In this briefing:
- ECM Weekly (15 December 2018) – Wanka, Alpha Smart, CMGE Tech, Junshi Science, Xinyi Energy.
- Rental Rates for Last Mile Industrial Real Estate Poised to Move Higher in Most Key Global Markets
- Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go
- Share Classifications: Mid-December 2018 Snapshot
- Alpha Smart – Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
1. ECM Weekly (15 December 2018) – Wanka, Alpha Smart, CMGE Tech, Junshi Science, Xinyi Energy.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
IPO listings this week have mostly been within our expectation. Mobvista (1860 HK), Natural Food International H (1837 HK), and Fosun Tourism (1992 HK) have all struggled to hold on to their IPO price on the first day of trading. Unfortunately, WuXi AppTec Co (2359 HK) has also struggled on this first day despite our expectation that the company should be trading at a relatively smaller 19% A-H premium which would imply about 11% upside based on Ke Yan, CFA, FRM‘s sensitivity analysis and Wuxi Apptec’s A share Friday close price.
In the US, Tencent Music Entertainment (TME US) performed well within our expectation. The company’s share price opened about 9% above IPO price. As Sumeet Singh has mentioned in his insight, Tencent Music IPO – Firework – Trading Strategies, this is unlikely going to be a bumper IPO and short-term investors could take profit at high single-digit to low double-digit returns on debut. Indeed, after a decent debut, TME has collapsed below its IPO price, probably due to investors taking profit as the broad market traded poorly on Friday.
Next week, all eyes will be on Softbank Corp (9434 JP)‘s debut and Mio Kato, CFA summarised in his note some of the reasons why Softbank Corp could perform poorly in the near term. Bookbuild results have been mixed. Bloomberg report suggested that Softbank’s international bookbuild was 2-3x oversubscribed while retail offering was at almost 2x. However, Nikkei Asian Review’s article reported that it has been a struggle to sell the IPO shares to retail investors. In any case, we will put out a note next week on our thoughts on bookbuild, updated valuation of peers, and how we think the IPO will likely trade after the recent series of events.
Other debuts next week include Luzhou Commercial Bank Co Ltd (1983 HK), Wanka Online (1669726D HK), and Asiainfo Technologies (1675 HK).
Accuracy Rate:
Our overall accuracy rate is 72% for IPOs and 64% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings this week
- Shanghai Henlius Biotech (Hong Kong, ~US$500m)
- Ingrid Millet (Hong Kong, re-filed)
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
- Chat-service firm Slack taps Goldman Sachs to lead IPO: sources
- Kyobo Life Insurance to seek IPO next year
- Uber has confidentially filed to go public
- London billionaire Michael Spencer boosts stake in Singapore Life, considers IPO
- Brokerages scramble on tepid investor response over SoftBank IPO
- After delivering 24 electric cars, this Chinese startup has IPO dreams
- Solar energy firm Xinyi said to postpone up to $582m Hong Kong IPO
Smartkarma Community’s this week Analysis on Upcoming IPO
- Alpha Smart – Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
- Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
- CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
- Junshi Bioscience (君实医药) IPO: Rich Is Valuation, but Catalyst Ahead
- Junshi Biosciences IPO Valuation: Sensibly Priced with Upside at the Low-End
- Wanka Online IPO – Quick Note – Even After the Downsize Its Still Too Expensive
- Xinyi Energy (信义能源) IPO: High Dividend Yield but Depreciating Asset
- Softbank IPO: Signs Point to Risk of Early IPO Price Break
- WuXi AppTec IPO Valuation: Bull/Bear Case DCF Scenarios
- Wuxi Apptec (药明康德) IPO: What You Need to Know Before the Trading Debut
List of pre-IPO Coverage on Smartkarma
2. Rental Rates for Last Mile Industrial Real Estate Poised to Move Higher in Most Key Global Markets
- New industry data this week, plus take-aways from our latest discussions with company managements, all confirm that the likely trend in the industrial segment of the global real estate industry is for rental rates to rise.
- The growth in e-commerce is continuing to accelerate globally. In some key market, this is “triggering a land grab for distribution space that experts say is accelerating”.
- Therefore, the increasing scarcity value of well situated industrial real estate in high demand markets is likely to continue to push up rental rates to higher and higher levels.
- Given our expectation that fundamentals driving the growing demand for Last Mile Industrial real estate are likely to persist, we continue to expect this segment to outperform the broader Real Estate sector for the foreseeable future.
3. Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go
Fosun Tourism (1992 HK)‘s IPO was priced at the low-end, HKD15.60/share. The retail tranche was undersubscribed while the institutional tranche was said to be moderately over-subscribed. I have covered most aspects of the deal in my earlier insights:
- Fosun Tourism Pre-IPO – No Improvement or Major Changes in Club Med Since the Acquisition
- Fosun Tourism IPO – Fair Value Is Probably Below Low-End
In this insight, I’ll provide an update on the deal dynamics, valuations and provide a table with the implied valuations at different share price levels.
4. Share Classifications: Mid-December 2018 Snapshot
This weekly share class summary is a companion insight to Travis Lundy‘s H/A Spread & Southbound Monitor – most recently discussed in H/A Spread & Southbound Monitor – Going Into Year End.
This share class monitor provides a snapshot of the premium/discounts for various share classifications around the region, and comprises four sets of data:
1. 82 ADRs
2. 105 Korean Prefs
3. 22 Regional Dual Classes
4. 7 Foreign/Local Thai shares
The average premium/discount for each set over a one-year period is graphed below.
For a granular breakdown of each set, PDFs are attached at the bottom of this insight.
5. Alpha Smart – Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
Alpha Smart (ALS HK), the parent of Chinese menswear fashion retailer GXG, plans to raise US$300m in its Hong Kong IPO. L Catterton, LVMH’s investment arm, along with another PE investor, owns a 73% stake in the company.
Earnings have been consistently growing with the highest contribution still coming from its flagship brand “GXG”. The recent expansion of the online channel has further aided sales growth, with ASL claiming to be the largest menswear retailer in terms of online sales.
Apart from a large dividend payout which covered half of the acquisition costs for L Capital, nothing much seems to have changed recently. In addition, operating cash flow has not kept pace with earnings due to a consistent increase in inventory. To add to that there are a few related party issues as well including some stores being run by former employees.
