Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p><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> listed associates have continued their exceptional share price performance over the past 6 months, led by <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a>  and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>. I estimate that Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at only 23.1x rolling 12-month forward earnings.</p><p><em>Please also refer to <a href="https://www.smartkarma.com/insights/tencent-a-closer-look-at-investees-reveals-a-discount-rating-and-future-value-unlock-potential" target="_blank" data-smartkarma-citation="insights:42361" rel="noopener">Tencent: A Closer Look at Investees Reveals a Discount Rating and Future Value Unlock Potential</a> for more detail on this analysis.</em></p>

Tencent Holdings (700 HK) listed associates have continued their exceptional share price performance over the past 6 months, led by Meituan (3690 HK), Pinduoduo (PDD US)  and JD.com (HK) (9618 HK). I estimate that Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at only 23.1x rolling 12-month forward earnings.Please also refer to Tencent: A Closer Look at Investees Reveals a Discount Rating and Future Value Unlock Potential for more detail on this analysis.

Tencent: Listed Associates Continue to Outperform

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

<p><a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> is seeking to raise as much as $4.85 billion through an issue of shares and convertible note. Pinduoduo will offer $1,750 million five-year notes, which is callable and puttable from December 2023. Concurrently with the notes offering, Pinduoduo is also offering 22 million ADSs which is worth around $3.1 billion at the last close price of $142.03 per ADS. The funds will be invested in agricultural logistics infrastructure and responsive manufacturing to capitalise on the online migration of retail, in particular consumers desire to buy fresh grocery more conveniently and frequently. Pinduoduo’s newest business, <em>Duo Duo Maicai</em>, a next-day self pick-up grocery service, is a natural extension of its e-commerce model to agriculture.</p><p>Pinduoduo is a rare beast – a China new economy company which lives up to the hype. The financial performance is heading in the right direction with the 3Q20 results showing a re-acceleration in revenue growth and narrowing losses. The balance sheet is strong with cash of RMB45,575 ($7.0 billion) and net cash (including lease liabilities and convertibles) of RMB36,723 ($5.6 billion) as of 3Q20. A successful offering will further add to Pinduoduo’s war chest to take 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/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>. </p><div class="content-highlight"><p>We remain bullish on Pinduoduo’s prospects and believe that potential new antitrust rules curbing market dominance in China will benefit relatively smaller challengers like Pinduoduo. Our DCF-based price target is $165 per ADS, implying a 16% upside to the last close. Overall, we would participate in the placement.</p></div>

Pinduoduo (PDD US) is seeking to raise as much as $4.85 billion through an issue of shares and convertible note. Pinduoduo will offer $1,750 million five-year notes, which is callable and puttable from December 2023. Concurrently with the notes offering, Pinduoduo is also offering 22 million ADSs which is worth around $3.1 billion at the last close price of $142.03 per ADS. The funds will be invested in agricultural logistics infrastructure and responsive manufacturing to capitalise on the online migration of retail, in particular consumers desire to buy fresh grocery more conveniently and frequently. Pinduoduo’s newest business, Duo Duo Maicai, a next-day self pick-up grocery service, is a natural extension of its e-commerce model to agriculture.Pinduoduo is a rare beast – a China new economy company which lives up to the hype. The financial performance is heading in the right direction with the 3Q20 results showing a re-acceleration in revenue growth and narrowing losses. The balance sheet is strong with cash of RMB45,575 ($7.0 billion) and net cash (including lease liabilities and convertibles) of RMB36,723 ($5.6 billion) as of 3Q20. A successful offering will further add to Pinduoduo’s war chest to take on Alibaba Group (BABA US) and JD.com Inc (ADR) (JD US). We remain bullish on Pinduoduo’s prospects and believe that potential new antitrust rules curbing market dominance in China will benefit relatively smaller challengers like Pinduoduo. Our DCF-based price target is $165 per ADS, implying a 16% upside to the last close. Overall, we would participate in the placement.

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.

