Daily BriefsIPOs and Placements

Equity Capital Markets: Yatsen Holding, JD Health, Kalyan Jewellers, Edding Group, DoorDash Inc and more

In today’s briefing:

  • Yatsen IPO: Valuation Insights
  • ECM Weekly (15 November 2020) – JD Health, Kuaishou, CR Mixc Life, Antengene, and Placements!
  • Kalyan Jewellers IPO: In a Recovery Following a Strategy Mishap
  • Edding Group (亿腾医药) Pre-IPO: Distributor Turning Pharmaceutical
  • DoorDash IPO Context: What It Is & How It Compares to Online Food Delivery Universe

Yatsen IPO: Valuation Insights

By Arun George

Yatsen Holding (YSG US) is the largest and only domestic company among the top ten beauty companies in China as measured by colour cosmetics retail sales value, according to CIC. 

Yatsen has launched its IPO at a price range of $8.50-10.50 per ADS. Indications of interest have been received for up to $300 million of the offer shares. Existing shareholders, Hillhouse Capital and Tiger Global will subscribe for $120 million and $80 million of the offer shares, respectively. Tencent Holdings (700 HK) and Yunfeng Financial Group will subscribe for $50 million and $50 million of the offer shares, respectively. Yatsen will raise net proceeds of $521.5 million at the mid-point of the IPO price range. 

In Yatsen IPO Initiation: Face the Facts, we stated that while Yasten is seemingly another new economy company with a winning proposition, the fundamentals are less than ideal which suggests that caution is warranted. In Yatsen IPO: Comparison with Leading Domestic Brands we noted that in comparison to peers, Yatsen offers investors a trade-off between high growth and margin/cash generation. Our valuation analysis suggests that IPO price is unattractive and we would be inclined to give the IPO a pass. 


ECM Weekly (15 November 2020) – JD Health, Kuaishou, CR Mixc Life, Antengene, and Placements!

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.

Much has happened since Ant Group (6688 HK)‘s IPO got pulled so this will be a lengthy weekly note.

Thanks to The Wall Street Journal (WSJ), we now know that Xi Jinping personally cancelled Ant’s IPO due to Jack Ma’s brazen comments a few weeks earlier. This doesn’t look good, especially with news of China’s antitrust watchdogs publishing draft rules targeting monopolistic practices of digital platforms.

The draft rules aim to prevent anti-competitive behavior among online platforms, collaboration on customer data, eliminating smaller payers, and etc. It also mentioned greater regulatory oversight of VIE which will obviously impact upcoming China IPOs and listed companies alike since most of them are built upon VIE structure to raise capital from foreign investors. The Chinese government has not officially legalized such a structure and could use this chance to reign in their control over these companies.

Well, it’s 2020, just when you think the bad news end here, there’s more.

Hong Kong’s Securities and Futures Commission (SFC) was said to be planning new code of conduct for equity and debt deals. This may see the introduction of framework to calculate fees for bookrunners. Companies looking to list may also need to secure underwriting syndicates earlier to limit non-bookrunners from pitching shares to investors to show they have demand in a bid to secure the bookrunner role. There are also potential changes to allocation rules, specifically, regarding the cornerstone structure in HK IPOs where cornerstone investors can secure guaranteed (usually larger) allocation in an IPO in exchange for a six-month lock-up period. For now, nothing is set in stone and, to be fair, this isn’t necessarily bad since the goal here is to tighten supervision. 

Aside from Ant’s IPO “hiccup” earlier, Hong Kong IPO activity is still looking strong, for now. JD Health (JDH HK), Blue Moon Group Holdings (BMG HK), and Evergrande Services was said to have gotten their approval this week and will start premarketing in the coming week. Netjoy (NETJOY HK) was also said to be seeking approval this week but we have yet to get confirmation of its approval.

Antengene (6996 HK) launched its IPO this week and Ke Yan, CFA, FRM shared his thoughts on valuation.

We also covered recently filed Beijing Kuaishou Technology Co Ltd (1496219D CH) which is expected to raise US$5bn.

In Australia, it’s a rare treat to get two IPOs almost at the same time. Dalrymple Bay Infrastructure and Nuix have set their terms for IPO and will begin their bookbuild process soon.

