Equity Research in HK and Mainland China

Li Tang

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<p>The PBOC published draft regulations on payments services by non-bank institutions for public to solicit public opinions until 19 February that define market dominance and looking to clamp down on monopolies in the third-party payments industry.</p>
<p>The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such as <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 href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> .Alipay and Tenpay have absolute advantages,Alipay and Tenpay have now monopolized the third-party payment market. The two giants accounted for 82.9% of the mobile third-party payment market in China.</p>

The PBOC published draft regulations on payments services by non-bank institutions for public to solicit public opinions until 19 February that define market dominance and looking to clamp down on monopolies in the third-party payments industry.
The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such as Alibaba Group (BABA US)and Tencent Holdings (700 HK) .Alipay and Tenpay have absolute advantages,Alipay and Tenpay have now monopolized the third-party payment market. The two giants accounted for 82.9% of the mobile third-party payment market in China.

PBOC Draft Online Payment Rules Provide Clarity on Regulatory Direction

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>PBoC’s latest regulatory proposals point to increased anti-trust focus in non-bank payments</li>
<li>This ups the ante on <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 href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a>, in particular</li>
<li>Alibaba shares have recovered some ground since our 13<sup>th</sup> January report, yet Alibaba has barely narrowed the gap with <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>, in market cap-to-revenue terms</li>
<li>This latest PBoC announcement, at best, adds to delay the Ant Group IPO, and adds to bearish sentiment on Alibaba and, to a lesser degree, Tencent shares</li>
<li>We believe that the recent re-emergence of Jack Ma is not, per se, sufficient cause for Alibaba share price relief; we would recommend locking in recent gains on BABA</li>
<li>Risks to our cautious view on Alibaba and Ant Group include an agreement on mutually acceptable regulatory parameters between the PBoC and Ant Group that allows for the Ant IPO to proceed in the relatively near term</li>
</ul>


PBoC’s latest regulatory proposals point to increased anti-trust focus in non-bank payments
This ups the ante on Alibaba Group (BABA US) and Ant Group (6688 HK), in particular
Alibaba shares have recovered some ground since our 13th January report, yet Alibaba has barely narrowed the gap with Tencent Holdings (700 HK), in market cap-to-revenue terms
This latest PBoC announcement, at best, adds to delay the Ant Group IPO, and adds to bearish sentiment on Alibaba and, to a lesser degree, Tencent shares
We believe that the recent re-emergence of Jack Ma is not, per se, sufficient cause for Alibaba share price relief; we would recommend locking in recent gains on BABA
Risks to our cautious view on Alibaba and Ant Group include an agreement on mutually acceptable regulatory parameters between the PBoC and Ant Group that allows for the Ant IPO to proceed in the relatively near term


Alibaba (BABA US) & Ant Group: PBoC Proposals Threaten Tighter Regulations

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>Growth: enjoy it while you can</li>
<li>No reset for US-China ties</li>
<li>Billionaire in proof of life video</li>
<li>How hard is it to make good chips?</li>
<li>Xi touts Winter Olympics as socialist showcase</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
Growth: enjoy it while you can
No reset for US-China ties
Billionaire in proof of life video
How hard is it to make good chips?
Xi touts Winter Olympics as socialist showcase
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

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

RLX Technology Inc / Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/rlx-technology-inc" target="_blank" data-smartkarma-citation="entities:31113:1" rel="noopener">RLX Technology Inc (RLX US)</a> has raised around US$1.4bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. </p>
</div>
<div>
<p>In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, talk about the trading dynamics and provide a valuation table at different  share price levels.</p>
</div>
<div>
<p>Links to our previous notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-positives-fast-growth-low-penetration" target="_blank" data-smartkarma-citation="insights:46797" rel="noopener">RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration</a> </li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-negatives-limited-track-record-and-missing-international-ops" target="_blank" data-smartkarma-citation="insights:46836" rel="noopener">RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-rlx-store-visits-to-relx-and-its-competitors" target="_blank" rel="noopener">RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-peer-comparison-and-valuation" target="_blank" rel="noopener">RLX Technology Pre-IPO - Peer Comparison and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-ipo-valuation-has-more-than-doubled-in-two-months" target="_blank" rel="noopener">RLX Technology IPO - Valuation Has More than Doubled in Two Months</a></li>
</ul>
</div>


RLX Technology Inc (RLX US) has raised around US$1.4bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. 


In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, talk about the trading dynamics and provide a valuation table at different  share price levels.


Links to our previous notes:




RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration 
RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops
RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors
RLX Technology Pre-IPO - Peer Comparison and Valuation
RLX Technology IPO - Valuation Has More than Doubled in Two Months



RLX Technology IPO Trading - We Won't Be Chasing

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Cloopen Group Holding Ltd / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/cloopen-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:31315:1" rel="noopener">Cloopen Group Holding Ltd (RAAS US)</a> is the largest multi-capability cloud-based communications solution provider in China, as measured by revenues in 2019, according to CIC. Its key brands are Ronglian, 7moor Cloud and RongVideo. Cloopen is seeking to raise $300-500 million through a listing on the NYSE, according to press reports. Cloopen is backed by Sequoia Capital (20.75% shareholder) and <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>.  </p><div class="content-highlight"><p>Cloopen is a play on the growth of China's cloud-based communications industry driven by the migration of IT spending on communications to cloud-based solutions. The shift is spearheaded by enterprises undergoing digital transformation with an increasing focus on improving efficiency and saving costs. However, Cloopen’s IPO pitch is muddied by the temporary impact of the COVID-19 outbreak which negatively influenced growth rates and the cash burn. While the fundamentals are not perfect, Cloopen offers enough to warrant a closer look.   </p></div>

Cloopen Group Holding Ltd (RAAS US) is the largest multi-capability cloud-based communications solution provider in China, as measured by revenues in 2019, according to CIC. Its key brands are Ronglian, 7moor Cloud and RongVideo. Cloopen is seeking to raise $300-500 million through a listing on the NYSE, according to press reports. Cloopen is backed by Sequoia Capital (20.75% shareholder) and Tencent Holdings (700 HK).  Cloopen is a play on the growth of China's cloud-based communications industry driven by the migration of IT spending on communications to cloud-based solutions. The shift is spearheaded by enterprises undergoing digital transformation with an increasing focus on improving efficiency and saving costs. However, Cloopen’s IPO pitch is muddied by the temporary impact of the COVID-19 outbreak which negatively influenced growth rates and the cash burn. While the fundamentals are not perfect, Cloopen offers enough to warrant a closer look.   

Cloopen Group IPO Initiation: Busy Signals

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)

PBOC Draft Online Payment Rules Provide Clarity on Regulatory Direction

The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such...

Li Tang

Alibaba (BABA US) & Ant Group: PBoC Proposals Threaten Tighter Regulations

Alibaba's share price, post its recent rally, is under threat again, as is the Ant IPO, from the latest regulatory proposals by PBoC; time to take...

Victor Galliano

GDP/ US-China/ Jack Ma/ Chips/ Olympics

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

RLX Technology IPO Trading - We Won't Be Chasing

RLX Technology Inc (RLX US) raised around US$1.4bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of...

Sumeet Singh

Cloopen Group IPO Initiation: Busy Signals

Cloopen is seeking to raise $300-500 million through a listing on the NYSE, according to press reports. While the fundamentals are not perfect,...

Arun George

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