Equity Capital Markets

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. HD Hyundai Marine Solution: IPO Book Building Results Analysis

HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range.
A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

2. A Review of Post IPO Price Performance of Top 13 IPOs in Korea Past 8 Months

In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months.
We review the the share price performances over different time periods (1 day, 1 week, and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs.
On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

3. Krafton Placement – Stock Has Been Doing Well, Momentum Remains Strong

SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
The stock has been doing well over the past few months and its earnings and price momentum remain strong.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

4. ECM Weekly (22nd Apr 2024) – Kokusai, J&T, Voda IDEA, ChaPanda, Cloudchain, Johor Plant, Aadhar

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Sichuan Baicha Baidao Industrial (2555 HK)‘s deal launch made it the first large HK IPO for this year.
On the placement front, Vodafone Idea (IDEA IN) deal was live. Also there are lockup expiries in Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) coming up.

5. Sichuan Baicha Baidao IPO Trading – Tepid Demand, While Peers Have Corrected

Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.

6. Horizon Robotics Pre-IPO – The Negatives – Large Part of the Growth Stems from Its JV

Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
In this note, we talk about the not-so-positive aspects of the deal.

7. Horizon Robotics Pre-IPO – The Positives – Rapid Revenue Growth

Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
In this note, we talk about the positive aspects of the deal.

8. China Resources Beverage (Holdings) Pre-IPO Tearsheet

China Resources Beverage (Holdings) Company Limited is looking to raise US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are BofA, BOCI, Citic, and UBS.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
According CIC, it was the second largest company in the packaged drinking water market in China and the largest company in the purified drinking water market in 2023.

9. OceanaGold Philippines IPO – Updated Thoughts on Valuation – Too Expensive Even at This Price

OceanaGold Philippines (OGP PM) is looking to raise up to US$106m in its Philippines IPO.
OceanaGold Philippines (OGPI) is a producer of gold and copper in the Philippines, and a subsidiary of OceanaGold Corporation, a Toronto Stock Exchange (TSX) listed gold mining and exploration company.
In our previous note, we talked about the company’s historical performance and shared our quick thoughts on valuation. In this note, we share our updated thoughts on valuation.

10. 99 Speedmart Holding Pre-IPO – Consistent Network Expansion, Although Margins Remain Well Below Peak

99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$300m in its upcoming Malaysia IPO.
99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
In this note, we look at the firm’s past performance.

Apr 21

Weekly Top Ten Equity Capital Markets – Apr 21, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry

Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details.

2. Baicha Baidao (2555 HK) IPO: Valuation Insights

Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, has launched an HKEx IPO to raise US$330 million. The shares will be listed on 23 April.
We previously discussed the IPO in Baicha Baidao IPO: The Bull Case and Baicha Baidao IPO: The Bear Case.
There are no cornerstone investors. Our valuation analysis suggests that Baicha is fairly valued at the HK$17.50 IPO price. Therefore, we would pass on the IPO.

3. Vodafone Idea Placement – Very Well Flagged but Its Not Going to Fix a Whole Lot of Issues

Vodafone Idea (IDEA IN) plans to raise around US$2.2bn via a follow-on public offering.
The deal has been in the works for years and proceeds will be used for capex and short-term debt repayment.
In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

4. ECM Weekly (15th Apr 2024) – Hyundai Marine, Bharti, Kayou, Zeekr, ChaPanda, Samsung, WT Micr, Sompo

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO.
On the placement front, there were deals across India, South Korea and Australia.

5. Pre-IPO Sichuan Baicha Baidao Industrial (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

Baicha Baidao’s profit model doesn’t rely on tea drink sales, but on continuous expansion of store size.However, rapid expansion brought by the franchise model has led to significant management challenges.
The profitability/market attractiveness of ChaPanda stores are declining, which not only reflects franchisees’ concerns about future profit prospects,but also reflects the market’s re-evaluation of the attractiveness of Baicha Baidao brand.
Although current financial performance of Baicha Baidao seems acceptable, after IPO, its performance could decline year by year, leading to a collapse in stock price/valuation if this is the case.

6. Belle Fashion IPO: The Investment Case

Belle Fashion Group (2007708D HK), the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO.
Belle Fashion originated from Belle International Holdings (2129452D HK), which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as Topsports International Holdings (6110 HK).
The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage.

