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.

Equity Capital Markets

RLX Technology Inc / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/rlx-technology-inc" target="_blank" data-smartkarma-citation="entities:31113:1" rel="noopener">RLX Technology Inc (RLX US)</a> aims to raise around US$1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. RLX only sells its e-vapor products in China. As of Sep 2020, it had over 5,000 branded partner stores and sold its products in over 100,000 other retail outlets, covering over 250 cities in China.Even though the company only started operations in 2018, it was already recording sales of around US$330m by 9M20. Margins too have been on an uptrend and operating cash flows have been robust. Moreover, the founding team and investor backing appear strong.In this insight, I'll talk about the positive aspects of the company.

RLX Technology Inc (RLX US) aims to raise around US$1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value of 48% in 2019 and 62.6% over 9M20. RLX only sells its e-vapor products in China. As of Sep 2020, it had over 5,000 branded partner stores and sold its products in over 100,000 other retail outlets, covering over 250 cities in China.Even though the company only started operations in 2018, it was already recording sales of around US$330m by 9M20. Margins too have been on an uptrend and operating cash flows have been robust. Moreover, the founding team and investor backing appear strong.In this insight, I'll talk about the positive aspects of the company.

RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the March 2021 review of the Hang Seng Family of Indexes on 19 February. The constituent changes will be effective after the close of trading on 5 March.We expect the March 21 review for 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> to have only 1 deletion, though there is a low probability of another set of changes. Post <a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>'s Fast Entry into the index, there needs to be one deletion at the March review. At the current time, the lowest ranked index constituent is <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">Petrochina Co Ltd H (857 HK)</a> and the stock should be deleted at the March review.There was a medium probability of <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> being included in the index. That has now become a low probability event post <a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>'s inclusion in the index. If <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> is included in the index, then <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a> could be deleted.The potential changes to 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> over the next 6 months will also have serious implications for the dividend futures expiring in 2021, 2022 and beyond.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the March 2021 review of the Hang Seng Family of Indexes on 19 February. The constituent changes will be effective after the close of trading on 5 March.We expect the March 21 review for the Hang Seng China Enterprises Index (HSCEI INDEX) to have only 1 deletion, though there is a low probability of another set of changes. Post JD Health (6618 HK)'s Fast Entry into the index, there needs to be one deletion at the March review. At the current time, the lowest ranked index constituent is Petrochina Co Ltd H (857 HK) and the stock should be deleted at the March review.There was a medium probability of Country Garden Services Holdings (6098 HK) being included in the index. That has now become a low probability event post JD Health (6618 HK)'s inclusion in the index. If Country Garden Services Holdings (6098 HK) is included in the index, then Hengan Intl Group (1044 HK) could be deleted.The potential changes to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months will also have serious implications for the dividend futures expiring in 2021, 2022 and beyond.

HSCEI Index Rebalance Preview: One Deletion For Sure, Could Be One More Change

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

In our previous insight <a href="https://www.smartkarma.com/insights/dida-pre-ipo-carpool-focused-but-is-main-business-in-short-term-risk" target="_blank" data-smartkarma-citation="insights:44376" rel="noopener">Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk?</a> , we looked at Dida’s business model and its growth prospects by comparing the company with its rival <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>. In this insight, we carry out a financial analysis and outlook on the company. Our key points are:<ul>
<li>
<a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> has reported strong revenue growth rates during 2017-2019 (CAGR of 244%). Moreover, despite the COVID impact, revenue during 1H 2020, grew by 66% YoY. A majority of the revenue growth came from the carpooling business (CAGR of 339% during 2017-2019). Given the strong industry growth prospects for carpooling and Dida’s dominant position in the market, if we conservatively assume Dida to grow in line with the industry (an outperformance is likely though), we could expect Dida’s revenue to grow at a double-digit CAGR of c. 27% through 2022.</li>
<li>Gross profit margins are at 82.2% as of 1H 2020, driven mainly by the carpooling business (GPM: 86.3%). However, based on our MPR analysis, total GPM and the GPM of the carpooling business appears to have reached potential, where significant upside is unlikely.</li>
<li>An upside in GPM is likely for the ride-hailing business, which started generating gross profits only in 1H2020 (Dida’s 31.1%), but appears limited given that GPM of peers like <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> and <a href="https://www.smartkarma.com/entities/lyft-inc" target="_blank" data-smartkarma-citation="entities:24423:1" rel="noopener">Lyft Inc (LYFT US)</a> range around 34-39%. Moreover, at the overall operating level, this business is unlikely to report profits any time soon as we see with international peers like Uber and Lyft.</li>
<li>Selling expenses do not move in line with revenue. Selling expenses usually increase when Dida expects to boost its sales in the upcoming year. This was the case in 2018. Having said that, a majority of selling expenses include user incentive costs, which has levelled out for the carpooling business but is likely to continue for the ride-hailing business which Dida started last year. Overall, given that Dida is yet to grab a share of the ride-hailing market, selling expenses are likely to be a significant expense over the next few years as well.</li>
<li>The company is generating losses at the net level and these losses are likely to continue even based on our less conservative assumptions. Though based on adjustments the company makes, profits are reported, we feel that these adjustments do not necessarily justify the company’s loss-making position.</li>
</ul>

