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.

Event-Driven

<div>
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>  shares closed at HK$528 per share as at the end of Thursday’s trading, only 5.2% higher than the company’s 12-month low of HK$502 per share. The company’s shares have been on a downward trend on the back of increased regulatory scrutiny over Chinese internet stocks. As Chinese regulators have broadened their crackdown on the country’s internet tech platforms during the past few days, Tencent’s shares dropped almost 10% over the last one week (since the beginning of July).</div><div></div><div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/217/580/original/image_22041245221625797905092.png?1625797914" class="editor-image img-responsive" data-smartkarma-image-id="217580"></figure></div><div>There is no sign that China is slowing down with its antitrust crackdown on the country’s tech platforms, rather the regulators have broadened their investigation to include cybersecurity violations such as on the recently listed <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> , <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> and <a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> .</div><div></div><div>According to the CNN, the People’s Bank of China has said that it would further regulate the countries’ payments companies after its massive overhaul of Ant Group. The Chinese online payment market is largely dominated by Alipay and WeChat Pay.</div>


Tencent (700 HK)  shares closed at HK$528 per share as at the end of Thursday’s trading, only 5.2% higher than the company’s 12-month low of HK$502 per share. The company’s shares have been on a downward trend on the back of increased regulatory scrutiny over Chinese internet stocks. As Chinese regulators have broadened their crackdown on the country’s internet tech platforms during the past few days, Tencent’s shares dropped almost 10% over the last one week (since the beginning of July).There is no sign that China is slowing down with its antitrust crackdown on the country’s tech platforms, rather the regulators have broadened their investigation to include cybersecurity violations such as on the recently listed DiDi Chuxing (DIDI US) , Kanzhun (BZ US) and Full Truck Alliance (YMM US) .According to the CNN, the People’s Bank of China has said that it would further regulate the countries’ payments companies after its massive overhaul of Ant Group. The Chinese online payment market is largely dominated by Alipay and WeChat Pay.

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/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. Zomato’s key shareholders are <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a> (18.55% of outstanding shares), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (9.1%) and <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>.  </p><p>Zomato is expected to launch its IPO on 19 July to raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%, according to press reports. The selling shareholder is Info Edge. </p><div class="content-highlight"><p>Zomato will be a landmark IPO in India as it the first large new economy technology platform to list. The food delivery market in India is attractive to the large addressable opportunity. While <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> entered the market last year, the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. Overall, we think that Zomato's fundamentals are attractive. </p></div>

Zomato (ZOM IN) is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. Zomato’s key shareholders are Info Edge India (INFOE IN) (18.55% of outstanding shares), Uber (UBER US) (9.1%) and Ant Financial Services Group (6688 HK).  Zomato is expected to launch its IPO on 19 July to raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%, according to press reports. The selling shareholder is Info Edge. Zomato will be a landmark IPO in India as it the first large new economy technology platform to list. The food delivery market in India is attractive to the large addressable opportunity. While Amazon.com Inc (AMZN US) entered the market last year, the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. Overall, we think that Zomato's fundamentals are attractive. 

Zomato IPO Initiation: Emerging Appetites

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>Kakao Pay is offering 17 million shares in the IPO at the price range of 63,000 won to 96,000 won per share. The IPO deal size range is from $948 million to $1.4 billion. According to the bankers' valuation, the expected market cap range would be from 8.6 trillion won to 13.0 trillion won.</p>
<p>At the high end of the market cap range (13.0 trillion won), this would represent the 31st largest market cap in KOSPI. Samsung Securities, Goldman Sachs, and JP Morgan are the lead underwriters of this IPO. </p>
<p>According to the company, it plans to use 381 billion won of the IPO proceeds in business operations/working capital. It plans to use the remaining 680 billion won in IPO proceeds for M&amp;A purposes. </p>
</div><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 214pt;"><div>Deal Specifics of the Kakao Pay IPO:</div></td>
<td style="width: 292pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 292pt;">Samsung Securities, Goldman Sachs, JP Morgan, Daishin Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 292pt;">63,000 won (low)/96,000 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 292pt;">17m shares (new shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 292pt;">US$948 mn (low);  US$1,444 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 292pt;">135.9m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 292pt;">8,562 billion won (low)/13,046 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 292pt;">29-Jul-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 292pt;">20-Jul-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 292pt;">12-Aug-21</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 292pt;"> </td>
</tr>
</tbody>
</table>


Kakao Pay is offering 17 million shares in the IPO at the price range of 63,000 won to 96,000 won per share. The IPO deal size range is from $948 million to $1.4 billion. According to the bankers' valuation, the expected market cap range would be from 8.6 trillion won to 13.0 trillion won.
At the high end of the market cap range (13.0 trillion won), this would represent the 31st largest market cap in KOSPI. Samsung Securities, Goldman Sachs, and JP Morgan are the lead underwriters of this IPO. 
According to the company, it plans to use 381 billion won of the IPO proceeds in business operations/working capital. It plans to use the remaining 680 billion won in IPO proceeds for M&amp;A purposes. 







