ECM Weekly (30th May 2021) - JD Log, Monde Nissin, Weilong Deli, Kanzhun, CARsgen, WM Tech, Novotech

In Hong Kong, JD Logistics debuted 14% higher on Friday but traded down throughout the day to close just 3.3% above IPO price. The loss of momentum throughout the day could be the result of the market reconciling the fact that JDL will unlikely meet the fast entry/early inclusion criteria for FTSE and MSCI, as discussed in our update notes this week.

• JD Logistics (京东物流) Update Note - Index Inclusion Requirements - Still Has Some Way to Go

• JD Logistics (京东物流) IPO Trading - Decent Demand + Updates to JD.com Valuation

• JD Logistics (京东物流) IPO - Updated Index Implications and Impact on JD.com (京东) HoldCo Valuation

• JD Logistics (京东物流) IPO - Widening Its Lead

• JD Logistics (京东物流) Pre-IPO - Index Implications - It Will Cut Close

• JD Logistics (京东物流) Pre-IPO - Quick Note - New PHIP with 1Q21 Results Changes Narrative

• JD Logistics (京东物流) Pre-IPO - PHIP Updates and Fine-Tuning Valuation

• JD Logistics (京东物流) Pre-IPO - Thoughts on Valuation

• JD Logistics (京东物流) Pre-IPO - Peer Comparison - Shielded from Price War

• JD Logistics (京东物流) Pre-IPO - Tethered to JD Group and Looking Beyond

Other upcoming trading debuts next week include Central China Management in Hong Kong on Monday and Monde Nissin in the Philippines on Tuesday. We liked Monde Nissin’s IPO given it is a well-known brand, has high market share coupled with potentially bright growth prospects.

• Monde Nissin Pre-IPO - The Positives - High Market Share

• Monde Nissin Pre-IPO - The Negatives - High Debt, Div Payments, Floundering MA

• Monde Nissin Pre-IPO - Peer Comparison for Food Business

• Monde Nissin Pre-IPO - Peer Comparison for Meat Alternative Business

• Monde Nissin Pre-IPO - Thoughts on Valuation

• Monde Nissin Pre-IPO - Not Cheap but Sensible

On the other hand, Central China Management traded 14% below IPO price in the grey market despite pricing close to the top-end of its price range.

• Central China Management (中原建业) IPO - Concentrated Exposure

It has also been a busy week in the placement space across Asia.

Leading in deal size was Country Garden Service, where the company raised US$2bn via a combination of US$1.35bn (upsized from US$1bn) from shares and US$650m (upsized from US$500m) from convertible bonds. Books were said to be multiple times covered from long-only investors, existing shareholders and hedge funds.

• Country Garden Placement - Opportunistic Raise Ahead of HSI Inclusion but with Good Reason

Weimob raised US$601m from an equity combo with a US$301m primary placement and US$300m convertible bond issue. Shares were priced 6% discount and traded well since, closing 16.1% above the deal price, a day after the deal (on Wednesday).

• Weimob (微盟) Placement - A Different Beast than Before - Tencent’s Support Helps Too

Kintor Pharmaceutical raised US$151m from a top-up placement this week. It was reported that books saw strong participation from long-only investors, healthcare specialists and existing shareholders. Part of the deal includes a sell-down by the co-founder.

• Kintor Pharma (开拓药业) Placement - Still Riding the COVID Momentum

In Japan, Skylark is looking to raise about US$365m in its global follow-on offering. Given the uncertain outlook, we think that it will need to be priced closer to 10% discount to undisturbed price level. The deal will price on Monday.

• Skylark Placement - Uncertainty Looms, Needs to Price at Low End of Range

In Singapore, Frasers Logistics & Commercial Trust raised US$252m in Singapore. Funds will be used to purchase six new properties in Europe. This marks their first foray into UK Logistics. Books were 2.8x covered with demand from long-only investors, companies and multi-strategy investors.

• Frasers Logistics Placement - Consistent Performance, Accretive Deal

Other placements this week include, A Living Smart City Services and E-House China raising US$420m and US$101m, respectively. Both have held up well with the latter closing right at its deal price on Friday. Notably, E-House China’s placement was a selldown by Country Garden which still has about 4% stake post-selldown. Refined chemical supplier, China Risun, raised US$266m and struggled to hold above its deal price.

We continued our coverage on CARsgen with a valuation note. The company began pre-marketing its US$500m IPO on Monday. Betta Pharmaceuticals also secured listing approval this week for its US$800m IPO. They will begin pre-marketing next week and we have covered the deal earlier.

• CARsgen (科济药业) Pre-IPO: Scientific bet on new CAR-T targets

• CARsgen (科济药业) Pre-IPO: Thoughts on Valuation

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

We also initiated a biotech focused contract research organisation, Novotech Holdings, this week. The company is looking to raise US$1.5bn in its upcoming IPO. The firm is 74.6% owned by TPG.

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

This week, we began coverage on fresh food and FMCG retailer, WM Tech. They operate Wumart and Metro China brands.

• WM Tech Pre-IPO - Digitalization Efforts Coming Through but Not Well Substantiated

We also initiated on spicy-snack maker, Weilong Delicious Global, looking to raise US$1bn in its upcoming Hong Kong IPO. The firm boasts an impressive line-up of Pre-IPO backers which includes Hillhouse, Tencent, Yunfeng Capital and Sequoia etc.

• Weilong Delicious Global Pre-IPO - The Positives - Fast Growth, Strong Backers

• Weilong Delicious Global Pre-IPO - The Negatives - Spicy Valuation

In terms of the IPO pipeline, there were a number of new filings as well. In Hong Kong, Cloud Village which operates NetEase Music app and is looking to raise US$1bn while online-merge-offline (OMO) tutoring service platform, Jiayi Education will likely raise more than US$100m.

In the US, Keep, a Chinese fitness app, and Meicai, a platform that connects restaurants and vegetable producers, filed confidentially for a US$500m IPO each. Tencent-backed online job listing site, Kanzhun, filed this week for its US$800m US IPO and began pre-marketing this week. We also covered Warburg and Softbank-backed Zhangmen Education.

• Kanzhun Pre-IPO - Bumble Meets Linkedin

• Zhangmen Education (掌门教育) - Leader in one-on-one market but there are concerns

There was also news of Ximalaya potentially heading for a Hong Kong IPO instead, after getting pressured by regulators despite having filed its prospectus with the SEC earlier this month.

Last but not least, we looked at the potential trade surrounding the lock-up expiry of Nongfu Spring. IPO lock-up expires on 8th Sept 21, and its controlling shareholders, and remaining pre-IPO investors will be eligible to sell then.

• Nongfu Spring Pre-IPO - The Positives - Leaves One Thirsty for More

• Nongfu Spring Pre-IPO - The Negatives - Doesn’t Need to List or Expand Production Facilities

• Nongfu Spring Pre-IPO - Peer Comparison - Superior Margins and Growth

• Nongfu Spring Pre-IPO - First Stab at Valuation

• Nongfu Spring Pre-IPO - PHIP Updates

• Nongfu Spring Pre-IPO - Updates to Valuation

• Nongfu Spring IPO - Not Cheap by Any Measure but Is a Quality Name

• Nongfu Spring IPO Trading Update - Strong Subscription Levels, in a League of Its Own

• Nongfu Spring Lock-Up Could Correct the Tiny Float and Limited Trading