Brief USA: Eagle Hospitality Trust IPO Quick Take – Revised Terms Do Little to Address Fundamental Concerns and more

In this briefing:

  1. Eagle Hospitality Trust IPO Quick Take – Revised Terms Do Little to Address Fundamental Concerns
  2. Yunji (云集) Trading Update – Tiny Adjusted Free Float + Expensive Valuation
  3. Beyond Meat (Post IPO) Goes Beyond Valuations – More than Just a Vegan Burger
  4. Green Shoots, Rotten Roots?
  5. Warning For Markets: There Is No Quantitative Easing…QT Re-Engaged!

1. Eagle Hospitality Trust IPO Quick Take – Revised Terms Do Little to Address Fundamental Concerns

Eagle Hospitality Trust (EHT SP) (EHT) plans to raise around US$566m via its IPO on SGX, based on its revised terms. The initial portfolio will comprise of 18 hotels in the US with an overall valuation of US$1.27bn. 

I covered the company background and other fundamental aspects in my earlier insights:

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

2. Yunji (云集) Trading Update – Tiny Adjusted Free Float + Expensive Valuation

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Yunji Inc. (YJ US) raised US$120m at US$11 per share, the bottom of its IPO price range. The company was initially expecting to raise up to US$176m through selling 13.5m ADS but it was downsized to 11m ADS. We have previously covered the IPO in:

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

3. Beyond Meat (Post IPO) Goes Beyond Valuations – More than Just a Vegan Burger

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Beyond Meat Inc (BYND US), a fast-growing US-based plant-based meat (substitute) maker, tripled its billion-dollar valuations on listing, last week – the best IPO debut pop for any US listing since 2008 financial crisis (for companies that raised at least USD 200 mn, says Bloomberg). The loss-making company, now valued at USD3.5bn, raised US$240 mn from IPO at the issue price of USD25/share (post upward revision), to fund its expansion plans.

The 10-years-old Los Angeles-based company has been in the limelight for pioneering the concept of research-backed high-quality plant-based meat (substitute). But the brand’s loyal fan base is built on something bigger – its broader philosophy of providing healthy, earth-friendly and animal-friendly food solutions to those who care. This value proposition has also attracted a line up of loyal celebrity backers/investors including Bill Gates and Leonardo DiCaprio. However financial investors need to note that competition is heating up and it may not be all smooth sailing unless Beyond Meat can commercially scale up faster.

Climate change: activism & awareness go beyond street protests, and have been influencing consumer choices. Beyond Meat has positioned itself as a food solution to the problem of rising greenhouse gas from livestock rearing; mainstream customers, not just vegans, are buying it. It is a case study worth looking at in terms of shifting consumer preferences and opportunities, hitherto overlooked by established bigger food companies. Our earlier report Climate Action – School Strikes Hit a Spot, Carbon Emitters Face Heat. Investors Take Note had highlighted how rising climate awareness/activism was impacting various sectors and the opportunities offered by changing consumer preferences including the Vegan movement.

In the report below we look at the likely factors driving investor euphoria over Beyond Meat – its products, the wider market opportunity and the positioning/philosophy. We also highlight the various risks involved in this early stage/new product company apart from rising competition

4. Green Shoots, Rotten Roots?

Just when you think the global economy is starting to spring green shoots, the skies have darkened and some of those shoots may be turning brown. In the U.S., ISM Manufacturing fell and missed expectations.

In China, both the official PMI, which is tilted toward larger SOEs, and the Cain PMI, which measures SMEs, fell and missed expectations. These readings have cast doubt on the longevity of Beijing’s stimulus-driven rebound.

On the other hand, the Non-Farm Payroll report came in ahead of expectations. In Europe, the PMIs for peripheral countries like Italy and Greece are outperforming Germany. In addition, exports from Korea and Taiwan, which are highly globally sensitive, have rebounded, indicating recovery.

How do investors interpret these cross-currents?

We concur with Rob Hanna of Quantifiable Edges, who made an insightful comment that “Tops Wobble Before Falling Over”. Our review of the market’s technical conditions reveals the market is not wobbling yet.

Any market wobble would be seen in NASDAQ and semiconductor stocks. Until Technology and NASDAQ leadership starts to falter, and if their leadership is not replaced by the reflation-sensitive cyclical groups, we remain bullish on equities.

5. Warning For Markets: There Is No Quantitative Easing…QT Re-Engaged!

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  • Latest data to early-May warn that Central Banks have re-engaged quantitative tightening
  • Both the US Fed and the People’s Bank (PBoC) are withdrawing funds at a more rapid pace
  • Global Central Bank Liquidity sliding at minus 4& annualised clip. This is NOT QE
  • Small off-sets to this drain from BoE and BoJ, which is loosest of majors

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