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

China Tourism Group Duty Free Corp Ltd / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. </p><p>CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.</p><p>As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.</p>

China Tourism Group Duty Free Corp Ltd (601888 CH) (CDF) aims to raise around US$5-10bn in its H-share listing in Hong Kong. CDF is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers. As per Frost &amp; Sullivan, it had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.As the A-shares are already listed and well covered, we will treat this listing more like a placement rather than an IPO. However, given the large potential size of the listing, we will go into more details than we would for a regular placement. Hence, in this note we will briefly cover the company’s background and recent performance before touching upon the deal dynamics.

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Xpeng (9868 HK) listed in Hong Kong on 7 July was added to the Hang Seng Composite Index (HSCI) at the close of trading on 20 July. However, being a WVR security, the stock will not be eligible for Southbound Stock Connect till early 2022.</p><p>Subject to passing the velocity test, we see Xpeng (9868 HK) as an inclusion 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 December rebalance, replacing <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a>.</p><p>With Hang Seng Indexes treating the stock as a primary listing, HSCEI passive trackers will need to buy a large part of the stock that was offered in Hong Kong. This could push Xpeng (9868 HK) to trade at a premium to <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> and there will be arb opportunities which could result in conversion from the ADS to the HK listing.</p><p>The inclusion of Xpeng (9868 HK) in the index will push 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> 2022 dividend futures lower. With the recent changes in China to companies looking to list on a foreign exchange, the HFCAA, and other structural changes to the index, we prefer a short position in the HSCEI 2022 dividend futures.</p>

Xpeng (9868 HK) listed in Hong Kong on 7 July was added to the Hang Seng Composite Index (HSCI) at the close of trading on 20 July. However, being a WVR security, the stock will not be eligible for Southbound Stock Connect till early 2022.Subject to passing the velocity test, we see Xpeng (9868 HK) as an inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, replacing Evergrande Real Estate Group (3333 HK).With Hang Seng Indexes treating the stock as a primary listing, HSCEI passive trackers will need to buy a large part of the stock that was offered in Hong Kong. This could push Xpeng (9868 HK) to trade at a premium to Xpeng (XPEV US) and there will be arb opportunities which could result in conversion from the ADS to the HK listing.The inclusion of Xpeng (9868 HK) in the index will push the Hang Seng China Enterprises Index (HSCEI INDEX) 2022 dividend futures lower. With the recent changes in China to companies looking to list on a foreign exchange, the HFCAA, and other structural changes to the index, we prefer a short position in the HSCEI 2022 dividend futures.

Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends

<div>
<p>Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of a short-seller report by Valliant Varriors which was published yesterday, see <a href="https://www.valiantvarriors.org/post/linklogis-the-brightest-stars-will-always-cast-the-deepest-shadows" target="_blank" rel="noopener">here</a>.</p>
<p>In this report, we will talk about the points raised by the short sellers.</p>
</div><div><p>We have covered various aspects of the deal in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-the-positives-fast-growing-blockchain-driven-supply-chain-financier" target="_blank" rel="noopener">Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier,</a> </li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-the-negatives-inconsistent-growth-and-margins-well-funded-competitors" target="_blank" rel="noopener">Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors, and</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-earnings-forecast-peer-comparison-and-first-stab-at-valuation" target="_blank" rel="noopener">Linklogis Pre-IPO - Earnings Forecast, Peer Comparison and First Stab at Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-phip-updates-nothing-to-complain-about" target="_blank" rel="noopener">Linklogis Pre-IPO - PHIP Updates - Nothing to Complain About</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-ipo-pricey-for-a-reason" target="_blank" rel="noopener">Linklogis IPO - Pricey for a Reason</a></li>
<li><a href="https://www.smartkarma.com/insights/linklogis-ipo-trading-decent-but-not-hot-demand" target="_blank" rel="noopener">Linklogis IPO Trading - Decent but Not Hot Demand</a></li>
</ul></div>


Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of a short-seller report by Valliant Varriors which was published yesterday, see here.
In this report, we will talk about the points raised by the short sellers.
We have covered various aspects of the deal in our earlier notes:

