IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

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 Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<p>For the first time in months, our EBIT and EPS forecasts are not dramatically lower than consensus and while we see scope for moderate EBIT downgrades, we believe any weakness in the shares would present a robust buying opportunity.</p>

For the first time in months, our EBIT and EPS forecasts are not dramatically lower than consensus and while we see scope for moderate EBIT downgrades, we believe any weakness in the shares would present a robust buying opportunity.

Alibaba – Have Consensus Forecasts Finally Bottomed?

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.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/dingdong-maicai" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicai (DDL US)</a>, an on-demand fresh produce and grocery delivery platform in China with RMB 11.3bn in annual revenue and 6.9m in monthly active customers, raised about $96.0m in its US IPO on Tuesday after slashing the size of the IPO <a target="_blank">to almost a fourth of its earlier target.</a> The shares were priced at $23.50 per ADS, at the lower end of the proposed IPO price range. If exercised, the overallotment option could increase the gross proceeds to the company by another $14.0m.</p>

Dingdong Maicai (DDL US), an on-demand fresh produce and grocery delivery platform in China with RMB 11.3bn in annual revenue and 6.9m in monthly active customers, raised about $96.0m in its US IPO on Tuesday after slashing the size of the IPO to almost a fourth of its earlier target. The shares were priced at $23.50 per ADS, at the lower end of the proposed IPO price range. If exercised, the overallotment option could increase the gross proceeds to the company by another $14.0m.

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Private Capital Markets

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<p>According to market sources, Bukalapak plans to raise around US$800m in an IPO in Jakarta on the IDX potentially by the end of July, making it the first Indonesian unicorn to list on the local bourse. This would potentially be followed by a SPAC merger in the US, which would value the company at US$4bn-5bn versus the last valuation range of US$2.5-3.0bn. </p>
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<p>Based on the available financial information and recent indications of growth prospects and the path to profitability, we see the suggested valuations as achievable and find Bukalapak an attractive prospect.  </p>
<p>Bukalapak started as a C2C business and one of Indonesia's earliest e-commerce pioneers,  focusing on consumers and sellers outside the major cities in Indonesia, with a focus on specialty goods at low prices. </p>
<p>In 2017, the company started Mitra Bukalapak, which focused on digitalizing the sourcing of products for offline warungs and small kiosks, increasing the range of products and reducing their sourcing costs plus improving margins.</p>
<p>Bukalapak now has more than 7m kiosks and 6m merchants on the platform, which provides a self-sustaining ecosystem, which does not demand high levels of promotional activity. </p>
<p>Bukalapak saw +70% growth in its GMV last year and +130% growth in transactions, with around 34m MAUs and it should achieve +50% growth this year on the current run-rate according to management.</p>
<p>We look at the implied valuations given limited financial information. The company is further along the road to profitability than its e-commerce peers, given its differentiated strategy.</p>
<p>The platform has already attracted some high profile investors including <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a>, both of which see opportunities to collaborate with Bukalapak.</p>
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<p>One obvious beneficiary of this IPO will be <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a>, which owns over 30% of Bukalapak, in that the investment should realise a higher valuation through its listing. There is also a potential that <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> may look to collaborate with Bukalapak in some way, given it has taken a 4% stake in <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a>.</p>
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According to market sources, Bukalapak plans to raise around US$800m in an IPO in Jakarta on the IDX potentially by the end of July, making it the first Indonesian unicorn to list on the local bourse. This would potentially be followed by a SPAC merger in the US, which would value the company at US$4bn-5bn versus the last valuation range of US$2.5-3.0bn. 