7. Horizon Robotics IPO Preview: “Journey Together”, Strong Business Position and Market Share Gains

By Andrei Zakharov

Horizon Robotics, a consumer-centric and fast-growing provider of integrated ADAS and AD solutions for passenger vehicles, filed for an IPO and plans to raise up to $500M in Hong Kong.
Horizon Robotics was founded in 2015 by Dr. Yu Kai, Dr. Chang Huang, Ms. Feiwen Tao, and a group of scientists and tech entrepreneurs.
I have a positive view of an upcoming IPO and believe Horizon Robotics is in a great position to capitalize on rapidly growing smart vehicles market in China and worldwide.

8. Sichuan Baicha Baidao IPO – Doesn’t Offer a Discount to Peers

By Sanghyun Park, Clepsydra Capital

Sichuan Baicha Baidao Industrial is looking to raise up to US$330m in its HK IPO.
SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
We have looked at the company’s performance in our past note. In this note, we talk about valuations

9. Upcoming Mobvoi’s Debut: Downsized IPO Despite Hyper-Growth In AIGC Business Segment

By Andrei Zakharov

Mobvoi, an emerging AIGC market player in China, set terms for an IPO and plans to raise ~HK$330M (~$42M) in Hong Kong. CICC and CMB International are leading the offering.
The initial public offering is expected to be between HK$3.70 and HK$4.10. At the midpoint of the range, Mobvoi has a market value of ~HK$5.8B based on 1491.5M outstanding shares.
In my insight, I discuss valuation framework for comparable company analysis and outline revenue growth scenarios for each business segment under my base case.

10. Will the Hyundai Marine Solution IPO Follow in Ecopro Materials’ Footsteps After It Goes Public?

The prospect of this IPO mirroring the post-listing rallies seen with Ecopro Materials is what keeps local institutions fixated on this IPO despite valuation issues.
The key factors are speculative trading frenzy among local retail investors and subsequent passive inflows through early entry into KOSPI 200/MSCI Standard.
Considering two factors is vital. Hyundai Marine Solution’s IPO size is twice Ecopro Materials’, potentially limiting speculative buying. Sector-wide rallies, crucial for Ecopro Materials, haven’t been as prominent in shipbuilding.

Apr 14

Weekly Top Ten Equity Capital Markets – Apr 14, 2024

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1. HD Hyundai Marine Solution IPO Valuation Analysis

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

2. Samsung Electronics Placement – Better Timing This Time Around

KEB Hana Bank, on behalf of Lee Boo-Jin, is looking to raise up to US$325m via selling 0.1% of Samsung Electronics (005930 KS).
The deal appears to be somewhat well flagged and the company recently reported better operating numbers for 1Q24.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

3. WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest

WT Microelectronics (3036 TT) is looking to raise US$341m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
The deal is a very well flagged one, and will be a relatively small one to digest at just 4.8 days of the stock’s three month ADV.
In this note, we run the deal through our ECM framework and comment on the deal dynamics.

4. Bharti Hexacom IPO Trading – Strong Insti and Anchor, Retail Gave It a Miss

Government of India raised around US$513m via selling some of its stake in Bharti Hexacom’s IPO.
Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

5. HD Hyundai Marine Solution IPO Industry Analysis

In this insight, we highlight some of the important industry factors impacting HD Hyundai Marine Solution.
Eco-Friendly ships are high-value-added ships that require more parts than conventional ships and are mechanically more complex, so the unit cost of parts is higher than that of conventional ships.
Therefore, the ship AM (aftermarket) is a key industry that is expected to benefit from higher customer demand and increase service prices.

6. ZEEKR IPO: Latest Updates as the IPO Process Restarts

ZEEKR (ZK US), a premium Chinese BEV manufacturer and a subsidiary of Geely Auto (175 HK), has restarted its IPO process to raise US$500 million by listing on the NYSE.
We previously discussed the IPO in ZEEKR IPO: The Bull Case and ZEEKR IPO: The Bear Case.
The latest SEC filings reinforce the bear case due to weak industry sentiment, rapidly slowing growth, ongoing operating losses and volatile FCF.

7. Baicha Baidao IPO: The Bull Case

Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, will launch an HKEx IPO to raise US$300 million next week, according to press reports.
Biacha is China’s third largest freshly-made tea shop company in terms of retail sales value in 2023, according to Frost & Sullivan.
The bull case rests on a rising market share, high revenue growth, sector-leading margins, cash generation and a strong balance sheet.

8. ECM Weekly (8th Apr 2024) – Hyundai Marine, Waaree Energies, Horizon Robotics, Bharti Hexacom

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS) and Bharti Hexacom (6597372Z IN).
On the placement front, India remained at the forefront with JSW Energy Ltd (JSW IN) and the potential share sale of Vodafone Idea (IDEA IN).

