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

<div>Bairong, an independent AI-powered technology platform in China serving the financial services industry, plans to raise around US$300m in its Hong Kong IPO. According to F&amp;S, it was the largest independent financial big data analytics solutions provider in China by revenue in 2019, with a market share of 8.7%.</div><div>
Over 2017-19, Bairong’s revenue expanded by 3.56x or at 88.8% CAGR. While its data analytics revenue increased by 66% over the period, its precision marketing services revenue grew 22.6x, and insurance distribution grew 54.5x. Over the same time, gross profit grew 3.99x and adjusted EBITDA, PAT and OCF all turned positive during that period.
I've covered the positive aspects of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/bairong-pre-ipo-the-positives-largest-independent-big-data-analytics-provider" target="_blank" rel="noopener">Bairong Pre-IPO - The Positives - Largest Independent Big-Data Analytics Provider</a>.
</div><div>In this insight, I'll talk about the not so pleasant aspects.</div>

Bairong, an independent AI-powered technology platform in China serving the financial services industry, plans to raise around US$300m in its Hong Kong IPO. According to F&amp;S, it was the largest independent financial big data analytics solutions provider in China by revenue in 2019, with a market share of 8.7%.
Over 2017-19, Bairong’s revenue expanded by 3.56x or at 88.8% CAGR. While its data analytics revenue increased by 66% over the period, its precision marketing services revenue grew 22.6x, and insurance distribution grew 54.5x. Over the same time, gross profit grew 3.99x and adjusted EBITDA, PAT and OCF all turned positive during that period.
I've covered the positive aspects of the deal in my earlier note, Bairong Pre-IPO - The Positives - Largest Independent Big-Data Analytics Provider.
In this insight, I'll talk about the not so pleasant aspects.

Bairong Pre-IPO - The Negatives - Playing with Its Own Data

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Negative Operating Remain Troubling: DBS Group Holdings (DBS.SP) [DBS] reported 4Q20 results of SGD 1.0 bn, declining SGD 285 mn (22.0%) on a linked quarter basis. Results remain troubling across the board, as this is the second consecutive quarter that DBS reported negative operating jaws whilst the decline in loss provisions reversed course on weaker credit;*Credit Risk Challenges Management: We remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs, as this improvement would appear to be in contravention to the stress being experienced regionally. By our calculation, we find that net new NPLs continue to increase – up SGD 631 mn or increasing 41.7% on an annualized basis – more than doubling the figures of SGD 272 mn or 18.9% on an annualized basis for 3Q20. We feel that reserves should be shored up in the neighborhood of SGD 2.8bn – amounting now to three plus full quarters of results, comparing very unfavorably to the SGD 1.3 bn calculated (one quarter of results) just a quarter earlier and suggest that Lakshmi Vilas Bank’s (LVB) risk is not under the control; and *India Deal Poses Significant Challenges: : By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent to the tune of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion. LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al.  DBS expects DBS India to return to profitability and that the LVB deal will be ROE accretive over the next 12-24 months. We’d like some of what management is smoking.

*Negative Operating Remain Troubling: DBS Group Holdings (DBS.SP) [DBS] reported 4Q20 results of SGD 1.0 bn, declining SGD 285 mn (22.0%) on a linked quarter basis. Results remain troubling across the board, as this is the second consecutive quarter that DBS reported negative operating jaws whilst the decline in loss provisions reversed course on weaker credit;*Credit Risk Challenges Management: We remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs, as this improvement would appear to be in contravention to the stress being experienced regionally. By our calculation, we find that net new NPLs continue to increase – up SGD 631 mn or increasing 41.7% on an annualized basis – more than doubling the figures of SGD 272 mn or 18.9% on an annualized basis for 3Q20. We feel that reserves should be shored up in the neighborhood of SGD 2.8bn – amounting now to three plus full quarters of results, comparing very unfavorably to the SGD 1.3 bn calculated (one quarter of results) just a quarter earlier and suggest that Lakshmi Vilas Bank’s (LVB) risk is not under the control; and *India Deal Poses Significant Challenges: : By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent to the tune of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion. LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al.  DBS expects DBS India to return to profitability and that the LVB deal will be ROE accretive over the next 12-24 months. We’d like some of what management is smoking. 

DBS Group Holdings – COVID & India Not A Good Combo

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

The yield curve is steepening. Oil prices are rising. Beijing pressures in Hong Kong, should benefit Singapore banks. India growth prospects, far outweigh those in the Asean city-sate. An improving credit cost delta may not be the only positive for DBS.

The yield curve is steepening. Oil prices are rising. Beijing pressures in Hong Kong, should benefit Singapore banks. India growth prospects, far outweigh those in the Asean city-sate. An improving credit cost delta may not be the only positive for DBS. 