In our previous insight Dida Pre-IPO: Carpool-Focused, But Is Main Business in Short-Term Risk? , we looked at Dida’s business model and its growth prospects by comparing the company with its rival DiDi Chuxing (1284375D CH). In this insight, we carry out a financial analysis and outlook on the company. Our key points are:

Dida (DIDA HK) has reported strong revenue growth rates during 2017-2019 (CAGR of 244%). Moreover, despite the COVID impact, revenue during 1H 2020, grew by 66% YoY. A majority of the revenue growth came from the carpooling business (CAGR of 339% during 2017-2019). Given the strong industry growth prospects for carpooling and Dida’s dominant position in the market, if we conservatively assume Dida to grow in line with the industry (an outperformance is likely though), we could expect Dida’s revenue to grow at a double-digit CAGR of c. 27% through 2022.
Gross profit margins are at 82.2% as of 1H 2020, driven mainly by the carpooling business (GPM: 86.3%). However, based on our MPR analysis, total GPM and the GPM of the carpooling business appears to have reached potential, where significant upside is unlikely.
An upside in GPM is likely for the ride-hailing business, which started generating gross profits only in 1H2020 (Dida’s 31.1%), but appears limited given that GPM of peers like Uber (UBER US) and Lyft Inc (LYFT US) range around 34-39%. Moreover, at the overall operating level, this business is unlikely to report profits any time soon as we see with international peers like Uber and Lyft.
Selling expenses do not move in line with revenue. Selling expenses usually increase when Dida expects to boost its sales in the upcoming year. This was the case in 2018. Having said that, a majority of selling expenses include user incentive costs, which has levelled out for the carpooling business but is likely to continue for the ride-hailing business which Dida started last year. Overall, given that Dida is yet to grab a share of the ride-hailing market, selling expenses are likely to be a significant expense over the next few years as well.
The company is generating losses at the net level and these losses are likely to continue even based on our less conservative assumptions. Though based on adjustments the company makes, profits are reported, we feel that these adjustments do not necessarily justify the company’s loss-making position.


Dida IPO (Financial Analysis): Expect Strong Revenue Growth but Not Profits

Kuaishou Technology / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Beijing Kuaishou Technology Co Ltd (1496219D CH)</a> (KT) is a content community and social platform. The company is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, Sequoia China, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>, DST Global, Boyu Capital, Temasek and others. As of six months ended Jun 2020, it had 302m daily active users (DAUs), who spent 85 mins on average on the app every day. It also had 776m monthly active users (MAUs) and total e-commerce GMV of RMB109.6bn. On an average 1.1bn short videos were uploaded on its app during 1H20. As per iResearch, Kuaishou was globally the largest live streaming platform by gross billings from virtual gifting and average live streaming MPUs, the second largest short video platform by average DAUs, and the second largest live streaming e-commerce platform by GMV, over six months ended June 30, 2020.In this note, I'll talk about the positive aspects of the deal.

Beijing Kuaishou Technology Co Ltd (1496219D CH) (KT) is a content community and social platform. The company is backed by Tencent Holdings (700 HK), Sequoia China, Baidu (BIDU US), DST Global, Boyu Capital, Temasek and others. As of six months ended Jun 2020, it had 302m daily active users (DAUs), who spent 85 mins on average on the app every day. It also had 776m monthly active users (MAUs) and total e-commerce GMV of RMB109.6bn. On an average 1.1bn short videos were uploaded on its app during 1H20. As per iResearch, Kuaishou was globally the largest live streaming platform by gross billings from virtual gifting and average live streaming MPUs, the second largest short video platform by average DAUs, and the second largest live streaming e-commerce platform by GMV, over six months ended June 30, 2020.In this note, I'll talk about the positive aspects of the deal.

