Daily BriefsIPOs and Placements

Equity Capital Markets: Krafton Inc, Bukalapak, Asymchem Laboratories, Iljin Hysolus, Del Monte Philippines, Paytm, Maruti Suzuki India, Yonghe Medical Group and more

In today’s briefing:

  • Krafton Bookbuilding Last Day: Institutional Mood So Far
  • Bukalapak IPO Valuation
  • Asymchem Labs A/H Listing Early Look – Fast Growing, Relatively Insulated
  • Iljin Hysolus Reduces IPO Price Range
  • Del Monte Philippines Pre-IPO – Peers, Assumptions, Valuations and Deal Dynamics
  • Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order
  • India Channel Insight | Maruti, Hyundai, Tata Motors, Eicher, Ola Electric
  • Pre-IPO Yonghe Medical Group – Here Are the Concerns

Krafton Bookbuilding Last Day: Institutional Mood So Far

By Sanghyun Park

Krafton will close the bookbuilding today, which started on the 14th. Two days later, it will finalize and announce the offering price on the 29th.

Krafton IPO schedule
Book close2021. 7. 27
Allotment2021. 7. 29
Subscription2021. 8. 2
Payment2021. 8. 5
Listing2021. 8. 10
Source: DART

Online press conference on the 26th

Krafton held an online press conference yesterday, where the CFO extensively commented on the bookbuilding atmosphere.

(Courtesy News 1)

First of all, the CFO said that the response was particularly enthusiastic from overseas institutional investors. He said that they include a number of long-term funds.

This is a direct quote from Bae Dong-geun, CFO of Krafton. He said,

It is difficult to give a clear answer because the institutional bookbuilding has not been completed yet, but at this point (one day left until the bookbuilding deadline), I can confidently say that it was a success.

He further revealed that overseas institutions participated more aggressively in the subscription than local institutional investors, and this somewhat surprising trend was clearly seen in the actual pricing.

What the bankers are saying

Then, below are the actual results of bookbuilding being leaked by the bankers.

The bankers are also saying that the institutional mood confirmed during the two weeks of bookbuilding is obviously hotter than initially expected.

For example, on the first day of bookbuilding alone, overseas institutional investors applied for a quantity that was 20 to 30 times more than the allocated quantity at a price higher than the upper end of the indicative price band (₩498,000)

Indicative price bandLower endUpper end
Price₩400,000₩498,000
Base deal size₩3,461.7B₩4,309.8B
– Institutional allotment₩1,903.9B₩2,370.4B
Implied market cap₩19,559.2B₩24,351.2B
Source: DART

Of course, this news also reached the ears of domestic institutions.

The pricing for local institutional investors started on the 20th. And it is being said (or leaked by the bankers) that local institutions are placing orders using all available funds as their competitive sentiment must have been triggered by the aggressive participation of foreign institutions.


Bukalapak IPO Valuation

By Oshadhi Kumarasiri

Indonesian e-commerce unicorn, Bukalapak (BUKA IJ) is expected to price its IPO at the top end of the offer range, which implies a market cap and EV of $6.0bn and $4.4bn respectively.

We like the way Bukalapak has placed itself in a relatively low competitive subsector within the Indonesian e-commerce market. However, it appears that it is extremely difficult to generate sufficient merchant commissions and advertising revenue from Bukalapak’s subsector of e-commerce. Although we are worried about the fact that Bukalapak may not be profitable in the medium term (inability to generate sufficient revenue), there are plenty of investors willing to invest in Bukalapak based on the company’s revenue potential.

Having said that, we still don’t anticipate Bukalapak to generate generous gains on its trading debut due to the extremely high IPO valuation. Nevertheless, there could be some upside on trading debut, but we think risks rewards are not sufficiently skewed to the upside trade this IPO with any conviction.


Asymchem Labs A/H Listing Early Look – Fast Growing, Relatively Insulated

By Sumeet Singh

Asymchem Laboratories (002821 CH) (AL) aims to raise around US$1-1.5bn in its H-share listing in Hong Kong. The A-shares listed were listed in Shenzhen in 2016.

AL is a provider of outsourced pharmaceutical development and manufacturing solutions and services. AL provides process development and manufacturing services for small molecule drugs throughout the preclinical, clinical and commercial stages. According to Frost & Sullivan, it is the fifth largest drug substance contract development manufacturing organization (CDMO) globally, and the largest China-based commercial stage chemical drug CDMO, as measured by 2020 revenue.

As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics. 


