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

<p><a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a>/SPH announced a privatisation offer from <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>. Keppel is taking private SPH through via a scheme of arrangement. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> and <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a>, the total consideration is S$2.099 per SPH share, which is a 39.9% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review) and an 11.6% premium to the share price of S$1.88 on 30 July 2021 (last trading day). </p><p>The privatisation proposal is the culmination of the SPH’s strategic review to unlock shareholder value. Keppel's offer was the best offer from several proposals evaluated, according to SPH management. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Post completion of the media business restructuring (requires approval at the EGM in Aug-Sep), SPH would be released from NPPA restrictions including the 5% shareholding cap restriction. Due to the impending lifting of the 5% shareholding cap, the SPH Board's preference was an offer for the whole SPH, to ensure the emergence of a controlling shareholder.</p><div class="content-highlight"><p>The key conditions for the successful privatisation are the completion of the media business restructuring, regulatory approval, SPH and Keppel shareholder approval. The modest premium/discount to historical long-term multiples and share prices is unlikely to excite long-term SPH shareholders. The offer price is largely designed to appeal to SPH shareholders lacking patience for SPH to unlock value through capital recycling (such as a listing of PBSA assets, disposal of investments), a post-COVID-19 recovery particularly in its property businesses and improving earnings quality through diversifying into defensive assets. Overall, while the implied offer price is not a knockout bid, it is ok in the context of our SoTP valuation (post-media business restructuring). </p></div>

Singapore Press Holdings (SPH SP)/SPH announced a privatisation offer from Keppel Corp (KEP SP). Keppel is taking private SPH through via a scheme of arrangement. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of Keppel REIT (KREIT SP) and SPH REIT (SPHREIT SP), the total consideration is S$2.099 per SPH share, which is a 39.9% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review) and an 11.6% premium to the share price of S$1.88 on 30 July 2021 (last trading day). The privatisation proposal is the culmination of the SPH’s strategic review to unlock shareholder value. Keppel's offer was the best offer from several proposals evaluated, according to SPH management. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Post completion of the media business restructuring (requires approval at the EGM in Aug-Sep), SPH would be released from NPPA restrictions including the 5% shareholding cap restriction. Due to the impending lifting of the 5% shareholding cap, the SPH Board's preference was an offer for the whole SPH, to ensure the emergence of a controlling shareholder.The key conditions for the successful privatisation are the completion of the media business restructuring, regulatory approval, SPH and Keppel shareholder approval. The modest premium/discount to historical long-term multiples and share prices is unlikely to excite long-term SPH shareholders. The offer price is largely designed to appeal to SPH shareholders lacking patience for SPH to unlock value through capital recycling (such as a listing of PBSA assets, disposal of investments), a post-COVID-19 recovery particularly in its property businesses and improving earnings quality through diversifying into defensive assets. Overall, while the implied offer price is not a knockout bid, it is ok in the context of our SoTP valuation (post-media business restructuring). 

Equity Capital Markets

Bukalapak.com PT Tbk / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a>, which means 'opening a kiosk' in Indonesian, is a leading e-commerce player in non-Tier 1 cities in Indonesia, with a market share of 35% in 2020 based on GMV (gross merchandise value), according to Frost &amp; Sullivan. Bukalapak carries out its main business activities through the mobile platform <em>Bukalapak</em> and <em>Bukalapak Partners</em>. Bukalapak has increased its IPO size by about a third to $1.5 billion due to strong demand, according to press reports. Bookbuilding will close on 19 July and the shares are set to list on 6 August. </p><p>The COVID-19 pandemic has accelerated the rate of e-commerce adoption in Indonesia as more consumers are reluctant to travel and started changing their shopping habits to online shopping, due to personal preferences or lockdown restrictions. The share of e-commerce of total retail spending in Indonesia has grown from 5.6% in 2017 to around 22% in 2020 and will reach 35.9% in 2025, according to Frost &amp; Sullivan. </p><div class="content-highlight"><p>Like its peers, Bukalapak is benefiting from this market tailwind. Bukalapak’s strategy of focusing on consumers in the non-Tier 1 area and the mass market in the Tier 1 area results in a relatively small overlap (less than 20%) between its customers and customers of other online marketplaces such as <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>'s Shopee, <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> and <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>'s Lazada. Competitors generally target the affluent segment of the market. Overall, Bukalapak's fundamentals tick all the right boxes of rising monetisation, lower losses and declining cash burn, in our view. We will discuss valuation in our next note. </p></div>

