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

<div><p><a href="https://www.smartkarma.com/entities/soulgate-inc" target="_blank" data-smartkarma-citation="entities:33304:1" rel="noopener">Soulgate (SSR US)</a> is an alternative social networking platform that lets users have virtual identities and aims to recommend to each user (referred to as a Souler) curated content and other Soulers with similar personalities, lifestyles and interests, enabling more in-depth interactions and more meaningful connections. Soulgate is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (49.9% of outstanding shares, 25.7% of outstanding shares). </p></div><div>
<p>At the mid-point of the proposed IPO price range of $13.0-15.00 per ADS, Soulgate will have a market cap of $1.7 billion. New investors Janus Henderson and Boyu Capital intend to purchase a total of $80 million worth of ADSs in the offering (43.3% of the deal). At the mid-point of the IPO price range, the net proceeds including the concurrent private placement are $257.3 million. </p>
<p>Soulgate will also raise an additional $89 million in a concurrent private placement with miHoYo. miHoYo was founded in 2012 by three Shanghai Jiaotong University graduate students. miHoYo is the creator of <em>Genshin Impact</em>, an open-world action role-playing game released in 2020, and one of the highest-grossing mobile games. It is not entirely clear if there are any near-term synergies through this investment. Currently, Soulgate's exposure to games is largely limited to its <em>Werewolf Rooms</em> (a subset of its <em>Animated Partyroom</em> app functionality) which enable users to play the popular board game <em>Werewolf</em>.</p>
</div><div><div>
<p>In <a href="https://www.smartkarma.com/insights/soulgate-ipo-initiation-lost-soul" target="_blank" data-smartkarma-citation="insights:51651" rel="noopener">Soulgate IPO Initiation: Lost Soul,</a> we opined at first glance, Soulgate is well-positioned to benefit from a sizeable China’s mobile social networking market. The strong growth in users, fast-paced revenue growth and ongoing revenue diversification suggest that Soulgate is heading in the right direction. However, the high S&amp;M expenses which exceeded revenue in each of the last three quarters, suggests that Soulgate is aggressively chasing user growth without paying much heed to monetisation and payback periods. This modus operandi is highly reflective of growth at all costs strategy. Overall, we think that the negatives in the Soulgate story warrant a pass.  </p>
<div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range fairly values Soulgate for its forecasted growth. Overall, as we remain unconvinced that Soulgate's growth at all costs strategy will generate shareholder value, we are inclined to give this IPO a pass. </p></div>
</div></div>

Soulgate (SSR US) is an alternative social networking platform that lets users have virtual identities and aims to recommend to each user (referred to as a Souler) curated content and other Soulers with similar personalities, lifestyles and interests, enabling more in-depth interactions and more meaningful connections. Soulgate is backed by Tencent (700 HK) (49.9% of outstanding shares, 25.7% of outstanding shares). 
At the mid-point of the proposed IPO price range of $13.0-15.00 per ADS, Soulgate will have a market cap of $1.7 billion. New investors Janus Henderson and Boyu Capital intend to purchase a total of $80 million worth of ADSs in the offering (43.3% of the deal). At the mid-point of the IPO price range, the net proceeds including the concurrent private placement are $257.3 million. 
Soulgate will also raise an additional $89 million in a concurrent private placement with miHoYo. miHoYo was founded in 2012 by three Shanghai Jiaotong University graduate students. miHoYo is the creator of Genshin Impact, an open-world action role-playing game released in 2020, and one of the highest-grossing mobile games. It is not entirely clear if there are any near-term synergies through this investment. Currently, Soulgate's exposure to games is largely limited to its Werewolf Rooms (a subset of its Animated Partyroom app functionality) which enable users to play the popular board game Werewolf.

In Soulgate IPO Initiation: Lost Soul, we opined at first glance, Soulgate is well-positioned to benefit from a sizeable China’s mobile social networking market. The strong growth in users, fast-paced revenue growth and ongoing revenue diversification suggest that Soulgate is heading in the right direction. However, the high S&amp;M expenses which exceeded revenue in each of the last three quarters, suggests that Soulgate is aggressively chasing user growth without paying much heed to monetisation and payback periods. This modus operandi is highly reflective of growth at all costs strategy. Overall, we think that the negatives in the Soulgate story warrant a pass.  
Our valuation analysis suggests that the IPO price range fairly values Soulgate for its forecasted growth. Overall, as we remain unconvinced that Soulgate's growth at all costs strategy will generate shareholder value, we are inclined to give this IPO a pass. 


