Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<div>
<p>On the 28 February, e-commerce and payment solutions provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.</p>
<p>All in, the indicative Offer price was HK$2.3088/share, a 30.2% <em>discount</em> to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. </p>
<p>In <em><a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a></em>, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. </p>
<p>On the 6  May, Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. </p>
<p>Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. </p>
<p>This is <em>starting</em> to look more attractive.</p>
</div>


On the 28 February, e-commerce and payment solutions provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders approved at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.


China Youzan (8083 HK): Reality Check As Shares Rollover

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.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a> is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop 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>, <a href="https://www.smartkarma.com/entities/swiss-re-ag-1f83dcbc-730e-46fa-82f2-bfe7e8e361a1" target="_blank" data-smartkarma-citation="entities:27914:1" rel="noopener">Swiss Re AG (SREN SW)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.</p></div><div><p>At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/waterdrop-ipo-initiation-going-for-brokers" target="_blank" data-smartkarma-citation="insights:50610" rel="noopener">Waterdrop IPO Initiation: Going for Brokers</a>, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. </p></div></div></div>

Waterdrop Inc (WDH US) is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by Tencent Holdings (700 HK), Swiss Re AG (SREN SW) and Meituan (3690 HK).At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.In Waterdrop IPO Initiation: Going for Brokers, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. 

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.

<p><a href="https://www.smartkarma.com/entities/linklogis" target="_blank" data-smartkarma-citation="entities:31126:1" rel="noopener">Linklogis (LINK HK)</a> announced the indicative price range to its IPO on 26<sup>th</sup> March 2021 at HK$16.28-18.28 per share, which implies a market cap and EV range of HK$36.9-41.4bn and HK$29.0-32.7bn respectively.</p><p>Linklogis generated healthy revenue growth (63.9% CAGR through 2018-20) and the OP margin is already strong. Moreover, the OP margin trend is still on a improving trajectory. (OPM: 14.3%, 20.0% and 31.1% in 2018, 2019 and 2020 respectively).</p><p>While value investors would never describe 28.2-31.8x Trailing EV/Sales and 90.7-102.0x Trailing EV/OP as reasonable, the fact remains that compared to where most SaaS IPO EV/Sales multiples ended on trading debut, Linklogis IPO valuation multiples are still on the low side , especially considering that Linklogis allows access to both SaaS and Singapore Digital Banking trends.</p>

Linklogis (LINK HK) announced the indicative price range to its IPO on 26th March 2021 at HK$16.28-18.28 per share, which implies a market cap and EV range of HK$36.9-41.4bn and HK$29.0-32.7bn respectively.Linklogis generated healthy revenue growth (63.9% CAGR through 2018-20) and the OP margin is already strong. Moreover, the OP margin trend is still on a improving trajectory. (OPM: 14.3%, 20.0% and 31.1% in 2018, 2019 and 2020 respectively).While value investors would never describe 28.2-31.8x Trailing EV/Sales and 90.7-102.0x Trailing EV/OP as reasonable, the fact remains that compared to where most SaaS IPO EV/Sales multiples ended on trading debut, Linklogis IPO valuation multiples are still on the low side , especially considering that Linklogis allows access to both SaaS and Singapore Digital Banking trends.

Linklogis IPO Valuation: Offer Multiples Are Not Cheap, Still Room For Upside on Trading Debut

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight"><p><strong>Our comparable companies valuation sensitivity analysis suggests an implied EV range of $6.2 billion to $11.3 billion and implied market cap of $7.3 billion to $12.4 billion for Tuya.</strong></p></div><p>The market is likely to attach valuation multiples that are in the high end range of the comps mainly because Tuya's sales growth is higher than the comps' average. Plus, it is difficult to find companies such as Tuya which specializes in the IoT related PaaS/SaaS products and services and investors are likely to put a premium on the company's strengths.</p><p>Similar to how smartphones and mobile connectivity has changed the world in the past decade, there is a huge amount of interest in IoT (Internet of Things) driven technology which is just starting to get penetrated in businesses around the world. Similar to how smartphones have allowed millions of people to be better "connected", the IoT technology will now enable the "machines to be connected" to the network, enabling greater business efficiencies and new revenue opportunities. </p>

Our comparable companies valuation sensitivity analysis suggests an implied EV range of $6.2 billion to $11.3 billion and implied market cap of $7.3 billion to $12.4 billion for Tuya.The market is likely to attach valuation multiples that are in the high end range of the comps mainly because Tuya's sales growth is higher than the comps' average. Plus, it is difficult to find companies such as Tuya which specializes in the IoT related PaaS/SaaS products and services and investors are likely to put a premium on the company's strengths.Similar to how smartphones and mobile connectivity has changed the world in the past decade, there is a huge amount of interest in IoT (Internet of Things) driven technology which is just starting to get penetrated in businesses around the world. Similar to how smartphones have allowed millions of people to be better "connected", the IoT technology will now enable the "machines to be connected" to the network, enabling greater business efficiencies and new revenue opportunities. 

