Daily BriefsIPOs and Placements

Equity Capital Markets: Del Monte Philippines, Robinhood Markets, Kakao Pay, Lotte Rental, Paytm, Transcenta Holding and more

In today’s briefing:

  • Del Monte Philippines IPO Initiation: Tempting Fruit
  • Robinhood Markets IPO Preview
  • Accurate Facts About the Application of Kakao Pay’s 135-Day Listing Date Rule
  • Lotte Rental IPO – Peers and Valuation
  • Paytm IPO: Few Bugs on the Show
  • Robinhood IPO Valuation Analysis
  • Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns

Del Monte Philippines IPO Initiation: Tempting Fruit

By Arun George

Del Monte Philippines (1575316D PM)/DMPI is a leading producer, distributor and marketer of premium quality, healthy food and beverage products. It is a market leader in the packaged pineapple and mixed fruit, ready-to-drink juices (excluding stand-up-pouches), tomato sauce and spaghetti sauce categories in the Philippines. DMPI has the rights to the Del Monte trademark for the Philippines for processed products and also sells products under the brands of S&W, Contadina and Today’s. The parent company is Del Monte Pacific (DELM PM) which holds 87.0% of outstanding shares.

DMPI is pre-marketing for an IPO to raise up to PHP44 billion ($0.9 billion) at the maximum offer price of PHP54.80, according to press reports. The base offer of 699.3 million shares is entirely a secondary offering by the selling shareholders, Del Monte Pacific (DELM SP) and Singapore-based SEA Diner Holdings. 

DMPI is a play on the healthy packaged and convenient packaged food and beverage categories that benefit from long-term secular tailwinds in the Philippines. DMPI’s financial track record shows it has been able to leverage its market-leading position to combine solid top-line growth with improving margins and cash generation. The growth strategy sensibly revolves around leveraging the strong brand to enter adjacent categories, the expansion of domestic distribution in underpenetrated regions and increasing share in North Asia, particularly China (premium fresh pineapples). Overall, we believe that DMPI’s fundamentals are attractive.


Robinhood Markets IPO Preview

By Douglas Kim

Robinhood Markets (HOOD US) is getting ready to complete its IPO next week. Currently, Robinhood is expected to start trading on 29 July. The IPO price range is between $38 to $42 per share. At the high end of the IPO price range, Robinhood would be valued at $35 billion, which would be a big jump from its private market valuation of $11.7 billion in September 2020. The lead underwriters of this IPO include Goldman Sachs and JP Morgan. 

Despite excellent sales growth and improving profitability, there will likely be a lot more skeptical investors on the company’s valuation of nearly $35 billion. The following are the five major risk factors that are likely to be emphasized on the Robinhood IPO:

  • Cryptocurrency trading based revenues to decline
  • Lost faith by some retail customers after Gamestop incident in January
  • No major extended bear market since the company’s inception
  • Potential concerns about customer related risks
  • Significant decline in revenue growth rate on a QoQ basis in 2Q 2021

Accurate Facts About the Application of Kakao Pay’s 135-Day Listing Date Rule

By Sanghyun Park

It has been reported that Kakao Pay is considering delaying its listing to September. This is because of the 135-day rule that a company undergoing an IPO must complete the listing procedure within 135 days from the date of preparation of the financial statements.

According to this regulation, Kakao Pay must complete the listing within August 13, 135 days from the date of the 1Q21 financial statements.

What is the 135-day rule?

The 135-day rule is a rule on the expiration date of accounting settlement data reflected in the IPO prospectus and the securities declarations for overseas investors.

The important point here is that KRX does not have any rule similar to the 135 rule.

On the other hand, the US Securities and Exchange Commission stipulates that all listing schedules, including payment, be completed within 135 days from the time the financial statements stated in the IPO prospectus are prepared.

So why should Kakao Pay care about the 135-day rule?

This rule does not apply to domestic investors, but it inevitably applies when a newly listed company with a large IPO size needs to raise funds abroad that are within the jurisdiction of the SEC.

When is the deadline for the initial IPO prospectus?

If listing proceeds based on the financial statements at the end of the first quarter, March 31 will become the base date. So, the last business day of the 135-day rule will be August 13.

For this reason, Kakao Pay’s listing date was set for August 12, despite concerns about overlapping demand with Kakao Bank.

That is, August 12, the scheduled listing date of Kakao Pay, was a really tight schedule. Therefore, the fact that the Financial Supervisory Service requested a revised report was risking that the listing schedule would be significantly pushed back.

How long will the schedule be delayed?

In the end, the 135-day rule was not met based on the 1Q financial statements, so the IPO prospectus has to be rewritten based on the 2nd quarter financial statements.

This means that the IPO schedule has to be adjusted in line with the submission of the 2Q financial report to be published in mid-August.

In this case, considering that it will take at least a month or more to complete the listing process, including the FSS review period, it is expected that the company will be listed at the end of September at the earliest. In other words, at this point, the possibility of an October listing should remain open.


Lotte Rental IPO – Peers and Valuation

By Zhen Zhou, Toh

Lotte Rental (KTRENZ KS) is looking to raise about US$740m in its Korea IPO. 

Lotte Rental (LR) is the largest car rental provider in South Korea in 2020 based on the number of registered rental cars. The company mainly offers car rentals and leasing services. It provides short-term car rental, monthly car rental, and chauffeur-driven car rental services. The company buys and sells used cars and also owns 84% stake in Green Car, a car-sharing platform.

Our previous coverage of the IPO:


Paytm IPO: Few Bugs on the Show

By Nitin Mangal

Paytm (PAYTM IN), run by One97 Communications Ltd is one of India’s leading start-ups engaged in building a digital ecosystem for consumer and merchants throughout the country. Paytm offers a two sided ecosystem and offers a range of payment, financial, cloud and commerce services. It is backed by some of the marquee investors like Ant Financial Services Group (6688 HK), Alibaba Group (9988 HK), Berkshire Hathaway Inc Cl A (BRK/A US), Elevation Capital, etc. 

Paytm had filed its DRHP few days ago, as the company stages up for further growth. Given the behemoth of a brand and the immense popularity among the public, Paytm however does exhibit several shortfalls on the forensic end as far as financials are concerned. Although the company has still not entered the green zone of profitability, the annual report checks have denoted further issues like poor investment and asset quality, working capital gimmick and unrecognised DTA. There are also several red herrings seen from the regulatory side too.


Robinhood IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Robinhood is implied market cap of US$25.1 billion or US$29.8 per share, which is 25% lower than the mid-point of the IPO price range (US$40). Given the downside risk, we would AVOID this IPO. 

  • Our valuation of Robinhood is based on an EV/S multiple of 10.7x using our estimated sales of US$2.1 billion in 2022.
    • The EV/S multiple of 10.7x is based on the average multiple of the comps in 2022.
    • The valuation multiple is higher than the those of online brokers Charles Schwab and Interactive Brokers Group.
    • However, it is lower than the valuation multiples of the fintech comps including Coinbase and Affirm.

Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns

By Xinyao (Criss) Wang

Recently, Transcenta Holding (THL HK) has passed the listing hearing of the HKEX and is expected to be listed on the main board in the near future. Transcenta is a clinical stage global biopharmaceutical company that integrates the capacities of discovery, research, development, manufacturing and business development, with nine product candidates in the pipeline, eight of which are oncology drug candidates. This insight mainly analyzed the important product candidates (such as MSB2311, TST001, TST005 and MSB0254) in the pipeline and related concerns. 


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