Bukalapak (BUKA IJ), which means 'opening a kiosk' in Indonesian, is a leading e-commerce player in non-Tier 1 cities in Indonesia, with a market share of 35% in 2020 based on GMV (gross merchandise value), according to Frost &amp; Sullivan. Bukalapak carries out its main business activities through the mobile platform Bukalapak and Bukalapak Partners. Bukalapak has increased its IPO size by about a third to $1.5 billion due to strong demand, according to press reports. Bookbuilding will close on 19 July and the shares are set to list on 6 August. The COVID-19 pandemic has accelerated the rate of e-commerce adoption in Indonesia as more consumers are reluctant to travel and started changing their shopping habits to online shopping, due to personal preferences or lockdown restrictions. The share of e-commerce of total retail spending in Indonesia has grown from 5.6% in 2017 to around 22% in 2020 and will reach 35.9% in 2025, according to Frost &amp; Sullivan. Like its peers, Bukalapak is benefiting from this market tailwind. Bukalapak’s strategy of focusing on consumers in the non-Tier 1 area and the mass market in the Tier 1 area results in a relatively small overlap (less than 20%) between its customers and customers of other online marketplaces such as Sea Ltd (SE US)'s Shopee, Tokopedia PT (1087142D IJ) and Alibaba Group (BABA US)'s Lazada. Competitors generally target the affluent segment of the market. Overall, Bukalapak's fundamentals tick all the right boxes of rising monetisation, lower losses and declining cash burn, in our view. We will discuss valuation in our next note. 

