Daily BriefsIPOs and Placements

Equity Capital Markets: Demae-Can Co., Ltd., Kakao Pay, Tam Jai International, Freshworks, Vulcan Energy Resources Ltd, FSN E-Commerce Ventures (Nykaa), Star Health, AIM Vaccine, Biel Crystal and more

In today’s briefing:

  • Demae-Can – Structurally Appalling but a Good Trade
  • Kakao Pay IPO Will Be Delayed Again
  • Tam Jai International IPO: A Big Appetite For Growth Under Toridoll’s Control
  • Freshworks IPO Valuation Analysis
  • Vulcan Energy Placement – Strong Momentum, Favorable Deal Dynamics
  • Nykaa IPO: Not Perfectly Elegant
  • Star Health Insurance Pre-IPO – Leading the Retail Healthcare Insurance Space
  • Pre-IPO AIM Vaccine – Insights on Key Products, Pipeline and Concerns
  • Biel Crystal (伯恩光学) Pre-IPO – Industry Landscape & Peer Comparison –  Auto Is the Wildcard

Demae-Can – Structurally Appalling but a Good Trade

By Mio Kato

Demae-Can once offered a sound business model in a niche for Japan and generated consistent double-digit growth with mid-teens margins, making it a relatively attractive stock for Japan. Since its push into the delivery business though, margins have collapsed, and cash-burn has reached Wework-ian proportions. Nevertheless, on a short-term basis, this could prove attractive.


Kakao Pay IPO Will Be Delayed Again

By Douglas Kim

It was mentioned in numerous local media today that Kakao Pay will delay its IPO once again to sometime in November/December 2021. Kakao Pay was planning to complete its IPO on 14 October. It is expected that Kakao Pay will revise its IPO prospectus. The current IPO price range is 60,000 won to 90,000 won per share, which suggested IPO offering range of $879 million to $1,319 million. In our view, the company is likely to lower the IPO price even further by about 10-20% in order to attract more investors. 

Kakao Group announces a plan to support SMEs and self-employed – In order to soothe the regulators, Kakao Group announced its plan to spend 300 billion won over five years to support SMEs and the self-employed. Kakao Group also plans to turn K-Cube Holdings into a social enterprise.

Overall, Kakao Group has provided a quick response to the Korean government’s efforts to crack down on the Kakao Group. The key points include to change K-Cube Holdings into a social enterprise as well as the formation of a 300 billion won fund to help the SMEs and self-employed. Despite these efforts, it remains to be seen if these measures will be sufficient to appease the Korean regulators. In other words, there could be more negative regulatory related issues related to the Kakao Group in the months ahead.


Tam Jai International IPO: A Big Appetite For Growth Under Toridoll’s Control

By Oshadhi Kumarasiri

  • Rice noodle chain operator, Tam Jai International (TJI HK) completed its listing hearing and received approval for the proposed US$100.0m IPO on the Hong Kong Stock Exchange on 13th September 2021.
  • TORIDOLL Holdings Corporation (3397 JP), the biggest operator of noodle shops in Japan, took control of stagnating TamJai and SamGor restaurant chains in 2018 from its founder to restructure and turn around the noodle chains to fast growth and highly profitable businesses.
  • We like Tam Jai International under Toridoll’s management as Toridoll seems capable of taking the popular TamJai and SamGor restaurant brands global while continuing to expand TamJai’s and SamGor’s presence in the domestic market (Hong Kong).

Freshworks IPO Valuation Analysis

By Douglas Kim

Freshworks (FRSH US) announced its IPO price range of $28 to $32 per share and it is selling 28.5 million shares. At the high end of this price range, the company would raise $912 million and it would be valued at nearly $9.6 billion (assuming fully diluted shares outstanding of 300 million).

Our base case valuation of Freshworks is implied market cap of US$13.5 billion or US$45 per share, which is 41% higher than the high end of the IPO price range (US$32). Given the solid upside, we have a POSITIVE view of this IPO. 

Our valuation of Freshworks is based on an EV/S multiple of 22.6x using our estimated sales of $546 million in 2022. The EV/S multiple of 22.6x is based on 30% premium to the average multiple of the comps in 2022.


Vulcan Energy Placement – Strong Momentum, Favorable Deal Dynamics

By Zhen Zhou, Toh

Vulcan Energy Resources Ltd (VUL AU)  is looking to raise A$200m (US$147m) in its underwritten institutional placement.

In this note, we will take a brief look at deal dynamics and run the deal through our ECM framework.


Nykaa IPO: Not Perfectly Elegant

By Nitin Mangal

We continue our focus on the coverage of IPO bound start-ups and next is none other than FSN E-Commerce Ventures (Nykaa) (1003622D IN). However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).

Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.

Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.


Star Health Insurance Pre-IPO – Leading the Retail Healthcare Insurance Space

By Sumeet Singh

Star Health and Allied Insurance (SHAI), the largest private health and retail health insurance company in India, plans to raise around US$1.0bn in its India IPO. It is backed by Westbridge and Rakesh Jhunjhuwala. Owing to the latter, it will draw a lot of retail interest. 

SHAI insured 20.5m people in FY21. SHAI primarily offers retail health insurance which accounted for 87.9% of its FY21 GWP. Individual agents accounted for 97% of its FY21 GWP. 

Its GWP has grown by 72.6% over FY19-21 on the back of 58.6% growth in agents and 62.5% growth in the number of policies. SHAI has consistently grown faster than the industry over the past few years resulting in a steady increase in its market share. With a gross written premium (GWP) of INR93.5bn in FY21, SHAI had a market share of 15.8% in the Indian health insurance market and 31.3% in the retail health insurance market. 

Along with growing fast, SHAI has also managed to remain profitable since FY16 with its claims ratio remaining below 67% in most years. Although, the company recorded a loss in FY21 on the back of higher claims due to COVID-19 and reinsurance related adjustments. In addition, as the second COVID-19 wave only peaked in 1Q22, FY22 will be impacted as well.


Pre-IPO AIM Vaccine – Insights on Key Products, Pipeline and Concerns

By Xinyao (Criss) Wang

The global spread of COVID-19 has given the vaccine industry unprecedented attention. With the increasing prosperity of the industry, many vaccine companies are increasingly enthusiastic about going public. On Sep 12, 2021, AIM Vaccine (AIM HK) submitted its listing application to the HKEX and officially started its IPO process. AIM is a leading vaccine company that covers the full value chain from R&D to manufacturing and to commercialization. This insight mainly analyzed AIM in terms of the industry characteristics, the key vaccine products, the vaccine pipeline and related concerns of the Company.


Biel Crystal (伯恩光学) Pre-IPO – Industry Landscape & Peer Comparison –  Auto Is the Wildcard

By Zhen Zhou, Toh

Biel Crystal (0924581D HK) is looking to raise up to US$2bn in its upcoming Hong Kong IPO. 

Biel Crystal (BC) is the largest smart device enclosure and module solution provider in terms of shipment value in 2020 with a market share of 17.6%, according to Frost & Sullivan (F&S). BC’s products are used in end products such as smartphones, tablets, smart watches, AR, and VR glasses as well as automobiles.

In this note, we will look at the industry landscape and compare BC to other Apple suppliers.

We covered the IPO previously in:


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