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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/razer-inc" target="_blank" data-smartkarma-citation="entities:24380:1" rel="noopener">Razer Inc (1337 HK)</a> announced a pre-conditional privatisation offer from Mr Tan, Mr Lim and CVC at HK$2.82 per share, a 55.8% premium to the unaffected price. </li>
<li>The pre-condition is anti-trust approval in several countries. Key conditions are the headcount test and approval by at least 75% disinterested shareholders (&lt;10% of all disinterested shareholders rejection).  </li>
<li>While the offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and multiples. The gross spread at the last close is 14.6%. </li>
</ul>



Razer Inc (1337 HK) announced a pre-conditional privatisation offer from Mr Tan, Mr Lim and CVC at HK$2.82 per share, a 55.8% premium to the unaffected price. 
The pre-condition is anti-trust approval in several countries. Key conditions are the headcount test and approval by at least 75% disinterested shareholders (&lt;10% of all disinterested shareholders rejection).  
While the offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and multiples. The gross spread at the last close is 14.6%. 


Razer’s Privatisation Bid by Founders and CVC

<p><a href="https://www.smartkarma.com/entities/razer-inc" target="_blank" data-smartkarma-citation="entities:24380:1" rel="noopener">Razer Inc (1337 HK)</a> designs and builds gamer-focused ecosystem of hardware, software, and services. It offers gaming peripherals and hardware, as well as virtual credit services and offline-to-online digital payment networks. Razer was listed on the HKEx in November 2017 to raise net proceeds of HK$3,930.7 million ($505 million) at HK$3.88 per share. </p><p>On Friday after market close, Razer announced that Mr Min-Liang Tan (co-founder, CEO and Chairman) and Mr Lim Kaling (a founding investor and non-executive director) are in preliminary discussions with financial investors to explore the possibility of a transaction involving Razer. The transaction may or may not lead to a general offer for the shares. The Board cautions that no decision has been made by Mr Tan and Mr Lim on whether to proceed with any transaction. </p><p>Mr Tan represents 3,009.3 million shares or 34.35% of outstanding shares and Mr Lim represents 2,054.8 million shares or 23.46% of outstanding shares. Consequently, Mr Tan and Mr Lim together represent 57.81% of outstanding shares.</p><p>Despite improving financial performance and strong 1H21, the shares are trading -14% and -49% below its 1-year VWAP and IPO price, respectively. Razer is cash rich with the net cash (including leases) accounting for around 23% of the market cap. Also, on 3 June 2021, Mr Tan and Mr Lim sold a combined 275 million shares (3.09% of the total issued share capital at that time) at HK$2.405 per share for financial management purposes. In this context, it is unsurprisingly that Mr Tan and Mr Lim are in discussions with financial investors. </p><div class="content-highlight"><p>While we think there is a good chance that a transaction materialises, the shares continue to be attractive on an underlying basis. Our base-case SoTP valuation of HK$2.47 per share implies a 26% upside to the last close price of HK$1.96 per share.</p></div>

Razer Inc (1337 HK) designs and builds gamer-focused ecosystem of hardware, software, and services. It offers gaming peripherals and hardware, as well as virtual credit services and offline-to-online digital payment networks. Razer was listed on the HKEx in November 2017 to raise net proceeds of HK$3,930.7 million ($505 million) at HK$3.88 per share. On Friday after market close, Razer announced that Mr Min-Liang Tan (co-founder, CEO and Chairman) and Mr Lim Kaling (a founding investor and non-executive director) are in preliminary discussions with financial investors to explore the possibility of a transaction involving Razer. The transaction may or may not lead to a general offer for the shares. The Board cautions that no decision has been made by Mr Tan and Mr Lim on whether to proceed with any transaction. Mr Tan represents 3,009.3 million shares or 34.35% of outstanding shares and Mr Lim represents 2,054.8 million shares or 23.46% of outstanding shares. Consequently, Mr Tan and Mr Lim together represent 57.81% of outstanding shares.Despite improving financial performance and strong 1H21, the shares are trading -14% and -49% below its 1-year VWAP and IPO price, respectively. Razer is cash rich with the net cash (including leases) accounting for around 23% of the market cap. Also, on 3 June 2021, Mr Tan and Mr Lim sold a combined 275 million shares (3.09% of the total issued share capital at that time) at HK$2.405 per share for financial management purposes. In this context, it is unsurprisingly that Mr Tan and Mr Lim are in discussions with financial investors. While we think there is a good chance that a transaction materialises, the shares continue to be attractive on an underlying basis. Our base-case SoTP valuation of HK$2.47 per share implies a 26% upside to the last close price of HK$1.96 per share.

