In this briefing:
- Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Relaunched at Lower Price
- Pinterest IPO Preview
- Ruhnn IPO Valuation: Face Value
- ECM Weekly (23 March 2019) – ESR, Sun Car, Ruhnn, CanSino, Frontage, Wuxi Bio, WiseTech,
1. Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
Leong Hup International (LEHUP MK) (LHI) plans to raise up to US$400m in its Malaysian IPO. LHI is one of the largest integrated poultry producer in Southeast Asia.
LHI was listed on Bursa Malaysia from 1990 to 2012. Since delisting, it has consolidated its Southeast Asia operations under a single entity and is now looking to relist the larger entity.
While revenue has been growing steadily, margins have been volatile. In addition, its difficult to pinpoint which products are performing well in which geographies. The feedmills business seems to be a more consistent performer as compared to the livestock business. It’s also a larger revenue contributor in the faster growing regions.
2. Dongzheng Auto Finance (东正汽车金融) IPO Review – Relaunched at Lower Price
Dongzheng Automotive Finance (2718 HK) (DAF) re-launched its IPO at a lower fixed price of HK$3.06 per share, expecting to raise about US$208m. We have covered the fundamentals and valuation of the company in:
- Dongzheng Auto Finance (东正汽车金融) Pre-IPO Review – Dependent on Dealership Network for Growth
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Better off Buying the Parent
In this insight, we will only look at the company’s updated valuation and re-run the deal through IPO framework.
3. Pinterest IPO Preview
Pinterest Inc (PINS US), a leading digital media platform in the US, is getting ready for an IPO in the next several weeks. In our view, this is one of the most exciting global tech IPOs since the Elastic NV (ESTC US) IPO in October 2018. Pinterest has one of those rare combinations of strong sales growth, leading website brand awareness, loyal users network effect, and a clear path to profitability. Pinterest was most recently valued at $12.3 billion in private market valuation when it raised $150 million in 2017.
One of the attractive features about Pinterest is the fact that it has a very loyal user base among moms in the US. According to the company, about two thirds of its total user base are female, mostly in the US. Nearly 8 out of 10 moms (who are often the decision makers for purchasing household goods) and about half of the millennials in the US regularly use Pinterest.
The company has a very attractive income statement. Its revenue increased 59% CAGR from 2016 to 2018 and its operating losses have been declining nicely. Operating loss as a percentage of sales declined from 62.9% in 2016 to 9.9% in 2018.
4. Ruhnn IPO Valuation: Face Value
Ruhnn Holding Ltd (RUHN US) is an e-commerce platform which drives sales through KOLs (key opinion leaders), backed by Alibaba Group Holding (BABA US) which an 8.6% shareholder. It announced its IPO price range of $11.50-13.50 per ADS. At the mid-point of the IPO price range, Ruhnn will raise net proceeds of $113 million, resulting in a fully diluted market cap of $1 billion.
We had previously expressed our concerns about Ruhnn’s fundamentals. Overall, we believe that the proposed IPO price range in unattractive and would stay clear of the deal.
5. ECM Weekly (23 March 2019) – ESR, Sun Car, Ruhnn, CanSino, Frontage, Wuxi Bio, WiseTech,
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Theme of the week: Block trades/Placements + news flow on upcoming IPOs
Starting with placements, the shareholders of Wuxi Biologics (Cayman) Inc (2269 HK) are back on the market again to sell some shares. They been quite consistent with the selling and our team have covered the company the IPO each of the placements. Wisetech Global (WTC AU) and Platinum Asset Management (PTM AU) also had blocks that were sold earlier this week. The former did excceedingly well post-placement, currently more than 10% above its deal price while the latter had struggled as a result of Kerr and his ex-wife selling a portion of their shares in the company.
As for upcoming IPOs, Hong Kong ECM activity is ramping up. Megvii, the Chinese AI startup is looking to list in Hong Kong or US whereas China Feihe (FEIHE HK) is said to be revisit its US$1bn HK IPO. Ke Yan, CFA, FRM has covered the latter in this insight almost two years ago.
We also heard that Frontage had already met investors and Ke Yan, CFA, FRM has provided preliminary thoughts on valuation in:
Mulsanne Group (previously known as Alpha Smart (GXG)), Xinyi Energy Holdings, CMGE Tech, and 360 ludashi (鲁大师) re-filed their draft prospectuses. We have covered Mulsanne and Xinyi Energy in:
- Alpha Smart Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
- Xinyi Energy (信义能源) IPO: High Dividend Yield but Depreciating Asset
- CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
360 ludashi’s previous filing indicated that its IPO deal size will be small (<US$100m). However, the updated financials shown an almost 50% YoY PATMI growth which could put its IPO at a borderline deal size of US$100m if growth maintains at 50%.
In the U.S, Yunji Inc. (YJ US) filed for a US$200m IPO. The company runs a Chinese e-commerce site that uses a social platform to promote its products. We will be writing an early note on the company next week.
In Singapore, Eagle Hospitality REIT is said to have started investor education for its IPO while Lendlease is planning to raise up to US$500m for its retail REIT according to media reports.
In other ASEAN markets, there are also a handful of IPOs to watch out for.
- In Indonesia, Lion Air is said to be targeting US$1bn listing in the third quarter of this year and it is starting to gauge investor interest. MAP Actif has already started pre-marketing its IPO.
- In Thailand, Kerry Express Thailand is said to have hired banks to prepare for a >US$100m IPO.
- In Malaysia, QSR Brands (QSR MY) has started to pre-market for its US$500m IPO. Sumeet Singh had previously written an early note:
Accuracy Rate:
Our overall accuracy rate is 72.3% for IPOs and 64.3% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
- Yunji (the U.S, ~US$200m)
- 360 LuDaShi (Hong Kong, potentially >US$100m)
- CMGE Tech (Hong Kong, re-filed)
- Mulsanne Group – FKA Alpha Smart – AKA GXG (Hong Kong, re-filed)
- Xinyi Energy (Hong Kong, re-filed)
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
- Chinese AI start-up Megvii mulls IPO in either Hong Kong or New York to raise US$800m
- Lendlease planning to raise up to US$500m with retail Reit listing on SGX
- Indonesia’s Lion Air Starts Work on $1 Billion IPO
- Chinese Tower Operator Guodong Is Said to Plan Hong Kong IPO
- Feihe International ‘revisits plan for Hong Kong IPO’
- Solar co Xinyi Energy revives Hong Kong IPO plan
This week Analysis on Upcoming IPO
- Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk
- Frontage Holding (方达控股) IPO: Updates from 2018 Numbers
- Sun Car Insurance Agency (盛世大联) IPO: Over Valued Vs P&C Companies
- ESR Cayman Pre-IPO – Earnings and Segment Analysis
- CanSino Biologics (康希诺) IPO: Valuation Attractive, Lilly Asia Doubling Up (Part 4)
- PagerDuty IPO Preview
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