Daily BriefsMost Read

Most Read: Evergrande Real Estate Group, Bukalapak, Zomato, Money Forward, SK IE Technology and more

In today’s briefing:

  • Evergrande’s Very Special… Special Dividend?
  • ECM Weekly (18th July 2021) – Krafton, Kakao Bank, Bukalapak, Filinvest REIT, Zomato, China ADR IPO
  • Index Rebalance & ETF Flow Recap: Bukalapak, Zomato, SD Biosensor, Alibaba, MSCI QIR
  • TOPIX Inclusion: Money Forward (3994) Could Outperform Freee (4478) Until End of Month
  • KRX BBIG Index Rebalance Preview: SK Bioscience & SK IE Tech Inclusions Add to Passive Inflow

Evergrande’s Very Special… Special Dividend?

By Travis Lundy

Evergrande Real Estate Group (3333 HK) shares rallied enormously sharply in 2017, moving from the mid single digits to HK$30+ by Q3 that year. That year the float in Evergrande was also sharply reduced by the purchases of shares by Chinese Estates Holdings (127 HK) and its owners. 

When the shares fell back after getting squeezed, Evergrande conducted a buyback which got them within a hair’s breadth of the residual minimum free float requirement mandated by the Hong Kong Stock Exchange. The shares stayed higher. 

Eventually, Evergrande saw more of the employee share options with low exercise prices exercised which increased the share count and float so when shares fell in 2020, the company could buy back shares, and it did so after shares fell to new 3yr lows in the covid-crash. It bought shares back from May to June, again reducing float to within a hair’s breadth of the free float limit, and in the period, shares rose ~50%. 

Then at the start of H2, with a press release about unaudited June sales results and how strong sales had been in H1, the shares popped 40% (from HK$20 to HK$28/share) in three days, then fell back over 6 weeks, going back below HK$20 when the company disclosed it was pre-selling stakes in its property management unit before the IPO, and three days later Evergrande actually issued a profit warning, just before releasing H1 results. 

Also in August, but undisclosed at the time, was the fact that several major real estate developers, including Evergrande, had been called on the carpet to discuss their participation in the so-called Three Red Lines pilot program (the three red lines are a liability-to-asset ratio excluding advanced receipts of 70%, net debt-to-equity ratio of 100%, and cash to short-term debt ratio at 1x). Companies which crossed one of three red lines could not increase interest-bearing borrowing by more than 10% in a year. Cross two of them and they were capped at 5% growth. Cross all three of them and the developer could not increase debt at all. This is tough when funding at HSD to 10+% interest rates are used to carry non-interest-earning land bank. But Evergrande “met” all three so needed to reduce debt and raise cash, discussed in Evergrande May Be Facing a Funding Squeeze

There was a story about a “letter”, later denied by the company, in September, discussing the importance of the local government helping Evergrande deal with its short-term funding issues, which included the issue of the buyback guarantee offered by Evergrande to minority shareholders of Evergrande’s major onshore operating unit Hengda. Evergrande denied the existence of the letter, but despite the fact some Hengda shareholders reportedly wanted out as listing was unlikely, somehow, with the local government’s help, Evergrande announced a new agreement meaning repayment in January 2021 wasn’t necessary. The shares popped and two weeks later Evergrande raised some capital (discussed in Evergrande Equity Placement – Musical Shares.

I had my ideas about WHY those shares were placed, and it was not to raise equity to pay down debt. The capital raised was less than expected despite the large discount and the shares quickly fell below placement price.  So just 3 weeks after raising equity, it started buying back shares, reasonably quickly raising the price above where it had sold shares. This was discussed in Evergrande Equity De-Placement: Musical Shares. Then a couple weeks later, we saw Evergrande Terminate Hengda’s Backdoor Listing so the story left was one of an optically “cheap” but heavily indebted developer, lowering selling prices to liquidate inventory, lower debt and raise cash levels, etc. There were sales of shares of recently listed subsidiaries. There were announcements of how much debt had been lowered.

But shares fell. 

There were stories in Chinese media and in social media about issues with the company’s trade acceptance bills. An article on Bloomberg.com a week ago reported that while Evergrande chairman Hui Ka Yan was in Beijing for the 100th anniversary celebrations 1 July, he met with the Financial Stability and Development Committee, which urged him to solve his company’s debt problems pronto. The article is worth reading. It suggested more worry at the top than thought, and even says FSDC officials had suggested bringing in strategic investors. Hui said he was speaking with local investors. 

Bonds have traded lower and lower and the 2024-2025 maturity bonds appear to be trading in the 60s, with shorter-dated bonds trading at 30+% yield to maturity.

Wednesday, the shares closed at HK$8.91 – lowest in four years. 

Yesterday, there was new news. 

