In this briefing:
- Wanda Sports (万达体育) IPO Review – Shareholders Selling in the IPO
- DouYu IPO: Bull/Bear DCF Scenarios
- Douyu IPO: Cost Structure Disadvantage Vs. Huya Implies a Discount Not Premium Is Appropriate
- CloudMinds IPO Initiation: Computer Says No
- CloudMinds Inc Early Thoughts – Still Nascent
Wanda Sports Group (WSG US) is looking to raise up to US$500m in its US IPO. We have previously covered the company in:
- Wanda Sports (万达体育) Early Thoughts – Convoluted by Contracts and Cyclicality
- Wanda Sports (万达体育) Pre-IPO – Closer Look at the Business Segments
In this insight, we will go through our assumptions, valuation forecast, run the deal through our ECM framework.
Douyu International Holdings (DOYU US) is a leading game live streaming platform in China with a focus on e-sports content. DouYu which announced its IPO price range of $11.50-14.00 per ADS, will price its IPO on 16 July.
In our valuation note, we stated that we would participate in the IPO at most at the mid-point of the proposed IPO valuation range. Our DCF analysis outlined in this note suggests a base-case valuation of $12.42 per ADS, 3% downside from the mid-point of the IPO price range. Our DCF sensitivity suggests that the top-end of the IPO price while achievable, prices in ambitious execution.
Douyu plans to list on the 16th of July on Nasdaq. Proceeds of the IPO are expected to be utilised to expand on content genres offered and provide premium esports content, improve existing technologies and big data analytics, invest in marketing activities and for general corporate purposes. At the mid-point of the offer price range, the company will raise approx. USD572.8m to carry out the above-mentioned investment activities.
Douyu mainly competes with Huya in the game streaming landscape in China. Huya listed in the US in May 2018 and the company has managed to make an operating profit and raise its gross profits in the last year. Meanwhile, Douyu continues to struggle to make operating profits, having just achieved gross profit status in the last fiscal year. Even though the company has a higher user base than Huya, Douyu continues to suffer with regards to efficiently managing costs related to revenue sharing fees and content costs.
Huya’s topline and bottomline performance seems much more favourable to us than Douyu’s. According to our estimates, Douyu has an EV of USD3,498m, which iterates to an FY1 EV/sales multiple of 4.4x, which we believe is expensive compared to peers. In comparison, peers Huya and iQiyi are trading at cheaper multiples of 3.4x and 3.1x respectively.
CloudMinds (CMDS US) offers an end-to-end cloud robot system which is capable of operating consumer service robots, which include both in-house and third-party robots. It is backed by Softbank Group (9984 JP)’s Vision Fund, which is a 34.6% shareholder.
CloudMinds is big on vision and buzzword-laden rhetoric. Overall, we believe that CloudMinds is not an IPO for the faint-hearted, and it is not yet ready for the unforgiving glare of the public markets.
CloudMinds (CMDS UA) is looking to raise US$500m in its upcoming IPO in the US.
The idea of replacing day to day mundane tasks through robots and being able to leverage AI and cloud computing to improve their performance sounds incredible. FY2018 revenue growth has also been spectacular.
But, under the fold, the company is less like a cloud robotics company since it derives majority of revenue from smart devices with cloud computing capabilities. The lack of data disclosure is frustrating, as it has made revenue visibility poor since there is no way of telling which products (smart devices or robots) are selling well.