Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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

<ul>
<li>Dingdong has the most app active users among all fresh food retailers.</li>
<li>Frontline warehouses are closer to customers, but fresh food have low gross margin.</li>
<li>Competition also came from new retail and O2O retailers.</li>
</ul>


Dingdong has the most app active users among all fresh food retailers.
Frontline warehouses are closer to customers, but fresh food have low gross margin.
Competition also came from new retail and O2O retailers.


Dingdong (叮咚买菜): Fresh Food Competition in and Outside of Frontline Warehouse

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.

<p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> , the pre-owned consumer electronics transaction and services platform in China has announced the indicative price range for its IPO at US$13-15 per ADS. The company plans to issue 16.23m ADSs (18.7m shares including the over-allotment) and each ordinary share represents 1.5 ADSs of the company. At the midpoint of the IPO price range of US$14 per share, Aihuishou will raise net proceeds of US$205.7m at a market capitalisation of US$3.1bn and a post-money enterprise value of US$2.85bn.</p><p>In our previous insight, we examined Aihuishou’s business model and its financials and concluded that the company’s revenues will continue to see strong growth and at the same time, we expect the company’s profitability to improve going forward.</p>

Aihuishou (RERE US) , the pre-owned consumer electronics transaction and services platform in China has announced the indicative price range for its IPO at US$13-15 per ADS. The company plans to issue 16.23m ADSs (18.7m shares including the over-allotment) and each ordinary share represents 1.5 ADSs of the company. At the midpoint of the IPO price range of US$14 per share, Aihuishou will raise net proceeds of US$205.7m at a market capitalisation of US$3.1bn and a post-money enterprise value of US$2.85bn.In our previous insight, we examined Aihuishou’s business model and its financials and concluded that the company’s revenues will continue to see strong growth and at the same time, we expect the company’s profitability to improve going forward.

AiHuiShou IPO: Peer Comparison and Valuation

Oshadhi Kumarasiri

<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

<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

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 (9618 HK)

Dingdong (叮咚买菜): Fresh Food Competition in and Outside of Frontline Warehouse

Dingdong has the most app active users among all fresh food retailers. Frontline warehouses are closer to customers, but have low margin....

Ming Lu

AiHuiShou IPO: Peer Comparison and Valuation

We believe there will be limited upside to the company’s indicative IPO price range and would be inclined to buy only if the company sets the final...

Shifara Samsudeen, ACMA, CGMA

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

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