9. ICTK IPO Preview

By Michael Causton, JapanConsuming

ICTK is getting ready to complete its IPO in KOSDAQ in May. The IPO price range is from 13,000 won to 16,000 won.
According to the bankers’ valuation, the expected market cap of the company after the listing is 171 billion won to 210 billion won.
ICTK is a security company specializing in Internet of Things (IoT) based on physical copy prevention technology.

10. Trial to Become 5th Biggest Supermarket Post-IPO

Trial, the discount FMCG and retail technology company, completed its IPO last month, achieving an initial market capitalisation higher than most of its rivals in the supermarket sector.
If forecasts for FY2023 are achieved, it will become the 5th largest chain in the country and its proprietary technology should give it an important advantage in the medium term.
But its position at the centre of the fast-growing discount sector will drive the real growth, and the Kyushu-based firm will emerge as challenger to leading retailers.

Apr 07

Weekly Top Ten Equity Capital Markets – Apr 7, 2024

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1. Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry

Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.

2. ECM Weekly (1st Apr 2024) – Shinhan, GlobalWafers, Mankind, Hyundai Marine, Bharti Hexacom, ChaPanda

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, HD Hyundai Marine Solution (443060 KS) and Bharti Hexacom were in the market trying to raise over US$500m each.
Placements flow continued unabated this week as well, India, Taiwan and South Korea seeing large blocks.

3. HD Hyundai Marine Solutions IPO: Valuation Insights

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.

4. Waaree Energies Pre-IPO – Riding the Anti-China US Wave

Waaree Energies is looking to raise up to US$400m in its upcoming India IPO.
Waaree Energies is a solar PV module manufacturer in India with an aggregate installed capacity of 12 GW, as of Jun 2023.
In this note, we talk about the company’s past performance.

5. HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In our previous note, we talked about the company’s historical performance. In this note, we talk about peer comparison.

6. HD Hyundai Marine Solution IPO – Thoughts on Valuation

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.

7. Horizon Robotics Pre-IPO Tearsheet

Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities International.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
HR was the first and the largest Chinese company providing integrated ADAS and AD solutions in terms of annual installation volume since 2021, according to CIC.

8. Weekly Deals Digest (07 Apr) – Kokusai Electric, HD Hyundai Marine, Langham, Jastec, JSR, Best World

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Kokusai Electric (6525 JP) lock-up expiry and HD Hyundai Marine Solution (443060 KS), Bharti Hexacom (6597372Z IN) IPOs.
Event-Driven developments: Langham Hospitality Inv Ss (1270 HK), IntelliCentrics Global Holding (6819 HK) Jastec Co Ltd (9717 JP), JSR Corp (4185 JP), Best World International (BEST SP), Isetan Singapore (ISET SP).

9. Crizac Pre-IPO Tearsheet

Crizac is looking to raise US$120m in its upcoming India IPO. The bookrunners on the deal are Equirus and Anand Rathi.
Crizac is an education platform offering international student recruitment solutions to global institutions of higher education in the United Kingdom, Canada, Republic of Ireland, Australia and New Zealand (ANZ).
Crizac is one of the largest student recruitment solutions providers from India to the UK with a market share of 13.0%, in terms of the number of students in 2023.

10. Ibotta IPO Valuation Analysis

By Andrei Zakharov

In my insight, I discuss valuation framework for comparable company analysis and outline revenue growth scenario under my base case.
Considering Ibotta achieved profitability in 2023 driven by strong growth in the segment of third-party publishers, I view EV/Revenue as the most appropriate methodology to value Ibotta.
I have a positive view of the upcoming Ibotta IPO. The company’s efficient B2B2C business model, success-based marketing approach and scale provide Ibotta with a long runway of growth.

Mar 31

Weekly Top Ten Equity Capital Markets – Mar 31, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. HD Hyundai Marine Solution IPO Preview

HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024.
The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won.
A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).

2. Globalwafers GDR Offering – Coming to Market Earlier than Anticipated

Globalwafers (6488 TT) is looking to raise up to US$681m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
The deal is a somewhat large one to digest at 20.2 days of three month ADV and the proceeds will be used to purchase raw materials overseas.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

3. Shinhan Financial Group Placement – Another Selldown, Momentum Is Strong but Deal Is Large

By Sanghyun Park, Clepsydra Capital

BNP Paribas (BNP FP) is looking to raise around US$680m via selling 3.5% of its stake in Shinhan Financial (055550 KS).
This will be the fourth selldown for the stock since the start of the year. It will also be the largest one of the lot, so far.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

4. Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation

Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.

