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.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> , the pre-owned consumer electronics transaction and services platform in China has announced the indicative price range for its IPO at US$13-15 per ADS. The company plans to issue 16.23m ADSs (18.7m shares including the over-allotment) and each ordinary share represents 1.5 ADSs of the company. At the midpoint of the IPO price range of US$14 per share, Aihuishou will raise net proceeds of US$205.7m at a market capitalisation of US$3.1bn and a post-money enterprise value of US$2.85bn.</p><p>In our previous insight, we examined Aihuishou’s business model and its financials and concluded that the company’s revenues will continue to see strong growth and at the same time, we expect the company’s profitability to improve going forward.</p>

Aihuishou (RERE US) , the pre-owned consumer electronics transaction and services platform in China has announced the indicative price range for its IPO at US$13-15 per ADS. The company plans to issue 16.23m ADSs (18.7m shares including the over-allotment) and each ordinary share represents 1.5 ADSs of the company. At the midpoint of the IPO price range of US$14 per share, Aihuishou will raise net proceeds of US$205.7m at a market capitalisation of US$3.1bn and a post-money enterprise value of US$2.85bn.In our previous insight, we examined Aihuishou’s business model and its financials and concluded that the company’s revenues will continue to see strong growth and at the same time, we expect the company’s profitability to improve going forward.

AiHuiShou IPO: Peer Comparison and Valuation

Oshadhi Kumarasiri

<ul>
<li>According to Reuters, <a href="https://www.smartkarma.com/entities/dingdong-maicia" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicia (DDL US)</a>, an on-demand fresh produce and grocery delivery platform in China, plans to raise US$500m in its US IPO, which values the company at around US$6.0bn.</li>
<li>Dingdong Maicai’s order fulfilment cost, which includes the amount paid to delivery partners, packaging, and other logistics-related costs, is almost two times the net revenue per order in 2020. Though we expect a gradual increase in net revenue per order, it seems unlikely that the average order fulfilment cost per order will decline sufficiently for Dingdong Maicai to be profitable over the next three to four years.</li>
<li>The fact that the company made an operating loss of RMB 295.5m (41.3% of net revenue) in 1Q20 (when COVID-19 lockdowns increased demand for grocery and fresh produce delivery) is a clear indication that Dingdong Maicai is incapable of becoming profitable through volume growth.</li>
<li>Lately, high growth Chinese e-commerce companies have fallen out of favour with US investors in general, and the worst-affected are the ones generating operating losses. With profitability nowhere in sight for Dingdong Maicai, we think that in terms of risk rewards, older and stable e-commerce names like <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> offer better risk-adjusted return in the short to medium term.</li>
</ul>


According to Reuters, Dingdong Maicia (DDL US), an on-demand fresh produce and grocery delivery platform in China, plans to raise US$500m in its US IPO, which values the company at around US$6.0bn.
Dingdong Maicai’s order fulfilment cost, which includes the amount paid to delivery partners, packaging, and other logistics-related costs, is almost two times the net revenue per order in 2020. Though we expect a gradual increase in net revenue per order, it seems unlikely that the average order fulfilment cost per order will decline sufficiently for Dingdong Maicai to be profitable over the next three to four years.
The fact that the company made an operating loss of RMB 295.5m (41.3% of net revenue) in 1Q20 (when COVID-19 lockdowns increased demand for grocery and fresh produce delivery) is a clear indication that Dingdong Maicai is incapable of becoming profitable through volume growth.
Lately, high growth Chinese e-commerce companies have fallen out of favour with US investors in general, and the worst-affected are the ones generating operating losses. With profitability nowhere in sight for Dingdong Maicai, we think that in terms of risk rewards, older and stable e-commerce names like Alibaba Group (9988 HK), JD.com Inc. (9618 HK) and Vipshop Holdings (VIPS US) offer better risk-adjusted return in the short to medium term.


Dingdong Maicai: Profitability Is a Tall Order, Even in the Medium-Long Term

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.