Bukalapak IPO Initiation: Island Shopping

Consumer Discretionary / Industrials

Henry Kwon

Equity Bottom-Up

<p>Since June 25, CPNG has outperformed NASDAQ by 16.90%, rising by 19.1%. The stock closed above its 10-day EMA for the third consecutive session today, and it seem that there is now an ascending channel that may have formed. From a valuation perspective, Risk-Free Rate as defined by the 10-year Treasury yield, has come down to 1.42% from 1.65% and consensus forecasts have been revised upwards since we last addressed CPNG's valuation issues (see <a href="https://www.smartkarma.com/insights/cpng-dead-cat-bounce-or-a-more-sustainable-price-recovery-in-the-cards" target="_blank" data-smartkarma-citation="insights:51427" rel="noopener">CPNG: Dead Cat Bounce or a More Sustainable Price Recovery in the Cards?</a>).</p><p>There were two news items we are aware of that have had a major impact on CPNG's recent rally:</p><ul>
<li>News that CPNG would be able to refinance its 5.5%, 5-year loan from Goldman Sachs to finance its warehouse burned down by fire, at a more favorable rate of around 2% (see <a href="https://www.koreatimes.co.kr/www/tech/2021/07/129_311390.html" target="_blank" rel="noopener">https://www.koreatimes.co.kr/www/tech/2021/07/129_311390.html</a>), should have been a non-event since CPNG is insured against fire damage. However, the shares reacted positively to the news on June 29, which is June 30 in Korea when media focused on the debt refinancing issue.</li>
<li>News that CPNG has just registered its "Coupang Biz" trademark for its planned B2B business for small-medium size businesses shopping for office equipment and other MRO items (see <a href="https://www.edaily.co.kr/news/read?newsId=03972086629113864&amp;mediaCodeNo=257" target="_blank" rel="noopener">https://www.edaily.co.kr/news/read?newsId=03972086629113864&amp;mediaCodeNo=257</a>) should also have been a non-starter from a fundamental standpoint, since anecdotal evidence seems to envision Coupang Biz to add about KRW 1.0trn to its top line at an as of yet unannounced timeline in the future. In other words, the news should be taken at face value, but no sane analyst should run out and immediately add what amounts to about 5% upgrade in FY21 consensus revenue forecasts based on what is in media reports. However, the news seems to have been at least responsible for today's 3.39% jump in share price.</li>
</ul><p>CPNG's shares closed above its 10-Day EMA for the third consecutive day at close today, with what looks like an ascending channel that may be forming. MACD is positively postured but RSI sits a little on the high side now at 67.28 albeit with further room for strength. The trading volumes reached 6.92m shares, from the 2.5-3.7m share range seen since the beginning of July. As for share price implications for the rest of the week:</p><ul>
<li>
<strong>Short Term Bullish Scenario</strong>: Following the third consecutive day's close above its 10-Day EMA today, the shares could try to break above the 61.8% Fibonacci retracement level at $45.30. If sufficient momentum builds the shares may attempt to break above the 50% retracement level at $49.83, but can face resistance in the 46.00-47.00 zone, which looks like the upper bounds of the ascending channel formation we referred to above.</li>
<li>
<strong>Short Term Bearish Scenario</strong>: The surge in trading volume seen today could also indicate a topping move, so in case of a pullback, investors should see the $41-42 price range along the 10-Day EMA as the first level of support, with the 21-Day EMA as the next level of support. Below these levels, we would expect shares to test the 78.6% Fibonacci retracement level at $38.86.</li>
</ul><p>In the short run, we believe from experience that fundamentals could take a long time to get priced into the share price of any stock, so investors should carefully weigh whether they will invest in CPNG or just trade the shares, because the choice could imply two very different courses of action. Having said that, it never hurts to buy low whether investing or trading. CPNG's next fundamental catalyst should come from the company's 2Q earnings release, which we anticipate is likely to take place in mid-August (see <a href="https://www.nasdaq.com/market-activity/stocks/cpng/earnings" target="_blank" rel="noopener">https://www.nasdaq.com/market-activity/stocks/cpng/earnings</a>).</p>

Since June 25, CPNG has outperformed NASDAQ by 16.90%, rising by 19.1%. The stock closed above its 10-day EMA for the third consecutive session today, and it seem that there is now an ascending channel that may have formed. From a valuation perspective, Risk-Free Rate as defined by the 10-year Treasury yield, has come down to 1.42% from 1.65% and consensus forecasts have been revised upwards since we last addressed CPNG's valuation issues (see CPNG: Dead Cat Bounce or a More Sustainable Price Recovery in the Cards?).There were two news items we are aware of that have had a major impact on CPNG's recent rally:
News that CPNG would be able to refinance its 5.5%, 5-year loan from Goldman Sachs to finance its warehouse burned down by fire, at a more favorable rate of around 2% (see https://www.koreatimes.co.kr/www/tech/2021/07/129_311390.html), should have been a non-event since CPNG is insured against fire damage. However, the shares reacted positively to the news on June 29, which is June 30 in Korea when media focused on the debt refinancing issue.
News that CPNG has just registered its "Coupang Biz" trademark for its planned B2B business for small-medium size businesses shopping for office equipment and other MRO items (see https://www.edaily.co.kr/news/read?newsId=03972086629113864&amp;mediaCodeNo=257) should also have been a non-starter from a fundamental standpoint, since anecdotal evidence seems to envision Coupang Biz to add about KRW 1.0trn to its top line at an as of yet unannounced timeline in the future. In other words, the news should be taken at face value, but no sane analyst should run out and immediately add what amounts to about 5% upgrade in FY21 consensus revenue forecasts based on what is in media reports. However, the news seems to have been at least responsible for today's 3.39% jump in share price.
CPNG's shares closed above its 10-Day EMA for the third consecutive day at close today, with what looks like an ascending channel that may be forming. MACD is positively postured but RSI sits a little on the high side now at 67.28 albeit with further room for strength. The trading volumes reached 6.92m shares, from the 2.5-3.7m share range seen since the beginning of July. As for share price implications for the rest of the week:

Short Term Bullish Scenario: Following the third consecutive day's close above its 10-Day EMA today, the shares could try to break above the 61.8% Fibonacci retracement level at $45.30. If sufficient momentum builds the shares may attempt to break above the 50% retracement level at $49.83, but can face resistance in the 46.00-47.00 zone, which looks like the upper bounds of the ascending channel formation we referred to above.