5. ECM Weekly (25th Mar 2024) – TCS, Akeso, Coforge, ABSL, Tokio Marine, Trial, Migao, Mixue, Reddit

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Trial Holdings (5882 JP) ended up doing better than we expected, while Hong Kong finally got its first US$100m+ listing for the year.
For placements, India was again at the forefront, this time with a not-so-pleasant results of Tata Consultancy Svcs (TCS IN).

6. Mankind Pharma Placement – Well Flagged, past Deals Have Done Well but Its Expensive

ChrysCap is looking to raise around US$295m via selling a 2.8% stake in Mankind Pharma.
MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
We have looked at the IPO, lock-up release and prior placement in our earlier notes. In this note, we talk about the current deal dynamics.

7. Bharti Hexacom IPO: Valuation Insights

Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise up to US$513 million at an IPO price range of Rs542-570 per share.
We previously discussed the IPO in Bharti Hexacom IPO: The Bull Case and Bharti Hexacom IPO: The Bear Case.
Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would not participate in the IPO.

8. HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In this note, we talk about the company’s historical performance.

9. Bharti Hexacom IPO: The Bull Case

Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise around US$500 million at a valuation of US$3.3-4.2 billion.
The offer is a pure secondary offering. The Government of India aims to reduce its stake from 30% to 15% of outstanding shares.
The bull case rests on market share gains, ARPU growth, low churn rates, improving margins, cash generation and low leverage.

10. Bharti Hexacom IPO – Unexciting and at a Half-Decent Discount

Bharti Hexacom is looking to raise up to US$513m in its upcoming India IPO.
Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
We have looked at the company’s past performance in our earlier notes. In this note, we talk about valutions.

Mar 24

Weekly Top Ten Equity Capital Markets – Mar 24, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. TCS US$1.1bn Placement – Relatively Small but Isn’t Well Flagged, Could Have Implications for Others

Tata Sons, holding company of Tata Group, is looking to raise around US$1.1bn via selling a 0.65% stake in Tata Consultancy Svcs (TCS IN).
The deal doesn’t appear to be well-flagged although it could be part of Tata Sons’ recent moves to avoid an RBI mandated listing next year.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

2. ECM Weekly (18th Mar 2024) – ITC, Interglobe (Indigo), MS&AD, GlobalWafer, Belle, Auntea, Trial

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Hong Kong appears to be heading towards its first US$100m+ IPO for the year.
For placements, after a flurry of placements in the prior week, past week was relatively quiet with only the US$2bn ITC Ltd (ITC IN) block.

3. Akeso Biopharma Placement (9926.HK) – Would Investors Be Willing to Take a Gamble?

By Xinyao (Criss) Wang

Akeso’s product sales grew rapidly in 2023, mainly driven by off-label use of AK104. Since AK104’s commercialization potential on other indications was “overdrawn” in advance, sales growth would slow afterwards.
The key investment logic of Akeso is whether/how much its BsAb pipelines would grab shares from PD-1. The high valuation has somewhat priced in AK112’s successful head-to-head trial with pembrolizumab.
If AK112 does beat Keytruda, valuation will reach a new level. If AK112 fails in critical clinical trials, it would cast a shadow on the entire BsAb pipeline of Akeso.

4. Trial Holdings IPO: Trading Debut

Trial Holdings (5882 JP) priced its IPO at JPY1,700 per share to raise gross proceeds of US$256 million. The shares will start trading on 21 March.
We previously discussed the IPO in Trial Holdings IPO: The Investment Case and Trial Holdings IPO: Valuation Thoughts.
The peers have modestly re-rated since the prospectus was released on February 19. The IPO price remains attractive.

5. Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side

By Shifara Samsudeen, ACMA, CGMA, LightStream Research

Trial Holdings (5882 JP) (TH) raised around US$259m after pricing its IPO at the top-end in its Japan IPO.
TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.

6. Tencent 4Q2023: Gaming Declines Yet Again, Margins Have Further Upside

Tencent (700 HK) reported 4Q results today. Both revenues and OP increased 7.1% and 42.0% YoY, however, both revenue and OP fell below consensus estimates.
The company also announced an increase to 2023 dividends and more than doublethe size of the company’s share buyback in 2024 compared to 2023.
We expect Internet VAS to grow at single-digits in 2024, however, high-margin new products to help boost margins in 2024.

