Brief Hong Kong: RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call and more

In this briefing:

1. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
2. Is There Still a Bright Future for FutureBright?
3. Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT
4. Wuxi Biologics Placement – Past Deals Have Done Well but Progressive Returns Are Getting Lower
5. Starboard Value. The Game Changing Activist Investor That Doesn’t Take No For An Answer.

1. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call

• US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
• Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
• Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
• Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.

2. Is There Still a Bright Future for FutureBright?

Almost 12 months after posting our initial thesis on Future Bright Holdings (703 HK)Gambling on a Bright Future, we review FutureBright’s most recent results, raising questions on whether stalling improvement in the core restaurant business performance warrants taking chips off the table while waiting for key catalysts to materialise.

3. Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT

Up Fintech (TIGR US)‘s IPO was priced at US$8/share, above its range of US$5-7/ADS raising at total of US$111m, including the proceeds from the private placement with Interactive Brokers Group, Inc (IBKR US). 

In my earlier insights, I looked at the company’s background,  past financial performance, scored the deal on our IPO framework and compared it to Futu Holdings Ltd (FHL US): 

• Futu Holdings IPO Quick Note – Comparison with Tiger Brokers – Same Market, Different Economics
• Up Fintech (Tiger Brokers) Pre-IPO Quick Note – Much Too Reliant on IBKR
• Up Fintech (Tiger Brokers) IPO Quick Take – It’s Not like Futu, Won’t Perform like It Either

In this insight, I will re-visit some of the deal dynamics, comment on share price drivers and provide a table with implied valuations.

4. Wuxi Biologics Placement – Past Deals Have Done Well but Progressive Returns Are Getting Lower

Biologics holdings is looking to raise upto US$517m by selling a 4.2% stake in Wuxi Biologics (Cayman) Inc (2269 HK). This will be fourth placement by the company since it listed less than two years ago. Below is a link to our coverage of the listing and the earlier placement:

• Jun 2017 – US$500m: WuXi Biologics IPO Review – An Opportunity to Get Exposure to Biologics in China
• Dec 2017- US$550m: Wuxi Biologics Placement – Selldown Right when Lockup Expires Suggests Eagerness to Offload
• Mar 2018 – US$600m: Wuxi Biologics Placement – In Time for the Next Lock-Up, Returns Will Probably Not Match Prior Ones
• Jun 2018 – US$500m: Wuxi Biologics Placement – Probably Not a Surprise to Sell Again when Lock-Up Expires

Each of the past placement has been of a similar size and has generally done well. The company recently reported results which were ahead of street estimates. The deal scores a marginal positive score on our framework but there is still a lot more selling left once the 90-day lock-up expires.

5. Starboard Value. The Game Changing Activist Investor That Doesn’t Take No For An Answer.

New York based activist investor firm Starboard Value has been intricately involved in shaping the  fortunes and futures of two high profile technology companies in recent years, Marvell and Mellanox. The firm first to prominence some five years ago when they were the first among their peers to accomplish the extraordinary feat of replacing the CEO and entire board of Fortune 500 restaurant group Darden, while holding less than 10% of the company’s shares.

In the wake of their Darden coup, the firm has gone from strength to strength. To date the firm has taken positions in a total of 105 publicly listed companies, replacing or adding some 211 directors on over 60 corporate boards.

On March 7’th 2019, Starboard Value announced the acquisition of a 4% stake in US comms infrastructure firm Zayo. In the intervening period, Zayo’s share price has risen by 14% as canny investors scramble to partake in the goodness that will surely be extracted by the activist firm that simply doesn’t take no for an answer.