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier, 
Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors, and
Linklogis Pre-IPO - Earnings Forecast, Peer Comparison and First Stab at Valuation
Linklogis Pre-IPO - PHIP Updates - Nothing to Complain About
Linklogis IPO - Pricey for a Reason
Linklogis IPO Trading - Decent but Not Hot Demand


Linklogis Short Sheller Report - Some Merit, Some Plain Drama - Mixed Bag

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Thematic (Sector/Industry)

<p>The China National Bureau of Statistics retail sales data for June 2021 appears to show a softer YoY growth compared to an outlier growth in 1Q21, but the 2YR CAGR of 17% outpaced 1Q21's 15%. (See April and May sales tracker in the report, <a href="https://www.smartkarma.com/insights/china-online-retail-sales-tracker-april-and-may-sales-growth-slows-on-unfavorable-comps" target="_blank" data-smartkarma-citation="insights:53557" rel="noopener">China Online Retail Sales Tracker: April and May Sales Growth Slows on Unfavorable Comps</a>.)  This solid online spending growth suggests China's consumption remains robust and the Chinese e-commerce names could receive greater attention from global investors especially if a rotation from the developed market to emerging market ensues. </p><p>The solid growth of online sales is positive for all online platforms including <strong><a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US), </a><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><a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">,  and  </a><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></strong>I like all three names as they currently trade at attractive valuations, but<strong> VIPS stands out with its nearly single-digit forward P/E</strong> and favorable operating metrics.  I am less sanguine on <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> because of its high marketing cost-powered business model despite its industry-leading growth.        </p><h3>Key takeaways from China retail sales data: </h3><ul>
<li>
<strong>Total retail sales grew 14% YoY</strong> in 2Q21, lower than the 34% growth in 1Q21, but on a 2-year CAGR accelerated in 2Q21 to 4.8% from 3.8% in 1Q21. </li>
<li>In 2Q21, <strong>apparel and cosmetics categories</strong> (total including offline and online) <strong>grew solid 19% and 16%</strong>, while household appliances sales growth was more muted at 5%.    </li>
<li>
<strong>Online sales (physical goods) grew 9% YoY in 2Q21</strong>, lower than 24% in 1Q21, but 2YR CAGR was 17% and 15%, respectively.  Because the soft YoY comparison may not do much to thaw investor sentiment on Chinese e-commerce, but I believe the current adverse optics provides opportunities.   </li>
<li>
<strong>Online sales for apparel-related categories along with general merchandise grew 13%</strong> ( by my estimate) for 2Q21 compared to 40% and 21%, respectively, for 1Q21.  However, again, on a 2YR CAGR basis, 2Q21 growth of 10.3% outpaced 1Q21's 9.3%.   Vipshop's revenue growth outpaced online apparel growth by 11% points in 1Q21.  This trend is expected to continue in 2Q21, especially when considering the 6/18 Festival promotions. </li>
</ul>

The China National Bureau of Statistics retail sales data for June 2021 appears to show a softer YoY growth compared to an outlier growth in 1Q21, but the 2YR CAGR of 17% outpaced 1Q21's 15%. (See April and May sales tracker in the report, China Online Retail Sales Tracker: April and May Sales Growth Slows on Unfavorable Comps.)  This solid online spending growth suggests China's consumption remains robust and the Chinese e-commerce names could receive greater attention from global investors especially if a rotation from the developed market to emerging market ensues. The solid growth of online sales is positive for all online platforms including Alibaba Group (BABA US), JD.com Inc (ADR) (JD US),  and  Vipshop Holdings (VIPS US).I like all three names as they currently trade at attractive valuations, but VIPS stands out with its nearly single-digit forward P/E and favorable operating metrics.  I am less sanguine on Pinduoduo (PDD US) because of its high marketing cost-powered business model despite its industry-leading growth.        Key takeaways from China retail sales data: 

Total retail sales grew 14% YoY in 2Q21, lower than the 34% growth in 1Q21, but on a 2-year CAGR accelerated in 2Q21 to 4.8% from 3.8% in 1Q21. 
In 2Q21, apparel and cosmetics categories (total including offline and online) grew solid 19% and 16%, while household appliances sales growth was more muted at 5%.    

Online sales (physical goods) grew 9% YoY in 2Q21, lower than 24% in 1Q21, but 2YR CAGR was 17% and 15%, respectively.  Because the soft YoY comparison may not do much to thaw investor sentiment on Chinese e-commerce, but I believe the current adverse optics provides opportunities.   

