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

Yatsen Holding Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/yatsen-holding-ltd" target="_blank" data-smartkarma-citation="entities:29719:1" rel="noopener">Yatsen Holding (YSG US)</a> is the largest and only domestic company among the top ten beauty companies in China as measured by colour cosmetics retail sales value, according to CIC. Founded in 2016, Yasten has three colour cosmetics and skincare brands: Perfect Diary, Little Ondine and Abby’s Choice. Yasten is backed by Hillhouse (13.8% of outstanding shares, 3.0% of the voting power) and Banyan Partners (9.2% of outstanding shares, 2.0% of the voting interest). Yatsen has filed for an NYSE IPO to raise $100 million. <div class="content-highlight">Yatsen is a play on Gen-Z and millennials which are shaping the fast-growing beauty industry in China. 74% of Yasten customers were Gen-Z and Perfect Diary is the most popular beauty brand among Gen-Z,  according to a CIC Consumer Survey. While Yasten is seemingly another new economy company with a winning proposition, the fundamentals are less than ideal which suggests that caution is warranted.</div>

Yatsen Holding (YSG US) is the largest and only domestic company among the top ten beauty companies in China as measured by colour cosmetics retail sales value, according to CIC. Founded in 2016, Yasten has three colour cosmetics and skincare brands: Perfect Diary, Little Ondine and Abby’s Choice. Yasten is backed by Hillhouse (13.8% of outstanding shares, 3.0% of the voting power) and Banyan Partners (9.2% of outstanding shares, 2.0% of the voting interest). Yatsen has filed for an NYSE IPO to raise $100 million. Yatsen is a play on Gen-Z and millennials which are shaping the fast-growing beauty industry in China. 74% of Yasten customers were Gen-Z and Perfect Diary is the most popular beauty brand among Gen-Z,  according to a CIC Consumer Survey. While Yasten is seemingly another new economy company with a winning proposition, the fundamentals are less than ideal which suggests that caution is warranted.

Equity Analyst, LightStream Research

Supun Walpola

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

Chinese government data for 3Q 2020 suggests that the strong demand for online shopping that was witnessed in the last quarter has somewhat declined with offline shopping taking precedence in the post-lockdown environment. However, we do not view this as particularly negative, rather, growth seems to have only normalised to the pre-pandemic level. Moreover, a YoY improvement in online retail penetration suggests that the Chinese e-commerce landscape is still fairly attractive, despite decelerating growth.Nevertheless, revenue growth of top e-commerce players 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>, <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>, and <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> are expected to decline in 3Q 2020 compared to the strong last quarter. However, the market may have already accounted for this, as consensus revenue estimates are not very different to our revenue estimates based on government e-commerce data.

Chinese government data for 3Q 2020 suggests that the strong demand for online shopping that was witnessed in the last quarter has somewhat declined with offline shopping taking precedence in the post-lockdown environment. However, we do not view this as particularly negative, rather, growth seems to have only normalised to the pre-pandemic level. Moreover, a YoY improvement in online retail penetration suggests that the Chinese e-commerce landscape is still fairly attractive, despite decelerating growth.Nevertheless, revenue growth of top e-commerce players such as Alibaba Group (BABA US), JD.com Inc (ADR) (JD US), and Pinduoduo (PDD US) are expected to decline in 3Q 2020 compared to the strong last quarter. However, the market may have already accounted for this, as consensus revenue estimates are not very different to our revenue estimates based on government e-commerce data. 

China E-Commerce [Alt Data]: Alibaba/JD/PDD’s Strong 2Q Growth to Decline in 3Q, But Expected

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.hkex.com.hk/News/Regulatory-Announcements/2020/201030news?sc_lang=en" target="_blank" rel="noopener">published</a> the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:<ul>
<li>a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.</li>
<li>be an 'innovative company' as part of the suitability for listing</li>
<li>demonstrate that the laws, rules and regulations provide certain shareholder protection standards</li>
</ul>The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for <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> and <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a>, among others, to pursue a secondary listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>.

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEX (388 HK), published the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:
a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.
be an 'innovative company' as part of the suitability for listing
demonstrate that the laws, rules and regulations provide certain shareholder protection standards
The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for Tencent Music (TME US) and iQIYI Inc (IQ US), among others, to pursue a secondary listing on the HKEX (388 HK). 

Conclusions of the Corporate WVR Consultation: Small Changes for Now

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

<ul>
<li>Xiaomi (1810)’s global shipment increased 42% YoY in 3Q20.</li>
<li>The Cyberspace Administration plans to pass a law of live broadcaster account classification.</li>
<li>JD.com (JD) has the largest market share of online fresh food.</li>
<li>Alibaba Health (241 HK)’s profit turned positive.</li>
</ul>


Xiaomi (1810)’s global shipment increased 42% YoY in 3Q20.
The Cyberspace Administration plans to pass a law of live broadcaster account classification.
JD.com (JD) has the largest market share of online fresh food.
Alibaba Health (241 HK)’s profit turned positive.


China Internet Weekly (2Nov2020):  Xiaomi Phone Shipment up 42%, New Live Broadcast Law Coming

<ul class="">
<li>Online sales were still strong in China in the quarter ended September; therefore, we believe BABA’s revenue can still grow rapidly in 2Q21.</li>
<li>The extraordinarily high “interest and investment income, net” in FY2020 will not happen again; therefore, we believe EPS will decrease by 10% in FY2021.</li>
<li>The stock price has risen 44% year to date, compared to 1% for the Standard and Poor 500 Index.</li>
<li>The P/E band since IPO suggests a downside of 17% and a price target of US$252.</li>
</ul>


Online sales were still strong in China in the quarter ended September; therefore, we believe BABA’s revenue can still grow rapidly in 2Q21.
The extraordinarily high “interest and investment income, net” in FY2020 will not happen again; therefore, we believe EPS will decrease by 10% in FY2021.
The stock price has risen 44% year to date, compared to 1% for the Standard and Poor 500 Index.
The P/E band since IPO suggests a downside of 17% and a price target of US$252.


Alibaba (BABA): Expect Higher Financials for F2Q21, But Lower Price

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)

Yatsen IPO Initiation: Face the Facts

While Yasten is seemingly another new economy company with a winning proposition, the fundamentals are less than ideal which suggests that caution...

Arun George

China E-Commerce [Alt Data]: Alibaba/JD/PDD’s Strong 2Q Growth to Decline in 3Q, But Expected

Revenue growth of top Chinese e-commerce players are expected to decline in 3Q 2020 compared to the strong last quarter based on government e...

Supun Walpola

Conclusions of the Corporate WVR Consultation: Small Changes for Now

The HKEX has published the conclusions of the consultation on corporate WVR beneficiaries. There are no major changes, but the proposed changes...

Brian Freitas

China Internet Weekly (2Nov2020): Xiaomi Phone Shipment up 42%, New Live Broadcast Law Coming

Xiaomi ’s global shipment up 42% YoY in 3Q20. The Cyberspace Administration plans to pass a law of live broadcaster account classification. JD.com...

Ming Lu

Alibaba (BABA): Expect Higher Financials for F2Q21, But Lower Price

We believe revenue can still grow rapidly, but EPS will decrease by 10% in F2021. The stock price has risen 44% year to date, compared to 1% for...

Ming Lu

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