<div><p><a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> (BEKE), a company 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/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and Hillhouse, raised around US$2.1bn in its US listing in Aug 2020. It's now back to raise a similar amount. </p></div><div><p>We have covered the stock since its listing, links to our previous notes are below. In this insight, I'll run the deal through our ECM framework and talk about deal dynamics.</p></div><div><p>In my previous insight, I have looked at various aspects of the deal:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-the-positives-fast-growth-high-market-share" target="_blank" rel="noopener">KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share</a>, </li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-the-negatives-questions-margins-p2p" target="_blank" rel="noopener">KE Holdings/​​Beike Pre-IPO - The Negatives - Questions, Margins, P2P</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-recent-updates-peer-comparison" target="_blank" rel="noopener">KE Holdings/​​Beike Pre-IPO - Recent Updates, Peer Comparison</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-thoughts-on-valuation-rumoured-valuation-might-be-a-stretch" target="_blank" rel="noopener">KE Holdings/​​​Beike Pre-IPO - Thoughts on Valuation, Rumoured Valuation Might Be a Stretch</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-can-t-see-much-upside" target="_blank" rel="noopener">KE Holdings/​​​​Beike IPO - Can’t See Much Upside</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-trading-we-would-be-sellers-if-it-pops" target="_blank" rel="noopener">KE Holdings/​​​​​Beike IPO Trading - We Would Be Sellers if It Pops</a></li>
</ul></div>

KE Holdings Inc (BEKE US) (BEKE), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised around US$2.1bn in its US listing in Aug 2020. It's now back to raise a similar amount. We have covered the stock since its listing, links to our previous notes are below. In this insight, I'll run the deal through our ECM framework and talk about deal dynamics.In my previous insight, I have looked at various aspects of the deal:

KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share, 
KE Holdings/​​Beike Pre-IPO - The Negatives - Questions, Margins, P2P
KE Holdings/​​Beike Pre-IPO - Recent Updates, Peer Comparison
KE Holdings/​​​Beike Pre-IPO - Thoughts on Valuation, Rumoured Valuation Might Be a Stretch
KE Holdings/​​​​Beike IPO - Can’t See Much Upside
KE Holdings/​​​​​Beike IPO Trading - We Would Be Sellers if It Pops


KE Holdings/​​​​​Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

<p><a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> plans to raise around US$5bn via a mix of issuing shares and convertible bonds.</p><p>The stock has been a one-way street since listing and has risen by 27% since it announced its 3Q20 results on 12th Nov 2020. </p><p>In this insight, we will run the deal through our ECM framework and talk about valuations. </p>

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds.The stock has been a one-way street since listing and has risen by 27% since it announced its 3Q20 results on 12th Nov 2020. In this insight, we will run the deal through our ECM framework and talk about valuations. 

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

JD Health International  / Equity Capital Markets

<p>This Insight discusses the assumptions required to justify JD Health's reportedly target valuation of US$20 billion. Our analysis indicates that the online pharmacy business could be worth US$10 billion assuming some degree of margin improvement. Further, the online healthcare services business will have to penetrate roughly 2% of healthcare services spending to justify the balance (US$10 billion) valuation, which we think is achievable.  </p>

This Insight discusses the assumptions required to justify JD Health's reportedly target valuation of US$20 billion. Our analysis indicates that the online pharmacy business could be worth US$10 billion assuming some degree of margin improvement. Further, the online healthcare services business will have to penetrate roughly 2% of healthcare services spending to justify the balance (US$10 billion) valuation, which we think is achievable.  

JD Health: Framing the Valuation Discussion

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com Inc (ADR) (JD US)

Tencent: Listed Associates Continue to Outperform

Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at...

Wium Malan, CFA

Pinduoduo Placement: A Bigger War Chest

Pinduoduo is seeking to raise as much as $4.85 billion through an issue of shares and convertible note. We remain bullish on its prospects and we...

Arun George

KE Holdings/Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

KE Holdings Inc (BEKE US), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised US$2.1bn in its US listing...

Sumeet Singh

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds. The stock has been a one-way street since listing.

Sumeet Singh

JD Health: Framing the Valuation Discussion

This Insight discusses the assumptions required to justify JD Health's reportedly target valuation of US$20 billion with a buildup by each business...

Kemp Dolliver, CFA

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52-week Range

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Tencent: Listed Associates Continue to Outperform

Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at...

Wium Malan, CFA

Pinduoduo Placement: A Bigger War Chest

Pinduoduo is seeking to raise as much as $4.85 billion through an issue of shares and convertible note. We remain bullish on its prospects and we...

Arun George

KE Holdings/​​​​​Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

KE Holdings Inc (BEKE US), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised US$2.1bn in its US listing...

Sumeet Singh

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds. The stock has been a one-way street since listing.

Sumeet Singh

JD Health: Framing the Valuation Discussion

This Insight discusses the assumptions required to justify JD Health's reportedly target valuation of US$20 billion with a buildup by each business...

Kemp Dolliver, CFA

KE Holdings/Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry