Brief Growth Ideas: ECM Weekly (9 Nov 2019) – Phoenix Tree, I-Mab, Tyro Payments, Pharmaron, Heaven-Sent and more

In this briefing:

  1. ECM Weekly (9 Nov 2019) – Phoenix Tree, I-Mab, Tyro Payments, Pharmaron, Heaven-Sent
  2. Rapid Response Daikin – Worth A Look as China Hints at Bottoming
  3. TFG: Opportunity Arises from Regional Meat Supply Shortage
  4. Baidu (BIDU-US):  The Rise and Fall (And Rise?)
  5. Xerox to Acquire HP Inc: Two Fading Stars to Unite

1. ECM Weekly (9 Nov 2019) – Phoenix Tree, I-Mab, Tyro Payments, Pharmaron, Heaven-Sent

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Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Hong Kong IPOs’ performance was mixed this week. ESR Cayman (1821 HK)‘s struggled to hold above its IPO price after an strong debut while Changsha Broad Homes (2163 HK), which just got listed on Wednesday, is already trading 7% below its IPO price. On the other hand, Shanghai Kindly Instrument-H (1501 HK) closed 29% above its IPO price on the first day of trading.

Next week, Sinomab Bioscience Ltd (3681 HK) and China Feihe (6186 HK) will listed on the 12th and 13th of November respectively. Pharmaron IPO has been approved and filed its PHIP while Heaven-Sent Gold Group has already launched its IPO bookbuild. Ke Yan, CFA, FRM share his thoughts on valuation for both IPOs in:

China ADRs listings have been pushing through with their IPOs at lower valuation as seen from Ecmoho (MOHO US), 36Kr Holdings (1753455D US)  and Q&K International (QK US)‘s much smaller deal size than initially filed. This doesn’t bode well for new IPO filings like YX Asset Recovery (YX US), which we hear is premarketing for its IPO, Phoenix Tree, I-Mab, Ehang and etc.

In other markets, we are also hearing that Bangkok Commercial Asset Management (BAM) is starting its premarketing this month after getting regulatory approval for the IPO in October. There were also reports that Sri Trang Gloves will look to IPO in 1H 2020. 

In Australia, despite the setbacks, Tyro Payments (TYRO AU)‘s IPO is looking promising so far as Sumeet Singh analyzed the company’s business model and track record in:

Accuracy Rate:

Our overall accuracy rate is 72.7% for IPOs and 64.8% for Placements 

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

New IPO filings this week

  • Burger King India (India, ~US$150m)
  • Liwayway (Global) Company (Hong Kong, ~US$100m)
  • Renrui Human Resources (Hong Kong, re-filed)
  • Beijing Enterprises Urban Resources (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

Analysis on Upcoming IPOs

Hong Kong

Alibaba IPO/Secondary Listing – The Real IPO Only Begins on the 11th Day Post Listing ​


Alphamab (康宁杰瑞) IPO: Strong R&D Capability and Innovative Platforms 

Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors

ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)


ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)


ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 


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


ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


Helenbergh (海伦堡) Early Thoughts – The Usual Red Flag – Related Party Transactions

Home Credit

Home Credit Pre-IPO (Part I) – The Positives – Lots to Like 

Home Credit

Home Credit Pre-IPO (Part II) – The Negatives – A Lot More to Dislike 

Home Credit

Home Credit Pre-IPO – Bigger but Not Necessarily Better than Peers 

Home Credit

Home Credit Pre-IPO – Thoughts on Valuation and the Curious Case of Expanding Equity Base 


Huali University (华立大学) IPO Early Thoughts – Risks Abound 


InnoCare (诺诚健华) Pre-IPO: A Decent Team but Short of Clinical Stage Candidates 


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

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
MicuRxMicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
Pharmaron Pharmaron (康龙化成) A+H Listing: A Leading Drug Discovery Company 
Pharmaron Pharmaron (康龙化成) A+H Listing: 3Q2019 Numbers and Thoughts on Valuation 
Poly Prp Poly Property Development (保利物业发展) IPO Early Thoughts – Well-Rounded Company 

Renrui Human Resources (人瑞人才) Pre-IPO Review – Riding on China’s Unicorns 


SinoMab (中国抗体): Pipeline Concentrated on Autoimmune Therapy 


Smoore Tech (麦克韦尔) IPO: Hidden E-Cigarette Player Behind the FEELM Technology 


Smoore Tech (麦克韦尔) Pre-IPO: 6Y and 1H2019 Financials Show Technology Driven Growth 

Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
Venus Venus Medtech (启明医疗) IPO: Has the Elements for a Hot Healthcare Deal 
Venus Venus Medtech (启明医疗) IPO: Technical Comparison of VenusA-Valve and Peers 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Aakash EduAakash Education Pre-IPO – Fast Growth in an Attractive Sector
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotels

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

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

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
Flemingo Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Emami Shares Pledge Might Lead to an Early IPO 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
MazagonMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending
Mrs. BectorMrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta


Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
Ujjivan Ujjivan Small Finance Bank Pre-IPO – Shouldn’t Be Forced to List 
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S
CloudMindsCloudMinds Inc Early Thoughts – Still Nascent
FangDD FangDD (房多多) IPO: Reminiscence of SFUN? 
Huize Huize (慧择) Pre-IPO – Insurance Agency Masquerading as a Platform Business 
I-Mab I-Mab (天境生物) Pre-IPO: Strong Management and Investor Backing with Differentiated Products 
MetenMeten International Edu (美联国际教育) Early Thoughts – Unclear Strategies
Phoenix Tree Phoenix Tree (Danke) Pre-IPO – Another WeWork – Nothing Is Improving Apart from Revenue 
Q&K Q&K Intl (青客) IPO: Yet Another WeWork Model that Will Not Work 
Tyro  Tyro Payments IPO – A Lot to like Apart from Its Earnings Profile and Churn Rate 

2. Rapid Response Daikin – Worth A Look as China Hints at Bottoming

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Daikin reported results on the 6th of November which were slightly below consensus at the OP line at ¥78.7bn (consensus ¥82.6bn), despite beating slightly on revenue (¥673bn vs. consensus at ¥668bn). The slight miss on margins and a 2.2% downward revision to FY revenue guidance drove the share price down about 2.6% over the next two days but we believe a slowing rate of decline in China makes a closer look appropriate.

3. TFG: Opportunity Arises from Regional Meat Supply Shortage


We initiate coverage of TFG with a BUY rating and a 2020E target price of Bt4.7, derived from 17.5xPE’20E, which implies a PEG ratio of 1.0x in 2020-21E and is equal to -1 SD of its 3-year trading average.

The story:

•Gradual expansion in a high-margin business
•Beneficiary of African Swine Fever outbreak in the region
•Short-term spread contraction is about to pass
•Expected earnings growth at 17% CAGR in 2020-21E


•Raw material cost fluctuation
•Exchange rate volatility

4. Baidu (BIDU-US):  The Rise and Fall (And Rise?)

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Ownership in Baidu (BIDU US) among GEM asset managers has been volatile over the past 8-years, with the holding dynamics mirroring the extreme moves in prices.  We split our analysis into 4 phases based on peak to trough levels of ownership since January 2011.  GEM managers have been quick to enter and exit the stock within each phase, with current levels the lowest in our history.

5. Xerox to Acquire HP Inc: Two Fading Stars to Unite

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It was reported yesterday that Xerox, one of the largest sellers of photocopiers has offered to buy HP Inc., one of the largest makers of printers and the latter has confirmed the news by issuing a public statement confirming that talks have been on-going and it will act in the best interest of the shareholders. As at the end of yesterday’s close, Xerox had a market capitalisation of USD8.2bn while HP had a market capitalisation of USD28.7bn, more than 3x that of Xerox. Xerox is considering funding the offer with both cash and stock. According to CNBC, Xerox’s offer to buy HP comes in at USD22 a share, consisting of 77% cash and 23% stock. HP’s shares closed at USD19.39 per share on Thursday’s trading, and the offer price of US$22 a share translates into a 13.5% premium to the last close price. At USD22 a share, the deal will be worth around USD33bn and Xerox will have to fund about US$22bn through debt financing to fund the deal. Our cashflow and balance sheet analysis on the combined entity reveals that it will take c. 5.5 years to pay off the debt (existing loans plus the new borrowings to fund the deal) using the free cashflows of both HP and Xerox. At USD22 a share, the deal implies a PE of about 7.7x for HP (based on TTM EPS).

HP has been struggling with declining demand for its printing business which is the core profit generator for the company due to digitisation. At the same time, Xerox has been facing the same fate too for its copy machines and the company’s revenues and profits have been declining over the past couple of years. What lies ahead for the two companies is not yet known and how the two companies will collectively respond to the declining demand for their core products is yet to be announced by the two companies.

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