Daily BriefsIPOs and Placements

Equity Capital Markets: Smart Share Global, Power Grid Corporation Of India, SK ie technology, Lodha Developers, WM Tech Corporation, Deliveroo and more

In today’s briefing:

  • Smart Share Global (怪兽充电) IPO Trading – Cheaper Now but Still May Not Be Enough
  • POWERGRID InvIT Pre-IPO – Always Going to Be Tricky with a Declining Yield
  • SK IET IPO Preview
  • Macrotech (Lodha) Developers Pre-IPO – New Name but up to Some of the Same Old Tricks
  • WM Tech IPO Initiation: Food for Thought
  • Deliveroo IPO First Day Trading: Too Risky to Hold Long Term
  • SK IE Technology IPO: Key Info & Issues at Hand

Smart Share Global (怪兽充电) IPO Trading – Cheaper Now but Still May Not Be Enough

By Zhen Zhou, Toh

Smart Share Global (EM US) (SSG), also known as Energy Monster, raised about US$150m at US$8.50 per ADS, below the bottom-end of its initial price range. 

SSG is a consumer tech company that provides mobile device charging service through online and offline networks. The company is the largest mobile device charging service provider in China in terms of 2020 gross revenue.

In this note, we look at deal dynamics and provide an update on valuation.

Our previous coverage of the IPO:


POWERGRID InvIT Pre-IPO – Always Going to Be Tricky with a Declining Yield

By Sumeet Singh

POWERGRID Infrastructure Investment Trust (PGIT) aims to raise around US$1bn in its India IPO. 

PGIT is an investment trust setup to own transmission assets of its sponsor Power Grid Corporation of India Limited (PGCIL). PGCIL is a central public sector enterprise which has been listed since 2007. 

PGIT will initially own five assets with a total network of 11 power transmission lines of approximately 3,698.59 ckm and three substations having 6,630 Megavolt amperes (MVA) of aggregate transformation capacity, as of Sep 2020, across five states in India. The total valuation of the assets was INR105bn (US$1.4bn) as of Sep 2020. 

These assets were awarded to PGCIL on a  build-own-operate-maintain (BOOM) basis. Therefore, the assets are operated under a long 35 years service agreement with largely pre-fixed revenue based on availability. In that sense, they will provide stable returns. 

However, its revenue terms are structured in such a way that its yield will continue to decline, while its sponsor’s government ownership will mean that it’s unlikely to diversify away from transmission assets with declining yield.


SK IET IPO Preview

By Douglas Kim

  • SK IET plans to complete its IPO in May.  The IPO price range is from 78,000 won to 105,000 won. The IPO base deal size is from $1.5 billion to $2.0 billion. According to the bankers’ valuation, the expected market cap of SK IET is from 5.6 trillion won to 7.5 trillion won. SK IET IPO will be the biggest IPO in Korea so far this year, beating SK Bioscience (302440 KS) which recently raised $1.3 billion in its IPO in March. 
  • The company will offer 21.39 million shares in the IPO (8.56 million new shares and 12.83 million old shares). The offered shares of 21.39 million represents nearly 30% of the outstanding shares (post IPO), which is large relative to its total outstanding shares. SK Innovation, which has a 90% stake in SK IET, plans to sell a 22.7% stake in the company in this IPO. In September 2020, SK Innovation sold a 10% stake in SK IET for 300 billion won to Premier Partners, a local fund management company. 
  • SK IET generated 197 billion won in EBITDA in 2020. Applying a 48.1x EV/EBITDA multiple (average valuation multiple of the company’s comps), this results in an EV of 9,458 billion won and implied market cap of 9,309 billion won (130,572 won per share). After applying IPO discount 19.6% – 40.3%, this results in an IPO price range of 78,000 – 105,000 won. 

Macrotech (Lodha) Developers Pre-IPO – New Name but up to Some of the Same Old Tricks

By Sumeet Singh

Macrotech Developers  (Lodha) aims to raise around US$350m in its India IPO. It is the largest real estate developer in India, by residential sales over FY14-20. In FY20, it had a share of 24% of total supply (by units), 32% of total absorption (by units) and 46% of total absorption (by value) in the Top Seven Indian Markets. 

Lodha’s is primarily a residential developer with most of its operations restricted to the Mumbai Metropolitan Region (MMR).  It has projects across the value spectrum from the affordable segment to ultra-luxury high-end residential projects. 

As of Dec 2020, it had completed 91 projects with a developable area of 77.22m sqft. As of Dec 2020, it also had 36 ongoing and 18 planned projects in India with a developable area of 28.78m sqft and 45.08m sqft, respectively.

This will be the company’s third listing attempt, after 2009/10 and 2018. The size of the deal is expected to be much smaller as well versus the US$800m that it was hoping to raise in 2018. We have looked at its previous listing attempt in our prior note, Lodha Developers Pre-IPO – Second Time Lucky but Not Really that Much Affordable.

In this note we will talk about the updates since our last note in 2018


WM Tech IPO Initiation: Food for Thought

By Arun George

WM Tech Corporation (WMT HK) is a leading fresh food and FMCG (fast-moving consumer goods) retailer in China through the Wumart and Metro China brands. It is the largest premium store-based fresh food and FMCG retailer in China with a 19.5% market share as measured by sales in 2020, according to Frost & Sullivan. WM Tech counts Tencent Holdings (700 HK) and Lenovo (992 HK) as shareholders. WM Tech has filed for an HKEx IPO to raise potentially $1 billion, according to press reports.  