APAC IPOs & Placements

Zhen Zhou, Toh

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/soulgate-inc" target="_blank" data-smartkarma-citation="entities:33304:1" rel="noopener">Soulgate (SSR US)</a> is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.</p><p>Soulgate Inc. (SGI) operates Soul app which is an algorithm-driven online social playground. The app is targeted at the younger generations audience (usually born after 1990s) and it aims to provide a virtual space for users (often referred to as Soulers) to connect and build social relationships through virtual identities and multi-media content. </p><p>In this note, we will take a brief look at the app, compare Soulgate to other Chinese social media platforms, and share our thoughts on valuation and deal dynamics.</p><p>We previously covered the IPO in:</p><ul><li>
<a href="https://www.smartkarma.com/insights/soulgate-pre-ipo-unsustainable-virtual-connection" target="_blank" data-smartkarma-citation="insights:51473" rel="noopener">Soulgate Pre-IPO - Unsustainable Virtual Connection</a> </li></ul>

Soulgate (SSR US) is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.Soulgate Inc. (SGI) operates Soul app which is an algorithm-driven online social playground. The app is targeted at the younger generations audience (usually born after 1990s) and it aims to provide a virtual space for users (often referred to as Soulers) to connect and build social relationships through virtual identities and multi-media content. In this note, we will take a brief look at the app, compare Soulgate to other Chinese social media platforms, and share our thoughts on valuation and deal dynamics.We previously covered the IPO in:
Soulgate Pre-IPO - Unsustainable Virtual Connection 

Soulgate IPO - MIHOYO Could Change the Game, Worth a Bet

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

<p>Kanzhun, an online recruitment platform in China, aims to raise around US$800m in its US IPO. The company is backed by Tencent. Kanzhun runs BOSS Zhipin APP, which allows enterprise users and jobseekers to directly chat, thus, providing more convenience to both.</p><p>Kanzhun is the largest online recruitment platform in China, as measured by average MAU in 2020, according to the CIC Report. As of Mar 2021, it had 13.0m verified enterprise users, 6.3m verified enterprises, and 85.8m verified job seekers on its platform. For 12 months ended Mar 2021, it had 2.89m paid enterprise customers. Its average MAU (including job seekers and enterprise users) reached 24.0m in 1Q21.</p><p>The company nearly doubled its revenue in 2020 and its 1Q21 revenue was nearly triple that of 1Q20. Furthermore, while it remains loss making, it has been operating cash flow positive since 2020.</p>

Kanzhun, an online recruitment platform in China, aims to raise around US$800m in its US IPO. The company is backed by Tencent. Kanzhun runs BOSS Zhipin APP, which allows enterprise users and jobseekers to directly chat, thus, providing more convenience to both.Kanzhun is the largest online recruitment platform in China, as measured by average MAU in 2020, according to the CIC Report. As of Mar 2021, it had 13.0m verified enterprise users, 6.3m verified enterprises, and 85.8m verified job seekers on its platform. For 12 months ended Mar 2021, it had 2.89m paid enterprise customers. Its average MAU (including job seekers and enterprise users) reached 24.0m in 1Q21.The company nearly doubled its revenue in 2020 and its 1Q21 revenue was nearly triple that of 1Q20. Furthermore, while it remains loss making, it has been operating cash flow positive since 2020.

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

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.

