Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<p>Mega cap tech stocks rarely underperform the market to the same extent as <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> during the last seven months, especially with no deterioration in earnings growth potential.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/217/249/original/image_11147906721625671618744.png?1625671621" class="editor-image img-responsive" data-smartkarma-image-id="217249"></figure><div class="content-caption"><em>Source: Cap IQ</em></div><p>After trading sideways during May/June 2021, technicals were pointing the right way for the very first time for Alibaba in 2021.</p><p>The stock rallied by 10% in the last week of June to $229.4 per share, causing most of us to assume that Alibaba was making a comeback.</p><p>Unfortunately, the joy lasted just a short time, as Xi Jinping’s government went back on the offence with a broadened crackdown on tech platforms, especially the US-listed Chinese tech companies like the recent ride sharing IPO <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>.</p><p>After underperforming the S&amp;P for almost seven months, most Chinese technology stocks, especially Alibaba, seem very cheap, but it is not cheap enough to call it a bottom amidst ongoing regulatory crackdowns and the geopolitical rivalry between the US and China. As such, we would not rush to buy any dips and recommend that we wait till the rally well and truly begins.</p>

Mega cap tech stocks rarely underperform the market to the same extent as Alibaba Group (9988 HK) during the last seven months, especially with no deterioration in earnings growth potential.Source: Cap IQAfter trading sideways during May/June 2021, technicals were pointing the right way for the very first time for Alibaba in 2021.The stock rallied by 10% in the last week of June to $229.4 per share, causing most of us to assume that Alibaba was making a comeback.Unfortunately, the joy lasted just a short time, as Xi Jinping’s government went back on the offence with a broadened crackdown on tech platforms, especially the US-listed Chinese tech companies like the recent ride sharing IPO DiDi Chuxing (DIDI US).After underperforming the S&amp;P for almost seven months, most Chinese technology stocks, especially Alibaba, seem very cheap, but it is not cheap enough to call it a bottom amidst ongoing regulatory crackdowns and the geopolitical rivalry between the US and China. As such, we would not rush to buy any dips and recommend that we wait till the rally well and truly begins.

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

Alibaba Group Holding  / Equity Capital Markets

<p>In our previous note <a href="https://www.smartkarma.com/insights/china-adrs-kanzhun-full-truck-and-didi-regulators-sending-a-message" target="_blank" rel="noopener">China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message,</a> we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme of a general crackdown on overseas listings for Chinese companies. </p>
<div>
<p>We have looked at the ADRs in the past, in our previous notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang,</a> published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. </li>
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a> published in May 2020, we looked at the recent developments and provided an revised short-list</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a>, published in May 2020, we spoke about the implication of the act which had made its way through the senate.</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-pipeline-looks-rich-have-three-years-to-move" target="_blank" rel="noopener">China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move</a>, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-sec-notice-instead-of-three-probably-have-four-years-till-2025-correction-overdone" target="_blank" rel="noopener">China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone, </a> we spoke about the new SEC notice and its implications. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-a-new-act-aims-to-put-an-end-to-china-adr-ipos" target="_blank" rel="noopener">China ADRs - A New Act Aims to Put an End to China ADR IPOs</a>, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies. </li>
</ul>
</div>
<div>
<p>In this note, we'll talk about the implications of the recent China regulatory announcements.</p>
</div>

In our previous note China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message, we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme of a general crackdown on overseas listings for Chinese companies. 

We have looked at the ADRs in the past, in our previous notes:




China ADRs Secondary Listing Deep-Dive: Yin and Yang, published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. 

In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List published in May 2020, we looked at the recent developments and provided an revised short-list
In China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home, published in May 2020, we spoke about the implication of the act which had made its way through the senate.
In China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. 
In China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone,  we spoke about the new SEC notice and its implications. 
In China ADRs - A New Act Aims to Put an End to China ADR IPOs, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies. 



In this note, we'll talk about the implications of the recent China regulatory announcements.


