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

<a href="https://www.smartkarma.com/entities/hello-inc" target="_blank" data-smartkarma-citation="entities:33031:1" rel="noopener">Hello Inc (1883864D US)</a>, which is backed by <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>, is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as Hello Bike and Hello e-Bike. It also has a carpooling marketplace known as Hello Carpooling. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports.   In <a href="https://www.smartkarma.com/insights/hello-ipo-initiation-goodbye" target="_blank" data-smartkarma-citation="insights:50795" rel="noopener">Hello IPO Initiation: Goodbye</a> we stated that Hello’s investor pitch is that its various businesses create a flywheel that drives user spending growth with limited user acquisition costs. However, Hello remains saddled with a core business (shared two-wheeler services) that has challenging prospects due to declining growth, low profitability and high cash burn. <div class="content-highlight">Hello has released an updated F-1 filing disclosing its 1Q21 performance and other developments. At first glance, the 1Q21 update looks stunning due to accelerating growth and margin progression. However, a closer look, suggests that business continues to face daunting challenges. Overall, we stick to our view to give the Hello IPO a pass.    </div>

Hello Inc (1883864D US), which is backed by Ant Financial Services Group (6688 HK), is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as Hello Bike and Hello e-Bike. It also has a carpooling marketplace known as Hello Carpooling. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports.   In Hello IPO Initiation: Goodbye we stated that Hello’s investor pitch is that its various businesses create a flywheel that drives user spending growth with limited user acquisition costs. However, Hello remains saddled with a core business (shared two-wheeler services) that has challenging prospects due to declining growth, low profitability and high cash burn. Hello has released an updated F-1 filing disclosing its 1Q21 performance and other developments. At first glance, the 1Q21 update looks stunning due to accelerating growth and margin progression. However, a closer look, suggests that business continues to face daunting challenges. Overall, we stick to our view to give the Hello IPO a pass.    

Hello IPO: 1Q21 Update Does Not Change the Avoid Tag

<a href="https://www.smartkarma.com/entities/hello-inc" target="_blank" data-smartkarma-citation="entities:33031:1" rel="noopener">Hello Inc (1883864D US)</a> is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as Hello Bike and Hello e-Bike. It also has a carpooling marketplace known as Hello Carpooling. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports. Hello is backed by <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> which owns 36.3% of the outstanding shares. The bike-sharing industry has proved to be a challenging market to generate investment returns as evidenced by <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>’s restructuring and impairments related to Mobike. Hello’s investor pitch is that its various businesses create a flywheel effect (a popular term abused by many tech IPO hopefuls) that drives user spending growth with limited user acquisition costs. Hello is suggesting that its core business (shared two-wheeler services) brings a large captive user base to feed its more capital-light and profitable businesses such as carpooling. <div class="content-highlight">However, the issue with this rose-tinted view is that Hello remains saddled with a core business that has challenging prospects due to declining growth, low profitability and high cash burn. Also, investors seeking a pure-play on the carpooling market may be better off participating in the <a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> IPO. Overall, we are inclined to give the Hello IPO a pass.    </div>

Hello Inc (1883864D US) is China's third-largest local services platform by transaction volume, according to iResearch. Hello offers bike-sharing and e-bike sharing services known as Hello Bike and Hello e-Bike. It also has a carpooling marketplace known as Hello Carpooling. Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports. Hello is backed by Ant Financial Services Group (6688 HK) which owns 36.3% of the outstanding shares. The bike-sharing industry has proved to be a challenging market to generate investment returns as evidenced by Meituan (3690 HK)’s restructuring and impairments related to Mobike. Hello’s investor pitch is that its various businesses create a flywheel effect (a popular term abused by many tech IPO hopefuls) that drives user spending growth with limited user acquisition costs. Hello is suggesting that its core business (shared two-wheeler services) brings a large captive user base to feed its more capital-light and profitable businesses such as carpooling. However, the issue with this rose-tinted view is that Hello remains saddled with a core business that has challenging prospects due to declining growth, low profitability and high cash burn. Also, investors seeking a pure-play on the carpooling market may be better off participating in the Dida (DIDA HK) IPO. Overall, we are inclined to give the Hello IPO a pass.    

