Daily BriefsIPOs and Placements

Equity Capital Markets: Jinke Smart Services, Ant Group, Root Inc, JD Health, Intuit Inc, Posco Chemtech and more

In today’s briefing:

  • Jinke Smart Services IPO: Valuation Insights
  • ECM Weekly (8 November 2020) – Ant, Sunac Svcs, Jinke Svcs, Antengene, Gland Pharma, Kalyan Jewel
  • Root Insurance. Leader And Innovator In Pay-How-You-Drive (PHYD) Segment
  • JD Health (京东健康) Pre-IPO – Peer Comparison – It’s a Close Fight and Competition Is Intensifying
  • Upstart Holdings IPO Preview
  • POSCO Chemical Rights Offer: Terms & Trade Approach

Jinke Smart Services IPO: Valuation Insights

By Arun George

Jinke Smart Services (9666 HK) is a Chinese property management company which is a subsidiary of Jinke Property Group (000656 CH). At the proposed IPO price range of HK$41.80-47.60 per share, Jinke will have a market cap of HK$26,455.7-30,126.6 million ($3.4-3.9 billion). At the mid-point of the IPO price range, Jinke will raise net proceeds of HK$5,738.1 million ($740 million). Ten cornerstone investors will subscribe for HK$2,673.7 million ($345 million) worth of the offer shares. The cornerstone investors include Taikang Life, Hillhouse Capital, Snow Lake Capital, CICC Capital, UBS Asset Management and Marshall Wace. 

In our initiation note, we highlighted that on a fundamental view, we believe that Jinke is attractive. However, we also noted that the poor post-IPO performance of recent property management IPOs despite good fundamentals was likely due to investors unwilling to pay a growth premium compared to an ever-expanding selection of listed peers. Our valuation analysis suggests that Jinke is fully valued at the proposed IPO price range and we would be inclined to give the IPO a pass on valuation grounds. 

ECM Weekly (8 November 2020) – Ant, Sunac Svcs, Jinke Svcs, Antengene, Gland Pharma, Kalyan Jewel

By Zhen Zhou, Toh

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Ant Group (6688 HK)‘s IPO was primed for a strong debut until it got suspended by the Shanghai exchange for failing to meet the listing guidelines and issuing and listing disclosures. It all seemed to have started from a meeting with China’s regulators (the four finance ministries) but Ming Lu pointed out that Jack Ma’s Bund Summit speech on 24th of October might have been the spark that started it all. The regulatory hold-up is likely going to take a while to resolve and was reported that it will at least take another six months before it comes back to market.

Even though large Hong Kong IPOs have been pulled before, such as Budweiser Brewing Company APAC (1876 HK) and ESR Cayman (1821 HK), those were done before bookbuild was completed. In Ant’s case, the IPO was pulled after bookbuild which was a mess as Ant needed to return the money to investors in two batches. 

However, Asia IPO market is still looking strong. Shinsun Holdings (2599 HK),  Sunac Services Holdings (1820476D HK) and Jinke Smart Services (9666 HK) launched their respective IPO bookbuilds this week.

And next week, Remegen Ltd (1788976D CH) and New Oriental Education (EDU US) Hong Kong secondary debuts on Monday and both traded well in the gray market.

We also heard that Antengene (ANGENE HK) and China Resources Mixc Lifestyle Services (CRML HK) are looking to start/have already pre-marketed their IPO. JD Health (JDH HK) was said to be targeting listing approval soon.

Ke Yan, CFA, FRM also continued his coverage on upcoming Hong Kong biotech listings:

India ECM is finally looking active again. This week, Kalyan Jewellers (KALYAN IN) and Gland Pharma (7172753Z IN) are looking to raise US$250m and US$900m, respectively.

In the U.S, Yatsen Holding, a China cosmetic and skincare brand backed by Hillhouse, Sequoia China, and Tiger Global filed its prospectus with the SEC last week, looking to raise US$500m. We are hearing that the company is pre-marketing its IPO.

Accuracy Rate:

Our overall accuracy rate is 73.4% for IPOs and 66.4% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings this week

  • Kuaishou (Hong Kong, ~US$5bn)
  • Microport Cardioflow (Hong Kong, ~US$300m)
  • Yatsen Holding (the U.S., ~US$500m)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

Analysis on Upcoming IPOs

Name Insight
Hong Kong
Antengene Antengene (德琪医药) Pre-IPO: Proven R&D Track Record by Founder Matters 
Blue Moon

Blue Moon Group Pre-IPO – The Positives – Dominant Market Share, Strong Online Sales 

Blue Moon

Blue Moon Group Pre-IPO – The Negatives – Flagging Offline Sales, Not Really a Primary Raising 

Blue Moon

Blue Moon: No. 1 But No Exclusive Advantage, Observation on the Ground 

Blue Moon

Blue Moon Group Pre-IPO – Online Reviews and Peer Comparison 


ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)


ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)


ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 


ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 


ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance (字节跳动) Pre-IPO – Globally the Most Downloaded App for Jan 2020 Driven by India 


ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 


Dida Pre-IPO – Making Hay While Big Brother Retreats 

E-Star Comm

E-Star Commercial Management Pre-IPO – Better Disclosure in New Prospectus 

E-Star Comm

E-Star Commercial Management Pre-IPO – Still Largely Reliant on Galaxy, Poor Disclosure Doesn’t Help 

Jiayuan Svcs

Jiayuan Services (佳源服务) Pre-IPO – Another Small Property Management Company 


Kilcoy Global Foods Pre-IPO – Rapid Earnings Growth on the Back of Margin Improvement 


Kilcoy Global Foods Pre-IPO – A Lot of Things Still Remain Unexplained 

Megvii Megvii (旷视) Pre-IPO – Remarkable Growth (Part 1) 
Megvii Megvii (旷视) Pre-IPO – A Bet on the Future – Segments, Revenue Drivers and Growth Potential 
Megvii Megvii (旷视) Pre-IPO – The Real Race Is in Research – Founders’ Profile and Talent 
Megvii Megvii (旷视) Pre-IPO – Competitive Landscape and Peer Analysis 
Megvii Megvii (旷视) Pre-IPO –  Initial Thoughts on Valuation 
Ocumension Ocumension (欧康维视) Pre-IPO: All Ready for a Great Listing Except a Block Buster 
Pop Mart Pop Mart Pre-IPO – The Negatives – Is It a Brand Owner or Just a Retailer? 
Pop Mart Pop Mart Pre-IPO – The Positives – Expanding Portfolio+Wider Distribution= Explosive Earnings Growth 
Pop Mart Pop Mart Pre-IPO – Peer Set and Valuation 
Pop Mart Pop Mart Pre-IPO Quick Note – On the Ground – Pop-Up Stores Are Effective 
RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
Simcere Simcere (先声制药) Pre-IPO: Long History but Products Concentrated 
Toplist Toplist China Pre-IPO – Overwhelmingly More Negatives than Positives 
Tasly Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 
WeDoctor WeDoctor (微医) Pre-IPO -App Walk Through – The Online Medical Directory and More 
WeDoctor WeDoctor (微医) Pre-IPO – A More Focused Online Medical Svc Provider than Ping An Good Doctor 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol Ind Anmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Burger King

Burger King India Pre-IPO – Has Been Growing Fast and Plans to Grow Even Faster 

Burger King

Burger King India Pre-IPO – Peer Comparison Yields Interesting Nuggets on Profitability and Capex 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS Info CMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal Crop Crystal Crop Protection Pre-IPO – DRHP Raises More Questions than in Answers
ESAF SFB ESAF Small Finance Bank Pre-IPO – Growing Fast but Remains Highly Dependant on a Related Party 
Flemingo  Flemingo Travel Retail Pre-IPO – Its a Different Business in Every Country
Emami Cem Emami Cement Pre-IPO – Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 
IRFC Indian Railway Finance Pre-IPO – Low Risk, Low Margin Business 
NSE NSE IPO Preview- Not Only Fast..its Risky and Expensive
NSE National Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some
Mrs. Bector Mrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Sta


Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 


Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable
Lodha Lodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB Met PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Samhi Hotels Samhi Hotels Pre-IPO – Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 
QSR QSR Brands Pre-IPO – As Healthy as Fast Food
PTTOR PTT Oil and Retail IPO – F&B Business Is the Profit Driver 
The U.S
CDP CDP Holdings Pre-IPO Review – Highly Reliant on Best Inc. 
CloudMinds CloudMinds Inc Early Thoughts – Still Nascent

Root Insurance. Leader And Innovator In Pay-How-You-Drive (PHYD) Segment

By Andrei Zakharov

In October VC-backed app-based car insurance unicorn Root announced pricing of its IPO and sold ~27 million shares of Class A common stock at IPO price of $27 a share (above its initial target range of $22-25). Columbus insurtech startup raised more than $1 billion dollars and funds affiliated with Dragoneer Investment Group and Silver Lake Technology agreed to purchase an aggregate of up to $500 million worth of shares in private placements. We saw solid demand for Root Insurance IPO. However, Root shares fell ~16% below IPO price and we believe this is a great buying opportunity for long-term investors.

Root is a fully licensed insurance carrier with a scaled proprietary telematics solution and operates on fast growing Pay-How-You-Drive (PHYD) segment of insurance telematics market. Under PHYD model driver may control the cost of insurance premium. Furthermore, company offers such products as Root Renters and Root Home cross-selling non-auto products across its customer base. At 14x and 11x forward EV/Revenue on our CY20 and CY21 estimates, which is a significant ~60% discount to its closest publicly listed peer Lemonade, Root valuations look attractive under our base case scenario. If we look at forward adjusted gross profit multiples, Root shares trade at 49x EV/Adj. Gross Profit on our CY21 estimates. This is a modest discount to insurtech peer Lemonade.

