Daily BriefsIPOs and Placements

Equity Capital Markets: iHuman Inc., Kerry Express Thailand, Allegro, MR D.I.Y. Group, Kronos Bio, Nepes Ark and more

In today’s briefing:

  • IHuman IPO: Just Not Worth It
  • Kerry Express & Best Inc: Two Approaches to ECommerce Logistics Growth in SE Asia
  • Allegro.eu IPO: Assessing Durability of Polish Listing and Largest Listed Co.
  • MR DIY IPO: Inexpensive Valuation Compared to Peers Despite Better Growth Profile
  • Kronos Bio IPO. Gilead’s SYK Inhibitor Portfolio Will Boost The Pipeline
  • Nepes Ark IPO Preview

IHuman IPO: Just Not Worth It

By Supun Walpola

In our previous note, IHuman IPO: Competition Is Likely to Eat into Profits, we suggested that, while we like iHuman for its robust medium-term growth profile, tight competition in the online edutainment market would prevent this strong growth from being reflected in the bottom-line, and we would only subscribe to the IPO as long as these weaknesses are compensated through the valuation. However, iHuman’s valuation looks expensive to us compared to its Chinese edutech peers, making the risk-reward nowhere near attractive.


Kerry Express & Best Inc: Two Approaches to ECommerce Logistics Growth in SE Asia

By Daniel Hellberg

The purpose of this note is to analyze the different eCommerce fulfillment markets pursued by Kerry Express Thailand (KEX TB) and BEST Inc (BEST US). KEX focuses on Thailand’s domestic express market, while Best has a competing domestic service and is also developing a X-border express service to quickly move Chinese goods into multiple SE Asian markets.

To better understand these two markets, we looked at market data from KEX’s IPO documents as well as financial data disclosed by eCommerce giant Alibaba Group (BABA US). These figures, combined with numbers from KEX itself and the Chinese express companies, give investors a sense of the size and growth potential of the Thai domestic and X-border eComm fulfillment markets.

While both markets offer attractive growth, they also present distinct challenges. In the Thai domestic express market, these challenges include a lack of scale (compared to China’s expess market) and relatively low population density, especially outside of Metro Bangkok. Challenges presented by the X-border market include exorbitant pricing, competition from large multinationals, and increased complexity (ie, paperwork, customs, tariffs, etc). 

We conclude that KEX is an intriguing pure play on Thailand’s eCommerce development whose upcoming IPO is worth following. Regarding Best, we recently upgraded its shares to Buy on expected sector consolidation. To date its Thai and X-border revenues remain a very small part of the company’s business which probably won’t “move the needle” in the near-term. 


Allegro.eu IPO: Assessing Durability of Polish Listing and Largest Listed Co.

By Patryk Basiewicz

Allegro (0919412D PW) (Allegro) is listing on the Warsaw Stock Exchange with trading confirmed to begin on October 12. The offer price is PLN43 per share. At listing, Allegro’s free-float will be PLN9.1 or EUR2.05bn, which is sizable.

Below I show three scenarios for long-term value for Allegro with respect to Amazon’s entry, with a DCF valuation. I also include what would Allegro’s “Market Prices” be if (1) the actual price is 25% below the fundamental value and (2) if the actual price is 15% below the fundamental value.

I see the table of valuation below a grid with which to guide, from a long-only perspective, for entry into the stock or for selling your allocation. 


MR DIY IPO: Inexpensive Valuation Compared to Peers Despite Better Growth Profile

By Shifara Samsudeen, ACMA, CGMA

The Malaysian home improvement retailer MR D.I.Y. plans to raise about US$362m (RM1.5bn) at an indicative IPO price of RM1.60 per share. The company is the largest home improvement retailer in the country with a store count of 640 as at the end of June 2020.

In our previous insight on the company’s IPO MR DIY IPO: Quality Homes , we examined the company’s business model, its financials and future prospects. Refer the extract below:

Having analysed the company’s IPO prospectus and its financials, we believe the company has good potential to improve its top line and further expand margins. Though it seems that the company’s margins are declining, a comparison of the company’s profit margins against its peers indicate that the company generates margins well above its peers

We find the company’s valuation attractive compared to its peers despite the company’s better growth profile and we believe there is further upside.


Kronos Bio IPO. Gilead’s SYK Inhibitor Portfolio Will Boost The Pipeline

By Andrei Zakharov

A clinical-stage biotech company Kronos Bio, founded by partners and executives from Two River Group, priced its IPO of ~13.1 million shares at price of $19 a share or IPO valuation of ~$1.2B at above the price range. We estimate net proceeds from the offering to reach ~$231 million. Lead underwriters are Goldman Sachs, Jefferies, Cowen and Piper Sandler.

Kronos Bio was backed by investment and venture capital firms Omega Funds, Vida Ventures, Perceptive Advisors, GV (formerly Google Ventures), Polaris Partners, Invus and established global asset managers Fidelity Investments, T. Rowe Price and Blackrock. According to Crunchbase, Kronos Bio raised ~$278M from sales of preferred stock and convertible debt.


Nepes Ark IPO Preview

By Douglas Kim

Nepes Ark is getting ready to complete its IPO in November in the Korean stock market. The IPO price range is 23,400 won to 26,500 won. The IPO base deal size is from $47 million to $53 million. The company provides test equipment for semiconductor wafer and packages from chipmakers and foundries. The company’s manufacturing facility is located at Cheongju, North Chungcheong Province.

Samsung Electronics and LG Display are key customers of Nepes Ark, which is a split-off of Nepes Corp (033640 KS)‘s semiconductor business. Nepes Corp has a 73.49% stake in Nepes Ark. The split-off & establishment of Nepes Ark was effective as of 1 April 2019. 
 


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