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

Full Truck Alliance   / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a>, known as <em>Manbang</em> in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of <em>Yunmanman</em> and <em>Huochebang</em>, which were founded in 2013 and 2011, respectively. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. </p>
<p>At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, FTA will have a market cap of $19.6 billion. FTA will also raise an additional $200 million in concurrent private placements to Ontario Teachers' Pension Plan Board and Mubadala Investment Company. At the mid-point of the IPO price range and including the concurrent private placement, the net proceeds are $1,620.7 million. FTA has received indications of interest from Fidelity ($100 million) and Invesco ($500 million). </p>
</div><div><p>In <a href="https://www.smartkarma.com/insights/full-truck-alliance-ipo-initiation-a-less-than-perfect-delivery" target="_blank" data-smartkarma-citation="insights:52399" rel="noopener">Full Truck Alliance IPO Initiation: A Less than Perfect Delivery</a>, we stated that at first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. We concluded that we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   </p></div><div><div>
<div class="content-highlight"><p>Our valuation analysis suggests that FTA trades at frothy multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. On the other hand, the indications of interest and the concurrent placing with blue-chip investors suggest that the IPO price range is grounded in some logic. We think that the IPO pricing seems reasonable based on recent share repurchases and the PEG multiple. While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously highlighted concerns and a rich valuation. </p></div>
<p><em><strong>For readers interested in peer</strong></em>, <a href="https://www.smartkarma.com/entities/foru-worldwide-inc" target="_blank" data-smartkarma-citation="entities:33314:1" rel="noopener">ForU Worldwide (FOYO US)</a>, which also recently filed for a $500 million Nasdaq IPO, we highlight our note - <a href="https://www.smartkarma.com/insights/foru-worldwide-ipo-initiation-not-foru" target="_blank" data-smartkarma-citation="insights:51888" rel="noopener">ForU Worldwide IPO Initiation: Not ForU</a>  </p>
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Full Truck Alliance (YMM US), known as Manbang in China, is the world’s largest digital freight platform by gross transaction value (GTV) in 2020, according to CIC. FTA was formed in 2017 through the merger of Yunmanman and Huochebang, which were founded in 2013 and 2011, respectively. FTA is backed by SoftBank Vision Fund (22.2% of the outstanding shares), Sequoia Capital (7.2%), Hillhouse and Tencent (700 HK). 
At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, FTA will have a market cap of $19.6 billion. FTA will also raise an additional $200 million in concurrent private placements to Ontario Teachers' Pension Plan Board and Mubadala Investment Company. At the mid-point of the IPO price range and including the concurrent private placement, the net proceeds are $1,620.7 million. FTA has received indications of interest from Fidelity ($100 million) and Invesco ($500 million). 
In Full Truck Alliance IPO Initiation: A Less than Perfect Delivery, we stated that at first sight, FTA recent results look stunning due to fast-paced growth, improving margin and cash generation. However, a closer look, suggests that FTA has less than ideal disclosure, a regulatory overhang and potential corporate governance issues. We concluded that we cannot recommend FTA wholeheartedly and inclined to watch this IPO unfold from the sidelines.   
Our valuation analysis suggests that FTA trades at frothy multiples (EV/Sales and growth adjusted EV/Sales) compared to its peers. On the other hand, the indications of interest and the concurrent placing with blue-chip investors suggest that the IPO price range is grounded in some logic. We think that the IPO pricing seems reasonable based on recent share repurchases and the PEG multiple. While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously highlighted concerns and a rich valuation. 
For readers interested in peer, ForU Worldwide (FOYO US), which also recently filed for a $500 million Nasdaq IPO, we highlight our note - ForU Worldwide IPO Initiation: Not ForU  


Full Truck Alliance IPO: Valuation Insights

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>We plan to do a deep dive on Didi Chuxing now that the prospectus is out but there are a few points related to Softbank that are worth highlighting in advance. In general, the IPO needs to be wildly successful to provide a meaningful bump in sentiment and anything less is probably factored into Softbank’s share price already. At equity valuations of $70-100bn, the upside for SBG shareholders would be ¥93-291/share. That is positive of course but relatively less than what Uber shareholders could expect (6% Didi exposure v SBG 4%) and also a smaller gain that that offered by the headline listings from Beike, DoorDash and Coupang in the last three periods. The good news is a placement before quarter-end helps the public portfolio which is down $8bn+ QTD.</p>

We plan to do a deep dive on Didi Chuxing now that the prospectus is out but there are a few points related to Softbank that are worth highlighting in advance. In general, the IPO needs to be wildly successful to provide a meaningful bump in sentiment and anything less is probably factored into Softbank’s share price already. At equity valuations of $70-100bn, the upside for SBG shareholders would be ¥93-291/share. That is positive of course but relatively less than what Uber shareholders could expect (6% Didi exposure v SBG 4%) and also a smaller gain that that offered by the headline listings from Beike, DoorDash and Coupang in the last three periods. The good news is a placement before quarter-end helps the public portfolio which is down $8bn+ QTD.

Softbank Group - Initial Thoughts on the Didi Chuxing IPO Filing

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.

