Equity Capital Markets

Weekly Top Ten Equity Capital Markets – Mar 10, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Trial Holdings IPO: Valuation Thoughts

By Arun George, Global Equity Research Ltd

  • Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$236 million at the IPO reference price of JPY1,550 per share.
  • We previously discussed the IPO in Trial Holdings IPO: The Investment Case
  • In this note, we discuss valuation. Our analysis suggests that Trial is attractively valued at the IPO reference price of JPY1,550. We would participate in the IPO.

2. Oriental Land Co Placement – Relatively Small One to Digest, Overhang Might Not Be as Large

By Clarence Chu, Aequitas Research

  • Keisei Electric Railway Co (9009 JP) is looking to raise up to US$553m from selling a 1% stake in Oriental Land (4661 JP).
  • Palliser Capital, has been pushing Keisei Electric Railway to reduce its stake in OLC to unlock shareholder value owing to the wide discrepancy between carrying/market value of the former’s investment.
  • Selling just 1% of shares outstanding, the deal wouldn’t be a very large one to digest, representing 4.7 days of OLC’s three month ADV. 

3. Trial Holdings IPO – Not Wholly Convinced but a Strong Market Should Help

By Sumeet Singh, Aequitas Research

  • Trial Holdings (5882 JP) (TH) is now looking to raise up to US$259m in its Japan IPO, after having canceled its prior listing attempt last year.
  • TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
  • We have looked at the company’s past performance in our previous notes. In this note, we talk about implied valuations in the IPO range.

4. Nippon Express Placement – Lukewarm Track Record, Although Buyback Could Lift Share Price

By Clarence Chu, Aequitas Research

  • A group of shareholders are looking to raise US$220m from selling their stakes in Nippon Express Holdings (9147 JP).
  • Overall, the deal would be a relatively large one to digest at 11 days of Nippon Express’ three month ADV, and 4.8% of the firm’s total shares outstanding.
  • Together with the announcement, the firm has also guided towards a share buyback program which should provide some share price support a month post-deal,  in our view.

5. Reddit IPO Valuation Analysis

By Douglas Kim

  • Reddit plans to price its IPO between $31 to $34 a share, which would suggest equity value of US$6.0 billion to US$6.5 billion on a fully diluted basis.
  • Our base case valuation of Reddit is implied market cap of US$7.9 billion or implied price of US$41.2 per share. 
  • Given the moderate upside relative to the IPO price range, we have a Positive view of the Reddit IPO. 

6. Sanyo Trading (3176 JP) – Small Secondary Offering as Banks Sell, More Later

By Travis Lundy, Quiddity Advisors

  • Sanyo Trading (3176 JP) is a small specialised trading company (rubber, polymers, elastomers, etc). Niche, decent profitability/margins, highish ROE.
  • Banks in the MUFG and SMBC family are selling. Norinchukin is selling a bit too. 
  • This is small in size but big in impact. 20% of Max RWF. 50d ADV. Unlike other recent, larger, offerings, this has no flow mitigants. But it’s cheap.

7. Ola Electric Pre-IPO Peer Comparison – Increasing Competition, but It’s Still the Leader

By Sumeet Singh, Aequitas Research

  • Ola Electric is looking to raise about US$1bn in its upcoming India IPO.
  • Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
  • In our previous note we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

8. ARM Holdings (ARM US): Lock up Expiry on 12 March

By Arun George, Global Equity Research Ltd

  • Softbank Group (9984 JP)’s 180-day lock-up period on its 89.75% ARM Holdings (ARM US) shareholding expires on 12 March. SoftBank’s stake is worth US$124 billion.
  • SoftBank will likely monetise its ARM stake using the Alibaba (ADR) (BABA US) playbook. This playbook uses prepaid forward contracts to raise capital with eventual settlement through shares. 
  • ARM is currently trading 2.6x its IPO price on AI-driven hype. ARM trades at a premium multiple to NVIDIA Corp (NVDA US), despite forecasted lower growth and margin.  

9. Zomato Placement – Momentum Is Very Strong, Somewhat Well Flagged

By Sumeet Singh, Aequitas Research

  • AntFin is looking to raise around US$350m by selling around 2% of Zomato (ZOMATO IN).
  • Ant Group had earlier sold some of its stake in Nov 2023 and Ant just came out of lockup from the previous selldown a few days ago.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework.

10. AAMB Holdings Placement – Despite the Overhang, Momentum Has Been Decent

By Clarence Chu, Aequitas Research

  • ANZ Funds is looking to raise around US$242m from selling a portion of its stake in AMMB Holdings (AMM MK).
  • Having written down its carrying value earlier, we would argue that the deal now is somewhat well flagged, with ANZ attempting to record some gains on investment.
  • That being said, there is an overhang and the deal would be a large one to digest at 111 days of AMBank’s three month ADV.