Tuya IPO - Valuation Sensitivity Analysis

<div><p><a href="https://www.smartkarma.com/entities/tuya-inc" target="_blank" data-smartkarma-citation="entities:32158:1" rel="noopener">Tuya Inc (1869782D US)</a> provides a backend service for IoT (internet of things) device makers. Tuya offers its customers a Platform-as-a-Service (PaaS) for IoT devices that handles the connectivity, device software and application development.</p></div><div><p>At the proposed IPO price range of $17-20 per ADS, Tuya will have a market cap of $9.5-11.2 billion. At the mid-point of the IPO price range, the net proceeds are $770.72 million. Tuya has received indications of interest from existing investors (<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 Hillhouse Capital) and new investors (Canada Pension Plan Investment Board, Dragoneer Investment Group, GIC and Tiger Global Management) for a total of $500 million worth of ADSs in the offering.</p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/tuya-ipo-initiation-connected-future" target="_blank" data-smartkarma-citation="insights:48695" rel="noopener">Tuya IPO Initiation: Connected Future</a>, we opined that Tuya’s PaaS solutions are well-positioned to benefit from the rising need for third-party IoT PaaS providers who can provide the required tools. We concluded that Tuya’s fundamentals are attractive.</p>
<div class="content-highlight"><p>The mid-point of the IPO price range of $17-20 per ordinary share (each ADS represents one Class A ordinary share) is a 48% and 28% premium to the valuation of the ordinary shares at the last raise ($12.48 - $200 million raise on 1/2 February 2021) and the last valuation exercise ($14.46 - 21 February 2021). While these juicy IPO premiums in a short space of time may turn off potential investors, our valuation analysis suggests that the IPO price range is reasonable but full at the high-end. Overall, we would participate in the IPO. </p></div>
</div>

Tuya Inc (1869782D US) provides a backend service for IoT (internet of things) device makers. Tuya offers its customers a Platform-as-a-Service (PaaS) for IoT devices that handles the connectivity, device software and application development.At the proposed IPO price range of $17-20 per ADS, Tuya will have a market cap of $9.5-11.2 billion. At the mid-point of the IPO price range, the net proceeds are $770.72 million. Tuya has received indications of interest from existing investors (Tencent Holdings (700 HK) and Hillhouse Capital) and new investors (Canada Pension Plan Investment Board, Dragoneer Investment Group, GIC and Tiger Global Management) for a total of $500 million worth of ADSs in the offering.
In Tuya IPO Initiation: Connected Future, we opined that Tuya’s PaaS solutions are well-positioned to benefit from the rising need for third-party IoT PaaS providers who can provide the required tools. We concluded that Tuya’s fundamentals are attractive.
The mid-point of the IPO price range of $17-20 per ordinary share (each ADS represents one Class A ordinary share) is a 48% and 28% premium to the valuation of the ordinary shares at the last raise ($12.48 - $200 million raise on 1/2 February 2021) and the last valuation exercise ($14.46 - 21 February 2021). While these juicy IPO premiums in a short space of time may turn off potential investors, our valuation analysis suggests that the IPO price range is reasonable but full at the high-end. Overall, we would participate in the IPO. 


China

Weimob Inc. provides targetedmarketing services. The Company offers product display, orderintake and payment processing, customer relationship management, and social media marketing services. Weimob provides services in China.

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Weimob Inc. (2013 HK)

China Youzan (8083 HK): Reality Check As Shares Rollover

Buying China Youzan means you are buying the Youzan Tech IPO at an Implied EV/sales multiple. That's around a 10% premium to peers currently. The...

David Blennerhassett

Waterdrop IPO: Valuation Insights

Waterdrop has launched its IPO to raise net proceeds of $301.6 million at the mid-point of the price range of $10-12. The price range is full at...

Arun George

Linklogis IPO Valuation: Offer Multiples Are Not Cheap, Still Room For Upside on Trading Debut

While value investors would never describe 28.2-31.8x Trailing EV/Sales as reasonable, compared to where most SaaS IPO EV/Sales multiples ended on...

Oshadhi Kumarasiri

Tuya IPO - Valuation Sensitivity Analysis

Our comparable companies valuation sensitivity analysis suggests an implied EV range of $6.2 billion to $11.3 billion and implied market cap of...

Douglas Kim

Tuya IPO: Valuation Insights

At the mid-point of the IPO price range of $17-20 per ADS, Tuya will raise net proceeds of $771 million. Our analysis suggests that the IPO price...

Arun George

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