JD Health (京东健康) Pre-IPO – Peer Comparison – It’s a Close Fight and Competition Is Intensifying

By Zhen Zhou, Toh

JD Health (JDH HK) is looking to raise about US$3bn in its upcoming Hong Kong IPO.

JDH’s retail pharmacy and online healthcare services form a strong, closed loop, end-to-end healthcare ecosystem that is well-positioned to benefit from the digitalization of China’s healthcare system. It has an extensive network of online and offline pharmacies which is expanding into offering more online healthcare services. Revenue has been strong in the past three years and it has accelerated further due to COVID-19. 

In this note, we will compare JDH to other listed China online healthcare tech companies.

Our earlier coverage of the company:

Upstart Holdings IPO Preview

By Douglas Kim

Upstart Holdings is getting ready to complete its IPO in the US stock market in the next several weeks. Upstart Holdings provides artificial intelligence, cloud-based lending platform. Upstart Holdings is led by several ex-Google employees including its CEO Dave Girouard. It put an IPO placeholder of $100 million but this is likely to be raised further. Goldman Sachs, BofA Securities, Citi, Jefferies, and Barclays are the joint bookrunners on the deal.

The company uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company’s inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. 

Upstart Holdings generated revenue of $164.2 million (up 65.3% YoY) in 2019 and $146.7 million (up 44.4% YoY) in 1Q-3Q2020. From 2017 to 2019, the company’s sales increased by 69.3% CAGR. The company’s operating margins have steadily improved in the past few years from -13.2% in 2017, -8.0% in 2018, and -2.8% in 2019. The company’s operating margins turned positive to 0.9% in 1Q-3Q 2020. 

POSCO Chemical Rights Offer: Terms & Trade Approach

By Sanghyun Park

POSCO Chemical announced a massive rights offering.

The total offering is 16.5M shares for ₩1T. 

Issuer Posco Chemical Co Ltd
Ticker 003670
Target A public offering of forfeited shares after offering to stockholders
Transferability Renounceable
Volume 16,475,000
Bonus issue volume 0
Preliminary price ₩60,700
Preliminary value ₩1,000,032,500,000
Oversubscription privilege 20.00%
Banker KIS, NH, & KB
– Underwriting type Standby
Source: DART

The offering carries a 27% capital increase with a 21.3% dilution. The ESOP takes 11.8%, putting the shareholder per-share allocation at 0.238.

Common 60,988,220
Pref (incl. RCPS & CPS) 0
Total shares 60,988,220
Treasury shares 0
Total shares ex treasury shares 60,988,220
Offer volume 16,475,000
– Common 16,475,000
– Pref 0
Per-share allocation 0.2382583
Capital increase 27.01%
Dilution 21.27%
Total shares after rights offer 77,463,220
– Common 77,463,220
– Pref 0
Bonus issue 0
– Common 0
– Pref 0
Per-share allocation 0.0000000
Total shares after bonus issue 77,463,220
– Common 77,463,220
– Pref 0
ESOP allocation 1,944,050
– % 11.80%
Stockholder allocation 14,530,950
– % 88.20%
Source: DART

December 8 is the ex-rights, giving 1st-round pricing on December 4. You can trade subscription rights on December 28~January 5, shortly followed by the final pricing on January 8.

The subscription falls on January 13, followed by the listing on February 3 next year.

BOD meeting 2020. 11. 6
Preliminary pricing 2020. 12. 4
Ex-rights date 2020. 12. 8
Record date 2020. 12. 9
Subscription rights trade beginning 2020. 12. 28
Subscription rights trade ending 2021. 1. 5
Final pricing 2021. 1. 8
Stockholder subscription 2021. 1. 13
Public subscription 2021. 1. 18
Payment 2021. 1. 21
Listing 2021. 2. 3
Record date – bonus shares N/A
Listing – bonus shares N/A
Source: DART

Pricing is nothing unusual at a 20% discount.

1st round RP × (1 – 20%) / [1 + (27.01% × 20%)]
– Reference price (RP) Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]
– Reference date 2020. 12. 4
Ex-rights base price [RP + (1st × 27.01%)] / (1 + 27.01%)
– Reference price (RP) Previous close
– Reference date 2020. 12. 8
2nd round RP × (1 – 20%)
– Reference price (RP) Min [Close, Avg (Close, 1W VWAP)]
– Reference date 2021. 1. 8
Final Max [Min (1st, 2nd), 3D VWAP × 60%]
– Reference date 2021. 1. 8
Discount rate 20.00%
Capital increase rate 27.01%
Source: DART

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