ECM Weekly (1 December 2018) - Softbank Corp, Tencent Music, Cansino, Wuxi Apptec, Fosun Tourism

We kicked off the week with Tongcheng-Elong Holdings Ltd (780 HK) debut in Hong Kong. The company raised just below US$200m in its IPO, pricing close to the bottom end. Book build announcement reported that international and Hong Kong Public Offer were only mildly over subscubribed, suggesting weak sentiment. We were negative on the deal but the stock did well in its debut after a brief struggle in the morning to close up over 20% on the first day. On hindsight, the good performance was probably the result of the company's short track record could have given the market a reason to bet on TCEL to emerge as a worthy and profitable competitor. On top of that, the IPO was launched after Ctrip's post-earnings price correction which would have baked in negative industry sentiment into its valuation.

On the other hand, Babytree Group (1761 HK)'s weak debut was within expectation. As mentioned in the valuation note, despite a massive downsize of deal size and valuation, the company is probably only fairly valued at the low-end and any potential upside would have to depend of the company delviering on 2019 numbers.

Next week, there will be the debut of Mogu (MOGU US), iDreamsky Technology Limited (1119 HK), and Yancoal Australia (YAL AU). A couple of IPOs will also be priced namely Fosun Tourism (1638664D HK), WuXi AppTec Co. Ltd. (2359 HK), Natural Food International H (1837 HK), and Mobvista (MBV HK). We will also keep a close eye on Softbank Corp (9434 JP)'s IPO which is opening on the 3rd of December.

We are also hearing that Shanghai Junshi Bioscience Co. Ltd. (1387344D CH) is gauging investor demand for its Hong Kong IPO.