bullish

Tencent Music

ECM Weekly (6 October 2018) - Tencent Music, Aston Martin, Osotspa, China Renaissance

413 Views06 Oct 2018 15:41
SUMMARY

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.

The buzz of the week goes to Tencent Music Entertainment (TME US) which just filed its F-1/A document in the US on the 2nd of October, targeting to raise U$1bn. Since this has been a widely anticipated IPO, there are already plenty of insights on Smartkarma (SMARTKARMA SP).

Most would agree that TME has set itself apart from most US-Chinese ADR listings this year by being a fast-growing market leader operating at a profit. Furthermore, as mentioned by Sumeet Singh, adjusting for consolidation shows that revenue growth accelerated over 1H18 vs 2017 YoY growth. However, on the flip side, we are seeing a common argument that the paying ratio is far lower than Spotify Technology Sa (SPOT US).

In the UK, Aston Martin (AML LN) 's IPO has been a disaster, breaking its IPO price within the first hour of trading. As mentioned in Sumeet Singh 's previous insights, the company has done a lot of things right to get to where it is today. However, it lags Ferrari on almost all measures apart from earnings growth, thus, it needs to trade at a discount to Ferrari. The below table provides an update of the implied share price at different discount levels to Ferrari.

Discount to Ferrari

FY18

EV/EBITDA

Implied Mcap

(US $m)

Implied price

AML price

(GBP)

Upside from

current price

0%20.86,3472118.1%
10%18.75,712196.3%
15%17.75,395180.4%
20%16.65,07717-5.5%
25%15.64,76016-11.4%
30%14.54,44315-17.3%
35%13.54,12514-23.2%
40%12.53,80813-29.1%

Next week, we may see some volatility in recent US IPOs such as NIO Inc (NIO US), Qutoutiao Inc (QTT US), and 111 Inc (YI US) since their analyst quiet period will be ending and there could be initiation reports by the bookrunners on these companies. Coincidentally, JL Warren Capital put out a bearish note on NIO Inc (NIO US) in SELL NIO –A Dangerous Bet on Chinese EV Target Price: $3 (52% Downside), noting that the company should not be trading at more than 1x EV/Sales (2020 blue sky) and their target price is at about US$3 per share, representing ~52% downside from US$6.30 share price.

Back in Hong Kong, China Renaissance Holdings (1911 HK) bounced from its low of the second day of trading back to close at HK$26 price level. This was close to our call in the trading note China Renaissance (华兴资本) Trading Update - Trading in Line with CICC, pointing out that HK$22 - 23 are good levels to be buying the company since it represents an 11 - 16% upside to CICC's P/E ratio. This was probably also helped by having bookrunner support which we usually saw late afternoon buying.

Next week, Midea Real Estate (3990 HK) and Jiangxi Ganfeng Lithium (1772 HK) will be listing in Hong Kong and, coincidentally, both companies were priced at the bottom of their price range. Whereas, on the flip side, Osotspa Co Ltd (OSP TB) was priced at the top of its price range suggesting strong demand from investors. The company is valued at a significant discount to Carabao Group (CBG TB) to reflect its slower growth and market share loss (albeit still dominant).

In Australia, another IPO bites the dust as Latitude Financial Services (1272471D AU) is said to have deferred its IPO. On the other hand, we are hearing that Property Exchange Australia (PEXA) is looking to list with a valuation of over a billion.

Accuracy Rate:

Our overall accuracy rate is 71.6% for IPOs and 64.1% for Placements

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

New IPO filings this week

  • Tencent Music Entertainment (the US, ~US$1bn)

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.

