.

2. FangDD (房多多) IPO: Reminiscence of SFUN?

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FangDD, a leading property transaction platform in China, is seeking to raise up to USD 150 million through its listing in the US.

In this insight, we will look at the company’s business model. While the company is promoting the SaaS model for property transactions in the secondary market, we think the company hasn’t solved the real problem prevailing in the secondary market. We also studied the failure of its close peer, SFUN. We also provide our preliminary thoughts on the company’s valuation.

3. IPO Radar: CRC (Part 2), Valuation and Risks

Primarily, we value CRC at Bt58/sh, implying a fair swap ratio of 1.15 CRC share to each ROBINS share. Our alternate valuation based on EV/EBITDA is Bt91. We are already invested in this stock via ROBINS. 

  • We value their three business lines (fashion, hardline, and food), and despite its lower growth, fashion is by far the most significant segment, accounting for 44% of its EV for the primary method (SOTP with DCF). We expect CRC to be on par with SCB in market value, making it one of Thailand’s top 10 companies…a very rare IPO indeed.
  • The company is investing Bt18.4bn in 2020. The bulk of this money will go to the food business and systems improvement.
  • Foremost amongst the key risks identified are: 1) threats from e-commerce; 2) events risk; 3) continued ability to attract top brands; and 4) inventory-related risks.

4. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About

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Helios Towers Ltd (HET UK) (HT) is a leading independent mobile tower operator in Africa. HT has filed for an IPO in the London Stock Exchange (LSE). HT plans to raise $125m floating at least 25% of its ownership. The IPO price range of 115-145 pence per share implies a post-listing market cap of $1.42bn-$1.79bn. IPO books will be closed on (Monday) October 14th and the stock will likely start trading on (Tuesday) October 15th. 

Our initial thoughts on HT’s operations are broadly positive. HT’s medium-term growth profile looks solid, underpinned by the strong demand for network infrastructure and room for further inorganic growth in Tanzania and DRC, two of HT’s biggest markets. We believe this should offset HT’s not so encouraging prospects in smaller markets like Ghana and Congo. The company’s recent entrance to South Africa is a big positive, where we believe HT could “buy” its way forward over the next few years. The company’s operational philosophies have so far generated tangible results, in the form of substantial margin improvements, and is expected to further strengthen its bottom line going forward.

5. Topsports International: Trading Debut, Valuation Scenario Analysis

Sensitivity

Topsports International (6110 HK) will commence trading on Thursday, 10 October. Topsports priced its IPO at HK$8.50 per share (towards the low-end of the range). The allotment results showed that both the international and Hong Kong offer Shares were “moderately over-subscribed.

In our valuation note, we said that we would be tempted to participate up to the mid-point of the offered price range of HK$8.30-10.10 per share. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is undemanding. 

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Brief IPOs & Placements: AllHome IPO: Valuation Tailored for Growth Investors and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. AllHome IPO: Valuation Tailored for Growth Investors

1. AllHome IPO: Valuation Tailored for Growth Investors

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AllHome (AHM PM) claims to have pioneered the “one-stop-shop” home improvement retailer in the Philippines. AllHome will launch book building on 13 September with pricing set for 26 September.

In our initiation note, we noted that AllHome seems to have a long runway to maintain its high growth, improving margin equity story. However, our enthusiasm is tempered by AllHome’s significant cash burn. From a valuation perspective, we believe that the IPO will prove attractive to growth investors.

For reference, our previous notes on Topsports
Initiation note: AllHome IPO Initiation: Cash-Guzzling Growth 
Benchmarking study: AllHome IPO: Benchmarking Points to a Trade-Off Between Growth/Margin and Returns 

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Brief IPOs & Placements: PropertyGuru IPO Valuation: Guru at Frothy Valuations and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. PropertyGuru IPO Valuation: Guru at Frothy Valuations
  2. Topsports International IPO Trading – Cheap at the IPO Price
  3. PropertyGuru IPO – SOTP Leaves One Well Short of the Low-End
  4. Languang Justbon Services (蓝光嘉宝) IPO Review – Cheap for a Reason
  5. IPO Radar: CRC (Part I), Thai Department Store Behemoth

1. PropertyGuru IPO Valuation: Guru at Frothy Valuations

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PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru set an indicative IPO price range of A$3.70-4.50 per CDI with the final price set to be announced on 24 October.

