Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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.

Equity Capital Markets

<ul>
<li>According to Reuters, <a href="https://www.smartkarma.com/entities/dingdong-maicia" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicia (DDL US)</a>, an on-demand fresh produce and grocery delivery platform in China, plans to raise US$500m in its US IPO, which values the company at around US$6.0bn.</li>
<li>Dingdong Maicai’s order fulfilment cost, which includes the amount paid to delivery partners, packaging, and other logistics-related costs, is almost two times the net revenue per order in 2020. Though we expect a gradual increase in net revenue per order, it seems unlikely that the average order fulfilment cost per order will decline sufficiently for Dingdong Maicai to be profitable over the next three to four years.</li>
<li>The fact that the company made an operating loss of RMB 295.5m (41.3% of net revenue) in 1Q20 (when COVID-19 lockdowns increased demand for grocery and fresh produce delivery) is a clear indication that Dingdong Maicai is incapable of becoming profitable through volume growth.</li>
<li>Lately, high growth Chinese e-commerce companies have fallen out of favour with US investors in general, and the worst-affected are the ones generating operating losses. With profitability nowhere in sight for Dingdong Maicai, we think that in terms of risk rewards, older and stable e-commerce names like <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> offer better risk-adjusted return in the short to medium term.</li>
</ul>


According to Reuters, Dingdong Maicia (DDL US), an on-demand fresh produce and grocery delivery platform in China, plans to raise US$500m in its US IPO, which values the company at around US$6.0bn.
Dingdong Maicai’s order fulfilment cost, which includes the amount paid to delivery partners, packaging, and other logistics-related costs, is almost two times the net revenue per order in 2020. Though we expect a gradual increase in net revenue per order, it seems unlikely that the average order fulfilment cost per order will decline sufficiently for Dingdong Maicai to be profitable over the next three to four years.
The fact that the company made an operating loss of RMB 295.5m (41.3% of net revenue) in 1Q20 (when COVID-19 lockdowns increased demand for grocery and fresh produce delivery) is a clear indication that Dingdong Maicai is incapable of becoming profitable through volume growth.
Lately, high growth Chinese e-commerce companies have fallen out of favour with US investors in general, and the worst-affected are the ones generating operating losses. With profitability nowhere in sight for Dingdong Maicai, we think that in terms of risk rewards, older and stable e-commerce names like Alibaba Group (9988 HK), JD.com Inc. (9618 HK) and Vipshop Holdings (VIPS US) offer better risk-adjusted return in the short to medium term.


Dingdong Maicai: Profitability Is a Tall Order, Even in the Medium-Long Term

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>Our valuation analysis suggests an implied market cap of $4.1 billion, representing an implied price of $15.8 per share for Aihuishou. This would represent an upside of 5% from the high end of the IPO price of $15 per share. Given the lack of upside, we would avoid this IPO deal. We based our valution based on 2.0x EV/S multiple (2022E), which is based on the average EV/S multiple of its peers in 2022. If the IPO is priced at the low end of the IPO price range, then it could be more attractive, but we are not too convinced of the investment merits of this company.</p>
<p>Among the many risks, we are especially concerned about the extreme price competition for electronic goods (including smartphones) and we do not believe that if the company could generate significant profits in this sector if it focuses just on the consumer electronics sector. In addition, we are not so sure about the company's capability in expanding profitably into other non-consumer electronics related areas going forward. </p>
</div><p>Established in 2011 as an online platform buying and selling second-hand phones and other consumer electronics, Aihuishou focuses on the electronics.</p><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> plans to raise $227 million in the upcoming IPO by offering 16.2 million ADS at a price range of $13 to $15 per share. Insiders plan to buy $100 million worth of ADS shares in this IPO. Aihuishou would have a market cap of $3.6 billion at the mid-point of the IPO price range. </p>


Our valuation analysis suggests an implied market cap of $4.1 billion, representing an implied price of $15.8 per share for Aihuishou. This would represent an upside of 5% from the high end of the IPO price of $15 per share. Given the lack of upside, we would avoid this IPO deal. We based our valution based on 2.0x EV/S multiple (2022E), which is based on the average EV/S multiple of its peers in 2022. If the IPO is priced at the low end of the IPO price range, then it could be more attractive, but we are not too convinced of the investment merits of this company.
Among the many risks, we are especially concerned about the extreme price competition for electronic goods (including smartphones) and we do not believe that if the company could generate significant profits in this sector if it focuses just on the consumer electronics sector. In addition, we are not so sure about the company's capability in expanding profitably into other non-consumer electronics related areas going forward. 
Established in 2011 as an online platform buying and selling second-hand phones and other consumer electronics, Aihuishou focuses on the electronics.Aihuishou (RERE US) plans to raise $227 million in the upcoming IPO by offering 16.2 million ADS at a price range of $13 to $15 per share. Insiders plan to buy $100 million worth of ADS shares in this IPO. Aihuishou would have a market cap of $3.6 billion at the mid-point of the IPO price range. 

