Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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Dalian Wanda Commercial Properties / Equity Capital Markets

We would take the deal.For Momentum/Liquidity Strategy investors the deal scores reasonably well on our Momentum-Adjusted IPO Framework, while for long-term/value investors the scores are marginal. Positives for the deal include: 1) recent outperformance of peers vs. the index; 2) steady growth outlook, owing to pipeline of asset completion; 3) strong cornerstone book taking up 56% of the deal; 4) reasonable valuation of over 40% discount to NAV as compared to 25-40% for larger peers; and 5) in addition, due to its size, the stock will likely be a member of all major indices, entailing passive money flow and will also find strong support from the property funds.On the flip side, our primary concerns stem from: 1) high debt levels, which are unlikely to materially subside post listing given the heavy capex lined up; 2) high level of related party transactions (18% of rental income); and 3) on a macro level an overall slowdown in China property, combined with continued rising threat to shopping malls sales from e-commerce.

We would take the deal.For Momentum/Liquidity Strategy investors the deal scores reasonably well on our Momentum-Adjusted IPO Framework, while for long-term/value investors the scores are marginal. Positives for the deal include: 1) recent outperformance of peers vs. the index; 2) steady growth outlook, owing to pipeline of asset completion; 3) strong cornerstone book taking up 56% of the deal; 4) reasonable valuation of over 40% discount to NAV as compared to 25-40% for larger peers; and 5) in addition, due to its size, the stock will likely be a member of all major indices, entailing passive money flow and will also find strong support from the property funds.On the flip side, our primary concerns stem from: 1) high debt levels, which are unlikely to materially subside post listing given the heavy capex lined up; 2) high level of related party transactions (18% of rental income); and 3) on a macro level an overall slowdown in China property, combined with continued rising threat to shopping malls sales from e-commerce.

Reasonable valuation and possible index inclusion make us positive on the deal despite debt concerns

China

Dalian Wanda Commercial Management Group Co., Ltd. operates as a commercial property developer, owner, and operator. The Company develops and manages mixed-use property projects including retail, office, hotel, residential, restaurant, entertainment, and other projects. Dalian Wanda Commercial Management Group conducts businesses in China.

Dalian Wanda Commercial Properties (1567411D HK)

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Reasonable valuation and possible index inclusion make us positive on the deal despite debt concerns

We would take the deal.For Momentum/Liquidity Strategy investors the deal scores reasonably well on our Momentum-Adjusted IPO Framework, while for...

Sumeet Singh