Deal Specifics of the Kakao Pay IPO:
 


Lead underwriters of the IPO: 
Samsung Securities, Goldman Sachs, JP Morgan, Daishin Securities


Expected IPO price per share: 
63,000 won (low)/96,000 won (high)


Number of Shares for IPO:
17m shares (new shares)


IPO base deal size: 
US$948 mn (low);  US$1,444 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
135.9m shares


Expected market cap after IPO:
8,562 billion won (low)/13,046 billion won (high)


Book open: 
29-Jul-21


Book closed:
20-Jul-21


Listing date: 
12-Aug-21


Source: Company data
 




Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>Back on the 27 July, Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>, majority-owned by <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a>  and <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="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a "Going-Private Transaction" at US$9/share.</p>
<p>Additionally, Sohu entered into a SPA with Tencent concerning its stake in Sogou, which would result in Tencent holding not less than 90% of the voting power in Sogou. Therefore the Merger would be a short-form merger - there is no vote. Dissenting rights will, however, now be afforded following the Grand Court of  Cayman Islands ruling handed down on the 28 January this year and discussed in <em><a href="https://skr.ma/H7E1t" target="_blank" rel="noopener">Changyou (CYOU US): Short-Form Merger Dissent Now Permitted</a></em>. Sohu's privatisation of Changyou competed on the 17 April.</p>
</div><div>
<p>The deal appeared to be a lock, until Sogou's 1 December <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115473750&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=SC+13E3%2FA&amp;dateFiled=2020-12-01&amp;CK=1713947" target="_blank" rel="noopener">SEC filing</a>, wherein the termination date for the SPA was pushed out to 31 July, from 29 March previously, to allow clearance from the PRC regulatory authorities, specifically State Administration for Market Regulation or SAMR.</p>
<p>What seemed an ample extension at the time now appears less assured as SAMR bears down on the tech sector. </p>
<p>This muddies when (and potentially if) the merger goes through. Plus the knock-on effect to Sohu which would pocket ~US$1.2bn under the merger compared to its current maker cap of ~US$0.7bn.</p>
<p>But Tencent is unlikely to walk - not at this Offer price. </p>
</div><div><p>More below the fold.</p></div>


Back on the 27 July, Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US)  and Tencent Holdings (700 HK), entered into a definitive agreement for a "Going-Private Transaction" at US$9/share.
Additionally, Sohu entered into a SPA with Tencent concerning its stake in Sogou, which would result in Tencent holding not less than 90% of the voting power in Sogou. Therefore the Merger would be a short-form merger - there is no vote. Dissenting rights will, however, now be afforded following the Grand Court of  Cayman Islands ruling handed down on the 28 January this year and discussed in Changyou (CYOU US): Short-Form Merger Dissent Now Permitted. Sohu's privatisation of Changyou competed on the 17 April.

The deal appeared to be a lock, until Sogou's 1 December SEC filing, wherein the termination date for the SPA was pushed out to 31 July, from 29 March previously, to allow clearance from the PRC regulatory authorities, specifically State Administration for Market Regulation or SAMR.
What seemed an ample extension at the time now appears less assured as SAMR bears down on the tech sector. 
This muddies when (and potentially if) the merger goes through. Plus the knock-on effect to Sohu which would pocket ~US$1.2bn under the merger compared to its current maker cap of ~US$0.7bn.
But Tencent is unlikely to walk - not at this Offer price. 
More below the fold.

Sohu/Sogou: Persuasive Situation Amid Ongoing Antitrust Investigations

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.

<p>CTOS Digital (CTOS) aims to raise up to US$300m via its Malaysian IPO. It is majority owned by Creador, a PE firm. </p><p>CTOS is an investment holding whose subsidiaries are principally involved in the business of credit reporting, digital software related services, software development, outsourcing and training services and investment holding.</p><p>CTOS was the largest credit reporting agency (CRA) in Malaysia with an estimated market share in terms of revenue of 71.2% in 2020 according to the IMR Report. Its associate, Experian, was the second largest CRA in Malaysia, with an estimated market share in terms of revenue of 17.5%.</p>

CTOS Digital (CTOS) aims to raise up to US$300m via its Malaysian IPO. It is majority owned by Creador, a PE firm. CTOS is an investment holding whose subsidiaries are principally involved in the business of credit reporting, digital software related services, software development, outsourcing and training services and investment holding.CTOS was the largest credit reporting agency (CRA) in Malaysia with an estimated market share in terms of revenue of 71.2% in 2020 according to the IMR Report. Its associate, Experian, was the second largest CRA in Malaysia, with an estimated market share in terms of revenue of 17.5%.

CTOS Digital Pre-IPO - Credit Where Credit’s Due

China

Ant Group Co., Ltd. develops online payment platforms. The Company produces credit system and financial services platforms which provide consumers and small businesses with safe and convenient inclusive financial services globally. Ant Group provides its services worldwide.

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Ant Group (6688 HK)

Tencent: Are We There Yet?

Compared to Alibaba, it has only been bits and pieces for Tencent so far when comes to regulatory crackdown. It seems obvious that Tencent will...

Shifara Samsudeen, ACMA, CGMA

Zomato IPO Initiation: Emerging Appetites

Zomato is expected to launch its IPO on 19 July to raise up to Rs93.75 billion ($1.3 billion). Overall, we think that Zomato's fundamentals are...

Arun George

Kakao Pay IPO Preview

Kakao Pay is offering 17 million shares in the IPO at the price range of 63,000 won to 96,000 won per share. The IPO deal size range is from $948...

Douglas Kim

Sohu/Sogou: Persuasive Situation Amid Ongoing Antitrust Investigations

Trading at a gross spread of 7.5%. Even assuming another six months out from here to complete the deal, that looks compelling. I still like Sohu...

David Blennerhassett

CTOS Digital Pre-IPO - Credit Where Credit’s Due

CTOS Digital (CTOS) aims to raise up to US$300m via its Malaysian IPO. It is majority owned by Creador, a PE firm. It has an over 70% market share...

Sumeet Singh

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