External broker reports(aggregated public sources), Masterlink Securities Corp

Masterlink Securities

External broker reports(aggregated public sources)

Equity Bottom-Up

<p>We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x FY21 PER and 8x FY22 PERare relatively cheap. The market is concerned about PC demandslowdown in 2022. However, Asustek’s current PC market share is lessthan 10%, and the company focuses on commercial, gaming and creatorPC markets. Thus, the impact of PC demand slowdown on Asustek shouldbe mild. Moreover, Asustek’s high profits this year will lead to rich dividenddistribution next year. Therefore, we reiterate BUY on Asustek, with a TP ofNT$416.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x FY21 PER and 8x FY22 PERare relatively cheap. The market is concerned about PC demandslowdown in 2022. However, Asustek’s current PC market share is lessthan 10%, and the company focuses on commercial, gaming and creatorPC markets. Thus, the impact of PC demand slowdown on Asustek shouldbe mild. Moreover, Asustek’s high profits this year will lead to rich dividenddistribution next year. Therefore, we reiterate BUY on Asustek, with a TP ofNT$416.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Asustek (2357 TT) Relatively Low Valuation

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/new-oriental-education-technology-group" target="_blank" data-smartkarma-citation="entities:32210:1" rel="noopener">New Oriental Education &amp; Technology Group (9901 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a> and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> while there was short covering on <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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>, <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> and <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>. Shorts decreased in the Consumer Discretionary, Information Technology, Real Estate, Materials, Indsutrials and Financials sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a>, <a href="https://www.smartkarma.com/entities/mizuho-financial-group-inc" target="_blank" data-smartkarma-citation="entities:219:1" rel="noopener">Mizuho Financial Group (8411 JP)</a>, <a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> and <a href="https://www.smartkarma.com/entities/nippon-steel-corporation" target="_blank" data-smartkarma-citation="entities:961:1" rel="noopener">Nippon Steel Corporation (5401 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a>, <a href="https://www.smartkarma.com/entities/pigeon-corp" target="_blank" data-smartkarma-citation="entities:3294:1" rel="noopener">Pigeon Corp (7956 JP)</a>, <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co., Ltd. (3088 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a> and <a href="https://www.smartkarma.com/entities/kawasaki-heavy-industries" target="_blank" data-smartkarma-citation="entities:8790:1" rel="noopener">Kawasaki Heavy Industries (7012 JP)</a>. Shorts increased in the Health Care, Financials, Materials and Communication Services sectors while decreasing in the Consumer Discretionary and Real Estate sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-heavy-industries" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Hyundai Heavy Industries (009540 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-electronics-inc" target="_blank" data-smartkarma-citation="entities:8814:1" rel="noopener">LG Electronics (066570 KS)</a>, <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>. </p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a>, <a href="https://www.smartkarma.com/entities/quanta-computer-inc" target="_blank" data-smartkarma-citation="entities:2754:1" rel="noopener">Quanta Computer (2382 TT)</a> and <a href="https://www.smartkarma.com/entities/fitipower-integrated-technology-inc" target="_blank" data-smartkarma-citation="entities:8712:1" rel="noopener">Fitipower Integrated Technology (4961 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/asia-cement-corp" target="_blank" data-smartkarma-citation="entities:15350:1" rel="noopener">Asia Cement (1102 TT)</a>, <a href="https://www.smartkarma.com/entities/elite-semiconductor-memory-technology" target="_blank" data-smartkarma-citation="entities:9373:1" rel="noopener">Elite Semiconductor Memory Technology (3006 TT)</a>, <a href="https://www.smartkarma.com/entities/yang-ming-marine-transport" target="_blank" data-smartkarma-citation="entities:8502:1" rel="noopener">Yang Ming Marine Transport (2609 TT)</a> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co-ltd" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">TA Chen Stainless Pipe (2027 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Kuaishou Technology (1024 HK), New Oriental Education &amp; Technology Group (9901 HK), Alibaba Health Information Technology (241 HK), Ping An Healthcare and Technology Company Limited (1833 HK) and Fuyao Glass Industry Group (3606 HK) while there was short covering on Alibaba Group (9988 HK), Tencent (700 HK), Wuxi Biologics (2269 HK), Galaxy Entertainment Group (27 HK) and Great Wall Motor (2333 HK). Shorts decreased in the Consumer Discretionary, Information Technology, Real Estate, Materials, Indsutrials and Financials sectors.In Japan, stocks increased on Takeda Pharmaceutical (4502 JP), Mizuho Financial Group (8411 JP), Kirin Holdings (2503 JP), KDDI Corp (9433 JP) and Nippon Steel Corporation (5401 JP) while there was short covering on Sharp Corp (6753 JP), Pigeon Corp (7956 JP), Matsumotokiyoshi Holdings Co., Ltd. (3088 JP), Shionogi &amp; Co (4507 JP) and Kawasaki Heavy Industries (7012 JP). Shorts increased in the Health Care, Financials, Materials and Communication Services sectors while decreasing in the Consumer Discretionary and Real Estate sectors.In Korea, shorts increased on LG Household &amp; Health Care (051900 KS), Hyundai Motor Co (005380 KS), HMM Co., Ltd. (011200 KS), Hyundai Heavy Industries (009540 KS) and SK Telecom (017670 KS) while shorts were covered on Samsung Electronics (005930 KS), LG Electronics (066570 KS), Oci Co Ltd (010060 KS), Naver Corp (035420 KS) and SK Hynix (000660 KS). In Taiwan, shorts increased on Novatek Microelectronics Corp (3034 TT), Mediatek Inc (2454 TT), Asustek Computer (2357 TT), Quanta Computer (2382 TT) and Fitipower Integrated Technology (4961 TT) while shorts covered on Yageo Corporation (2327 TT), Asia Cement (1102 TT), Elite Semiconductor Memory Technology (3006 TT), Yang Ming Marine Transport (2609 TT) and TA Chen Stainless Pipe (2027 TT).