Event-Driven

<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> is Southeast Asia’s leading superapp and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab is backed by SoftBank Vision Fund (21.7% stake), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (16.6%), <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a> (8.7%) and <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> (6.9%). Grab intends to go public in the US through a SPAC merger with <a href="https://www.smartkarma.com/entities/altimeter-growth-corp" target="_blank" data-smartkarma-citation="entities:33007:1" rel="noopener">Altimeter Growth Corp (AGC US)</a>. The deal proceeds include more than $4.0 billion of fully committed PIPE led by $750 million from Altimeter Capital Management. Investors in the PIPE include BlackRock, Morgan Stanley Investment Management, Fidelity International, FMR, Janus Henderson Investors, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek. Altimeter will commit to a three-year lock-up period for its sponsor promote shares. The deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue. Post-close of the transaction, the existing Grab shareholders will represent 87.7% of outstanding shares. <div class="content-highlight">Over the years, Grab has transformed into a superapp that encompasses transactions related to transportation, eating, shopping, and digital payments. The transactions are high-frequency which tend to increase user stickiness. By spanning several categories, Grab has many opportunities to capture a user’s wallet spend. Grab is using its superapp status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish. We will look at Grab’s valuation in our next note.</div>

Grab (0967655D SP) is Southeast Asia’s leading superapp and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab is backed by SoftBank Vision Fund (21.7% stake), Uber (UBER US) (16.6%), DiDi Chuxing (1284375D CH) (8.7%) and Toyota Motor (7203 JP) (6.9%). Grab intends to go public in the US through a SPAC merger with Altimeter Growth Corp (AGC US). The deal proceeds include more than $4.0 billion of fully committed PIPE led by $750 million from Altimeter Capital Management. Investors in the PIPE include BlackRock, Morgan Stanley Investment Management, Fidelity International, FMR, Janus Henderson Investors, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek. Altimeter will commit to a three-year lock-up period for its sponsor promote shares. The deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue. Post-close of the transaction, the existing Grab shareholders will represent 87.7% of outstanding shares. Over the years, Grab has transformed into a superapp that encompasses transactions related to transportation, eating, shopping, and digital payments. The transactions are high-frequency which tend to increase user stickiness. By spanning several categories, Grab has many opportunities to capture a user’s wallet spend. Grab is using its superapp status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish. We will look at Grab’s valuation in our next note.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

On 13th Apr 2021, <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> announced that it plans to go public in the US in partnership with Altimeter Growth Corp (AGC US) at an equity valuation of US$39.6bn. It will raise around US$4.5bn cash through the transaction. In this note, I'll take a quick look at the numbers and implied valuations.

On 13th Apr 2021, Grab (0967655D SP) announced that it plans to go public in the US in partnership with Altimeter Growth Corp (AGC US) at an equity valuation of US$39.6bn. It will raise around US$4.5bn cash through the transaction. In this note, I'll take a quick look at the numbers and implied valuations.

Grab SPAC Listing - High on Ambition, Very High on Valuation

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Hang Seng China Enterprises Index / Event-Driven

The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a>, <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> and <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> announcing results (and dividends) today, and <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a>, <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener">Agricultural Bank Of China (1288 HK)</a> and <a href="https://www.smartkarma.com/entities/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.With <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>. <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili Inc (9626 HK)</a> lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> has already filed papers to list in Hong Kong. Then there are companies like <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a> and <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.

The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With Bank Of Communications Co H (3328 HK), ICBC (H) (1398 HK) and China Construction Bank H (939 HK) announcing results (and dividends) today, and Postal Savings Bank of China (1658 HK), Agricultural Bank Of China (1288 HK) and Bank Of China Ltd (H) (3988 HK) announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.With Baidu (9888 HK) included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the HKEX (388 HK). Bilibili Inc (9626 HK) lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. JD Logistics (JDL HK) has already filed papers to list in Hong Kong. Then there are companies like DiDi Chuxing (1284375D CH), ByteDance (1460967D CH) and Ant Financial Services Group (6688 HK) that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

China

DiDi Chuxing Incorporated operates passenger transportation platforms. The Company provides mobility solutions, cloud computing and other application based services. DiDi Chuxing serves customers worldwide.

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DiDi Global (DIDI US)

Hello IPO: 1Q21 Update Does Not Change the Avoid Tag

Hello has released an updated F-1 filing disclosing its 1Q21 performance and other developments. The 1Q21 results suggest that business continues...

Arun George

Hello IPO Initiation: Goodbye

Hello is seeking to raise $1 billion through a Nasdaq listing, according to press reports. Overall, we are inclined to give the Hello IPO a pass.

Arun George

Grab SPAC Deal: Delivering the Goods

Grab has announced a SPAC merger with Altimeter Growth Corp which values Grab at a post-money market cap of $39.6 bn. We think that Grab has strong...

Arun George

Grab SPAC Listing - High on Ambition, Very High on Valuation

On 13th Apr 2021, Grab announced that it plans to go public in the US in partnership with Altimeter Growth Corp at an equity valuation of...

Sumeet Singh

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

While the HSCEI 2021 dividend futures are trading near our estimated fair, the HSCEI 2021/22 div steepener is not. We recommend selling the...

Brian Freitas

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