Daily BriefsIPOs and Placements

Equity Capital Markets: Bukalapak, KakaoBank, Shanghai HeartCare Medical Technology, Zomato, Hangzhou Bioer Technology, Devyani International and more

In today’s briefing:

  • Bukalapak IPO: Valuation Insights
  • Kakao Bank Fast Entry Possibilities & Timeline: KOSPI 200, MSCI Standard, & FTSE All-World
  • Shanghai HeartCare (心玮医疗) Pre-IPO: Thoughts on Valuation
  • Zomato IPO: Oversubscribed, But We Reckon Listing Gains Could Be Towards the Low Side
  • Pre-IPO Hangzhou Bioer Technology – Concerns Behind the Outstanding Performance
  • Devyani Pre-IPO – Peer Comparison – Slots in Neatly

Bukalapak IPO: Valuation Insights

By Arun George

Bukalapak (BUKA IJ), which means ‘opening a kiosk’ in Indonesian, is a leading e-commerce player in non-Tier 1 cities in Indonesia, with a market share of 35% in 2020 based on GMV (gross merchandise value), according to Frost & Sullivan. 

Bukalapak will price its IPO at the top-end of its indicative price range of Rp750-850 per share, according to press reports. Bukalapak will raise Rp22 trillion ($1.5 billion) which will be Indonesia’s largest-ever IPO. The shares are set to list on 6 August. 

In Bukalapak IPO Initiation: Island Shopping, we noted that like its peers, Bukalapak is benefiting from the accelerating adoption of e-commerce in Indonesia. Bukalapak’s strategy of focusing on consumers in the non-Tier 1 area and the mass market in the Tier 1 area results in a relatively small overlap (less than 20%) between its customers and customers of other online marketplaces such as Sea Ltd (SE US)‘s Shopee, Tokopedia PT (1087142D IJ) and Alibaba Group (BABA US)‘s Lazada. Competitors generally target the affluent segment of the market. We concluded that Bukalapak’s fundamentals tick all the right boxes of rising monetisation, lower losses and declining cash burn, in our view. 

Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.


Kakao Bank Fast Entry Possibilities & Timeline: KOSPI 200, MSCI Standard, & FTSE All-World

By Sanghyun Park

Kakao Bank’s index Fast Entry has to go through a much more complicated equation with Krafton.

This is because it is not easy to clearly predict the float rate, which is the most important variable in estimating Fast Entry.

Below is Kakao Bank’s post-IPO shareholding structure.

ShareholdingPost-IPOSharesLock-up
Kakao27.26%129,533,7256 months
Korea Investment Value Asset23.25%110,484,0816 months
Korea Investment Financial Holdings4.01%19,049,6436 months
KB Kookmin Bank8.02%38,097,9596 months
 – Major shareholder + Special stakeholders62.55%297,165,408
IPB Ltd (Anchor Equity Partners)2.24%10,640,0006 months
Keto Holdings, L.P. (TPG)2.24%10,640,0006 months
Netmarble1.60%7,619,5923 months
Skyblue Luxury Investment Pte. Ltd. (Tencent)1.60%7,619,5923 months
ESOP (post-IPO shareholders)2.76%13,090,0001 year
– Sub-total72.99%346,774,592
Pre-IPO non-lockup minority shareholders15.99%75,965,645
IPO shareholders (institutional & retail)11.02%52,360,000
Total100.00%475,100,237
Source: DART

First, the KOSPI 200 is fairly simple and clear. Only 62.55% owned by Kakao (the major shareholder), Korea Financial Group and KB (the special stakeholders) is highly likely to be bundled as non-float. So the remaining 37.45% will be calculated as immediate float.

MSCI and FTSE are highly likely to treat all of the pre-IPO minority shareholders held by corporations and VCs as non-float regardless of lockup. In addition, voluntary lockup of institutions participating in the IPO is treated as non-float. In this case, even under the premise that the ESOP subscription rate and voluntary lockup percentage are low this time, the immediate float is highly likely to stay in the low 10% range.

Post-IPO index float scheduleKOSPI 200MSCI StandardFTSE All-World
Listing37.45%10~25%10~25%
Source: DART

However, there is one more point to consider here.