The company announced a board meeting for 27 July where the Board would consider a special dividend. 

My first reaction was, I admit, one of surprise, but on second thought it should not be THAT surprising.

The immediate public comments I have seen suggested an attempt to squeeze shorts. Yes, according to data from the SFC, shorts have risen from levels near-matching covid-crash lows, and now stand at roughly 2.1% of shares out (a bit under 10% of float), but that would not do it.

The single most indebted real estate company in the world, with short-term bonds yielding risk-free-rate plus…. [checks notes] 30+%, where the chairman gets called onto the carpet of the highest financial regulator in China – not the PBOC, CSRC, or CBIRC – above them – urging him to Do Something – sell assets, lower debt, raise equity – deciding to pay a special dividend to its equity holders? 

I expect Hui Ka Yan has his reasons, and I expect those reasons do not include rewarding long-suffering minority shareholders. Or squeezing shorts. 

ECM Weekly (18th July 2021) – Krafton, Kakao Bank, Bukalapak, Filinvest REIT, Zomato, China ADR IPO

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.

ECM activity eased after China’s Cyber Security announcement last week. 

It was reported that Bytedance has earlier halted its US IPO plans after warnings of data security from Chinese regulators. Adding to the list of halted China ADR IPO plans is Alibaba-and-Tencent-backed Xiaohongshu. Lalamove was also reported to be considering moving its US$1bn IPO to Hong Kong as well. 

On top of that, China is planning on exempting Hong Kong IPOs from seeking the approval of cybersecurity regulators, showing that it was specifically targeting US listings. Following our coverage on the event, this week, we discussed the new draft Cyber Security Review measures and its likely impact on future listings. 

For live deals this week, in Korea, we initiated on Kakao Bank, South Korea’s largest digital bank. Its US$2.2bn bookbuild will close on Wednesday, pricing on Thursday and it is expected to debut on 4th August. Despite its short operating history, Kakao Bank has recorded a stupendous growth rate.

Continuing our coverage on Krafton, we shared our thoughts on valuation, index inclusion, and its tiered IPO lock-up agreements. Books were said to be multiple times covered. Bookbuild is expected to close on 27th July and debut on 10th August.

In Indonesia, we shared our thoughts on valuation of Bukalapak. Later in the week, it was reported that IPO bookbuild was upsized to US$1.5bn, up from an initial US$1.1bn deal. Books were multiple times covered, with interests coming from global long-only investors, sovereign wealth funds and domestic institutions, as per media reports. Bookbuild will close on Monday and shares will trade on 6th August.

In the Philippines, Filinvest REIT launched its US$240m bookbuild. Despite an initial portfolio of 17 properties, we think that the REIT is like a single asset. The REIT has since guided pricing towards the lower end of the IPO price range. Books will close Monday and begin trading on 12th August. 

In India, Zomato closed its bookbuild, raising US$1.26bn and making it the largest listing in India from the technology sector. Books were oversubscribed by 38x with QIBs subscription at the highest 51.79x and HNI at 32.97x. Shares will debut on 27 July, and we covered the deal earlier:

Yidu Tech IPO lock-up expired Thursday this week and about a  total of about US$2bn worth of shares have been freed up. We discuss the profile of shareholders and their likelihood of selling in:

In Hong Kong, there were multiple biopharma debuts. Brii Biosciences debuted on Tuesday, traded slightly upwards on its first day before dipping, breaking deal price, and closing 6.5% below deal price on Friday. 

Medlive Technology priced its bookbuild at the top end and began trading on Thursday. Shares did well on its first day, closing 14% higher and ended the week 10.5% above IPO price. 

Kindstar Globalgene was priced at the top end and began trading on Friday. The IPO debuted poorly and closed 7.6% below IPO price on its first day. 

New filings this week include digital payments providers One 97 Communications Limited (Paytm) and Mobikwik. They are looking to raise US$2.2bn and US$255m, respectively, from their India IPOs. The former is backed by Softbank, while the latter boasts pre-IPO investors that include American Express, Cisco, Sequoia etc.

