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

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<p><a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>’s in-house logistics department in 2007.</p>
<p>JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, <a href="https://www.thestandard.com.hk/section-news/section/2/229859/JD-Logistics-gets-ball-rolling-for-US%244b-IPO" target="_blank" rel="noopener">according to press reports</a>. </p>
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<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-initiation-the-flow-of-things" target="_blank" data-smartkarma-citation="insights:48279" rel="noopener">JD Logistics IPO Initiation: The Flow of Things</a>, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.</p>
<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-prioritizing-market-share-gains-over-margins" target="_blank" data-smartkarma-citation="insights:50976" rel="noopener">JD Logistics IPO: Prioritizing Market Share Gains over Margins</a>,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. </p>
</div><div><div><div class="content-highlight"><p>In this note, we update our forecasts and valuation presented in <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-valuation-first-look" target="_blank" data-smartkarma-citation="insights:48384" rel="noopener">JD Logistics IPO: Valuation First Look</a> for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. </p></div></div></div>


JD Logistics (JDL HK) is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of JD.com Inc (ADR) (JD US)’s in-house logistics department in 2007.
JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, according to press reports. 

In JD Logistics IPO Initiation: The Flow of Things, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.
In JD Logistics IPO: Prioritizing Market Share Gains over Margins,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. 
In this note, we update our forecasts and valuation presented in JD Logistics IPO: Valuation First Look for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. 

JD Logistics IPO: Valuation and Forecast Update

Event-Driven

<p><a href="https://www.smartkarma.com/entities/li-fung-ltd" target="_blank" data-smartkarma-citation="entities:6290:1" rel="noopener">Li &amp; Fung Ltd (494 HK)</a> is a 114-year-old global merchandise supply chain manager. On 20 March, it announced a privatisation bid of HK$1.25 per scheme share from the Fung family and GLP, a logistics warehouse operator and investor. The scheme document was released today with the IFA considering that the terms of the proposal, the scheme and founder arrangement are fair and reasonable. The court meeting and SGM are scheduled for 12 May.</p><div class="content-highlight"><p>The fate of the proposal rests on how Silchester, with a 10.0% stake, casts its vote. Calling the Silchester vote is difficult. Since the announcement of the bid, the gross spread has narrowed from 33% to 15% (at the last close), as the market views a Silchester acceptance more likely. From a trading perspective, we would sell at the current levels with a view of adding around HK$0.95 per share. </p></div>

Li &amp; Fung Ltd (494 HK) is a 114-year-old global merchandise supply chain manager. On 20 March, it announced a privatisation bid of HK$1.25 per scheme share from the Fung family and GLP, a logistics warehouse operator and investor. The scheme document was released today with the IFA considering that the terms of the proposal, the scheme and founder arrangement are fair and reasonable. The court meeting and SGM are scheduled for 12 May.The fate of the proposal rests on how Silchester, with a 10.0% stake, casts its vote. Calling the Silchester vote is difficult. Since the announcement of the bid, the gross spread has narrowed from 33% to 15% (at the last close), as the market views a Silchester acceptance more likely. From a trading perspective, we would sell at the current levels with a view of adding around HK$0.95 per share. 

Li & Fung Scheme Document, Silchester's Vote

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>The Scheme Document, together with the notices of the Court Meeting and the SGM, have been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0419/2020041900047.pdf" target="_blank" rel="noopener">despatched</a>, despite an earlier notice <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0409/2020040900599.pdf" target="_blank" rel="noopener">delaying</a> the despatch of the Scheme Doc to no later than 31 May.</p>
<p>The Court Meeting and SGM will be on Tuesday, 12 May 2020. This is a physical meeting, not an electronic one, although physical attendance is not necessary for shareholders to exercise their rights. </p>
<p>The Independent Financial Adviser (Platinum) considers the terms of the Scheme and Founder Arrangement to be fair and reasonable.</p>
<p>Should the Scheme be successful, the effective date is expected to be on the 26 May with cash payment on or before the 4 June, a full month ahead of my earlier expected timetable. </p>
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<p>The key risk to the transaction is how Silchester, holding 10.9% of shares out, will vote. Silchester has previously said it would consider the Offer ”o<em>n its merits at the appropriate time</em>”, and that it is “<em>open to bids for shares Silchester controls at close to the offer price</em>”. Logically that would indicate they are sellers at (or around) the Offer price. But, nevertheless, it is an unusual statement to make. </p>
<p>Li &amp; Fung is challenged by ongoing shifts in the global supply chain; which are compounded by the COVID-19 virus and macroeconomic uncertainties. Cashing out of Li &amp; Fung here is looking increasingly attractive.</p>
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The Scheme Document, together with the notices of the Court Meeting and the SGM, have been despatched, despite an earlier notice delaying the despatch of the Scheme Doc to no later than 31 May.
The Court Meeting and SGM will be on Tuesday, 12 May 2020. This is a physical meeting, not an electronic one, although physical attendance is not necessary for shareholders to exercise their rights. 
The Independent Financial Adviser (Platinum) considers the terms of the Scheme and Founder Arrangement to be fair and reasonable.
Should the Scheme be successful, the effective date is expected to be on the 26 May with cash payment on or before the 4 June, a full month ahead of my earlier expected timetable. 

