In this briefing:
- Ramayana Lestari Sentosa (RALS IJ) – The Changeling – On the Ground in J-Town
- ECM Weekly (26 January 2019) – Maoyan, CStone Pharma, Polycab India, Hujiang Edu
- TAL Education (TAL): Online Courses Improved Margin in 3Q19, Parents Returning, 44% Upside
- Z IN
- China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
1. Ramayana Lestari Sentosa (RALS IJ) – The Changeling – On the Ground in J-Town
A visit to Ramayana Lestari Sentosa (RALS IJ) in Jakarta confirmed that its positive transformation continues, as it strives to move up the value chain, bringing in more consignment brands and reassigning space to complementary tenants in its stores to draw in the crowds. This is reducing its heavy dependence on Lebaran sales, as it moves up the value chain to attract a slightly more affluent customer.
Ramayana Lestari Sentosa (RALS IJ) continues to upgrade its stores and bring in new tenants, such as cinemas and F&B such as Starbucks, as its closes loss-making supermarkets. A revamped store is expected to see a 20-25% sales enhancement. It will transform a further 30 stores in 2019, including cinemas into the mix.
The company continues to see strong performance from its consignment and fashion sales, with the drop off in supermarket sales lessening and this business no longer losing money.
Ramayana Lestari Sentosa (RALS IJ) strives to be the leader in providing fashion for the masses and continues to use celebrities to endorse its own brands.
It has decentralised sourcing of products and incentivised stores managers at the EBIT level rather than for sales. It has also introduced a strict process for discounting, which is enhancing profitability.
The company will introduce a further 20 new consignment brands in 2019 to help grow this side of the business and move up the value chain. Shoes are one of the most important growth categories.
Ramayana Lestari Sentosa (RALS IJ) is in the midst of a significant metamorphosis, which could see the company truly realise the value of its nationwide franchise, and move up the value to become less reliant on Lebaran sales. It continues to transform its store portfolio, introducing more consignment vendors and complementary tenants into its stores to increase footfall. According to Capital IQ consensus, the stock trades on 18.3x FY19E PER and 17.3x FY20E PER, with estimated EPS growth of +9% and +6% for FY19E and FY20E respectively. These growth expectations look to be conservative given the positive direction that management is taking both on its merchandising, brands, and tenant mix.
2. ECM Weekly (26 January 2019) – Maoyan, CStone Pharma, Polycab India, Hujiang Edu
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.
Starting with placements this week, we had a relatively small Recruit Holdings (6098 JP) block sold by Toppan Printing (7911 JP). The stock traded below its deal price of JPY2,762 for the most part of the first-day post-placement. It bounced back on Friday to close just 0.6% above its deal price. We were bullish about the placement because it was a tiny deal relative to its three-month ADV.
There was also a small Ihh Healthcare (IHH MK) secondary block on Thursday after markets have closed. The deal was about US$80m and got priced at MYR5.56, the bottom-end of the price range.
For deals that have launched, there are Maoyan Entertainment (EPLUS HK) and Chalet Hotels. Maoyan will be pricing on the 28th of January while Chalet Hotels will open its book on the 29th of January and swiftly close on the 31st.
In terms of upcoming IPOs, we are hearing that CStone Pharma (CSTONE HK) is looking to pre-market in Hong Kong next week while Hansoh Pharmaceutical (HANSOH HK) will be looking to launch its US$1bn IPO in next month. Ke Yan, CFA, FRM has written early thoughts on the IPOs in:
- CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
- Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
- Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results
Earlier this week, we also heard that Dexin China, a property developer mostly based on Zhejiang Province, was seeking listing approval to list in Hong Kong whereas Global Switch, a UK-based data center operator, will meet banks next week in London to choose arrangers for a Hong Kong IPO of about US$1bn in 2019.
Other than that, another pharma company, Jubilant Pharma, is looking to list on the US market after getting tepid interests from investors for an SGX listing. It was initially looking to raise about US$500m. Fang Holdings Limited (SFUN US), a Chinese real estate internet portal, has also submitted a confidential filing to the SEC for a proposed spin-off of its research unit, China Index Holdings.
Accuracy Rate:
Our overall accuracy rate is 71.9% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
No new IPO filings
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
- Asia’s thirst for beer adds fizz to mega-brewer’s plans for IPO
- Chinese cryptocurrency exchanges seek reverse mergers in Hong Kong
- Market, bankers pin hope on Chalet Hotels for breaking lull in IPO launches
- Hong Kong exchange head clarifies listing rules as IPO hopes dim for cryptocurrency giant Bitmain
Smartkarma Community’s this week Analysis on Upcoming IPO
- CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
- Maoyan Entertainment IPO Valuation: Press the Skip Button
- Hujiang Education (沪江教育) Pre-IPO – Spending More than It Earns
- Polycab India Limited Pre-IPO – Market Leader with Steady Growth but with a Few Unanswered Question
- Maoyan Entertainment (猫眼娱乐) IPO: Turning Profitable, Thoughts on Valuation
- Ecopro BM IPO Preview: The World’s #2 Player in the NCA High Nickel-Based Cathode Materials
List of pre-IPO Coverage on Smartkarma
3. TAL Education (TAL): Online Courses Improved Margin in 3Q19, Parents Returning, 44% Upside
- We believe that parents of primary school children will bring their children back to tutoring schools when they become aware of the competition in junior high schools.
- The expansion of online business and the change towards small classes are improving both the revenue growth and the margins.
- We believe that the requirement of educator license is not a concern.
- The 5-year P/E band suggests an upside of 44% for the share of TAL Education.
4. Z IN
In spite of a stellar quarter (Q3 FY19), we remain cautious on Zee Entertainment Enterprises (Z IN) and the prospects of broadcasters in India. Hindi GEC is consolidating, and most of the growth is likely to happen in regional channels which remain competitive. Global data suggests ad spends as a % of revenue for many broadcasters and cable operators has been disrupted and couple of year’s down the line, India should be no exception. Contrary to consensus, driven by millennials and non-affordability of second television, cord cutting in India could accelerate sooner than excepted. With an hyper competitive OTT landscape, uncertainty post TRAI Tariff implementations, in an industry suspect to easy value migration, the long term outlook for Zee Entertainment Enterprises (Z IN) and the broadcast Industry warrants attention. The only near term positive for the stock is the potential stake sale to a strategic partner, which is likely to keep the stock price buoyant but only in the near term.
5. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in:
- China Kepei Edu (科培教育) Pre-IPO Review – A Well Run Private Higher Education Company
- China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
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