Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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FIT Hon Teng, a subsidiary of Taiwan listed <a href="https://www.smartkarma.com/entities/745" target="_blank" data-smartkarma-citation="entities:745:1">Hon Hai Precision Industry (2317 TT)</a>, is planning to raise US$1-1.5bn to expand its business. In this insight, I will look at FIT's competitiveness and related party transaction, its recent acquisition of Avago's optical module business, and compare FIT's financial and operational metrics with other listed subsidiaries of Hon Hai.

FIT Hon Teng, a subsidiary of Taiwan listed Hon Hai Precision Industry (2317 TT), is planning to raise US$1-1.5bn to expand its business. In this insight, I will look at FIT's competitiveness and related party transaction, its recent acquisition of Avago's optical module business, and compare FIT's financial and operational metrics with other listed subsidiaries of Hon Hai. 

FIT Hon Teng IPO Early Thought: Parent Hon Hai Has a Different Focus

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Cowell E Holdings / Equity Capital Markets

Cowell e holdings (Cowell) plans to raise ~US$100-150m through its IPO through a mix of primary and secondary shares. We would take the deal, towards the mid-end as at the high-end we expect upside to be limited:<ul><li>The company has been a camera module supplier to Apple since 2009 and supplies over 50% of&nbsp;iPhone front cameras</li><li>The company has exhibited strong revenue and PATMI growth in the recent past and&nbsp;Cowell&nbsp;is looking at supplying more cameras (back cameras) to Apple as well, while increasing its supply to LG as well</li><li>The offer price implies a valuation of 6.2-8.9x p/e which looks reasonable as compared to an average 12x for peers with the overall range being from 6.8-20x</li></ul>However, we expect upside to be limited given:<ul><li>Its production line for Apple front cameras, can only be used to supply Apple and hence, that limits expansion capabilities with regards to other manufacturers. In addition,&nbsp;Apple tends to limit its exposure to any component provider at 50%, that too limits further revenue upside.</li><li>There are enough listed options available to investors to play this sector, hence, the stock doesn't offer a unique exposure as such</li><li>Other IT sector listing in Hong Kong recently haven't done well (Q Technology was a recent listing in the same space, which is still below IPO price). In addition, the deal doesn't have any cornerstone investors.</li></ul>

Cowell e holdings (Cowell) plans to raise ~US$100-150m through its IPO through a mix of primary and secondary shares. We would take the deal, towards the mid-end as at the high-end we expect upside to be limited:The company has been a camera module supplier to Apple since 2009 and supplies over 50% of&nbsp;iPhone front camerasThe company has exhibited strong revenue and PATMI growth in the recent past and&nbsp;Cowell&nbsp;is looking at supplying more cameras (back cameras) to Apple as well, while increasing its supply to LG as wellThe offer price implies a valuation of 6.2-8.9x p/e which looks reasonable as compared to an average 12x for peers with the overall range being from 6.8-20xHowever, we expect upside to be limited given:Its production line for Apple front cameras, can only be used to supply Apple and hence, that limits expansion capabilities with regards to other manufacturers. In addition,&nbsp;Apple tends to limit its exposure to any component provider at 50%, that too limits further revenue upside.There are enough listed options available to investors to play this sector, hence, the stock doesn't offer a unique exposure as suchOther IT sector listing in Hong Kong recently haven't done well (Q Technology was a recent listing in the same space, which is still below IPO price). In addition, the deal doesn't have any cornerstone investors.

Cowell Holdings (1415 HK) - A cheap play on Apple but we would be price sensitive

Hong Kong

Cowell e Holdings Inc, is a holding company, which operates electronics and optical components manufacturing entities. The products include camera modules, optical lens and prisms.

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Cowell E Holdings (1415 HK)

FIT Hon Teng IPO Early Thought: Parent Hon Hai Has a Different Focus

FIT Hon Teng, a subsidiary of Taiwan listed Hon Hai Precision Industry (2317 TT), is planning to raise US$1-1.5bn to expand its business. In this...

Ke Yan, CFA, FRM

Cowell Holdings (1415 HK) - A cheap play on Apple but we would be price sensitive

Cowell e holdings (Cowell) plans to raise ~US$100-150m through its IPO through a mix of primary and secondary shares. We would take the deal,...

Sumeet Singh

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52-week Range

Market Cap (USDm)

P/E

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