The key risk to the transaction is how Silchester, holding 10.9% of shares out, will vote. Silchester has previously said it would consider the Offer ”on its merits at the appropriate time”, and that it is “open to bids for shares Silchester controls at close to the offer price”. Logically that would indicate they are sellers at (or around) the Offer price. But, nevertheless, it is an unusual statement to make. 
Li &amp; Fung is challenged by ongoing shifts in the global supply chain; which are compounded by the COVID-19 virus and macroeconomic uncertainties. Cashing out of Li &amp; Fung here is looking increasingly attractive.





Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p>The key problem is in the declining revenue from postal at an accelerating rate outpacing the growth rate from e-commerce business. This mismatch has happened for some time and unfortunately, it may not stop anytime soon. </p><p>Unfortunately, the market for courier services for an e-commerce business is very crowded with Gogovan, <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> Express and <a href="https://www.smartkarma.com/entities/yamato-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2:1" rel="noopener">Yamato Holdings (9064 JP)</a> -backed TaQbin are scrambling for market share. Does Singpost stand a chance to grab the lion share of the business? It is a possibility but not without sacrificing their profitability. </p>

The key problem is in the declining revenue from postal at an accelerating rate outpacing the growth rate from e-commerce business. This mismatch has happened for some time and unfortunately, it may not stop anytime soon. Unfortunately, the market for courier services for an e-commerce business is very crowded with Gogovan, Grab (0967655D SP) Express and Yamato Holdings (9064 JP) -backed TaQbin are scrambling for market share. Does Singpost stand a chance to grab the lion share of the business? It is a possibility but not without sacrificing their profitability. 

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<p>Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE vs. EM ratio. The U.S. dollar (DXY) is currently trading near support within the 16-17 month uptrend channel. Technicals suggest the most likely scenario is for the DXY uptrend to continue and for support to hold -- which would likely result in EAFE reasserting as leadership.  In this publication we highlight attractive investment themes and individual ideas across developed markets, with special attention given to Japan, Germany, Sweden, Italy, Spain, and Switzerland.</p>

Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE vs. EM ratio. The U.S. dollar (DXY) is currently trading near support within the 16-17 month uptrend channel. Technicals suggest the most likely scenario is for the DXY uptrend to continue and for support to hold -- which would likely result in EAFE reasserting as leadership.  In this publication we highlight attractive investment themes and individual ideas across developed markets, with special attention given to Japan, Germany, Sweden, Italy, Spain, and Switzerland.

Developed Markets Strategy: Stick with Japan

Germany

Deutsche Post AG provides mail delivery and other services to the public and businesses. The Company offers domestic mail delivery, international parcel and mail delivery services, and freight delivery and logistics services.

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Deutsche Post (DHL GR)

JD Logistics IPO: Valuation and Forecast Update

JD Logistics is set to launch its IPO to raise $3-4 bn in May. The rumoured $40 bn valuation is fair, particularly in the context of its...

Arun George

Li & Fung Scheme Document, Silchester's Vote

Li & Fung Ltd (494 HK) is a 114-year-old global merchandise supply chain manager. On 20 March, it announced a privatisation bid of HK$1.25 per...

Arun George

Li & Fung: Scheme Doc Out, IFA Signs Off

The Scheme Document, together with the notices of the Court Meeting and the SGM, have been despatched, despite an earlier notice delaying the...

David Blennerhassett

Singpost (SPOST): Lasting Tough Times

The key problem is in the declining revenue from postal at an accelerating rate outpacing the growth rate from e-commerce business. This mismatch...

Henry Soediarko

Developed Markets Strategy: Stick with Japan

Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE...

Vermilion Research

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