Kuaishou Technology / Equity Capital Markets

<div>The Chinese short-video and livestreaming platform <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>  reported its 1Q2021 results today (24th May). Kuaishou’s revenues for the quarter grew 36.6% YoY driven by strong growth in revenue from Online Marketing services which helped offset YoY drop in revenue from Live Streaming. Kuaishou’s revenue for the quarter declined 6.0% on a quarter-over-quarter basis due to huge drop in live streaming revenues which declined 8.2% QoQ during 1Q21.</div><div></div><div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/208/522/original/image_63846562621621867858258.png?1621867860" class="editor-image img-responsive" data-smartkarma-image-id="208522"></figure></div><div>Kuaishou’s gross profit margin for the quarter improved to 41.1% compared to 34.2% a year ago benefitting from a favourable revenue mix. On the other hand, operating losses for the quarter increased to 42.8% of revenues from 40.3% in the same quarter a year ago.</div>

The Chinese short-video and livestreaming platform Kuaishou Technology (1024 HK)  reported its 1Q2021 results today (24th May). Kuaishou’s revenues for the quarter grew 36.6% YoY driven by strong growth in revenue from Online Marketing services which helped offset YoY drop in revenue from Live Streaming. Kuaishou’s revenue for the quarter declined 6.0% on a quarter-over-quarter basis due to huge drop in live streaming revenues which declined 8.2% QoQ during 1Q21.Kuaishou’s gross profit margin for the quarter improved to 41.1% compared to 34.2% a year ago benefitting from a favourable revenue mix. On the other hand, operating losses for the quarter increased to 42.8% of revenues from 40.3% in the same quarter a year ago.

Kuaishou: Online Ad Drives Top Line Growth; Margins to Remain Under Pressure with Overseas Expansion

<div><p><a href="https://www.smartkarma.com/entities/ximalaya-inc" target="_blank" data-smartkarma-citation="entities:33232:1" rel="noopener">Ximalaya (XIMA US)</a> is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China. <br>Ximalaya is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (5.4% of outstanding shares), <a href="https://www.smartkarma.com/entities/tal-education-group" target="_blank" data-smartkarma-citation="entities:1124:1" rel="noopener">TAL Education (TAL US)</a>, Sony Music Entertainment and <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a>. Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   </p></div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ximalaya-ipo-initiation-out-of-tune" target="_blank" data-smartkarma-citation="insights:51169" rel="noopener">Ximalaya IPO Initiation: Out of Tune</a>, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. </p></div></div>

Ximalaya (XIMA US) is the largest online audio platform in China as measured by average MAUs (monthly active users), total mobile listening time, and total revenues in 2020, according to CIC. Ximalaya also has the largest audio content library and the most audio content creators in China.  Ximalaya is backed by Tencent (700 HK) (5.4% of outstanding shares), TAL Education (TAL US), Sony Music Entertainment and China Literature (772 HK). Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion, according to press reports.   In Ximalaya IPO Initiation: Out of Tune, we stated that Ximalaya is well-positioned to benefit from this sizeable China online audio market opportunity. The strong user engagement, fast-paced revenue growth and declining loss margin suggest that Ximalaya is heading in the right direction. However, a closer look reveals concerning developments on several fronts. We concluded that the negatives in the Ximalaya story warrant a pass. In this note, we present our forecasts and take the first look at Ximalaya's potential valuation range. 

China

Hello Group Inc. operates as a mobile-based social networking platform. The Company enables users to establish and expand social relationships based on location and interests. Hello Group operates out of the Peoples Republic of China.

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Hello Group (MOMO US)

Soulgate IPO: Valuation Insights

The IPO price range fairly values Soulgate for its forecasted growth. However, as we remain unconvinced that Soulgate's strategy will generate...

Arun George

Soulgate IPO - MIHOYO Could Change the Game, Worth a Bet

Soulgate (SSR US) is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.

Zhen Zhou, Toh

Kanzhun Pre-IPO - Bumble Meets Linkedin

Kanzhun, an online recruitment platform in China, aims to raise around US$800m in its US IPO. The company is backed by Tencent. Kanzhun runs BOSS...

Sumeet Singh

Kuaishou: Online Ad Drives Top Line Growth; Margins to Remain Under Pressure with Overseas Expansion

Kuaishou’s 1Q2021 results reveal that the company’s live streaming business growth is declining after seeing a boost during the pandemic last year.

Shifara Samsudeen, ACMA, CGMA

Ximalaya IPO: Valuation First-Look

Ximalaya has filed for an NYSE IPO to raise proceeds of $0.5-1.0 billion. In this note, we present our forecasts and take the first look at...

Arun George

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