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.

<div><p><a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>, the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> 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>, along with other investors.</p></div><div><p>It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  </p></div><div><p>We provided a brief background and financials overview in our previous note,<a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-one-of-asia-s-largest-ipos-this-year-tearsheet" target="_blank" rel="noopener"> DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet</a>.</p></div><p>In this note, we will look at the financials and talk about the rumoured valuation.</p>

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank Group (9984 JP) and Tencent (700 HK), along with other investors.It is present in over 4,000 cities, counties and towns across 15 countries. As of twelve months ending (LTM) 1Q21, it had 493m annual active users and 15m drivers, who participated in 41m average daily transactions. It generated a gross transaction value of RMB341bn over LTM1Q21.  We provided a brief background and financials overview in our previous note, DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet.In this note, we will look at the financials and talk about the rumoured valuation.

DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

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.

<div><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of <em>AHS Recycle</em> (an omnichannel business for the collection of pre-owned consumer electronics), <em>PJT Marketplace</em> (B2B channel) and <em>Paipai Marketplace</em> (B2C channel). </p></div><div>
<p>At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.</p>
<p>Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and Tiger Global.</p>
<p>In <a href="https://www.smartkarma.com/insights/aihuishou-ipo-initiation-turning-the-vicious-cycle-into-a-virtuous-one" target="_blank" data-smartkarma-citation="insights:52617" rel="noopener">AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One</a>, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.</p>
</div><div><div class="content-highlight">
<p>On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.</p>
<p>While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. </p>
</div></div>

Aihuishou (RERE US) operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of AHS Recycle (an omnichannel business for the collection of pre-owned consumer electronics), PJT Marketplace (B2B channel) and Paipai Marketplace (B2C channel). 
At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.
Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from JD.com Inc. (9618 HK) and Tiger Global.
In AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.

On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.
While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of Kanzhun (BZ US) suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. 


<div><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> (AHS), China’s largest pre-owned consumer electronics transactions and services platform, aims to raise up to US$243m via a US listing. It is backed by <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>, Morningside and Tiger Global.</p></div><div>
<p>We covered some aspects of the deal in our earlier notes:</p>
<ul>
<li>
<a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-mostly-positive-pre-owned-but-well-loved" target="_blank" rel="noopener">AiHuiShou Pre-IPO - Mostly Positive - Pre-Owned but Well Loved</a>. </li>
<li><a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">AiHuiShou Pre-IPO - First Stab at Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-pricing-my-mobile-handset-at-physical-stores" target="_blank" rel="noopener">Aihuishou (爱回收) Pre-IPO: Pricing My Mobile Handset at Physical Stores</a></li>
</ul>
<p>In this note, we will talk about the deal dynamics and run the deal through our ECM Framework.</p>
</div>

Aihuishou (RERE US) (AHS), China’s largest pre-owned consumer electronics transactions and services platform, aims to raise up to US$243m via a US listing. It is backed by JD.com Inc (ADR) (JD US), Morningside and Tiger Global.
We covered some aspects of the deal in our earlier notes:


AiHuiShou Pre-IPO - Mostly Positive - Pre-Owned but Well Loved. 
AiHuiShou Pre-IPO - First Stab at Valuation
Aihuishou (爱回收) Pre-IPO: Pricing My Mobile Handset at Physical Stores

In this note, we will talk about the deal dynamics and run the deal through our ECM Framework.


AiHuiShou IPO - Priced to Go but Won't Do a Kanzhun

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com Inc (ADR) (JD US)

Dingdong Maicai: Profitability Is a Tall Order, Even in the Medium-Long Term

Most COVID beneficiary stocks in China showcased what they could be in future through their financial results of the COVID-affected first quarter...

Oshadhi Kumarasiri

Aihuishou IPO Valuation Analysis

Our valuation analysis suggests an implied price of $15.8 per share for Aihuishou. This would represent an upside of 5% from the high end of the...

Douglas Kim

DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, aims to raise around US$10bn in its US listing. It is backed by Softbank...

Sumeet Singh

AiHuiShou IPO: Valuation Insights

While the lower than expected raise suggest lukewarm investor interest, yesterday's blistering first-day pop of Kanzhun points to improving market...

Arun George

AiHuiShou IPO - Priced to Go but Won't Do a Kanzhun

Aihuishou (RERE US), China’s largest pre-owned consumer electronics transactions and services platform, aims to raise up to US$243m via a US...

Sumeet Singh

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