Short Term Bearish Scenario: The surge in trading volume seen today could also indicate a topping move, so in case of a pullback, investors should see the $41-42 price range along the 10-Day EMA as the first level of support, with the 21-Day EMA as the next level of support. Below these levels, we would expect shares to test the 78.6% Fibonacci retracement level at $38.86.
In the short run, we believe from experience that fundamentals could take a long time to get priced into the share price of any stock, so investors should carefully weigh whether they will invest in CPNG or just trade the shares, because the choice could imply two very different courses of action. Having said that, it never hurts to buy low whether investing or trading. CPNG's next fundamental catalyst should come from the company's 2Q earnings release, which we anticipate is likely to take place in mid-August (see https://www.nasdaq.com/market-activity/stocks/cpng/earnings).

<div><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. </p></div><div><p>Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is <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>. </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/zomato-ipo-initiation-emerging-appetites" target="_blank" data-smartkarma-citation="insights:54141" rel="noopener">Zomato IPO Initiation: Emerging Appetites</a>, we stated that that 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. In <a href="https://www.smartkarma.com/insights/zomato-ipo-results-point-to-a-favourable-trajectory" target="_blank" data-smartkarma-citation="insights:54220" rel="noopener">Zomato IPO: Results Point to a Favourable Trajectory</a>, we noted that the FY21 results support our view that Zomato has attractive fundamentals. </p>
<div class="content-highlight"><p>Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. </p></div>
</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 will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is Info Edge India (INFOE IN). 
In Zomato IPO Initiation: Emerging Appetites, we stated that that 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. In Zomato IPO: Results Point to a Favourable Trajectory, we noted that the FY21 results support our view that Zomato has attractive fundamentals. 
Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. 


<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. </p><p>Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is <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>. </p><p>In <a href="https://www.smartkarma.com/insights/zomato-ipo-initiation-emerging-appetites" target="_blank" data-smartkarma-citation="insights:54141" rel="noopener">Zomato IPO Initiation: Emerging Appetites</a>, we stated that that 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. </p><div class="content-highlight"><p>In this note, we look at the updated prospectus which discloses the FY21 results and recent developments. Overall, the latest results support our view that Zomato has attractive fundamentals. </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 will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is Info Edge India (INFOE IN). In Zomato IPO Initiation: Emerging Appetites, we stated that that 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. In this note, we look at the updated prospectus which discloses the FY21 results and recent developments. Overall, the latest results support our view that Zomato has attractive fundamentals. 

Zomato IPO: Results Point to a Favourable Trajectory

South Korea

Coupang, Inc. operates as an e-commerce company. The Company offers dynamic end-to-end e-commerce and logistic solutions. Coupang serves customers worldwide.

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Coupang (CPNG US)

SPH’s Privatisation by Keppel

SPH announced a privatisation offer from Keppel for a total consideration is S$2.099 per share. While the implied offer price is not a knockout...

Arun George

Bukalapak IPO Initiation: Island Shopping

Bukalapak has increased its IPO size by about a third to $1.5 billion due to strong demand. Its fundamentals tick all the right boxes of rising...

Arun George

CPNG: Is Coupang Biz that Big of a Deal?

DCF analysis suggests that Market is currently pricing in both margin and overseas growth even though RFR is lower and Consensus Estimates are...

Henry Kwon

Zomato IPO: Valuation Insights

Our DCF valuation is Rs62.84 per share, 15% below the mid-point of the IPO price range. While we like the fundamentals, the IPO price range is...

Arun George

Zomato IPO: Results Point to a Favourable Trajectory

Zomato will launch its IPO on 14 July to raise up to $1.3 billion. Overall, the FY21 results disclosed in the updated prospectus, support our view...

Arun George

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