<p><a href="https://www.smartkarma.com/entities/dingdong-maicia" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicia (DDL US)</a>, a groceries on-demand e-commerce company, aims to raise up to US$500m via a US listing. It is backed by Tiger Global, General Atlantic and Softbank.</p><p>Dingdong Maicai (DM) is an on-demand e-commerce company in China which provides users and households with fresh produce, meat and seafood and other daily necessities via its self-operated frontline fulfillment grid. As of 1Q21, DM had 6.9m monthly transacting users, who had placed 69.7m orders during the quarter. Its FY20 gross merchandise value was RMB13bn, representing a 10%+ market share for the on-demand ecommerce fresh groceries and daily necessities market.</p><p>Its core product category is fresh groceries and it procures most of its products directly and offers to deliver them to customers within 30mins of having received an order.</p>

Dingdong Maicia (DDL US), a groceries on-demand e-commerce company, aims to raise up to US$500m via a US listing. It is backed by Tiger Global, General Atlantic and Softbank.Dingdong Maicai (DM) is an on-demand e-commerce company in China which provides users and households with fresh produce, meat and seafood and other daily necessities via its self-operated frontline fulfillment grid. As of 1Q21, DM had 6.9m monthly transacting users, who had placed 69.7m orders during the quarter. Its FY20 gross merchandise value was RMB13bn, representing a 10%+ market share for the on-demand ecommerce fresh groceries and daily necessities market.Its core product category is fresh groceries and it procures most of its products directly and offers to deliver them to customers within 30mins of having received an order.

Dingdong Maicai Pre-IPO - Increasing Market Share, Fast Growth but No Signs of Profit

<p>In the run-up to results last week, we said that tech weakness could push Softbank closer to a buyback renewal but it is tech gains that highlight market disappointment. A return to tech on Friday boosted Vision Fund’s public portfolio by $5.2bn (¥571bn equal to ¥158/share @48% VF equity and 1.7bn S/O) but SBG shares are down today as the discount has widened to 34% from 32% on Friday and 21% a week ago. In recent years, shares have traded in the range of 40-50% of the underlying public value until the Vision Fund IPO parade kicked into higher gear even as an unprecedented buyback plan provided additional support. With tech weakness, a return to that level seems more likely and the Friday valuation rebound underscores the importance of returns to shareholders too.</p>

In the run-up to results last week, we said that tech weakness could push Softbank closer to a buyback renewal but it is tech gains that highlight market disappointment. A return to tech on Friday boosted Vision Fund’s public portfolio by $5.2bn (¥571bn equal to ¥158/share @48% VF equity and 1.7bn S/O) but SBG shares are down today as the discount has widened to 34% from 32% on Friday and 21% a week ago. In recent years, shares have traded in the range of 40-50% of the underlying public value until the Vision Fund IPO parade kicked into higher gear even as an unprecedented buyback plan provided additional support. With tech weakness, a return to that level seems more likely and the Friday valuation rebound underscores the importance of returns to shareholders too.

Softbank Group - The Market Is Sending a Message

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

<p>DoorDash’s had a fairly impressive 1Q21 as it still is benefitting from annualizing the pandemic surge. The company even raised full year guidance by more than then the first quarter beat. However, they are guiding to deceleration in the backhalf of the year as reopenings pick up and normal seasonality sets in for 3Q. On balance, the quarter and commentary made us less bearish – but there’s still that insane valuation to wrap one’s mind around. At 15x forward sales, its down from 20x after last quarter, but after a 22% rip on earnings, this company’s valuation makes no sense in the context of an industry that saw Grubhub and Postmates get acquired at 6x forward sales a year ago.</p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

DoorDash’s had a fairly impressive 1Q21 as it still is benefitting from annualizing the pandemic surge. The company even raised full year guidance by more than then the first quarter beat. However, they are guiding to deceleration in the backhalf of the year as reopenings pick up and normal seasonality sets in for 3Q. On balance, the quarter and commentary made us less bearish – but there’s still that insane valuation to wrap one’s mind around. At 15x forward sales, its down from 20x after last quarter, but after a 22% rip on earnings, this company’s valuation makes no sense in the context of an industry that saw Grubhub and Postmates get acquired at 6x forward sales a year ago.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

DoorDash 1Q21 Earnings: Reopening or Decelerating?

United States

DoorDash, Inc. provides restaurant food delivery services. The Company develops technology to connect customers with merchants through an on-demand food delivery application. DoorDash serves customers in the United States.

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DoorDash (DASH US)

Full Truck Alliance IPO: Valuation Insights

While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously...

Arun George

Softbank Group - Initial Thoughts on the Didi Chuxing IPO Filing

Softbank's reaction to Didi's IPO filing has been muted as expectations are set and only a wildly sucecssful debut would boost sentiment. Also,...

Kirk Boodry

Softbank Group - The Market Is Sending a Message

Even with a record one-day performance for Vision Fund's public portfolio, the discount to fair value has widened to 34% from c. 20% last week...

Kirk Boodry

DoorDash 1Q21 Earnings: Reopening or Decelerating?

DoorDash had a fairly impressive 1Q21 as it still is benefitting from annualizing the pandemic surge. 15x forward P/S, valuation makes no sense...

Aaron Gabin

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Full Truck Alliance IPO: Valuation Insights

While the recent first-day pops suggest an awakening of IPO animal spirits, we remain uncomfortable in recommending FTA based on our previously...

Arun George

Softbank Group - Initial Thoughts on the Didi Chuxing IPO Filing

Softbank's reaction to Didi's IPO filing has been muted as expectations are set and only a wildly sucecssful debut would boost sentiment. Also,...

Kirk Boodry

Dingdong Maicai Pre-IPO - Increasing Market Share, Fast Growth but No Signs of Profit

Dingdong Maicia (DDL US), a groceries on-demand e-commerce company, aims to raise up to US$500m via a US listing. It is backed by Tiger Global,...

Sumeet Singh

Softbank Group - The Market Is Sending a Message

Even with a record one-day performance for Vision Fund's public portfolio, the discount to fair value has widened to 34% from c. 20% last week...

Kirk Boodry

DoorDash 1Q21 Earnings: Reopening or Decelerating?

DoorDash had a fairly impressive 1Q21 as it still is benefitting from annualizing the pandemic surge. 15x forward P/S, valuation makes no sense...

Aaron Gabin