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.

Equity Bottom-Up

<ul>
<li>The main competitor, Huawei Group, decided to sell one of its two smartphone brands.</li>
<li>Xiaomi took all the smartphone market share that Huawei Group left behind.</li>
<li>Xiaomi’s revenue growth rate jumped to 35% yoy in 3Q20 versus 3% yoy in 2Q20.</li>
<li>However, so far, we believe the company is slightly overvalued.</li>
</ul>


The main competitor, Huawei Group, decided to sell one of its two smartphone brands.
Xiaomi took all the smartphone market share that Huawei Group left behind.
Xiaomi’s revenue growth rate jumped to 35% yoy in 3Q20 versus 3% yoy in 2Q20.
However, so far, we believe the company is slightly overvalued.


Xiaomi (1810 HK): Taking Advantage of Huawei’s Sale of Smartphone Brand, But Overvalued

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The S&amp;P DJI Global Indices team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201211-1277389/1277389_tes15aircaivspindnkn4.pdf?force_download=true" target="_blank" rel="noopener">confirmed</a> Friday night that <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with <a href="https://www.smartkarma.com/entities/apartment-invt-mgmt-co-a" target="_blank" data-smartkarma-citation="entities:2193:1" rel="noopener">Apartment Invt &amp; Mgmt Co A (AIV US)</a> coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing <a href="https://www.smartkarma.com/entities/dunkin-brands-group-inc" target="_blank" data-smartkarma-citation="entities:15866:1" rel="noopener">Dunkin' Brands Group (DNKN US)</a> in the S&amp;P Midcap 400, and <a href="https://www.smartkarma.com/entities/occidental-petroleum-corp" target="_blank" data-smartkarma-citation="entities:17075:1" rel="noopener">Occidental Petroleum (OXY US)</a> coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

The S&amp;P DJI Global Indices team confirmed Friday night that Tesla Motors (TSLA US) would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with Apartment Invt &amp; Mgmt Co A (AIV US) coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing Dunkin' Brands Group (DNKN US) in the S&amp;P Midcap 400, and Occidental Petroleum (OXY US) coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

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.

<a href="https://www.smartkarma.com/entities/cowell-e-holdings-inc" target="_blank" data-smartkarma-citation="entities:336:1" rel="noopener">Cowell E Holdings (1415 HK)</a> is a major supplier of camera modules for mobile devices to leading mobile device manufacturers such as <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a>. On Thursday after market close, Cowell announced a sale and purchase agreement (SPA) and a possible mandatory conditional cash offer. As the offeror will acquire more than 30% of the voting rights because of the SPA, the Takeovers Code requires the offeror to make a mandatory conditional cash offer for all the issued shares. The offer price of HK$5.87 per share, which is in line to SPA price, is a 2.98% premium to the last trading price of HK$5.70 per share (9 December prior to the trading halt). <div class="content-highlight">The offer is conditional on the offeror and concert parties holding more than 50% of the voting rights. Post the SPA completion, the offeror will hold 44.87% of the outstanding shares and voting rights. In combination with a reasonable price, we think that offer will fulfil the completion condition and become unconditional. </div>

Cowell E Holdings (1415 HK) is a major supplier of camera modules for mobile devices to leading mobile device manufacturers such as Apple Inc (AAPL US). On Thursday after market close, Cowell announced a sale and purchase agreement (SPA) and a possible mandatory conditional cash offer. As the offeror will acquire more than 30% of the voting rights because of the SPA, the Takeovers Code requires the offeror to make a mandatory conditional cash offer for all the issued shares. The offer price of HK$5.87 per share, which is in line to SPA price, is a 2.98% premium to the last trading price of HK$5.70 per share (9 December prior to the trading halt). The offer is conditional on the offeror and concert parties holding more than 50% of the voting rights. Post the SPA completion, the offeror will hold 44.87% of the outstanding shares and voting rights. In combination with a reasonable price, we think that offer will fulfil the completion condition and become unconditional. 

Cowell E Holdings’ Possible Mandatory Conditional Cash Offer

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Meta Platforms (Facebook) / Equity Bottom-Up

The US Federal Trade Commission (FTC) and almost four dozen US states and territories have filed antitrust suits against <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a>, seeking to force the social giant to divest its Instagram and Whatsapp functions. For the suits against FB to succeed, the plaintiffs must establish that FB a) enjoys monopoly power that it has used to stifle smaller rivals and that b) consumers have been harmed as a result. Proving that consumers have been harmed will likely prove especially, in our opinion. For its part, FB executives have made it clear they view efforts to break up the company as an "existential threat".So how will the suits play out? The US government's case appears to have bi-partisan and popular support, and FB has made it clear they intend to fight. We expect this case to move slowly, perhaps requiring years to resolve. A clear win for the US government is unlikely; a more likely outcome would be a settlement in which FB agrees to limit its expansion in certain areas and/or its commercial use of user data. Increased scrutiny of FB's practices and a potential settlement could slow FB's growth, but is this really a growth stock? In Q320, OP increased by just 12% on 22% revenue growth, and consensus estimates for 2021e call for similar growth. In our view, the suits represent a likely headache for FB, but not much more, and are thus unlikely to have much impact beyond the company, either.