Accuracy Rate:

Our overall accuracy rate is 73.7% for IPOs and 67.5% for Placements 

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

New IPO filings this week

  • One 97 Communications Limited (PayTM) (India, US$2.2bn)
  • Mobikwik (India, US$255m)

News on Upcoming IPOs

Hong Kong/China

US/China ADRs



Analysis on Upcoming IPOs

Hong Kong

Anjuke Pre-IPO – Mixed (Positive and Negative) Developments 

Betta Pharma

Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 


Broncus (堃博医疗) Pre-IPO: Big Potential to Be Tested 


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


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


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


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


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


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


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


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


Dida Pre-IPO – Making Hay While Big Brother Retreats 


Dida Pre-IPO – Earnings Forecast and First Stab at Valuation 


Dida Pre-IPO – Peer Comparison – Lagging in Scale, Leading in Profitability 

Edding Grp

Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 

Edding Grp

Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 


Shanghai Hanyu (捍宇医疗) Pre-IPO: Not a Straight-A but Listing at Right Time 

Intco Med

Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 


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


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


Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation 

RemeGen RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 
SH Bio-heart Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 
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 
WeDoctor We Doctor (微医) Pre-IPO – Peer Comparison – Picking Its Battles Wisely 
WeDoctor We Doctor (微医) Pre-IPO – Forecasts, Early Thoughts on Valuation, and Acquisition Gripes 
Weilong Weilong Delicious Global Pre-IPO – The Positives – Fast Growth, Strong Backers 
Weilong Weilong Delicious Global Pre-IPO – The Negatives – Spicy Valuation 
WM Tech WM Tech Pre-IPO – Digitalization Efforts Coming Through but Not Well Substantiated 
WM Tech WM Tech Pre-IPO – Peer Comparison and Pre-IPO Valuation – Some Signs of Advantage 
Aadhar Housing Aadhar Housing Finance Pre-IPO – Decent past Growth but Comes with Weird Disclosures 
ASK ASK Investment Managers Pre-IPO – Riding on a Wave of Wealth 
Anmol IndAnmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Bharat Hotel

Bharat Hotels Pre-IPO – Catching up with Peers 

Bajaj En

Bajaj Energy Pre-IPO – Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 

CMS InfoCMS Info Systems Pre-IPO – When a PE Sells to Another PE… Only One Gets the Timing Right
Crystal CropCrystal 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 
NSENSE IPO Preview- Not Only Fast..its Risky and Expensive
NSENational Stock Exchange Pre-IPO Review – Bigger, Better, Stronger but a Little Too Fast for Some


Life Insurance Corporation of India Pre-IPO – Early Take on India’s Largest IPO 
Penna Cem Penna Cement – Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 
PNB MetPNB 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 
Zomato Zomato Pre-IPO – Filings Lack Narrative, a Little Bit of History Helps 
Zomato Zomato Pre-IPO – Food Delivery Revenue Was Probably up 16x 
QSRQSR Brands Pre-IPO – As Healthy as Fast Food
The U.S.
ForU ForU Worldwide Pre-IPO – Mostly Negatives 
Qiniu Qiniu Cloud (七牛云) Pre-IPO: PaaS Doesn’t Warrant a Premium 

Index Rebalance & ETF Flow Recap: Bukalapak, Zomato, SD Biosensor, Alibaba, MSCI QIR

By Brian Freitas

In this weeks recap, we look at:

Inflows to the Kraneshares Csi China Intern (KWEB US) ETF continue (and accelerate) even as the constituent stocks sell off.

Events This Week

Click on the link under Detail to go to the Insight




20 July
20 July

TOPIX Inclusion: Money Forward (3994) Could Outperform Freee (4478) Until End of Month

By Janaghan Jeyakumar, CFA

Cloud-based business accounting software company Money Forward (3994 JP)  announced on 7th June 2021 that they had received approval to move from the Mothers Section to the First Section of the Tokyo Stock Exchange which triggers inclusion into the TOPIX Index. Previously, this situation was covered in TOPIX Inclusion: Money Forward (3994 JP)

On 15th July 2021, Money Forward (3994 JP) announced earnings for the quarter ending May 2021. Below is a closer look at how the stock has traded since the TSE1 promotion was announced and the upside potential for the remainder of the event timeline. 

KRX BBIG Index Rebalance Preview: SK Bioscience & SK IE Tech Inclusions Add to Passive Inflow

By Brian Freitas

The KRX will announce the results of the September review of the BBIG indices in August and the changes will become effective after the close of trading on 9 September.

The review period ends on 31 July, so there are only 10 trading days left and the list of potential inclusions and exclusions will not change unless there is a big change in stock prices.

At the September review we expect the following changes:

The largest inflows will be on SK Bioscience (302440 KS), SK IE Technology (361610 KS), LG Chem Ltd (051910 KS), SK Innovation (096770 KS) and Douzone Bizon (012510 KS) while the largest outflows will be on SK Biopharmaceuticals Co Ltd (326030 KS), Kakao Corp (035720 KS), Posco Chemical Co Ltd (003670 KS), Kakao Games Corp (293490 KS) and SKC Co Ltd (011790 KS).

With Krafton Inc (259960 KS) expected to list in August, post the cutoff date of 31 July, the stock will not be eligible for index inclusion at the review and will need to wait till the following rebalance in March 2022 to join the Game and BBIG indices.

Before it’s here, it’s on Smartkarma