Daily BriefsIPOs and Placements

Equity Capital Markets: Ming Yuan Cloud Group, Ganfeng Lithium, Ant Financial, iHuman Inc., Neusoft Education, Huazhu Group, JFrog Ltd and more

By September 16, 2020 No Comments

In today’s briefing:

  • Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still
  • Ganfeng Lithium Placement – Momentum Play
  • Ant Group IPO: Ant Vs CreditTech Peers
  • Ming Yuan Cloud IPO: Valuation Insights
  • IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue
  • Neuedu (东软教育) Pre-IPO: COVID-19 Updates, Financial Comp, Valuation
  • Huazhu Group Secondary Listing: Consensus Ignores COVID Even as The Business Goes Asset-Heavy
  • JFrog IPO Valuation Analysis

Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still

By Mio Kato

Ming Yuan Cloud offers software dedicated to the real estate industry and is the market leader in China. The company has already secured a bevy of high-class investors as cornerstones with Sequoia, GIC, Fidelity and Blackrock on board. We examine the company’s business model and market exposure below.

Ganfeng Lithium Placement – Momentum Play

By Sumeet Singh

Ganfeng Lithium (1772 HK) aims to raise around US$191m to fund its capacity expansion plans. 

We have covered the H-shares listing in 2018, Ganfeng Lithium IPO (赣锋锂业): Falling Lithium Prices Weigh on the Leading Producer.

The shares have more than doubled on YTD basis, even though earnings have far from kept pace. However, analyst continue to be positive on the stock and are building in much faster growth ahead.

Ant Group IPO: Ant Vs CreditTech Peers

By Supun Walpola

In our previous notes, we suggested that Ant’s medium-term revenue and margins are likely to be driven by its CreditTech business (refer our notes Ant Group: Early Thoughts on the IPO – Alipay Is NOT the Cash Cow Here and Ant Group IPO: CreditTech to Drive Medium-Term Growth and Margins).

However, Ant had left out several key pieces of information about its CreditTech business from the IPO prospectus, including its revenue and cost structures, margins, and even the number of customers. In this insight, we compare Ant’s CreditTech business with its listed peers, Lexinfintech Holdings (LX US) and 360 Finance, Inc. (QFIN US), in an attempt to get an insight into some of these missing pieces of information.    

Ming Yuan Cloud IPO: Valuation Insights

By Arun George

Ming Yuan Cloud Group (MYCG HK) is the leading software solution provider for property developers in China with a market share of 18.5% as measured by revenue in 2019, according to Frost & Sullivan. Ming Yuan has launched its IPO at a price range of $15.00-16.50 per share. At the mid-point of the IPO price range, Ming Yuan will raise net proceeds of HK$5,635.9 million ($727 million). Six cornerstone investors will subscribe for 36.3% of the shares under the global offering, at the mid-point of the IPO price range. The cornerstone investors are Hillhouse Capital, GIC, China Structural Reform Fund, Sequoia Capital, BlackRock and Fidelity International. 

In our initiation note, we stated that Ming Yuan’s fundamentals are attractive due to several factors. Overall, we think that a reasonable PEG valuation, a market-leading business and solid cornerstone support makes Ming Yuan tempting at the proposed pricing range. 

IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue

By Zhen Zhou, Toh

iHuman Inc. (IH US) is looking to raise US$100m in its upcoming IPO in the U.S.

iHuman is a childhood edutainment company in China. The company develops products and services that caters to the education demands of children aged between three and eight. The company has developed and now operates the widely popular app, iHuman Chinese. It also operates other apps such as iHuman English World, iHuman Pinyin, and etc. On top of its app business, the company sells offline products that include learning materials, smart reading pens, building blocks, and learning consoles.

In this note, we will look at the company’s background, analyze its financials and operating metrics, and share our thoughts.

Neuedu (东软教育) Pre-IPO: COVID-19 Updates, Financial Comp, Valuation

By Ke Yan, CFA, FRM

Neuedu, a leading IT higher education service provider in China, is looking to raise up to USD 300m in its Hong Kong listing.

In our previous note, we discussed that Neuedu operated three private universities (Dalian, Chengdu, Foshan) in China with capacity utilization of over 90% in the past three years. Its three universities all have nearly 20 years of operation. We like Neuedu’s long-established reputation of private higher education in IT-related fields. Of the three, Dalian University stands out in terms of ranking among private universities. Having said that, the average graduate salary was marginally better than the respective provincial average by low double-digit. The company is undertaking RMB 2.4 bn expansion plans to increase the campus capacity by 44% by 2023. The company is held by founders, Neusoft, Alps Alpine, PICC, and individual investors.

In this note, we will provide updates with respect to the impact of COVID-19 in the first six months of the year. We compare the company’s financials with other listed peers and provide our thoughts on valuation.

Our previous coverage on Neuedu

Huazhu Group Secondary Listing: Consensus Ignores COVID Even as The Business Goes Asset-Heavy

By Oshadhi Kumarasiri

Founded by Mr. Ji Qi, a co-founder of Trip.com (TCOM US), Huazhu Group (HTHT US) is the second-largest hotel chain in China and the ninth-largest in the world. Huazhu has 17 hotel chain brands covering the entire spectrum from budget to upscale hotels.

Source: Company Disclosures

The company started operations in 2005 as a budget hotel chain and was listed on the NASDAQ stock exchange on 26th March 2010.

Following other US-listed Chinese companies, Huazhu has filed for a secondary listing on the Hong Kong stock exchange to issue 20.4m shares at a maximum offer price of HK$ 368.0 per share.

The offer commenced on 11th September and remains open till 12:00 noon on 16th September 2020.

JFrog IPO Valuation Analysis

By Douglas Kim

In this insight, we provide a valuation analysis of JFrog which raised the IPO price range to $39 to $41 per share from $33 to $37 due to higher investors’ demand. The company and existing shareholders are selling 8 million shares and 3.57 million shares, respectively. At $41 per share, the JFrog IPO could raise $474 million. 

Our valuation analysis suggests an implied market cap of $5.0 billion and a target price of $55.2 per share for JFrog. The IPO price range is from $39 to $41 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 35% upside to this price level. Given the solid upside, we have a positive view of this stock.

The key investment thesis of JFrog is that it is a company has been able to capitalize on its first mover’s advantage in this new product category of Continuous Software Release to scale up its business significantly without spending large sums of money on sales & marketing and this is one of the key reasons why the company has quickly become profitable.

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