Asia Shorts: Kuaishou, EDU, Fuyao, Galaxy, KDDI, Sharp, HMC, HMM, SK Tel, Naver, Novatek, Yageo

Taiwan Stock Exchange Weighted Index / Event-Driven

<p>The <a href="https://www.smartkarma.com/entities/taiwan-stock-exchange-weighted-index" target="_blank" data-smartkarma-citation="entities:26056:1" rel="noopener">Taiwan Stock Exchange Weighted Index (TWSE INDEX)</a> is 17.5% higher from its lows a couple of months ago. The margin balance is also at a new high and has risen by nearly US$3bn over the last 2 months.</p><p>At the same time, short notional has increased by US$3.7bn. Of the increase, only US$470m has come from new shorts being created while the rest is a result of higher stock prices.</p><p>The <a href="https://www.smartkarma.com/entities/taiwan-stock-exchange-weighted-index" target="_blank" data-smartkarma-citation="entities:26056:1" rel="noopener">Taiwan Stock Exchange Weighted Index (TWSE INDEX)</a> is one of the best performing Asian markets over the last year and could be susceptible to a pullback. The sharp increase in margin balance could lead to an equally sharp unwind that could lead to a repeat of the forced selling in May.</p><p>With geo-political tensions and the COVID19 variants still around, plus the higher margin balances, we would look to reduce long positions in Taiwan or put appropriate hedges in place to cushion the impact of a sharp selloff in markets.</p>

The Taiwan Stock Exchange Weighted Index (TWSE INDEX) is 17.5% higher from its lows a couple of months ago. The margin balance is also at a new high and has risen by nearly US$3bn over the last 2 months.At the same time, short notional has increased by US$3.7bn. Of the increase, only US$470m has come from new shorts being created while the rest is a result of higher stock prices.The Taiwan Stock Exchange Weighted Index (TWSE INDEX) is one of the best performing Asian markets over the last year and could be susceptible to a pullback. The sharp increase in margin balance could lead to an equally sharp unwind that could lead to a repeat of the forced selling in May.With geo-political tensions and the COVID19 variants still around, plus the higher margin balances, we would look to reduce long positions in Taiwan or put appropriate hedges in place to cushion the impact of a sharp selloff in markets.

Taiwan: TWSE & Margin Balance at New Highs

Taiwan

Asustek Computer Inc. manufactures and markets computer motherboards, interface cards, notebook computers, and other related products.

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Asustek Computer (2357 TT)

Razer’s Privatisation Bid by Founders and CVC

While the HK$2.82 per share offer will leave many disappointed (such as IPO investors), it is reasonable compared to historical share prices and...

Arun George

Razer Potentially in Play?

Razer announced that Mr Tan and Mr Lim are in discussions with investors on a possible transaction that may lead to a general offer. The shares...

Arun George

Asustek (2357 TT) Relatively Low Valuation

We forecast Asustek’s FY21 and FY22EPS at NT$57.3 and NT$41.61, respectively. Based on a recent shareprice of NT$323, Asustek’s valuations of 6x...

Masterlink Securities

Asia Shorts: Kuaishou, EDU, Fuyao, Galaxy, KDDI, Sharp, HMC, HMM, SK Tel, Naver, Novatek, Yageo

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Taiwan: TWSE & Margin Balance at New Highs

The TWSE and margin balances are both at a new high. With geo-political concerns and COVID-19 still major factors, we would look to lower long...

Brian Freitas

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