7. Ceigall India Pre-IPO Tearsheet

Ceigall India (1605242D IN) is looking to raise at least US$100m in its upcoming India IPO. The deal will be run by IIFL Securities, JM Financial and ICICI Securities.
Ceigall India is an infrastructure construction company with experience in undertaking specialized structural work such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways.
Its principal business operations are broadly divided into EPC and hybrid annuity model (HAM) projects, which are spread across ten states in India.

8. MIXUE Pre-IPO – Initial Thoughts on Valuation

Mixue Group is looking to raise about US$1bn in its upcoming Hong Kong IPO.
MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
In our earlier notes, we have looked at the past performance and undertaken a peer comparison. In this note, we provide our initial thoughts on valuation.

9. Akeso Inc Placement – A Small One to Digest, Momentum Has Been Strong

Akeso Biopharma Inc (9926 HK) is looking to raise US$155m from its primary placement.
Proceeds from the deal would be geared towards R&D expenditure for its preclinical programs, expediting clinical trials, and towards commercializing its existing approved products.
Accounting for 3% of shares outstanding, and representing 5.7 days of its three month ADV, the deal would be a relatively small one for the firm to digest.

10. Jeil Machine & Solution IPO Preview

Jeil Machine & Solution is getting ready for an IPO in April in the Korean stock market. The IPO price range is 15,000 won to 18,000 won.
The total offering amount ranges from 36 billion won to 43.2 billion won. The book building for the institutional investors will last from 5 to 12 April.
According to the bankers’ assessment, the implied market cap of the company ranges from 309 billion won to 371 billion won.

Mar 17

Weekly Top Ten Equity Capital Markets – Mar 17, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. ITC $2bn Placement – Very Well Flagged but Still Won’t Be an Easy One to Digest, Won’t Do an Indigo

In Feb 2024, BAT’s management stated that they were reviewing their stake in ITC Ltd (ITC IN). The news of a possible selldown by BAT was leaked again earlier today.
BAT has owned its stake in ITC for over a century and remains its largest shareholder.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

2. Ola Electric Pre-IPO – Initial Thoughts on Valuation

Ola Electric is looking to raise about US$1bn in its upcoming India IPO.
Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
In our previous note we looked at the company’s past performance and undertook a peer comparison. In this note, we will talk about valuations.

3. ECM Weekly (11th Mar 2024) – Oriental Land, ARM, Tuhu, Wiwynn, Macrotech, Zomato, Trial Holding

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Trial Holdings (5882 JP) was hoping for better luck with its listing this time around.
For placements, it was a very busy week for a change with most regions, apart from Hong Kong, chipping in.

4. Astera Labs IPO Preview

By Nitin Mangal, India Independent Insight

Astera Labs (ALAB US) is scheduled to debut its IPO on 20 March. The company is offering 17.8 million shares at a price of $27 to $30 per share.
Founded in 2017, Astera Labs is a fabless semiconductor company headquartered in Silicon Valley. The company designs and sells semiconductor technology, but the production is outsourced.
Astera Labs’ major competitors include Montage Technology (688008 CH), Parade Technologies (4966 TT), Broadcom (AVGO US), Credo Technology Group Holding (CRDO US), and Marvell Technology (MRVL US).

5. Gopal Snacks Ltd IPO- Forensic Analysis

Gopal Snacks (1592789D IN) IPO worth INR 6.5 bn is live on the bourses.
The company is a prominent snacks manufacturer in India, especially in the state of Gujarat. It boasts one of the highest fixed asset turnover ratio and high ROCEs.
On the flipside, caution must remain on its dull revenue growth post F22 and on its related party transactions, especially with promoter companies.

6. Belle Fashion Pre-IPO – Refiling Updates

Belle Fashion (BF) aims to raise up to US$1bn in its Hong Kong listing. The company recently refiled its application proof after a gap of two years.
As per F&S, it was the largest player in China’s fashion footwear market with a 12.3% market share, based on 2022 retail sales.
We have looked at the company’s past performance based on its earlier filings in 2022. In this note, we talk about the updates from its recent filings.

7. Astera Labs IPO Valuation Analysis

Our base case valuation is market cap of US$5.4 billion or target price of US$35.9 per share, which is 20% higher than high end of the IPO price range (US$30).
We estimate Astera Labs (ALAB US) to generate revenue of $221.3 million (up 91.1% YoY) in 2024 and $304.5 million (up 37.5% YoY) in 2025.
Many investors are willing to take extra risk to invest in companies such as Astera Labs that could generate strong sales growth amid rush to aggressively expand AI capabilities.