Based on the available financial information and recent indications of growth prospects and the path to profitability, we see the suggested valuations as achievable and find Bukalapak an attractive prospect.  
Bukalapak started as a C2C business and one of Indonesia's earliest e-commerce pioneers,  focusing on consumers and sellers outside the major cities in Indonesia, with a focus on specialty goods at low prices. 
In 2017, the company started Mitra Bukalapak, which focused on digitalizing the sourcing of products for offline warungs and small kiosks, increasing the range of products and reducing their sourcing costs plus improving margins.
Bukalapak now has more than 7m kiosks and 6m merchants on the platform, which provides a self-sustaining ecosystem, which does not demand high levels of promotional activity. 
Bukalapak saw +70% growth in its GMV last year and +130% growth in transactions, with around 34m MAUs and it should achieve +50% growth this year on the current run-rate according to management.
We look at the implied valuations given limited financial information. The company is further along the road to profitability than its e-commerce peers, given its differentiated strategy.
The platform has already attracted some high profile investors including Microsoft Corp (MSFT US) and Standard Chartered (STAN LN), both of which see opportunities to collaborate with Bukalapak.

One obvious beneficiary of this IPO will be Emtek (EMTK IJ), which owns over 30% of Bukalapak, in that the investment should realise a higher valuation through its listing. There is also a potential that Grab (0967655D SP) may look to collaborate with Bukalapak in some way, given it has taken a 4% stake in Emtek (EMTK IJ).

   

Bukalapak - Leading the Unicorn Charge - Buy Emtek

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

<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> 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. The <em>DiDi Chuxing</em> app in China where consumers can access mobility and other essential services. 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>Didi has priced its IPO at $14.00 per ADS, which is at the top-end of the IPO price range of $13.00-14.00 per ADS, <a href="https://www.reuters.com/business/chinas-didi-raises-4-billion-us-ipo-source-2021-06-29/" target="_blank" rel="noopener">according to Reuters</a>. Reuters also noted that Didi sold a higher 317 million ADS versus the planned 288 million ADS (10% more), resulting in a fully-diluted market cap of $73 billion ($67.5 billion on a non-diluted basis).</p><div><p>In <a href="https://www.smartkarma.com/insights/didi-chuxing-xiaoju-kuaizhi-initiation-in-for-a-bumpy-ride" target="_blank" data-smartkarma-citation="insights:53014" rel="noopener">Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?</a>, we opined that 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 company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/xiaoju-kuaizhi-didi-chuxing-ipo-growth-vs-margin" target="_blank" data-smartkarma-citation="insights:53232" rel="noopener">Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin</a>, we examined the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, <a href="https://www.smartkarma.com/entities/lyft-inc" target="_blank" data-smartkarma-citation="entities:24423:1" rel="noopener">Lyft Inc (LYFT US)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a>. Our analysis showed that Didi offered a trade-off between growth and profitability in comparison to its peers. We concluded that in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.</p>
<p>In <a href="https://www.smartkarma.com/insights/didi-global-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:53626" rel="noopener">DiDi Global IPO: Valuation Insights</a>, we noted that the proposed IPO valuation is materially below the previously rumoured top-end valuation of $100 billion. In combination with our SoTP valuation, we opined that Didi is fairly valued at the IPO price range.   </p>
<div class="content-highlight"><p>Our relative valuation suggests that the IPO price is full. Updating for the final IPO raise and the latest peer multiples, our SoTP valuation is $13.54 per ADS, which is marginally below the IPO price of $14 per ADS. Consequently, we would take profits on any meaningful first day IPO pop.</p></div>
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DiDi Chuxing (DIDI US) 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. The DiDi Chuxing app in China where consumers can access mobility and other essential services. 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). Didi has priced its IPO at $14.00 per ADS, which is at the top-end of the IPO price range of $13.00-14.00 per ADS, according to Reuters. Reuters also noted that Didi sold a higher 317 million ADS versus the planned 288 million ADS (10% more), resulting in a fully-diluted market cap of $73 billion ($67.5 billion on a non-diluted basis).In Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?, we opined that 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 company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. 
In Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin, we examined the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, Lyft Inc (LYFT US) and Grab (0967655D SP). Our analysis showed that Didi offered a trade-off between growth and profitability in comparison to its peers. We concluded that in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.
In DiDi Global IPO: Valuation Insights, we noted that the proposed IPO valuation is materially below the previously rumoured top-end valuation of $100 billion. In combination with our SoTP valuation, we opined that Didi is fairly valued at the IPO price range.   
Our relative valuation suggests that the IPO price is full. Updating for the final IPO raise and the latest peer multiples, our SoTP valuation is $13.54 per ADS, which is marginally below the IPO price of $14 per ADS. Consequently, we would take profits on any meaningful first day IPO pop.


Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<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> raised USD4.4 billion today, pricing the IPO at the top of its indicated range and selling more shares than initially planned, according to Reuters.  This constitutes a USD67.5 billion valuation on a non-diluted basis and USD73 billion fully diluted. </p><p>While this IPO was well oversubscribed, there are 3 reasons why I would be cautious on the stock:</p><ol>
<li>Why should I be overjoyed at receiving my IPO allotment when I am paying a 31% premium to Uber and 47% to Lyft on FY21 EV/Sales even though they are expected to grow faster than Didi?  </li>
<li>Didi appears to be cheap by using EV/sales, but not so if platform revenue is used.  Uber and Lyft’s revenues are net of payments to drivers.  Using Didi's platform revenue multiple, its IPO price is not so cheap.  </li>
<li>Didi’s gross transaction value (GTV) per transaction is only 27% of Uber’s. Why?  Because taxi fare in Beijing is 75% cheaper than NYC’s rate.  Uber’s GTV in 1Q21 was USD19.5 bn, Didi’s USD1.2 bn. <strong>Didi’s market cap on a fully diluted basis is USD73 bn, Uber USD95 bn</strong>.</li>
</ol>

DiDi Chuxing (DIDI US) raised USD4.4 billion today, pricing the IPO at the top of its indicated range and selling more shares than initially planned, according to Reuters.  This constitutes a USD67.5 billion valuation on a non-diluted basis and USD73 billion fully diluted. While this IPO was well oversubscribed, there are 3 reasons why I would be cautious on the stock:
Why should I be overjoyed at receiving my IPO allotment when I am paying a 31% premium to Uber and 47% to Lyft on FY21 EV/Sales even though they are expected to grow faster than Didi?  
Didi appears to be cheap by using EV/sales, but not so if platform revenue is used.  Uber and Lyft’s revenues are net of payments to drivers.  Using Didi's platform revenue multiple, its IPO price is not so cheap.  
Didi’s gross transaction value (GTV) per transaction is only 27% of Uber’s. Why?  Because taxi fare in Beijing is 75% cheaper than NYC’s rate.  Uber’s GTV in 1Q21 was USD19.5 bn, Didi’s USD1.2 bn. Didi’s market cap on a fully diluted basis is USD73 bn, Uber USD95 bn.


Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison

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)

Alibaba – Have Consensus Forecasts Finally Bottomed?

For the first time in months, our EBIT and EPS forecasts are not dramatically lower than consensus and while we see scope for some EBIT downgrades,...

Rickin Thakrar

Dingdong Maicai IPO Trading Update

It is somewhat strange that Dingdong Maicai’s share price closed marginally above IPO price, especially considering that the company downsized the...

Oshadhi Kumarasiri

Bukalapak - Leading the Unicorn Charge - Buy Emtek

Bukalapak has outlined plans to list in Jakarta, giving access to its leading position in enabling warungs in Indonesia. The immediate beneficiary...

Angus Mackintosh

DiDi Global IPO: Trading Debut

Didi has priced its IPO at $14 per ADS and sold 10% more ADSs than planned. Our relative valuation and SoTP valuation suggests a full price. We...

Arun George

Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison

DiDi IPO raised USD4.4 bn today, pricing at the top of its indicated range and selling more shares than initially planned. I offer three reasons...

Mitchell Kim

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