Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

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<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> plans to raise around US$2.2bn in a primary follow-on offering. The stock is up 4x this year and has risen 10x since its IPO in 2017. 
We have covered the company since listing, links to our previous notes are below. In this note, I'll talk about the deal dynamics and run the deal through our ECM framework.
Links to our prior SEA coverage:
<ul>
<li><a href="https://www.smartkarma.com/insights/sea-ltd-trade-idea-time-to-shine-market-discounting-e-commerce-to-almost-zero" target="_blank" rel="noopener">Sea Ltd Trade Idea - Time to Shine - Market Discounting E-Commerce to Almost Zero</a></li>
<li>
<a href="https://www.smartkarma.com/insights/sea-ltd-placement-capitalizing-on-momentum" target="_blank" data-smartkarma-citation="insights:28366" rel="noopener">Sea Ltd Placement - Capitalizing on Momentum</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/sea-ltd-ipo-review-e-commerce-constitutes-64-of-sotp-valuation" target="_blank" data-smartkarma-citation="insights:14375" rel="noopener">Sea Ltd IPO Review - E-Commerce Constitutes 64% of SOTP Valuation</a> </li>
<li><a href="https://www.smartkarma.com/insights/sea-ltd-ipo-review-a-pure-exposure-to-se-asia-s-e-commerce-gaming-despite-stiff-competition" target="_blank" data-smartkarma-citation="insights:13958" rel="noopener">Sea Ltd IPO Review - A Pure Exposure to SE Asia's E-Commerce &amp; Gaming Despite Stiff Competition</a></li>
</ul>
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Sea Ltd (SE US) plans to raise around US$2.2bn in a primary follow-on offering. The stock is up 4x this year and has risen 10x since its IPO in 2017. 
We have covered the company since listing, links to our previous notes are below. In this note, I'll talk about the deal dynamics and run the deal through our ECM framework.
Links to our prior SEA coverage:

Sea Ltd Trade Idea - Time to Shine - Market Discounting E-Commerce to Almost Zero

Sea Ltd Placement - Capitalizing on Momentum 

Sea Ltd IPO Review - E-Commerce Constitutes 64% of SOTP Valuation 
Sea Ltd IPO Review - A Pure Exposure to SE Asia's E-Commerce &amp; Gaming Despite Stiff Competition



SEA Ltd Placement - New Business Needs New Money

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

The Monetary Authority of Singapore (MAS) announced last week that it will award a full digital bank license to <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and to a consortium including <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> and <a href="https://www.smartkarma.com/entities/singapore-telecommunications" target="_blank" data-smartkarma-citation="entities:20:1" rel="noopener">Singtel (ST SP)</a> in a move to liberalize the local banking industry. In this insight, we consider the potential for <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> to benefit from this new pillar. 
Like traditional banks, these players will provide retail customers with services such as opening accounts, deposits, as well as issuing debit and credit cards, The difference being that digital banks will not have a physical presence and all banking services will be done online.
The MAS will also grant digital wholesale bank licenses to <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and a consortium including Greenland Financial, Linklogis Hong Kong, and Beijing Cooperative Equity Investment Fund. Digital wholesale banks can serve corporates and small and medium-sized enterprises.
This should be taken positively for <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and <a href="https://www.smartkarma.com/entities/singapore-telecommunications" target="_blank" data-smartkarma-citation="entities:20:1" rel="noopener">Singtel (ST SP)</a> and, signaling a firm move by the former to further build its exposure into the financial space beyond digital payments. It has already been making significant headway with digital payments as a late starter, especially in Indonesia.
SeaMoney and ShopeePay saw positive momentum across Garena and Shopee during 3Q2020, with the total mobile wallet payment volume exceeding US$2.1bn and quarterly paying users surpassing 17.8m. The eventual prospect of selling financial services to Sea Money and Shopee Pay users must make sense as a long-term growth driver. 
No doubt that <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> has caught out short sellers in their droves but for good reason, in that it keeps delivering on growth and is already forging a path to profitability with increasingly positive EBITDA over the past two quarters. This will continue to be a stock to own in 2021, with digital payments and other related financial services becoming increasingly important. 
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> just announced that it is to raise US$2bn-2.6bn in new funds through a placement of new ADS shares. This will provide the company with further funding to ramp up its digital bank and other digital finance businesses. The company had over US$3.5bn in cash or equivalents at end of 3Q2020, so this only adds to its firepower.

The Monetary Authority of Singapore (MAS) announced last week that it will award a full digital bank license to Sea Ltd (SE US) and to a consortium including Grab (0967655D SP) and Singtel (ST SP) in a move to liberalize the local banking industry. In this insight, we consider the potential for Sea Ltd (SE US) to benefit from this new pillar. 
Like traditional banks, these players will provide retail customers with services such as opening accounts, deposits, as well as issuing debit and credit cards, The difference being that digital banks will not have a physical presence and all banking services will be done online.
The MAS will also grant digital wholesale bank licenses to Alibaba Group (BABA US) and a consortium including Greenland Financial, Linklogis Hong Kong, and Beijing Cooperative Equity Investment Fund. Digital wholesale banks can serve corporates and small and medium-sized enterprises.
This should be taken positively for Sea Ltd (SE US) and Singtel (ST SP) and, signaling a firm move by the former to further build its exposure into the financial space beyond digital payments. It has already been making significant headway with digital payments as a late starter, especially in Indonesia.
SeaMoney and ShopeePay saw positive momentum across Garena and Shopee during 3Q2020, with the total mobile wallet payment volume exceeding US$2.1bn and quarterly paying users surpassing 17.8m. The eventual prospect of selling financial services to Sea Money and Shopee Pay users must make sense as a long-term growth driver. 
No doubt that Sea Ltd (SE US) has caught out short sellers in their droves but for good reason, in that it keeps delivering on growth and is already forging a path to profitability with increasingly positive EBITDA over the past two quarters. This will continue to be a stock to own in 2021, with digital payments and other related financial services becoming increasingly important. 
Sea Ltd (SE US) just announced that it is to raise US$2bn-2.6bn in new funds through a placement of new ADS shares. This will provide the company with further funding to ramp up its digital bank and other digital finance businesses. The company had over US$3.5bn in cash or equivalents at end of 3Q2020, so this only adds to its firepower. 