<p><a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its <em>DiDi Chuxing</em> app in China where consumers can access mobility and other essential services. It acquired rival Kuaidi Dache in February 2015 for $2.2 billion and then acquired the China operations of Uber Technologies for $7.0 billion in August 2016.  </p><p>Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (12.8%), <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (6.8%), <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/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>. </p><p>Ride-hailing platforms depend heavily on customers in high-density populated cities. China which has 14 metropolitan areas with a population of over 10 million offers the ideal conditions for ride-hailing platforms to flourish. Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. </p><div class="content-highlight"><p>However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a business that is trying to make it costlier for customers to switch to rival platforms by leveraging a core business that is highly profitable and cash generative. Unfortunately, Didi’s core business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. In combination with the ongoing regulatory overhang and less than ideal financial disclosure, we are inclined to give the Didi IPO a pass.</p></div><p><em><strong>For readers interested in Didi's peers which are also seeking IPOs/SPAC deals, we highlight our research notes:</strong></em> </p><p><a href="https://www.smartkarma.com/insights/grab-spac-deal-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:50305" rel="noopener">Grab SPAC Deal: Delivering the Goods</a> </p><p><a href="https://www.smartkarma.com/insights/grab-spac-deal-a-sensible-super-app-valuation" target="_blank" data-smartkarma-citation="insights:50344" rel="noopener">Grab SPAC Deal: A Sensible Super-App Valuation?</a> </p><p><a href="https://www.smartkarma.com/insights/hello-ipo-initiation-goodbye" target="_blank" data-smartkarma-citation="insights:50795" rel="noopener">Hello IPO Initiation: Goodbye</a> </p><p><a href="https://www.smartkarma.com/insights/hello-ipo-1q21-update-does-not-change-the-avoid-tag" target="_blank" data-smartkarma-citation="insights:51119" rel="noopener">Hello IPO: 1Q21 Update Does Not Change the Avoid Tag</a> </p><p><a href="https://www.smartkarma.com/insights/dida-ipo-initiation-sharing-a-lift" target="_blank" data-smartkarma-citation="insights:47652" rel="noopener">Dida IPO Initiation: Sharing a Lift</a> </p>

DiDi Chuxing (DIDI US)/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its DiDi Chuxing app in China where consumers can access mobility and other essential services. It acquired rival Kuaidi Dache in February 2015 for $2.2 billion and then acquired the China operations of Uber Technologies for $7.0 billion in August 2016.  Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), Uber (UBER US) (12.8%), Tencent (700 HK) (6.8%), Alibaba Group (BABA US) and Toyota Motor (7203 JP). Ride-hailing platforms depend heavily on customers in high-density populated cities. China which has 14 metropolitan areas with a population of over 10 million offers the ideal conditions for ride-hailing platforms to flourish. Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a business that is trying to make it costlier for customers to switch to rival platforms by leveraging a core business that is highly profitable and cash generative. Unfortunately, Didi’s core business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. In combination with the ongoing regulatory overhang and less than ideal financial disclosure, we are inclined to give the Didi IPO a pass.For readers interested in Didi's peers which are also seeking IPOs/SPAC deals, we highlight our research notes: Grab SPAC Deal: Delivering the Goods Grab SPAC Deal: A Sensible Super-App Valuation? Hello IPO Initiation: Goodbye Hello IPO: 1Q21 Update Does Not Change the Avoid Tag Dida IPO Initiation: Sharing a Lift 

Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?

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/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>, the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by <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 <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, along with other investors.</p></div><div><p>It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  </p></div><div><p>We provided a brief background and financials overview in our previous note,<a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-one-of-asia-s-largest-ipos-this-year-tearsheet" target="_blank" rel="noopener"> DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet</a>.</p></div><p>In this note, we will look at the financials and talk about the rumoured valuation.</p>

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank Group (9984 JP) and Tencent (700 HK), along with other investors.It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  We provided a brief background and financials overview in our previous note, DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet.In this note, we will look at the financials and talk about the rumoured valuation.

DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

<div><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of <em>AHS Recycle</em> (an omnichannel business for the collection of pre-owned consumer electronics), <em>PJT Marketplace</em> (B2B channel) and <em>Paipai Marketplace</em> (B2C channel). </p></div><div>
<p>At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.</p>
<p>Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and Tiger Global.</p>
<p>In <a href="https://www.smartkarma.com/insights/aihuishou-ipo-initiation-turning-the-vicious-cycle-into-a-virtuous-one" target="_blank" data-smartkarma-citation="insights:52617" rel="noopener">AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One</a>, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.</p>
</div><div><div class="content-highlight">
<p>On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.</p>
<p>While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. </p>
</div></div>

Aihuishou (RERE US) operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of AHS Recycle (an omnichannel business for the collection of pre-owned consumer electronics), PJT Marketplace (B2B channel) and Paipai Marketplace (B2C channel). 
At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.
Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from JD.com Inc. (9618 HK) and Tiger Global.
In AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.

On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.
While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of Kanzhun (BZ US) suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. 


China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba Group Holding (9988 HK)

AiHuiShou IPO: Peer Comparison and Valuation

We believe there will be limited upside to the company’s indicative IPO price range and would be inclined to buy only if the company sets the final...

Shifara Samsudeen, ACMA, CGMA

Dingdong Maicai: Profitability Is a Tall Order, Even in the Medium-Long Term

Most COVID beneficiary stocks in China showcased what they could be in future through their financial results of the COVID-affected first quarter...

Oshadhi Kumarasiri

Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?

Didi is seeking to raise as much as $10 bn. Due to the costly distractions of the non-core business, regulatory overhang and less than ideal...

Arun George

DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank...

Sumeet Singh

AiHuiShou IPO: Valuation Insights

While the lower than expected raise suggest lukewarm investor interest, yesterday's blistering first-day pop of Kanzhun points to improving market...

Arun George

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