The US Federal Trade Commission (FTC) and almost four dozen US states and territories have filed antitrust suits against Facebook Inc A (FB US), seeking to force the social giant to divest its Instagram and Whatsapp functions. For the suits against FB to succeed, the plaintiffs must establish that FB a) enjoys monopoly power that it has used to stifle smaller rivals and that b) consumers have been harmed as a result. Proving that consumers have been harmed will likely prove especially, in our opinion. For its part, FB executives have made it clear they view efforts to break up the company as an "existential threat".So how will the suits play out? The US government's case appears to have bi-partisan and popular support, and FB has made it clear they intend to fight. We expect this case to move slowly, perhaps requiring years to resolve. A clear win for the US government is unlikely; a more likely outcome would be a settlement in which FB agrees to limit its expansion in certain areas and/or its commercial use of user data. Increased scrutiny of FB's practices and a potential settlement could slow FB's growth, but is this really a growth stock? In Q320, OP increased by just 12% on 22% revenue growth, and consensus estimates for 2021e call for similar growth. In our view, the suits represent a likely headache for FB, but not much more, and are thus unlikely to have much impact beyond the company, either. 

US FTC & States' Suits Against Facebook Unlikely to Result in Breakup, but Could Slow Expansion

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Equity Capital Markets

Airbnb aims to raise up to US$3.1bn in its US listing. Airbnb is a global short-stay offering platform. To put it simply, it connects hosts, who post available accommodation on Airbnb, with guests, who make bookings for the accommodation. It charges a fee for this service.As of 9M20, it had 4 million hosts in more than 220 countries and regions around the world. Since inception, its hosts have welcomed over 825m guest arrivals and have cumulatively earned over $110bn. In 2019, it had 54m active bookers worldwide, who booked 327m nights and experiences on Airbnb.Over 2017-19, the company reported steady growth in earnings led by an increase in the number of bookings. Its overall number of guests and hosts have been growing as well, with most metrics heading in the right direction. I’ve covered various aspects of the deal in my previous note, <a href="https://www.smartkarma.com/insights/airbnb-ipo-time-for-a-good-break-even-from-the-share-lock-up" target="_blank" rel="noopener">Airbnb IPO - Time for a good break - even from the  share lock-up</a>. In this note, I’ll take a look at its peers recent performance and talk about valuations.

Airbnb aims to raise up to US$3.1bn in its US listing. Airbnb is a global short-stay offering platform. To put it simply, it connects hosts, who post available accommodation on Airbnb, with guests, who make bookings for the accommodation. It charges a fee for this service.As of 9M20, it had 4 million hosts in more than 220 countries and regions around the world. Since inception, its hosts have welcomed over 825m guest arrivals and have cumulatively earned over $110bn. In 2019, it had 54m active bookers worldwide, who booked 327m nights and experiences on Airbnb.Over 2017-19, the company reported steady growth in earnings led by an increase in the number of bookings. Its overall number of guests and hosts have been growing as well, with most metrics heading in the right direction. I’ve covered various aspects of the deal in my previous note, Airbnb IPO - Time for a good break - even from the  share lock-up. In this note, I’ll take a look at its peers recent performance and talk about valuations.

Airbnb IPO - Peer Comparison and Valuation - Smaller but Nimbler, Possible COVID Winner

United States

Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related accessories. The Company also offers payment, digital content, cloud and advertising services. Apple Inc.'s customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.

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Apple (AAPL US)

Xiaomi (1810 HK): Taking Advantage of Huawei’s Sale of Smartphone Brand, But Overvalued

The main competitor, Huawei Group, decided to sell one of its two smartphone brands. Xiaomi took all the smartphone market share that Huawei Group...

Ming Lu

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

Cowell E Holdings’ Possible Mandatory Conditional Cash Offer

Cowell announced a possible mandatory conditional cash offer at HK$5.87 per share. In combination with a reasonable price, we think that offer will...

Arun George

US FTC & States' Suits Against Facebook Unlikely to Result in Breakup, but Could Slow Expansion

We believe the US government is unlikely to get a clear win against FB. A drawn-out trial may end in a settlement, but this could take two+ years....

Tracking Traffic

Airbnb IPO - Peer Comparison and Valuation - Smaller but Nimbler, Possible COVID Winner

Airbnb aims to raise up to US$3.1bn in its US listing. Even at the revised price range, the stock is still at a discount to booking.com.

Sumeet Singh

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