*Weak 4Q20: Bank Central Asia (BBCA.IJ) [BCA] reported 4Q20 results of IDR 7.1 tn, declining IDR 699 bn (9.0%) on a linked quarter basis. Worse yet, when we exclude various non-core items, core operating results declined IDR 4.6 bn (55.5%) over the same period. Results at BCA were highlighted by negative operating jaws; and  *Credit Challenge, But Modest Earnings Event: By our calculation, we find that 4Q20 net new NPLs amounted to IDR 1.3 tn for an annualized rate of increase of 46.5% - rivaling some of the worst Indian banks. Given the continued breakdown in credit quality which shows no signs of abating, we calculate that reserves are short close to IDR 3.5 tn or about 50% of 4Q20 PBT – which is de minimis relative to the sector and region.

*Weak 4Q20: Bank Central Asia (BBCA.IJ) [BCA] reported 4Q20 results of IDR 7.1 tn, declining IDR 699 bn (9.0%) on a linked quarter basis. Worse yet, when we exclude various non-core items, core operating results declined IDR 4.6 bn (55.5%) over the same period. Results at BCA were highlighted by negative operating jaws; and  *Credit Challenge, But Modest Earnings Event: By our calculation, we find that 4Q20 net new NPLs amounted to IDR 1.3 tn for an annualized rate of increase of 46.5% - rivaling some of the worst Indian banks. Given the continued breakdown in credit quality which shows no signs of abating, we calculate that reserves are short close to IDR 3.5 tn or about 50% of 4Q20 PBT – which is de minimis relative to the sector and region. 

Bank Central Asia – Poor Showing At Indo Bellweather

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Cholamandalam Investment and Finance / Equity Bottom-Up

Back in November 2020, M M Murugappan retired and Vellayan Subbiah joined the board as Chairman. At the time, the move seemed like a non-event, as it seemed like a group-wide replacement than a targeted role. But subsequently the CEO, Arun Alagappan, cousin of Vellayan Subbiah, who joined as Executive Director in 2017 and was elevated to CEO not too long ago in 2019, also resigned in Jan 2021. Meanwhile, since Nov 2020, there has been an increasing emphasis from RBI on converting large NBFCs into banks. These events together have translated this seemingly innocuous move (Vellayan Subbiah joining as Chairman) into a meaningful leadership change at <a href="https://www.smartkarma.com/entities/cholamandalam-investment-and-finance" target="_blank" data-smartkarma-citation="entities:17583:1" rel="noopener">Cholamandalam Investment and Finance (CIFC IN)</a> ["Chola"]. Going by the commentary from Vellayan Subbiah at the recent earnings call, this can potentially lead to long-run transformational changes at Chola. Below we share the history of Chola and the role Vellayan Subbiah has played in shaping it, to put in perspective our favorable view on the leadership change and highlight what could be in store for Chola.

Back in November 2020, M M Murugappan retired and Vellayan Subbiah joined the board as Chairman. At the time, the move seemed like a non-event, as it seemed like a group-wide replacement than a targeted role. But subsequently the CEO, Arun Alagappan, cousin of Vellayan Subbiah, who joined as Executive Director in 2017 and was elevated to CEO not too long ago in 2019, also resigned in Jan 2021. Meanwhile, since Nov 2020, there has been an increasing emphasis from RBI on converting large NBFCs into banks. These events together have translated this seemingly innocuous move (Vellayan Subbiah joining as Chairman) into a meaningful leadership change at Cholamandalam Investment and Finance (CIFC IN) ["Chola"]. Going by the commentary from Vellayan Subbiah at the recent earnings call, this can potentially lead to long-run transformational changes at Chola. Below we share the history of Chola and the role Vellayan Subbiah has played in shaping it, to put in perspective our favorable view on the leadership change and highlight what could be in store for Chola.

Leadership Change Alert | Chola Investment: Vellayan Is Back; Watch Out for Transformational Leap

Singapore

DBS Group Holdings Limited and its subsidiaries provide a variety of financial services.  The Company offers services including mortgage financing, lease and hire purchase financing, nominee and trustee, funds management, corporate advisory and brokerage .  DBS Group also acts as the primary dealer in Singapore government securities.

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DBS (DBS SP)

Bairong Pre-IPO - The Negatives - Playing with Its Own Data

Bairong, an independent AI-powered technology platform in China serving the financial services industry, plans to raise around US$300m in its Hong...

Sumeet Singh

DBS Group Holdings – COVID & India Not A Good Combo

DBS GROUP HOLDINGS: DBS reported a 4Q20 results decline of 22.0% linked quarter. Results remain troubling across the board. India deal poses...

Thomas J. Monaco

DBS – A Montage

An improving credit cost delta at DBS may not be the only positive driver, where rising oil prices, a steepening yield curve, and HK emigration to...

Daniel Tabbush

Bank Central Asia – Poor Showing At Indo Bellweather

BANK CENTRAL ASIA: BBCA reported 4Q20 results decline of 9.0% linked quarter. Results at BCA were highlighted by negative operating jaws. Net new...

Thomas J. Monaco

Leadership Change Alert | Chola Investment: Vellayan Is Back; Watch Out for Transformational Leap

With Vellayan back at the helm and with the kind of vision he is approaching his role at Chola, Chola seems to be gearing up for a transformational...

Ankit Agrawal, CFA

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