China ADRs - Now the Message Is Loud and Getting Clearer

<div><p><a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a>  aims to raise US$1.1bn in its upcoming India IPO, which will be launched next week. This would be the largest listing in India from the technology sector.</p></div><div><p>Zomato operates a technology platform that provides services for restaurant partners, customers, and delivery partners. During FY20, Zomato recorded 41.5m average MAU and was one of the leading Food Services platforms in India, in terms of value of goods sold, according to RedSeer. As of 31 Dec 20, it had a presence in 526 Indian cities and had 350,174 active restaurant listings.</p></div><div><p>We have covered some aspects of the deal in our earlier notes  <a href="https://www.smartkarma.com/insights/zomato-pre-ipo-filings-lack-narrative-a-little-bit-of-history-helps" target="_blank" rel="noopener">Zomato Pre-IPO - Filings Lack Narrative, a Little Bit of History Helps </a>and <a href="https://www.smartkarma.com/insights/zomato-pre-ipo-food-delivery-revenue-was-probably-up-16x" target="_blank" rel="noopener">Zomato Pre-IPO - Food Delivery Revenue Was Probably up 16x.</a></p></div><div><p>In this note, we will undertake a peer comparison with its global peers and its main local peer.</p></div>

Zomato (ZOM IN)  aims to raise US$1.1bn in its upcoming India IPO, which will be launched next week. This would be the largest listing in India from the technology sector.Zomato operates a technology platform that provides services for restaurant partners, customers, and delivery partners. During FY20, Zomato recorded 41.5m average MAU and was one of the leading Food Services platforms in India, in terms of value of goods sold, according to RedSeer. As of 31 Dec 20, it had a presence in 526 Indian cities and had 350,174 active restaurant listings.We have covered some aspects of the deal in our earlier notes  Zomato Pre-IPO - Filings Lack Narrative, a Little Bit of History Helps and Zomato Pre-IPO - Food Delivery Revenue Was Probably up 16x.In this note, we will undertake a peer comparison with its global peers and its main local peer.

Zomato Pre-IPO - Peer Comparison - Listed and Domestic

APAC IPOs & Placements

Zhen Zhou, Toh

<p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> is looking to raise up to US3.8bn in its South Korea IPO. </p><p>Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.</p><p>In this note, we will look at the company's fundamentals and share our initial thoughts on the IPO.</p>

 Krafton Inc (1486402D KS) is looking to raise up to US3.8bn in its South Korea IPO. Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.In this note, we will look at the company's fundamentals and share our initial thoughts on the IPO.

Krafton IPO - Adapting and Transforming Well

<p>Daojia Limited (DL), one of the largest one-stop home services platforms in China, aims to raise at least US$300m in its US IPO, which now may or may not happen. The company is backed by 58.com and Baba.</p><p>DL operates Swan Daojia, a platform where it offers multiple services across categories such as maternity nurse, nanny, housekeeping services, along with training services and SaaS-based solutions.</p>

Daojia Limited (DL), one of the largest one-stop home services platforms in China, aims to raise at least US$300m in its US IPO, which now may or may not happen. The company is backed by 58.com and Baba.DL operates Swan Daojia, a platform where it offers multiple services across categories such as maternity nurse, nanny, housekeeping services, along with training services and SaaS-based solutions.

Daojia Pre-IPO - Can’t Pinpoint the True Growth

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent (700 HK)

Alibaba: Still Too Risky to Own

Mega cap tech stocks rarely underperform the market to the same extent as Alibaba during the last seven months, especially with no deterioration in...

Oshadhi Kumarasiri

China ADRs - Now the Message Is Loud and Getting Clearer

In our previous note we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme...

Sumeet Singh

Zomato Pre-IPO - Peer Comparison - Listed and Domestic

Zomato (ZOM IN) aims to raise US$1.1bn in its upcoming India IPO, which will be launched next week. This would be the largest listing in India...

Sumeet Singh

Krafton IPO - Adapting and Transforming Well

Krafton Inc (1486402D KS) is looking to raise up to US3.8bn in its South Korea IPO. Krafton Inc is a video game developer based in South Korea.

Zhen Zhou, Toh

Daojia Pre-IPO - Can’t Pinpoint the True Growth

Daojia Limited (DL), one of the largest one-stop home services platforms in China, aims to raise US$300m in its US IPO, which now may or may not...

Sumeet Singh

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