Source: Aequitas Research

News on Upcoming IPOs

Smartkarma Community's this week Analysis on Upcoming IPO

List of pre-IPO Coverage on Smartkarma

NameInsight
Hong Kong
Ant FinancialAnt Financial IPO Early Thought: Understand Fintech Empire, Growth & Risk Factors
Asia InfoAsiaInfo Tech (亚信科技) IPO: Cost Control Is the Key (Part 1)
BabyTreeBabytree Group Pre-IPO - Young Moms Need It but Almost All Seem to Have It, Might Be at Peak MAU
BitmainBitmain IPO Preview: The Last Hurrah Before Reality Bites
BitmainBitmain IPO Preview (Part 2) - King of Cryptocurrency Mining Rigs but Its Moat Is Shrinking
BitmainBitmain: A Counter Thesis
Canaan Inc.Canaan Inc. IPO Preview (Part 1) - The Biggest Blockchain Related IPO Globally in 2018
Canaan Inc.Canaan Inc. IPO Preview (Part 2) - A Closer Look at ASIC Developments and Competition
Canaan Inc.Canaan Inc. IPO Preview (Part 3): Earnings Forecast & Valuation Analysis
Canaan Inc.Canaan (嘉楠耘智) IPO Quick Take: Beware that ASIC Is a Different Ball Game
CenmintangCenmintang IPO Preview: A Beverage and Snack Play Whose Growth Is Hard to Grasp
China FeiheChina Feihe IPO Preview: Goat Bless Infant Formula Milk?
Entertnmt PlusEntertainment Plus – 60% Market Share, Margin Not a Concern
Entertnmt PlusMaoyan IPO Preview: Running Out of Growth Drivers
Entertnmt PlusEntertainment Plus (猫眼娱乐) IPO: The Engineered Movie Ticketing Leader Running Out of Steam (Part 1)
Entertnmt PlusEntertainment Plus (猫眼娱乐) IPO: The Coming Regulatory Bang Isn't That Bad (Part 2)
Fosun TourismFosun Tourism IPO, Part 1: Back to the Beach With Club Med! | But Is This a 'China' Play?
Fosun Tourism

Fosun Tourism IPO Analysis: Quid Pro Quo for the Better of Fosun Group?

China KepeiChina Kepei Edu (科培教育) Pre-IPO Review - A Well Run Private Higher Education Company
Innovent BioInnovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
Innovent Bio

Innovent Biologics IPO Preview: Limited Upside on China's PD-1 Drug Market Compared to BeiGene

MicuRxMicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
Sinochem EnergySinochem Energy (中化能源) IPO First Impression: Trophy Asset Mixed with Volatile Trading Business
STX STX IPO Preview– a One-Hit Wonder
STX STX Entertainment (胜图娱乐) IPO: Legendary Founder but Results Matter
TongchengTongcheng-ELong (同程艺龙) Pre-IPO Review - A Force to Be Reckoned With
Qilu ExpressQilu Expressway IPO Preview: Concentration Risk and Recent News May Mean Discount to Peers
WeLabWeLab Pre-IPO - Stuck in a Regulatory Quagmire; Not the Right Time to List
South Korea
DaeyuDaeyu Co. IPO Preview (Part 1)
EbangEbang IPO Preview (Part 1): Lower Sales but Higher Operating Profit Versus Canaan Inc.
FoodnamooFoodnamoo Inc IPO Preview (Part 1) - A Leader in Home Meal Replacement Products in Korea
Livent

Livent IPO Preview (Part 1): A Profitable Company that Produces Lithium

Plakor

Plakor IPO Preview (Part 1)

Robotis

Robotis IPO Preview (Part 1) - An Innovative Provider of Robotic Solutions in Korea

ZinusZinus IPO Preview (Part 1) - An Amazing Comeback Story (#1 Mattress Brand on Amazon)
India
CMS InfoCMS Info Systems Pre-IPO Review - 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
Flemingo Flemingo Travel Retail Pre-IPO - Its a Different Business in Every Country
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
Mazagon DockMazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending

Lodha

Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable
LodhaLodha Developers IPO: Large Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt
The U.S.
CNFinanceCNFinance (泛华金融) IPO First Impression: Beware Rising Credit Risk and Slowing Loan Origination
CNFinanceCNFinance IPO Preview: A Renaissance that May Not Come
Niu

Niu Technologies – Another EV Upstart From China; This One Has Zest

NiuNIU IPO Preview: More Substance than Hype Compared to NIO
Studio City

Studio City (新濠影汇) IPO: A Melco Spin-Off Turning Profitable

Tencent Music

Tencent Music IPO: A Deep-Dive on Why Tencent Music Is Profitable and Spotify Is Not

Tencent Music

Tencent Music (TME): Only 29% Spotify-Like, But the Other Business Produces Profits

Tencent Music

Tencent Music IPO: A Deep-Dive on Why Tencent Music Is Profitable and Spotify Is Not

Tencent Music

Tencent Music Entertainment Group - Much Ado Nah Music About Nothing!

Tencent Music

Tencent Music Entertainment Group: Part 2 -The Curious Case of Acquiring Ultimate Music Inc

Tencent MusicTencent Music Pre-IPO - This Is How We Do It - A Quick Look at How the Apps Work
Tencent MusicTencent Music Pre-IPO Review - The Final Countdown - Growth Doesn't Seem to Be Slowing Down
WeidaiWeidai IPO Preview: Robust Foundations in Turbulent Times
Australia
Latitude financialLatitude Financial Group Pre-IPO Review - Credit Prospectus Throw up Some Interesting Data Points
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