There will also be a few trading debuts next week. Jinke Smart Services (9666 HK), Shinsun Holdings (2599 HK), and Sunac Services (1516 HK) will debut in Hong Kong on Tuesday, Wednesday, and Thursday, respectively, followed by Gland Pharma (7172753Z IN) on Friday in India. 

Last but not least, for placements, there were deals across different countries and they were mostly secondary share sale. There is Ascendas Real Estate Investment Trust (AREIT SP) private and preferential placement in Singapore to buy office properties and data centres, Japan Airlines (9201 JP) primary placement to shore up balance sheet, selldowns by shareholders in Jiumaojiu (9922 HK), Shenzhou Intl Group Holdings (2313 HK), BDO Unibank Inc (BDO PM) and VGI PCL (VGI TB).

Out of these, the one that stood out (which happened to be the only one we chose to avoid) was VGI’s placement which closed higher the day after its done despite its massive deal size (relative to ADV) and deep discount (11%) to last close. The deal was said to be driven by reverse enquiries and was well covered by institutional investors.

Accuracy Rate:

Our overall accuracy rate is 73.4% for IPOs and 66.1% for Placements 

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

New IPO filings this week

  • New Horizon Health (Hong Kong, ~US$300m)
  • Central China Management (Hong Kong, >US$100m)
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

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

ByteDance

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

Dida

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 

JD Health

JD Health (京东健康) Pre-IPO – Well-Positioned to Ride China’s Healthcare Digitalization 

JD Health

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

JD Health

JD Health (京东健康) Pre-IPO – Assumptions and Valuations 

Kilcoy

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

Kilcoy

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

Kuaishou

Kuaishou Technology Pre-IPO – The Positives – Hot Segment, Fast Growth 

Kuaishou

Kuaishou Technology Pre-IPO – The Negatives – Ample Doubts Remain 

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 
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 
India
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

LIC

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

Lodha

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 
Malaysia
QSR QSR Brands Pre-IPO – As Healthy as Fast Food
Thailand
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

Kalyan Jewellers IPO: In a Recovery Following a Strategy Mishap

By Oshadhi Kumarasiri

Kalyan Jewellers (KALYAN IN) is one of the largest jewellery companies with around 107 showrooms across India and around 30 more in the Middle East. In our previous insight, we discussed India’s gold jewellery retail industry and how industry growth could flow through to the company. In this insight, we will analyse the company’s historical performance, along with our expectations of future growth.


Edding Group (亿腾医药) Pre-IPO: Distributor Turning Pharmaceutical

By Ke Yan, CFA, FRM

Edding Group, a leading integrated pharmaceutical company in China, plans to raise up to USD 200m via a Hong Kong listing.

The company is turning from a distributor of NMC drugs to a pharmaceutical company by acquiring product rights in the past two years. We are of the view that the Vancocin and Ceclor are the selling point of the company as they both have a dominant position in the respective segment and are in growing markets. 

The company’s Vascepa is an interesting CVD product but the competition is intense given that the statin is the main therapy to reduce CV risks and it has many varieties with a competitive market. 

However, we do not see Mulpleta and EPD 125 attractive. Sales of Mulpleta are very small in Japan and the EDP125 was suspended by Eli Lilly previously given that it failed to demonstrate superiority in Phase II/III clinical trials. 

We think the management does not possess impressive working experience, though investor backing is strong.


DoorDash IPO Context: What It Is & How It Compares to Online Food Delivery Universe

By Daniel Hellberg

US-based online food delivery company DoorDash Inc (0881510D US) has filed to go public. In this note we describe the company’s operations and compare its scale and efficiency to other online food delivery companies in the US and around the globe. 

Intensely focused and increasingly dominant in its home market, DoorDash has made admirable progress toward profitability by focusing on smaller cities and suburban areas in the US. This approach is the opposite of conventional wisdom, which suggests that only a handful of large US cities can generate the order density necessary to make online food delivery economically viable. 

DoorDash is seeking growth from new market segments adjacent to its core operation even as it faces the threat of a large, disruptive new entrant in US online food delivery. Last valued at US$16 bn in June 2020, we believe DoorDash’s unorthodox approach deserves to be thoroughly understood by investors. We will write more about DoorDash as the IPO process moves forward.


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