8. Angel Robotics: IPO Bookbuilding Results Analysis

Angel Robotics reported exceptional IPO bookbuilding results. Angel Robotics’ IPO price has been determined at 20,000 won, which is 33% higher than the high end of the IPO price range.
A total of 2,067 institutional investors participated in this IPO book building. The demand ratio was 1,157 to 1. Angel Robotics will start trading on 26 March 2024.
We remain positive on Angel Robotics. There is likely to be a sharp overshooting of its share price relative to its intrinsic value on the first day of trading.

9. Pre-IPO PegBio Co., Ltd. – This GLP-1 Biotech Has Gloomy Outlook

By Xinyao (Criss) Wang

PB-119 (T2DM) has the fastest R&D progress, but this is a highly competitive market.China’s diabetes drug market is dominated by traditional drugs. It’s not easy for PegBio to break through.
Since the future competitive landscape of GLP-1s (obesity) would present a very different situation.If PB-119 fails to have better weight loss effect, it would be eliminated due to fierce competition.
PegBio’s IPO on SSE STAR Market was rejected. We’re not optimistic about its future commercialization performance. Together with cash-flow issues, we doubt whether PegBio would bring expected returns to investors.

10. Samhyun IPO Bookbuilding Results Analysis

Samhyun reported excellent IPO bookbuilding results. Samhyun’s IPO price has been determined at 30,000 won per share, which is 20% higher than the high end of the IPO price range.
A total of 2,168 institutional investors participated in this IPO book building. The demand ratio was 649 to 1. Samhyun will start trading on 21 March 2024.
Our base case valuation of Samhyun is implied market cap of 396 billion won or target price of 37,402 won, which is 25% higher than the IPO price.

Mar 10

Weekly Top Ten Equity Capital Markets – Mar 10, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Trial Holdings IPO: Valuation Thoughts

Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$236 million at the IPO reference price of JPY1,550 per share.
We previously discussed the IPO in Trial Holdings IPO: The Investment Case.
In this note, we discuss valuation. Our analysis suggests that Trial is attractively valued at the IPO reference price of JPY1,550. We would participate in the IPO.

2. Oriental Land Co Placement – Relatively Small One to Digest, Overhang Might Not Be as Large

Keisei Electric Railway Co (9009 JP) is looking to raise up to US$553m from selling a 1% stake in Oriental Land (4661 JP).
Palliser Capital, has been pushing Keisei Electric Railway to reduce its stake in OLC to unlock shareholder value owing to the wide discrepancy between carrying/market value of the former’s investment.
Selling just 1% of shares outstanding, the deal wouldn’t be a very large one to digest, representing 4.7 days of OLC’s three month ADV.

3. Trial Holdings IPO – Not Wholly Convinced but a Strong Market Should Help

Trial Holdings (5882 JP) (TH) is now looking to raise up to US$259m in its Japan IPO, after having canceled its prior listing attempt last year.
TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
We have looked at the company’s past performance in our previous notes. In this note, we talk about implied valuations in the IPO range.

4. Nippon Express Placement – Lukewarm Track Record, Although Buyback Could Lift Share Price

A group of shareholders are looking to raise US$220m from selling their stakes in Nippon Express Holdings (9147 JP).
Overall, the deal would be a relatively large one to digest at 11 days of Nippon Express’ three month ADV, and 4.8% of the firm’s total shares outstanding.
Together with the announcement, the firm has also guided towards a share buyback program which should provide some share price support a month post-deal, in our view.

5. Reddit IPO Valuation Analysis

Reddit plans to price its IPO between $31 to $34 a share, which would suggest equity value of US$6.0 billion to US$6.5 billion on a fully diluted basis.
Our base case valuation of Reddit is implied market cap of US$7.9 billion or implied price of US$41.2 per share.
Given the moderate upside relative to the IPO price range, we have a Positive view of the Reddit IPO.

6. Sanyo Trading (3176 JP) – Small Secondary Offering as Banks Sell, More Later

Sanyo Trading (3176 JP) is a small specialised trading company (rubber, polymers, elastomers, etc). Niche, decent profitability/margins, highish ROE.
Banks in the MUFG and SMBC family are selling. Norinchukin is selling a bit too.
This is small in size but big in impact. 20% of Max RWF. 50d ADV. Unlike other recent, larger, offerings, this has no flow mitigants. But it’s cheap.