In our initiation note, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. From a valuation perspective, we believe that the proposed IPO price range is unattractive.

2. Topsports International IPO Trading – Cheap at the IPO Price

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Topsports International (TOP HK) (TIH) raised US$1.0bn in its Hong Kong listing after pricing its IPO near the bottom-end at HKD8.50/share. 

I’ve covered various aspects of the deal in my earlier insights, links to which are below. In this insight, I’ll run through the deal dynamics and provide a table with implied valuations at different share price levels.

Links to my earlier insights:

3. PropertyGuru IPO – SOTP Leaves One Well Short of the Low-End

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PropertyGuru (PGU AH) plans to raise up to around US$260m via selling a mix of primary and secondary CHESS Depository Interests (CDIs) in Australia. 

In my earlier insight, PropertyGuru IPO – Powered by Singapore, Recharged by Vietnam but Dragged Down by Others, I had looked at the company’s past performance and some of the other aspects of the deal. 

In this insight, I’ll run the deal through our IPO framework and comment on valuations.

4. Languang Justbon Services (蓝光嘉宝) IPO Review – Cheap for a Reason

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Languang Justbon Services (2606 HK) (LJS) is looking to raise up to US$213m in its Hong Kong IPO. We covered the company in:

In this insight, we will compare LJS with Hong Kong-listed property management companies, value the company, and run the deal through our framework.

5. IPO Radar: CRC (Part I), Thai Department Store Behemoth

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Central Retail Corp (CRC) looks set to steal the IPO crown from either AWC (if set in 2019) or PTTOR (if set in 2020). In this review, we explore the business side of the IPO before diving into the valuations.

  • The IPO is underwritten by Phatra and is good for 1.73bn shares and will take place alongside the Robinson tender offer (at Bt66.5/sh).
  • The Business includes Central Dept Store, the country’s largest chain by revenues, which also owns a majority stake in Robinsons (53.83% pre-tender) and non-listed subsidiaries in other formats, such as convenience store (Family Mart), construction materials (Thai Watsadu), supermarkets (Tops). It is run by the Chirathivat family, Thailand’s third richest family.
  • Foreign operations include La Renasciente, Italy’s largest department store chain, and Big C Vietnam. We note that the foreign operations enjoy better sales growth than the domestic one.
  • Business lines: CRC categorizes itself into three key business lines (fashion, hard-line, and food). The fashion business has the largest revenue and highest margin, though it seems very saturated in Thailand.

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Brief IPOs & Placements: AllHome IPO: Valuation Tailored for Growth Investors and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. AllHome IPO: Valuation Tailored for Growth Investors
  2. WeWork IPO: Examining WeWork’s Other Investments – Is There SOTP Value to Extract?
  3. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost

1. AllHome IPO: Valuation Tailored for Growth Investors

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AllHome (AHM PM) claims to have pioneered the “one-stop-shop” home improvement retailer in the Philippines. AllHome will launch book building on 13 September with pricing set for 26 September.

In our initiation note, we noted that AllHome seems to have a long runway to maintain its high growth, improving margin equity story. However, our enthusiasm is tempered by AllHome’s significant cash burn. From a valuation perspective, we believe that the IPO will prove attractive to growth investors.

For reference, our previous notes on Topsports
Initiation note: AllHome IPO Initiation: Cash-Guzzling Growth 
Benchmarking study: AllHome IPO: Benchmarking Points to a Trade-Off Between Growth/Margin and Returns 

2. WeWork IPO: Examining WeWork’s Other Investments – Is There SOTP Value to Extract?

Amidst genuine concerns that the WeWork IPO may be shelved (Source: FT) we take a deep-dive at the broad array of investments WeWork has made into side ventures, including purchasing Meetup, a coding school as well as an organic food company. We believe WeWork’s investments fall into two categories: 1) Acquisitions related to driving startup traffic rather than enterprise business at its WeWork facilities or 2) Acquisitions possibly related to the management’s own interests (such an investment in a Wavepool company or a vegan coffee creamer business). We believe neither category moves the needle of uncovering value for WeWork and there seems to be mixed effects on whether this is helpful to its focus of an enterprise co-working ecosystem. Bigger picture, WeWork has a -93% EBIT margin and burnt through 2.2bn USD  in cash in FY18 on our estimates, driven by c2bn USD in gross capex.  We believe WeWork will need to show a significant degree of perspicacity into its investments and strategy in order to get its IPO off the ground. More details below.

3. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost

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SmileDirectClub (SDC US) is a direct-to-consumer teeth-aligner startup which uses teledentistry to virtually connect licensed dentists and orthodontists with customers who require teeth aligners. SDC ships clear aligners directly to its customers whereas the dentists remotely monitor the progress of the patient. The company has filed for an IPO to raise approximately USD1.1bn (after underwriting and related expenses) and has set the IPO price in the range of USD19-22 per share, resulting in a valuation of about USD8bn for the company.

The company revenues have grown over the last two years though at a declining rate while the operating losses have shrunk significantly over the last ten quarters. About 65% of the company revenues are generated through the SmilePay program which offers customers credit through an installment plan. We have observed significant growth in accounts receivables while the cash balance has declined significantly at the end of 1H2019 alongside an increase in borrowings. Moreover, the company has been under criticism for providing dental solutions without in-patient visits.

In addition, we have also observed several red flags related to the company’s governance such as dual-class shares, a controlling shareholder who holds majority voting power, a board lacking a majority of independent directors, etc.

We discuss the details below.

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Brief IPOs & Placements: FangDD (房多多) IPO: Reminiscence of SFUN? and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. FangDD (房多多) IPO: Reminiscence of SFUN?
  2. IPO Radar: CRC (Part 2), Valuation and Risks
  3. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About
  4. Topsports International: Trading Debut, Valuation Scenario Analysis
  5. AllHome Trading Update – Past Deals that Debut Well, Hold Above the IPO Price

1. FangDD (房多多) IPO: Reminiscence of SFUN?

Valuation

FangDD, a leading property transaction platform in China, is seeking to raise up to USD 150 million through its listing in the US.

In this insight, we will look at the company’s business model. While the company is promoting the SaaS model for property transactions in the secondary market, we think the company hasn’t solved the real problem prevailing in the secondary market. We also studied the failure of its close peer, SFUN. We also provide our preliminary thoughts on the company’s valuation.

2. IPO Radar: CRC (Part 2), Valuation and Risks

Primarily, we value CRC at Bt58/sh, implying a fair swap ratio of 1.15 CRC share to each ROBINS share. Our alternate valuation based on EV/EBITDA is Bt91. We are already invested in this stock via ROBINS. 

  • We value their three business lines (fashion, hardline, and food), and despite its lower growth, fashion is by far the most significant segment, accounting for 44% of its EV for the primary method (SOTP with DCF). We expect CRC to be on par with SCB in market value, making it one of Thailand’s top 10 companies…a very rare IPO indeed.
  • The company is investing Bt18.4bn in 2020. The bulk of this money will go to the food business and systems improvement.
  • Foremost amongst the key risks identified are: 1) threats from e-commerce; 2) events risk; 3) continued ability to attract top brands; and 4) inventory-related risks.

3. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About

6

Helios Towers Ltd (HET UK) (HT) is a leading independent mobile tower operator in Africa. HT has filed for an IPO in the London Stock Exchange (LSE). HT plans to raise $125m floating at least 25% of its ownership. The IPO price range of 115-145 pence per share implies a post-listing market cap of $1.42bn-$1.79bn. IPO books will be closed on (Monday) October 14th and the stock will likely start trading on (Tuesday) October 15th. 

Our initial thoughts on HT’s operations are broadly positive. HT’s medium-term growth profile looks solid, underpinned by the strong demand for network infrastructure and room for further inorganic growth in Tanzania and DRC, two of HT’s biggest markets. We believe this should offset HT’s not so encouraging prospects in smaller markets like Ghana and Congo. The company’s recent entrance to South Africa is a big positive, where we believe HT could “buy” its way forward over the next few years. The company’s operational philosophies have so far generated tangible results, in the form of substantial margin improvements, and is expected to further strengthen its bottom line going forward.

4. Topsports International: Trading Debut, Valuation Scenario Analysis

Sensitivity

Topsports International (6110 HK) will commence trading on Thursday, 10 October. Topsports priced its IPO at HK$8.50 per share (towards the low-end of the range). The allotment results showed that both the international and Hong Kong offer Shares were “moderately over-subscribed.