Kuaishou Technology Pre-IPO - The Positives - Hot Segment, Fast Growth

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

We hope <a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> will publish another set of updated financial statements (from Q3 2020) before it lists in Hong Kong later this year. If and when those results are published, investors should study them carefully to detect signs of a resurgent <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> , the ride-hailing giant that exited the car pool market in late 2018 but quietly re-entered about a year ago.
The two most telling signs of a DiDi ChuXing resurgence in the car pool segment would be: 
<ol>
<li>Dida Inc's car pool revenue growing slower than its car pool ride volume or GTV</li>
<li>A sharp rise in Sales &amp; Marketing expenses relative to DiDa Inc's overall revenue</li>
</ol>
Both of the above metrics would be reflected in DiDa Inc's car pool 'take rate': the net revenue it earns on booking car pool rides after deducting any incentives paid to drivers, payments that have likely diminished dramatically in the two years since Didi ChuXing exited the market. 
We suspect that in the absence of a large, savvy competitor (like DiDi ChuXing), DiDa Inc's 'take rate' is higher and its spending on Sales &amp; Marketing is lower than it would be otherwise. Signs that DiDi ChuXing is aggressively pushing its way back into this market -- which it used to dominate, and not so long ago -- would be negative for DiDa Inc, in our view.
In fact, the 'free ride' DiDa Inc has enjoyed as the dominant (and quite profitable) player in the growing car pool segment could come to an end.

We hope Dida (DIDA HK) will publish another set of updated financial statements (from Q3 2020) before it lists in Hong Kong later this year. If and when those results are published, investors should study them carefully to detect signs of a resurgent DiDi Chuxing (1284375D CH) , the ride-hailing giant that exited the car pool market in late 2018 but quietly re-entered about a year ago.
The two most telling signs of a DiDi ChuXing resurgence in the car pool segment would be: 

Dida Inc's car pool revenue growing slower than its car pool ride volume or GTV
A sharp rise in Sales &amp; Marketing expenses relative to DiDa Inc's overall revenue

Both of the above metrics would be reflected in DiDa Inc's car pool 'take rate': the net revenue it earns on booking car pool rides after deducting any incentives paid to drivers, payments that have likely diminished dramatically in the two years since Didi ChuXing exited the market. 
We suspect that in the absence of a large, savvy competitor (like DiDi ChuXing), DiDa Inc's 'take rate' is higher and its spending on Sales &amp; Marketing is lower than it would be otherwise. Signs that DiDi ChuXing is aggressively pushing its way back into this market -- which it used to dominate, and not so long ago -- would be negative for DiDa Inc, in our view.
In fact, the 'free ride' DiDa Inc has enjoyed as the dominant (and quite profitable) player in the growing car pool segment could come to an end. 

No More 'Free Ride'? Key DiDa Inc Metrics That Could Reveal a DiDi ChuXing Resurgence

China

DiDi Chuxing Inc 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 (DIDIY US)

RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration

RLX Technology (RLX US) aims to raise around US$1bn in its US listing. RLX is the largest branded e-vapor company in China with a market share of...

Sumeet Singh

HSCEI Index Rebalance Preview: One Deletion For Sure, Could Be One More Change

Following JD Health's Fast Entry into the HSCEI, PetroChina is a high probability deletion in March. There is a low probability of Country Garden...

Brian Freitas

Dida IPO (Financial Analysis): Expect Strong Revenue Growth but Not Profits

This is our follow-up note on Dida's IPO. In this insight, we carry out a financial analysis and outlook on the company.

Aqila Ali

Kuaishou Technology Pre-IPO - The Positives - Hot Segment, Fast Growth

Kuaishou Technology is a content community and social platform. The company is backed by Tencent Holdings (700 HK), Sequoia China, Baidu (BIDU US),...

Sumeet Singh

No More 'Free Ride'? Key DiDa Inc Metrics That Could Reveal a DiDi ChuXing Resurgence

DiDa Inc has carved out a niche for itself in China's growing car pool segment. But should ride-hailing giant DiDi ChuXing re-emerge as a player,...

Tracking Traffic

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