7. Ola Electric Pre-IPO Peer Comparison – Increasing Competition, but It’s Still the Leader

Ola Electric is looking to raise about US$1bn in its upcoming India IPO.
Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
In our previous note we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

8. ARM Holdings (ARM US): Lock up Expiry on 12 March

Softbank Group (9984 JP)’s 180-day lock-up period on its 89.75% ARM Holdings (ARM US) shareholding expires on 12 March. SoftBank’s stake is worth US$124 billion.
SoftBank will likely monetise its ARM stake using the Alibaba (ADR) (BABA US) playbook. This playbook uses prepaid forward contracts to raise capital with eventual settlement through shares.
ARM is currently trading 2.6x its IPO price on AI-driven hype. ARM trades at a premium multiple to NVIDIA Corp (NVDA US), despite forecasted lower growth and margin.

9. Zomato Placement – Momentum Is Very Strong, Somewhat Well Flagged

AntFin is looking to raise around US$350m by selling around 2% of Zomato (ZOMATO IN).
Ant Group had earlier sold some of its stake in Nov 2023 and Ant just came out of lockup from the previous selldown a few days ago.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

10. AAMB Holdings Placement – Despite the Overhang, Momentum Has Been Decent

ANZ Funds is looking to raise around US$242m from selling a portion of its stake in AMMB Holdings (AMM MK).
Having written down its carrying value earlier, we would argue that the deal now is somewhat well flagged, with ANZ attempting to record some gains on investment.
That being said, there is an overhang and the deal would be a large one to digest at 111 days of AMBank’s three month ADV.

Mar 03

Weekly Top Ten Equity Capital Markets – Mar 3, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Renesas (6723) – YET ANOTHER Clean-Up Block Trade – This Time Mitsubishi Elec

Today after the close, Mitsubishi Electric (6503 JP) announced the sale of its position in Renesas Electronics (6723 JP). That’s 50,706,800 shares.
This is the third large block in four months (Renesas in November for 223mm shares, NEC and Hitachi in January 2024 for 123mm shares).
This is smaller, and reasonably well-flagged. Index demand is longer-dated.

2. Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting

On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.

3. Toei Animation (4816 JP): The Current Playbook

Since the US$550 million secondary placement announcement, Toei Animation (4816 JP)’s shares are down 7.0% from the undisturbed price of JPY18,560 per share (14 February).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Toei Animation’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 27 February. Investors participating in previous large Japanese placements tend to secure positive returns.

4. Woori Financial Placement – While the Overhang Remains, the Deal Would Be Easily Digested

IMM PE, via Obis1, is looking to raise US$136m from selling a portion of its stake in Woori Financial Group (316140 KS).
While the deal doesn’t look particularly well-flagged, the PE has been invested for quite some time now.
Despite the overhang, the deal is a small one to digest at just 1.7% of total shares outstanding, representing 5 days of the firm’s ADV.

5. Nippon Express (9147) Secondary Offering – Banks, Sompo, Others Sell – “2024 Problem” Looms

Today post-close, Nippon Express Holdings (9147 JP) announced a secondary offering. Total size is ~¥30bn before considering where it will price; 11-12 days of ADV, 4.6% of shares out.
Various banks, Toyota-related auto cos, and Sompo Japan will sell. This is a start to the unwind, but it is a very small portion of the total cross-holding position.
NX also announced an on-market buyback of up to ¥10bn to run from 11April -31July 2024. This, and index demand, mitigate some heaviness. But The 2024 Problem looms large.

6. ECM Weekly (26th Feb 2024) – Trial Holdings, Juniper, Xiaocaiyuan, Union Bank, Orica, Azure

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, we looked at Trial Holdings (5882 JP) refiling and Xiaocaiyuan International Holding .
For placements, it was an action packed week in India, again, with Australia joining in as well.

7. Renesas Electronics Block – Smaller than Recent Deals but Still Likely Well Flagged

Mitsubishi Electric (6503 JP) is looking to raise approximately US$800m through an accelerated secondary block deal, via selling 50.71m shares (2.6% of TSO) of Renesas Electronics (6723 JP) stock.
The deal will be an easy one to digest at only three days of three month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

8. Tokyo Metro IPO Early Look – Could Raise Around US$2bn While Still Recovering from COVID

Tokyo Metro (TKYMETRO JP)’s shareholders, the Japanese and Tokyo Metropolitan Governments, could look to raise up to US$2bn by selling half of their stake via an IPO.
Tokyo Metro is one of the two metro network operators in the Tokyo region. It operates nine subway lines.
In this note, we take an early look at the possible listing.

9. Trading Strategy of APR on the First Day of IPO

In this insight, we discuss a trading strategy for APR (278470 KS) which starts trading on 27 February. APR is the most anticipated IPO in Korea so far in 2024.
Our base case (6 months – 1 year) target price of APR is 370,809 won, which is 48% higher than the IPO price.
We recommend investors to take some profits off the table (30%-50%) if the share price shoots higher by 100% to 200%+ from the IPO price on the first day.