In our valuation note, we said that we would be tempted to participate up to the mid-point of the offered price range of HK$8.30-10.10 per share. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is undemanding. 

5. AllHome Trading Update – Past Deals that Debut Well, Hold Above the IPO Price

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AllHome (AHM PM) raised US$248m at PHP11.50, the bottom-end of its IPO price range. We covered on the IPO extensively in:

In this insight, we will look at the post-listing performances of Philippines IPO since 2015, update on valuation and include a valuation sensitivity table.

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Brief IPOs & Placements: SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost
  2. Datadog IPO Valuation Analysis

1. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost

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SmileDirectClub (SDC US) is a direct-to-consumer teeth-aligner startup which uses teledentistry to virtually connect licensed dentists and orthodontists with customers who require teeth aligners. SDC ships clear aligners directly to its customers whereas the dentists remotely monitor the progress of the patient. The company has filed for an IPO to raise approximately USD1.1bn (after underwriting and related expenses) and has set the IPO price in the range of USD19-22 per share, resulting in a valuation of about USD8bn for the company.

The company revenues have grown over the last two years though at a declining rate while the operating losses have shrunk significantly over the last ten quarters. About 65% of the company revenues are generated through the SmilePay program which offers customers credit through an installment plan. We have observed significant growth in accounts receivables while the cash balance has declined significantly at the end of 1H2019 alongside an increase in borrowings. Moreover, the company has been under criticism for providing dental solutions without in-patient visits.

In addition, we have also observed several red flags related to the company’s governance such as dual-class shares, a controlling shareholder who holds majority voting power, a board lacking a majority of independent directors, etc.

We discuss the details below.

2. Datadog IPO Valuation Analysis

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  • Datadog Inc (DDOG US), which provides a monitoring and analytics platform, provided an IPO price range of $19 and $22 per share. The company is expected to complete its IPO later this month.
  • Our base case valuation of the company is $8.2 billion (in market cap) or $28.1 per share. This would represent a 37% upside to the initial valuation of $20.5 per share (mid-point of the IPO price range of $19 to $22 per share. As such, we are bullish on this IPO. 
  • Smartkarma has been a customer of Datadog products for more than a year. We included several Q&As about Datadog with interesting comments from Marlon Marcos, one of the employees at Smartkarma.

Get Straight to the Source on Smartkarma

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Brief IPOs & Placements: SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost
  2. Datadog IPO Valuation Analysis
  3. Jiumaojiu (九毛九) Pre-IPO Early Thoughts – New Brand Driving Growth

1. SmileDirectClub IPO: The Perfect Smile Comes at a Very Big Cost

How%20works

SmileDirectClub (SDC US) is a direct-to-consumer teeth-aligner startup which uses teledentistry to virtually connect licensed dentists and orthodontists with customers who require teeth aligners. SDC ships clear aligners directly to its customers whereas the dentists remotely monitor the progress of the patient. The company has filed for an IPO to raise approximately USD1.1bn (after underwriting and related expenses) and has set the IPO price in the range of USD19-22 per share, resulting in a valuation of about USD8bn for the company.

The company revenues have grown over the last two years though at a declining rate while the operating losses have shrunk significantly over the last ten quarters. About 65% of the company revenues are generated through the SmilePay program which offers customers credit through an installment plan. We have observed significant growth in accounts receivables while the cash balance has declined significantly at the end of 1H2019 alongside an increase in borrowings. Moreover, the company has been under criticism for providing dental solutions without in-patient visits.

In addition, we have also observed several red flags related to the company’s governance such as dual-class shares, a controlling shareholder who holds majority voting power, a board lacking a majority of independent directors, etc.

We discuss the details below.

2. Datadog IPO Valuation Analysis

Datadog c

  • Datadog Inc (DDOG US), which provides a monitoring and analytics platform, provided an IPO price range of $19 and $22 per share. The company is expected to complete its IPO later this month.
  • Our base case valuation of the company is $8.2 billion (in market cap) or $28.1 per share. This would represent a 37% upside to the initial valuation of $20.5 per share (mid-point of the IPO price range of $19 to $22 per share. As such, we are bullish on this IPO. 
  • Smartkarma has been a customer of Datadog products for more than a year. We included several Q&As about Datadog with interesting comments from Marlon Marcos, one of the employees at Smartkarma.