The confusing “WM Tech” holdco name is to emphasise that the proprietary technology platform (WDOS) is a key differentiation from other players in an increasingly competitive market. The technology platform is claimed to provide a unified data loop between the online and offline channels to maximize operational efficiency and greatly improve the shopping experience. 

The full adoption of this technology platform is viewed as the key to delivering synergies from the April 2020 acquisition of Metro China from METRO AG (MEO GR). While WM Tech is not the only store-based retailer with a complete technology platform, Wumart’s performance suggests that there is some merit in the claim of technology differentiation. Overall, we believe that WM Tech’s fundamentals offer more positives than negatives.


Deliveroo IPO First Day Trading: Too Risky to Hold Long Term

By Oshadhi Kumarasiri

One of London’s most anticipated tech IPOs in recent history, Deliveroo (ROO LN), tumbled 26.3% on first day after pricing its shares at £3.90 per share, at bottom end of the lowered IPO price range. The share price went down to £2.71 per share in early trading before eventually ending the day at £2.87 per share.

Deliveroo managed to narrow losses last year, however if Deliveroo is requested to treat its riders as employees, all that could be easily undone. Therefore, we expect shares to remain under pressure medium term with additional pressure from retail selling towards mid next week as shares bought via the Deliveroo app becomes tradable from 7th April.


SK IE Technology IPO: Key Info & Issues at Hand

By Sanghyun Park

SK IE Technology, SK Innovation’s most profitable subsidiary, finally put out the IPO book.

It offers a total of 21.39M shares with a split of 40% primary and 60% secondary. The institutional allotment is 55%.

Mirae and JPM are the main underwriters with a firm commitment.

The book opens on April 13, and runs until April 23. The subscription follows on April 28.

Overview
IssuerSK IE Technology
Ticker361610
BourseKOSPI
Pre-IPO SO62,741,592
– Common62,741,592
– Pref (incl. RCPS)0
Offering21,390,000
– Common21,390,000
– Pref0
– % of SO34.09%
– Institutional allotment55.00%
SplitYes
– Primary %40.00%
– Primary qty.8,556,000
– Secondary %60.00%
– Secondary qty.12,834,000
Post-IPO SO71,297,592
Capital increase rate13.64%
Dilution12.00%
CornerstonesNo
ClawbackNo
GreenshoeNo
BankerMirae, JPM, KIS, CS, SK, Samsung, & NH
– TypeFirm commitment
Source: DART
Timetable
Book open2021. 4. 13
Book close2021. 4. 23
Allotment2021. 4. 26
Subscription2021. 4. 28
Payment2021. 5. 3
ListingTBA
Source: DART

The major shareholder, SK Innovation, will continue to retain 61.2% with a 6 month lock-up. Excluding 6% to be owned by the ESOP, at least 76% will be locked up from 6 months to 1 year.

ShareholdingPost IPOLock-up
SK Innovation61.20%6 months
Premier Superior Ltd.8.80%6 months
ESOP6.00%1 year
IPO24.00%
Total100.00%
Source: DART

The price band is ₩78,000~105,000, giving a base deal size of ₩1.67~2.25T at an implied MC of ₩5.56~7.49T.

The IPO book valuation is ₩9.31T at a 48.12x EV/EBITDA, so the indicative price band is at a 19.6~40.3% discount.

Pricing (₩B)LowHigh
Price (₩)₩78,000₩105,000
Base deal size1,668.42,246.0
– Institutional allotment917.61,235.3
Implied market cap5,561.27,486.2
– Discount40.27%19.59%
Source: DART
Valuation (₩B)
Ticker361610
SO71,297,592
Reference value (EBITDA)196.6
Reference valuation multiple (EV/EBITDA)48.12
EV9,459.1
Interest-bearing debt515.8
Cash & cash equivalents367.1
Net borrowings148.7
Market cap9,310.4
Price per share₩130,586
Source: DART
Valuation (₩B)Yunnan Energy New Material Co LtdEcopro BM Co LtdIljin Materials Co LtdPosco Chemical Co LtdChunbo Co Ltd
TickerSHE:002812247540020150003670278280
SO887,716,76521,035,16646,110,83560,988,22010,000,000
Reference value (EBITDA)326.591.685.3124.741.3
Reference valuation multiple (EV/EBITDA)52.2037.8035.6077.8037.20
Average48.12
Source: DART
Financials (₩B)SK IE TechnologyYunnan Energy New Material Co LtdEcopro BM Co LtdIljin Materials Co LtdPosco Chemical Co LtdChunbo Co Ltd
Assets1,991.63,535.5791.81,076.62,088.1260.7
– Current assets566.81,496.5306.0519.1810.6140.1
– Non-current assets1,424.92,039.0485.8557.61,277.4120.6
Liabilities783.41,542.7330.5211.51,064.436.2
– Current liabilities272.6737.2187.894.4220.619.8
– Non-current liabilities510.7805.5142.7117.1843.816.3
Equity1,208.31,908.1437.7614.01,000.7224.5
– Capital62.7152.410.523.130.55.1
– Retained earnings151.5472.1131.7196.3778.9142.4
Sales469.3736.1854.7536.91,566.2155.5
OP125.2265.154.551.060.330.1
NP88.2191.742.744.229.627.4
EPS₩1,521₩216₩2,065₩959₩485₩2,742
OPM26.68%36.02%6.38%6.38%9.50%3.85%
NPM18.79%26.05%4.99%4.99%8.23%1.89%
ROA4.43%5.42%5.39%5.39%4.11%1.42%
ROE7.30%10.05%9.75%9.75%7.20%2.96%
Current ratio207.88%203.00%162.99%162.99%549.85%367.38%
Debt ratio64.84%80.85%75.51%75.51%34.45%106.37%
Source: DART

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