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

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On 24th Mar 2021, Securities Exchange Commission (SEC) issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs fell by 7.5% on average. 
We have covered various aspects of this topic before in our prior note, links to which are below. In this note, I'll talk about the SEC updates.
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In our previous notes:
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<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>
</ul>
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On 24th Mar 2021, Securities Exchange Commission (SEC) issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs fell by 7.5% on average. 
We have covered various aspects of this topic before in our prior note, links to which are below. In this note, I'll talk about the SEC updates.


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. 



China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

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.

<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> reported its 4Q2020 results on Wednesday (24th March 2021) which saw revenues increasing 26% YoY to RMB133.7bn (consensus revenue of RMB132.2bn) while operating profit (non-IFRS) was up 26% YoY to RMB38bn (IFRS OP of RMB63bn vs consensus OP of RMB38bn) during the fourth quarter.Despite the ongoing regulatory concerns regarding the company’s fintech business, Tencent’s core businesses continued to see strong performance in 2020, which led to 28% YoY increase in revenues for full-year 2020. Tencent’s Value added services segment performed better than the rest of the businesses during 2020.

Tencent Holdings (700 HK) reported its 4Q2020 results on Wednesday (24th March 2021) which saw revenues increasing 26% YoY to RMB133.7bn (consensus revenue of RMB132.2bn) while operating profit (non-IFRS) was up 26% YoY to RMB38bn (IFRS OP of RMB63bn vs consensus OP of RMB38bn) during the fourth quarter.Despite the ongoing regulatory concerns regarding the company’s fintech business, Tencent’s core businesses continued to see strong performance in 2020, which led to 28% YoY increase in revenues for full-year 2020. Tencent’s Value added services segment performed better than the rest of the businesses during 2020.

Tencent 4Q: Solid Performance Across All Businesses Despite Ongoing Regulatory Concerns

The Japanese cloud-based accounting and HR/Payroll software provider <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>  has announced a secondary offering of 4.6m shares on 22nd March 2021. The new share issue will account for approx. 9.3% of the extended share capital (post follow-on offering) of Freee and the company’s shares closed at JPY9,660 per share on the day of the announcement. At the above price, Freee will raise about JPY44.4bn (US$408.8m). The offer price will be determined between 25-29th March 2021 at a 0-10% discount. In addition to issuing new shares, two of the company’s existing shareholders DCM VI and A-Fund will also sell 481.8k of their holdings in the company.

The Japanese cloud-based accounting and HR/Payroll software provider freee (4478 JP)  has announced a secondary offering of 4.6m shares on 22nd March 2021. The new share issue will account for approx. 9.3% of the extended share capital (post follow-on offering) of Freee and the company’s shares closed at JPY9,660 per share on the day of the announcement. At the above price, Freee will raise about JPY44.4bn (US$408.8m). The offer price will be determined between 25-29th March 2021 at a 0-10% discount. In addition to issuing new shares, two of the company’s existing shareholders DCM VI and A-Fund will also sell 481.8k of their holdings in the company.

Freee Secondary Offering: Recent Drop in Multiples Offer a Good Entry

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a>  reported its 4Q2020 results on Monday (22nd March) after market which saw revenues growing 14.3% YoY to RMB8.3bn. Despite revenues growing YoY during the quarter, TME’s operating profit declined 5% YoY resulting in a 250bps drop in the company’s OPM. TME’s revenues for 4Q2020 were in line with consensus estimates, however, reported OP was 21.8% below consensus expectations.In our previous insights, we discussed the company’s business model, segments, revenue and margins in detail.<a href="https://www.smartkarma.com/insights/tme-secondary-listing-monetisation-efforts-in-social-entertainment-should-boost-top-line-growth" target="_blank" data-smartkarma-citation="insights:48830" rel="noopener">TME Secondary Listing: Monetisation Efforts in Social Entertainment Should Boost Top Line Growth</a> <a href="https://www.smartkarma.com/insights/tencent-music-secondary-unlikely-for-margins-to-expand-but-should-remain-stable-at-current-level" target="_blank" data-smartkarma-citation="insights:49034" rel="noopener">Tencent Music Secondary: Unlikely for Margins to Expand but Should Remain Stable at Current Level</a>

Tencent Music (TME US)  reported its 4Q2020 results on Monday (22nd March) after market which saw revenues growing 14.3% YoY to RMB8.3bn. Despite revenues growing YoY during the quarter, TME’s operating profit declined 5% YoY resulting in a 250bps drop in the company’s OPM. TME’s revenues for 4Q2020 were in line with consensus estimates, however, reported OP was 21.8% below consensus expectations.In our previous insights, we discussed the company’s business model, segments, revenue and margins in detail.TME Secondary Listing: Monetisation Efforts in Social Entertainment Should Boost Top Line Growth Tencent Music Secondary: Unlikely for Margins to Expand but Should Remain Stable at Current Level 

TME 4Q Results: Strong Finish to 2020, Further Strengthens Partnerships and Focus on New Initiatives

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>The revenue growth rate accelerated further to 53% yoy in 4Q20.</li>
<li>Online market revenue surged by 195% yoy in 4Q20.</li>
<li>We believe total revenue will grow 53% in 2021 versus 50% in 2020.</li>
<li>The gross margin improved significantly to 47% in 4Q20 versus 39% in 4Q19.</li>
<li>We believe the company will make operating profit in 2022.</li>
<li>However, we believe the stock price has a downside of 18% for the end of 2022.</li>
</ul>


The revenue growth rate accelerated further to 53% yoy in 4Q20.
Online market revenue surged by 195% yoy in 4Q20.
We believe total revenue will grow 53% in 2021 versus 50% in 2020.
The gross margin improved significantly to 47% in 4Q20 versus 39% in 4Q19.
We believe the company will make operating profit in 2022.
However, we believe the stock price has a downside of 18% for the end of 2022.


Kuaishou (1024 HK): Q4, Higher Growth , Higher Margin, User Base Closer to TikTok, But Overvalued

China

Tencent Music Entertainment operates an online music entertainment platform in China. The Company offers platform that comprises of online music, recording, music-centric live streaming enabling users to discover, listen, sing, watch, perform, and socialize music.

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Tencent Music (TME US)

China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone

On 24th Mar 2021, SEC issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs...

Sumeet Singh

Tencent 4Q: Solid Performance Across All Businesses Despite Ongoing Regulatory Concerns

Though it seems inevitable that Tencent could come under regulatory pressures, we believe Tencent may be well prepared to avoid the same level of...

Shifara Samsudeen, ACMA, CGMA

Freee Secondary Offering: Recent Drop in Multiples Offer a Good Entry

We believe it is worth subscribing to Freee’s secondary offering at the current price as we believe it is unlikely for Freee to trade below 28-30x...

Shifara Samsudeen, ACMA, CGMA

TME 4Q Results: Strong Finish to 2020, Further Strengthens Partnerships and Focus on New Initiatives

TME reported its 4Q2020 results which saw revenues growing 14.3% YoY to RMB8.3bn. Despite revenues growing YoY during the quarter, TME’s OP...

Shifara Samsudeen, ACMA, CGMA

Kuaishou (1024 HK): Q4, Higher Growth , Higher Margin, User Base Closer to TikTok, But Overvalued

The revenue growth rate accelerated further to 53% yoy in 4Q20. Online market revenue surged by 195% yoy in 4Q20. The gross margin improved...

Ming Lu

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