Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Xpeng, Softbank Group, Intouch Holdings, Pola Orbis Holdings and more

In today’s briefing:

  • Xpeng: What Does HK IPO Mean to US Shares?
  • Softbank Group – Vision Fund’s Public Companies on Wild Ride to End Quarter in the Black
  • StubWorld: Gulf’s Curious Offer For Intouch Now Open
  • POLA Launched on Hainan Island: Valuation Could Expand As China Becomes POLA’s Center of Attention

Xpeng: What Does HK IPO Mean to US Shares?

By Victoria Li

Xpeng will get listed in HK market as 9868.HK on 7th July 2021 in a fairly quick listing process. Its IPO price is announced at HK$165, equivalent to US$42.3 on Nasdaq.  The proceeds is estimated to be HK$14bn. 

Should US investors worry about the earnings dilution from HK IPO? We believe is NO. It might bring short term weakness on XPEV.US share performance. However in the long run, this IPO would benefit US investors and reduce the potential downside if Chinese companies have to delist from American bourses if a law passed at the end of the Trump administration actually gets implemented.

Fundamentally, Xpeng G5 is expected to come in July as we discussed in last note. G3i, the facelift of G3 would be launched on 9th July. 

Reiterate BUY on Xpeng.


Softbank Group – Vision Fund’s Public Companies on Wild Ride to End Quarter in the Black

By Kirk Boodry

Softbank will be able to report a positive Q1 contribution from public companies in the Vision Fund portfolio thanks to five new listings and some amazing quarter-end moves for Dingdong Maicai, Full Truck Alliance and Coupang. All in, we estimate public VF companies ended the quarter up $1.1bn after mid-quarter losses that had been as high as $12bn. New listings were a big help surfacing almost $6bn in value, enough to offset c. $5bn in valuation losses for the existing portfolio. It is worth noting that the underlying value of Softbank shares is at all-time highs as VF liquidity offsets recent Alibaba weakness. That is less apparent in the share price as the discount has expanded to 45% from <30% when the company announced its full-year results in May.


StubWorld: Gulf’s Curious Offer For Intouch Now Open

By David Blennerhassett

This week in StubWorld …

With Intouch Holdings (INTUCH TB) trading at terms to Gulf Energy Development Public Company (GULF TB)‘s Offer…

…What’s the play here?

Preceding my comments on Intouch are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.


POLA Launched on Hainan Island: Valuation Could Expand As China Becomes POLA’s Center of Attention

By Oshadhi Kumarasiri

  • The company announced last week that it will begin selling POLA products in a duty-free store on Hainan Island, China from July 2021. This is the first step taken by Pola Orbis to tap into the Chinese duty-free market through the company’s flagship brands. Chinese travel retail market offers significant growth potential, especially in the high prestige skincare category.
  • Meanwhile, Pola Orbis Holdings (4927 JP) has broken out of a medium-term downtrend and outperformed Kose Corp (4922 JP) and Shiseido Company (4911 JP) by around 20% and Kao Corp (4452 JP) and Fancl Corp (4921 JP) by around 25% since March 2021.
  • Pola Orbis has a relatively small overseas presence compared to peers such as Shiseido and Kose. With the expansion of its domestic flagship brands into the Chinese market, the company is expected to attain an overseas sales ratio of around 25% by 2023 compared to the current 15%. Exposure to the Chinese cosmetics market is highly regarded by investors and they have generally given such companies premium valuations.
  • Pola Orbis currently trades at a new all-time high FY+2 EV/EBIT of 22.0x. However, it is still around 40-50% lower than Shiseido’s current FY+2 EV/EBIT, and Kose’s peak FY+2 EV/EBIT multiple, indicating plenty of room for multiple expansion.

Related tickers: Xpeng (XPEV.N), Softbank Group (9984.T), Intouch Holdings (INTUCH.BK), Pola Orbis Holdings (4927.T)

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