Iljin Hysolus Reduces IPO Price Range

By Douglas Kim

Iljin Hysolus reduced its IPO price range. The company announced that it will reduce the IPO price range from 30,300 won to 37,300 won previously to 25,700 won to 34,300 won, respectively. This represents a decline of 8% to 15%.

The IPO deal size has been revised down to US$243 million to US$325 million. The expected market cap after the IPO is from 933 billion won (low) to 1,245 billion won (high). The book building for the institutional investors starts on 19 August 2021. 

Our revised base case valuation of Iljin Hysolus is implied market cap of 940 billion won or 25,898 won per share, which represents 1% higher than the low end of the IPO price range of 25,700 won. Given the lack of upside, we continue to maintain a NEGATIVE view of this IPO and we would avoid this IPO.

Deal Specifics of the Iljin Hysolus IPO (Revised):
 
Lead underwriters of the IPO: 
Mirae Asset Securities, Samsung Securities
Expected IPO price per share: 
25,700 won (low)/34,300 won (high)
Number of Shares for IPO:
10.89m shares (7.26m new shares and 3.63m old shares)
IPO base deal size: 
US$243 mn (low);  US$325 mn (high)
Expected common shares outstanding, fully diluted (post-IPO):  
36.31m shares
Expected market cap after IPO:
933 billion won (low)/1,245 billion won (high)
Book open: 
19-Aug-21
Book closed:
20-Aug-21
Listing date: 
TBD
Source: Company data
 

Del Monte Philippines Pre-IPO – Peers, Assumptions, Valuations and Deal Dynamics

By Zhen Zhou, Toh

Del Monte Philippines (1575316D PM) (DMPI) is looking to raise about US$791m in its upcoming Philippines IPO.

Del Monte Philippines, Inc (DMPI) is a leading food and beverage producer in the Philippines and internationally. DMPI has been in operation in the Philippines for 95 years. It produces, markets, and distributes its products worldwide under brands like Del Monte, S&W, Contadina and it has a dominant market position across a range of products. 

We have previously covered the IPO in:


Paytm IPO: Multiple Revenue Channels but Profitability Is a Tall Order

By Shifara Samsudeen, ACMA, CGMA

India’s largest payment and financial services platform Paytm (PAYTM IN)  has filed for an IPO to raise about INR166bn (US$2.2bn) through the issuance of new shares as well as through the sale of existing shares. Paytm plans to raise about INR83bn through the sale of new shares while the existing shareholders including the company’s founder Mr. Vijay Shekhar Sharma and other investors plan to offer part of their shareholding in the company.

According to news media outlets, Paytm aims for a valuation of about US$25-30bn and the company’s FY03/2021 revenues of INR28bn (US$364m) implies a trailing EV/Sales of 69-82x.

Paytm’s revenues grew 1.5% YoY in FY03/2020 while it declined 14.6% YoY in FY03/2021 due to the pandemic. We expect the company’s commerce and cloud services business’s top line to further decline in FY03/2022E due to the resurgence of Covid-19 in India in April 2021. Though Paytm has multiple monetisation channels and established itself as a category leader in overall payments sector in India, we believe it will take a few more years for the company to reach profits.

In this insight, we examine Paytm’s business model, segments, revenues and margins. In a follow-up insight, we plan to take a look at the corporate governance related issues of the company and run through our governance framework.


India Channel Insight | Maruti, Hyundai, Tata Motors, Eicher, Ola Electric

By Pranav Bhavsar

In this Insight, we present commentary from our interactions with one of the largest dealers of Maruti Suzuki India (MSIL IN) , Store Manager of Royal Enfield from Eicher Motors (EIM IN) , Dealership owners of Hyundai Motor Co (005380 KS) and an Electric Vehicle (EV) of Greaves Cotton (GRV IN). We also share anecdotal commentary that we have gathered about Tata Motors Ltd (TTMT IN) .

About India Channel Insight 

Our objective with India Channel Insight is to share snippets from our channel interactions that are part of our research process. These snippets emerging out of these interactions and have been aiding us to generate interesting trade ideas and have often proven to be reliable sources of qualitative alpha.


Pre-IPO Yonghe Medical Group – Here Are the Concerns

By Xinyao (Criss) Wang

Modern fast pace of life and huge work pressure make hair loss anxiety spread to all kinds of groups. As people pay more attention to hair, the awareness of hair health and management is gradually awakening, and hair transplantation is one of the solutions. On June 17, Yonghe Medical Group (YMG HK) formally submitted its prospectus to the HKEX and planned to be listed on the main board. If everything goes well, Yonghe will be the first listed company in the field of hair transplantation in China. However, despite the promising market potential, there are some concerns of the Company that deserve investors’ attention.


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