10. MIXUE/ChaPanda/Good Me Pre-IPO – Peer Comparison

Mixue Group is looking to raise about US$1bn in its Hong Kong IPO, while Sichuan Baicha (ChaPanda) and Guming Holdings (Good me) are said to be looking to raise US$300m each.
All three are primarily focussed on providing freshly-made drinks, including freshly-made fruit drinks, and tea, with some selling ice cream, coffee, baked goods and ready to drink beverages as well.
In this note, we will undertake a peer comparison, including the Hong Kong listed peer, Nayuki Holdings (2150 HK).

Feb 25

Weekly Top Ten Equity Capital Markets – Feb 25, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Senko Group (9069 JP) Offering – Banks and Insurers Unwinding Cross-Holdings in Offering

SENKO Group Holdings Co., Ltd. (9069 JP) today announced large financial institutional cross-holders would sell shares in a Secondary Offering. There’s a buyback on the back end.
Cross-Holding unwinding is the subject of the moment. It will continue to be so. It will involve selldowns, and buybacks. Study the model of what companies must do what.
In this case, Senko has a LOT of cross-holders and minimal excess cash. So investors buy more shares. But there is a buyback and index demand to come.

2. Gree (3632 JP) – Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out

Today after the close, KDDI Corp (9433 JP) and Gree Inc (3632 JP) announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.
The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.
The problem is that too much of revenue isn’t earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.

3. Heiwado (8276 JP) – Banks and Insurers Unwinding Cross-Holdings In Offering

Heiwado Co Ltd (8276 JP) today announced a Secondary Offering sell-down by cross-holders, combined with a buyback post-offering to mitigate some of the effects of overhang.
Banks and insurers are selling, and that will leave the stock with a lot of cross-holders left, but investors should look at the model given he zeitgeist.
Companies with lots of cross-holders have to be “fair” to them. Those without copious cash have to spread it around so this transaction model looks likely to be continued.

4. Initial Thoughts on the Webtoon Entertainment IPO

Naver Corp (035420 KS) is trying to complete the IPO of its affiliate Webtoon Entertainment in the US stock market as early as June 2024.
The expected value of Webtoon Entertainment (post IPO) is about US$3 billion to US$4 billion. Webtoon Entertainment is seeking to raise about US$500 million in this IPO.
The IPO of Webtoon Entertainment in the US is likely to have a positive impact on Naver Corp (035420 KS).

5. Azure Minerals Block – Removal of Overhang but Still a Risky Bet

Mineral Resources (MIN AU) is looking to raise up to A$229m (US$150m) via a secondary block trade in Azure Minerals (AZS AU), which will be a clean-up.
The deal is a large one to digest, at approximately 51.6 days of three month ADV and 13.8% of current mcap.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

6. Union Bank of India QIP – Well-Flagged and Just in Time for Index Inclusion

Union Bank Of India (UNBK IN) is looking to raise up to US$370m (INR30bn) via its QIP.
The company last undertook a QIP in Aug 2023, which we covered in Union Bank of India QIP – Well-Flagged Deal, Recent Momentum Has Been Strong.
This deal too is a very well flagged one, with the firm having earlier reported that it would look to do a QIP to boost its free float and capital.

7. Trial Holdings Pre-IPO – Refiling Updates – Margin Uptick, More Golf Courses

Trial Holdings (5882 JP) (TH) is now looking to raise around US$234m in its Japan IPO, after having canceled its prior listing attempt last year.
TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
We have looked at the past performance in our previous notes. In this note, we talk about the updates from its recent filings.

8. Orica Placement – Keeping the Acquisition Momentum Going

Orica Ltd (ORI AU) is looking to raise up to A$400m (US$260m) in its primary placement. The proceeds will be used to partially fund the acquisition of Cyanco.
The deal is a large one to digest, representing 21.3 days of three month ADV and 5.2% dilution.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

9. ECM Weekly (19th Feb 2024) – Toei Ani, KB Fin, IIF, Trial, Juniper, Bharti Hexacom, Octillion Energy

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Trial Holdings (5882 JP) was back in the market, a year after ditching its previous attempt, while Juniper Hotels is trying to ride the India wave.
For placements, more signs of REIT coming back to life, this time in Japan. A relatively large deal in Toei Animation (4816 JP) as well was launched.

10. Amman Mineral International Lockup Expiry – Large Lockup Expiry, Sitting on Sizeable Profits