3. Jiumaojiu (九毛九) Pre-IPO Early Thoughts – New Brand Driving Growth

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Jiumaojiu (JMJ HK), a Chinese fast fashion restaurant brand manager and operator, is looking to raise about US$100m in its upcoming Hong Kong IPO.

The company operates two main brands, Jiu Mao Jiu (九毛九)and Tai Er(太二). Strong revenue growth has largely been driven by Tai Er brand. It gained popularity in 2016 and the company has capitalized on it by expanding aggressively. The expansion paid off as operating margins and net margins have expanded as the restaurants matured.

Operating metrics suggest that near-term growth will continue to be driven by Tai Er brand. The company also laid out an aggressive expansion plan which will continue to focus on its two main brands.

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Brief IPOs & Placements: Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About and more

By | Daily Briefs, IPOs and Placements

In this briefing:

  1. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About
  2. Topsports International: Trading Debut, Valuation Scenario Analysis
  3. AllHome Trading Update – Past Deals that Debut Well, Hold Above the IPO Price
  4. PropertyGuru IPO Valuation: Guru at Frothy Valuations
  5. Topsports International IPO Trading – Cheap at the IPO Price

1. Helios Towers IPO (Part I): More Room for Inorganic Growth and a Lot More to Like About

3

Helios Towers Ltd (HET UK) (HT) is a leading independent mobile tower operator in Africa. HT has filed for an IPO in the London Stock Exchange (LSE). HT plans to raise $125m floating at least 25% of its ownership. The IPO price range of 115-145 pence per share implies a post-listing market cap of $1.42bn-$1.79bn. IPO books will be closed on (Monday) October 14th and the stock will likely start trading on (Tuesday) October 15th. 

Our initial thoughts on HT’s operations are broadly positive. HT’s medium-term growth profile looks solid, underpinned by the strong demand for network infrastructure and room for further inorganic growth in Tanzania and DRC, two of HT’s biggest markets. We believe this should offset HT’s not so encouraging prospects in smaller markets like Ghana and Congo. The company’s recent entrance to South Africa is a big positive, where we believe HT could “buy” its way forward over the next few years. The company’s operational philosophies have so far generated tangible results, in the form of substantial margin improvements, and is expected to further strengthen its bottom line going forward.

2. Topsports International: Trading Debut, Valuation Scenario Analysis

Dcf

Topsports International (6110 HK) will commence trading on Thursday, 10 October. Topsports priced its IPO at HK$8.50 per share (towards the low-end of the range). The allotment results showed that both the international and Hong Kong offer Shares were “moderately over-subscribed.

In our valuation note, we said that we would be tempted to participate up to the mid-point of the offered price range of HK$8.30-10.10 per share. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is undemanding. 

3. AllHome Trading Update – Past Deals that Debut Well, Hold Above the IPO Price

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AllHome (AHM PM) raised US$248m at PHP11.50, the bottom-end of its IPO price range. We covered on the IPO extensively in:

In this insight, we will look at the post-listing performances of Philippines IPO since 2015, update on valuation and include a valuation sensitivity table.

4. PropertyGuru IPO Valuation: Guru at Frothy Valuations

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PropertyGuru (PGU AH) is an online property classifieds marketplace with presence in five countries across South East Asia – Singapore, Vietnam, Malaysia, Thailand and Indonesia. PropertyGuru set an indicative IPO price range of A$3.70-4.50 per CDI with the final price set to be announced on 24 October.

In our initiation note, we stated that while PropertyGuru is a good company, we believe that the forecasts are based on a bull scenario, leaving little room for any setbacks. From a valuation perspective, we believe that the proposed IPO price range is unattractive.

5. Topsports International IPO Trading – Cheap at the IPO Price

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Topsports International (TOP HK) (TIH) raised US$1.0bn in its Hong Kong listing after pricing its IPO near the bottom-end at HKD8.50/share. 

I’ve covered various aspects of the deal in my earlier insights, links to which are below. In this insight, I’ll run through the deal dynamics and provide a table with implied valuations at different share price levels.

Links to my earlier insights:

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