Online sales for apparel-related categories along with general merchandise grew 13% ( by my estimate) for 2Q21 compared to 40% and 21%, respectively, for 1Q21.  However, again, on a 2YR CAGR basis, 2Q21 growth of 10.3% outpaced 1Q21's 9.3%.   Vipshop's revenue growth outpaced online apparel growth by 11% points in 1Q21.  This trend is expected to continue in 2Q21, especially when considering the 6/18 Festival promotions. 


China Online Retail Sales Tracker: Steady Recovery in June Without the Optical Illusion

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.

Bukalapak.com PT Tbk / Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak (BUKA IJ)</a>, which means 'opening a kiosk' in Indonesian, is a leading e-commerce player in non-Tier 1 cities in Indonesia, with a market share of 35% in 2020 based on GMV (gross merchandise value), according to Frost &amp; Sullivan. </p>
<p>Bukalapak will price its IPO at the top-end of its indicative price range of Rp750-850 per share, according to press reports. Bukalapak will raise Rp22 trillion ($1.5 billion) which will be Indonesia's largest-ever IPO. The shares are set to list on 6 August. </p>
</div><div><p>In <a href="https://www.smartkarma.com/insights/bukalapak-ipo-initiation-island-shopping" target="_blank" data-smartkarma-citation="insights:54584" rel="noopener">Bukalapak IPO Initiation: Island Shopping</a>, we noted that like its peers, Bukalapak is benefiting from the accelerating adoption of e-commerce in Indonesia. Bukalapak’s strategy of focusing on consumers in the non-Tier 1 area and the mass market in the Tier 1 area results in a relatively small overlap (less than 20%) between its customers and customers of other online marketplaces such as <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>'s Shopee, <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>'s Lazada. Competitors generally target the affluent segment of the market. We concluded that Bukalapak's fundamentals tick all the right boxes of rising monetisation, lower losses and declining cash burn, in our view. </p></div><div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.</p></div>


Bukalapak (BUKA IJ), which means 'opening a kiosk' in Indonesian, is a leading e-commerce player in non-Tier 1 cities in Indonesia, with a market share of 35% in 2020 based on GMV (gross merchandise value), according to Frost &amp; Sullivan. 
Bukalapak will price its IPO at the top-end of its indicative price range of Rp750-850 per share, according to press reports. Bukalapak will raise Rp22 trillion ($1.5 billion) which will be Indonesia's largest-ever IPO. The shares are set to list on 6 August. 
In Bukalapak IPO Initiation: Island Shopping, we noted that like its peers, Bukalapak is benefiting from the accelerating adoption of e-commerce in Indonesia. Bukalapak’s strategy of focusing on consumers in the non-Tier 1 area and the mass market in the Tier 1 area results in a relatively small overlap (less than 20%) between its customers and customers of other online marketplaces such as Sea Ltd (SE US)'s Shopee, Tokopedia PT (1087142D IJ) and Alibaba Group (BABA US)'s Lazada. Competitors generally target the affluent segment of the market. We concluded that Bukalapak's fundamentals tick all the right boxes of rising monetisation, lower losses and declining cash burn, in our view. Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.

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)

China Tourism Group A/H Listing Early Look - Over US$5bn Raising for a Monopoly on Chinese Tourists

China Tourism Group Duty Free Corp Ltd (601888 CH) aims to raise around US$5-10bn in its H-share listing in Hong Kong. It had 92.3% market share by...

Sumeet Singh

Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends

Xpeng (9868 HK) could be added to the HSCEI in December. Limited liquidity in HK could create arb opportunities with XPEV US. Xpeng index inclusion...

Brian Freitas

Linklogis Short Sheller Report - Some Merit, Some Plain Drama - Mixed Bag

Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of...

Sumeet Singh

China Online Retail Sales Tracker: Steady Recovery in June Without the Optical Illusion

Consensus revenue estimates for Chinese e-commerce platforms could be too conservative based on comparison to the NBS data. 2Q21 revenue and...

Mitchell Kim

Bukalapak IPO: Valuation Insights

Bukalapak will price its IPO at the top-end of its indicative price range of Rp750-850 per share, according to press reports. Our valuation...

Arun George

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