As seen in the case of HYBE, which was included in MSCI Standard in SAIR in May, MSCI does not blindly treat pre-IPO shares held by VCs as non-float. Even before the one-year grace period, MSCI decided to include some pre-IPO shareholders, including VCs, in the float. This is an example showing that MSCI flexibly interprets non-locked corporate and VC holdings according to the holding purpose.

Similar to HYBE, about 2% of Kakao Bank is owned by individual investors. In addition, if some corporate/VC holdings that are not locked up (eg, eBay Korea and Yes25) are treated as floats, and the ESOP subscription and institutional public offering lockup ratios are kept low, the float can rise to the low 20%.

In this case, MSCI float can go up to 25% with 5% roundup applied.

Pre-IPO non-lockup minority shareholdersPost-IPOShares
Netmarble (KS 251270)1.60%7,619,591
Skyblue Luxury Investment Pte.Ltd. (Tencent)1.60%7,619,591
Seoul Guarantee Insurance Company3.21%15,239,183
Korea Post3.21%15,239,183
eBay Korea3.21%15,239,183
Yes24 (KS 053280)1.20%5,681,393
Pre-IPO non-lockup minority shareholders having less than a 1% stake1.96%9,327,521
Total15.99%75,965,645
Source: DART

Shanghai HeartCare (心玮医疗) Pre-IPO: Thoughts on Valuation

By Ke Yan, CFA, FRM

Shanghai HeartCare is a neuro-interventional medical device pioneer in China. It has four products approved for marketing and expects 9 products to commercialize in 2021, as well 10 products to commercialize between 2022 and 2025. 

In our previous note, we looked at the company’s two core products Captor and LAA Occluder. We think the Captor, a stent retrieving thrombectomy device, is the main selling point of the deal given its decent efficacy and safety data and it has already been approved by the NMPA. Market structure for Captor is characterized by the early stage of growth and dominance by MNC players and the company’s product is the first approved domestic product with commendable data from head-to-head clinical trials. The company’s management are mainly ex-employee from Microport Scientific, a leading international medical device player in China. 

In this note, we will provide our thoughts on valuation.


Zomato IPO: Oversubscribed, But We Reckon Listing Gains Could Be Towards the Low Side

By Oshadhi Kumarasiri

  • The subscription period for the Zomato (ZOM IN) IPO ended last Friday (16th July 2021) with books covered around 38.25x, mostly at the top end of the offer range of INR 72.0-76.0 per share.
  • The Indian IPO market is a bit different from other developed markets as there were several previous IPOs (like SBI Cards) without notable listing gains despite around 20.0-50.0x oversubscription.
  • We think Zomato needed significantly more subscriptions to guarantee a substantial listing gain as the three IPOs that popped over 100% on day one during the last two years (Burger King India, Indigo Paints, and Happiest Minds Technologies) were oversubscribed over 100.0x.
  • Moreover, the “Employees Reservation Portion” of the offer (6.5m shares) was undersubscribed (0.62x), indicating that the 3,755 people who know the ins and outs of the business are less enthusiastic about Zomato’s offer than the retail and institutional investors, even with a 13.0-18.0% premium on the grey market.

Pre-IPO Hangzhou Bioer Technology – Concerns Behind the Outstanding Performance

By Xinyao (Criss) Wang

On June 11, Hangzhou Bioer Technology (BIOER HK) officially started the IPO process by submitting a prospectus to the HKEX. Bioer was founded in 2002 and has developed for 19 years, but its performance soared during the COVID-19 and ushered in great changes. Therefore, this may be the best time to launch an IPO for Bioer. However, aside from the outstanding financial performance brought by the pandemic, there are also some concerns and potential risks that worth the attention of investors.


Devyani Pre-IPO – Peer Comparison – Slots in Neatly

By Sumeet Singh

Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$200m via its Indian IPO. The IPO will be a mix of primary and secondary shares. 

DIL operates a chain of quick service restaurants (QSRs) in India. Its core business is to operate KFC, Pizza Hut and Costa Coffee in India. It operated 655 stores across 155 cities in India, as of Mar 2021. These include 264 KFC stores, 297 Pizza Hut stores and 44 Costa Coffee stores. It also operates stores in Nepal and Nigeria for KFC and Pizza Hut. In addition, it also runs its own brands Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar in India. Yum owns over 4% stake in the company.

We covered various aspects of the deal in our previous note, Devyani Pre-IPO – Might not do another Burger King India but should be good.

In this note we will compare the company against some of its listed peers.


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