Sea Ltd (SE US) - Financial Services the Third Pillar?

APAC IPOs & Placements

Zhen Zhou, Toh

<a href="https://www.smartkarma.com/entities/archosaur-games" target="_blank" data-smartkarma-citation="entities:28948:1" rel="noopener">Archosaur Games (9990 HK)</a> (AG) is a mobile game developer in China with a focus on mobile massively multiplayer online role-playing game (MMORPGs). The company is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> and <a href="https://www.smartkarma.com/entities/perfect-world-co-ltd-china" target="_blank" data-smartkarma-citation="entities:28923:1" rel="noopener">Perfect World (002624 CH)</a>. It has a track record of developing and publishing popular MMORPGs which include Dragon Raja (龙族幻想), Fantasy Zhuxian (梦幻诛仙), and Loong Craft (六龙争霸).
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AG was listed on the 15th of July, 2020, and it has traded well since then, still holding onto its 110% gain since IPO. But in October, share price dipped on the back of the rise in popularity of Genshin Impact. But we think that AG still offers one of the best exposure to mobile MMORPG game development given the track record of the company.
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Archosaur Games (9990 HK) (AG) is a mobile game developer in China with a focus on mobile massively multiplayer online role-playing game (MMORPGs). The company is backed by Tencent Holdings (700 HK) and Perfect World (002624 CH). It has a track record of developing and publishing popular MMORPGs which include Dragon Raja (龙族幻想), Fantasy Zhuxian (梦幻诛仙), and Loong Craft (六龙争霸).

AG was listed on the 15th of July, 2020, and it has traded well since then, still holding onto its 110% gain since IPO. But in October, share price dipped on the back of the rise in popularity of Genshin Impact. But we think that AG still offers one of the best exposure to mobile MMORPG game development given the track record of the company.


2021 High Conviction - Archosaur Games (祖龙娱乐) - A Bet on the Mobile RPG Boom

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Tencent is not an overheated company riding on the home quarantine. On the contrary, we believe  the competitors to all Tencent's business lines are in trouble. These provide Tencent another opportunity of upside.
The 6-year P/E Band suggests an upside of 24% for the end of 2021 and a price target. We upgraded Tencent to "buy" after the release of the 3Q20 result. Now we raise our price target from HK$660 to HK$700.

Tencent is not an overheated company riding on the home quarantine. On the contrary, we believe  the competitors to all Tencent's business lines are in trouble. These provide Tencent another opportunity of upside.
The 6-year P/E Band suggests an upside of 24% for the end of 2021 and a price target. We upgraded Tencent to "buy" after the release of the 3Q20 result. Now we raise our price target from HK$660 to HK$700.

2021 High Conviction: Long Tencent as All Competitors Are in Trouble

Alibaba Group Holding  / Equity Bottom-Up

<ul class="">
<li>Alibaba (BABA) is selling BigBasket.com to Tata Group.</li>
<li>It is rumored that Alibaba (BABA) will dismiss the Xiami Music team.</li>
<li>Xiaomi (1810 HK) issued 1 billion shares at the price of HK$23.70.</li>
<li>Trip.com (TCOM)’s revenue decreased by 48% yoy in 3Q20.</li>
</ul>


Alibaba (BABA) is selling BigBasket.com to Tata Group.
It is rumored that Alibaba (BABA) will dismiss the Xiami Music team.
Xiaomi (1810 HK) issued 1 billion shares at the price of HK$23.70.
Trip.com (TCOM)’s revenue decreased by 48% yoy in 3Q20.


China Internet Weekly (7Dec2020): Alibaba Withdrawing from India and Domestic Music Market

China

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

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NetEase Inc (NTES US)

SEA Ltd Placement - New Business Needs New Money

Sea Ltd (SE US) plans to raise around US$2.2bn in a primary follow-on offering. The stock is up 4x this year and has risen 10x since its IPO in 2017.

Sumeet Singh

Sea Ltd (SE US) - Financial Services the Third Pillar?

Sea Ltd keeps delivering on growth and is forging a path to profitability with increasingly positive EBITDA over the past two quarters. Financial...

Angus Mackintosh

2021 High Conviction - Archosaur Games (祖龙娱乐) - A Bet on the Mobile RPG Boom

AG was listed on the 15th of July, 2020, and it has traded well since then. AG offers one of the best exposure to mobile MMORPG game development...

Zhen Zhou, Toh

2021 High Conviction: Long Tencent as All Competitors Are in Trouble

Tencent is not an overheated company riding on the home quarantine. All the competitors to all Tencent's business lines are in trouble. These...

Ming Lu

China Internet Weekly (7Dec2020): Alibaba Withdrawing from India and Domestic Music Market

Alibaba (BABA) are selling BigBasket.com to Tata Group in India and will dismiss Xiami Music in China. Xiaomi will issue new shares.

Ming Lu

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