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

<div><p><a href="https://www.smartkarma.com/entities/ximalaya-inc" target="_blank" data-smartkarma-citation="entities:33232:1" rel="noopener">Ximalaya (XIMA US)</a> is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China. <br>Ximalaya is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (5.4% of outstanding shares), <a href="https://www.smartkarma.com/entities/tal-education-group" target="_blank" data-smartkarma-citation="entities:1124:1" rel="noopener">TAL Education (TAL US)</a>, Sony Music Entertainment and <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a>. Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   </p></div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ximalaya-ipo-initiation-out-of-tune" target="_blank" data-smartkarma-citation="insights:51169" rel="noopener">Ximalaya IPO Initiation: Out of Tune</a>, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. </p></div></div>

Ximalaya (XIMA US) is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China.  Ximalaya is backed by Tencent (700 HK) (5.4% of outstanding shares), TAL Education (TAL US), Sony Music Entertainment and China Literature (772 HK). Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   In Ximalaya IPO Initiation: Out of Tune, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. 

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>A mere 1.41178 billion</li>
<li>Hush now. Central bank calms inflation fears</li>
<li>When a poem, slashes share price</li>
<li>Kerry: China is an adversary</li>
<li>Don’t wait to recharge your batteries</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
A mere 1.41178 billion
Hush now. Central bank calms inflation fears
When a poem, slashes share price
Kerry: China is an adversary
Don’t wait to recharge your batteries
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Population/ Commodities/ Meituan/ US-China/ EVs

<div><p><a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a> is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by <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="https://www.smartkarma.com/entities/swiss-re-ag-1f83dcbc-730e-46fa-82f2-bfe7e8e361a1" target="_blank" data-smartkarma-citation="entities:27914:1" rel="noopener">Swiss Re AG (SREN SW)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.</p></div><div><p>At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/waterdrop-ipo-initiation-going-for-brokers" target="_blank" data-smartkarma-citation="insights:50610" rel="noopener">Waterdrop IPO Initiation: Going for Brokers</a>, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. </p></div></div></div>

Waterdrop Inc (WDH US) is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by Tencent Holdings (700 HK), Swiss Re AG (SREN SW) and Meituan (3690 HK).At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.In Waterdrop IPO Initiation: Going for Brokers, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. 

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 class="">
<li>The State Administration for Market Regulation (SAMR) began to investigate Meituan.</li>
<li>We believe Meituan must be fined after the investigation.</li>
<li>We also believe Alibaba’s Ele.me will benefit from the investigation and may possibly change its disadvantageous situation.</li>
<li>We set the downside for Meituan between 21% and 23%.</li>
</ul>


The State Administration for Market Regulation (SAMR) began to investigate Meituan.
We believe Meituan must be fined after the investigation.
We also believe Alibaba’s Ele.me will benefit from the investigation and may possibly change its disadvantageous situation.
We set the downside for Meituan between 21% and 23%.


Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*One Reorganization Down, One More To Go: </em></strong>Tencent Holdings (700.HK) [Tencent] announced a new round of organizational and employee adjustments in its Platform and Content Group (PCG) - the largest reshuffle since it began in 2018. With Alibaba Holdings (BABA] agreeing to form a financial holding company. Tencent cannot be far behind; and  </p><p><strong><em>*Earnings To Decline, Capital Requirements To Increase:</em></strong> For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn, FinTech represents a growing 28.8% of revenue – and are key component of Tencent’s current and future results.  No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.</p>

*One Reorganization Down, One More To Go: Tencent Holdings (700.HK) [Tencent] announced a new round of organizational and employee adjustments in its Platform and Content Group (PCG) - the largest reshuffle since it began in 2018. With Alibaba Holdings (BABA] agreeing to form a financial holding company. Tencent cannot be far behind; and  *Earnings To Decline, Capital Requirements To Increase: For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn, FinTech represents a growing 28.8% of revenue – and are key component of Tencent’s current and future results.  No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.

Tencent Holdings – FHC Restructure On Its Way

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

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Baidu (BIDU US)

Ximalaya IPO: Valuation First-Look

Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion. In this note, we present our forecasts and take the first look at...

Arun George

Population/ Commodities/ Meituan/ US-China/ EVs

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

Waterdrop IPO: Valuation Insights

Waterdrop has launched its IPO to raise net proceeds of $301.6 million at the mid-point of the price range of $10-12. The price range is full at...

Arun George

Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba

State Administration for Market Regulation (SAMR) began to investigate Meituan. We believe penalty must follow. We also believe Alibaba’s Ele.me...

Ming Lu

Tencent Holdings – FHC Restructure On Its Way

TENCENT HOLDINGS: Tencent announced a reorganization to its Platform and Content Group (PCG). With Alibaba Holdings (BABA] agreeing to form a...

Thomas J. Monaco

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