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/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a> is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/swiss-re-ag-1f83dcbc-730e-46fa-82f2-bfe7e8e361a1" target="_blank" data-smartkarma-citation="entities:27914:1" rel="noopener">Swiss Re AG (SREN SW)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.</p></div><div><p>At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/waterdrop-ipo-initiation-going-for-brokers" target="_blank" data-smartkarma-citation="insights:50610" rel="noopener">Waterdrop IPO Initiation: Going for Brokers</a>, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. </p></div></div></div>

Waterdrop Inc (WDH US) is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by Tencent Holdings (700 HK), Swiss Re AG (SREN SW) and Meituan (3690 HK).At the mid-point of the proposed IPO price range of $10.00-12.00 per ADS, Waterdrop will have a market cap of $4.3 billion. At the mid-point of the IPO price range, the net proceeds are $301.6 million. New and existing shareholders have indicated on $210 million of the IPO, including Boyu Capital ($100 million), HOPU Investments (at least $80 million), and Kevin Sunny Holding ($30 million). The indications of interest represent 63.6% of the ADSs on offer at the mid-point of the IPO price range.In Waterdrop IPO Initiation: Going for Brokers, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. Our analysis suggests that the IPO price range is full at the high-end but has some upside at the low-end. 

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p>Over the past two weeks, there have been two significant negative catalytic events (SEC moved forward on the road to a potential US delisting and missed margin calls by Archegos Capital Management created a forced seller) which has placed significant pressure on the Baidu share price, listed in the US <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> and Hong Kong <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a>.  </p>
<p>In this insight, I analyse the impact of recent share price movements on Baidu’s valuation and what that implies for the Core Search and Non-marketing Core operations. </p>

Over the past two weeks, there have been two significant negative catalytic events (SEC moved forward on the road to a potential US delisting and missed margin calls by Archegos Capital Management created a forced seller) which has placed significant pressure on the Baidu share price, listed in the US Baidu (BIDU US) and Hong Kong Baidu (9888 HK).  
In this insight, I analyse the impact of recent share price movements on Baidu’s valuation and what that implies for the Core Search and Non-marketing Core operations. 

Baidu: Attractive Short Term Entry Point Following SEC Statement and Block Sales

Zhihu Technology / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/zhihu-technology-ltd" target="_blank" data-smartkarma-citation="entities:32185:1" rel="noopener">Zhihu Technology (ZH US)</a> is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC.</p></div><div><p>Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range of $9.50-11.50 per ADS, according to press reports. At the final IPO price of $9.50 per share, Zhihu will have a market cap of $5.7 billion. Zhihu will also raise an additional $250 million in a concurrent private placement to <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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> and Lilith Games.</p></div><div><p>In <a href="https://www.smartkarma.com/insights/zhihu-ipo-initiation-question-time" target="_blank" data-smartkarma-citation="insights:48928" rel="noopener">Zhihu IPO Initiation: Question Time</a>, we opined that as the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from favourable industry trends. We concluded that Zhihu’s fundamentals are attractive. In <a href="https://www.smartkarma.com/insights/zhihu-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:49410" rel="noopener">Zhihu IPO: Valuation Insights,</a> we noted that the IPO price range is attractive. </p></div><div><div><div class="content-highlight"><p>However, since the launch of the IPO, a brutal sell-off on Chinese ADRs was triggered by SEC adopting measures that would kick foreign companies off US stock exchanges if they do not comply with US auditing standards. Despite the subsequent de-rating of peers, Zhihu remains attractive at the IPO price. Updating for the final IPO net raise, our base-case DCF derived price target of $12.35 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on securing a modest share of the addressable market. </p></div></div></div>

Zhihu Technology (ZH US) is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC.Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range of $9.50-11.50 per ADS, according to press reports. At the final IPO price of $9.50 per share, Zhihu will have a market cap of $5.7 billion. Zhihu will also raise an additional $250 million in a concurrent private placement to Alibaba Group (BABA US), JD.com Inc (ADR) (JD US), Tencent Holdings (700 HK) and Lilith Games.In Zhihu IPO Initiation: Question Time, we opined that as the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from favourable industry trends. We concluded that Zhihu’s fundamentals are attractive. In Zhihu IPO: Valuation Insights, we noted that the IPO price range is attractive. However, since the launch of the IPO, a brutal sell-off on Chinese ADRs was triggered by SEC adopting measures that would kick foreign companies off US stock exchanges if they do not comply with US auditing standards. Despite the subsequent de-rating of peers, Zhihu remains attractive at the IPO price. Updating for the final IPO net raise, our base-case DCF derived price target of $12.35 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on securing a modest share of the addressable market. 

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p><a href="https://www.smartkarma.com/entities/zhihu-technology-ltd" target="_blank" data-smartkarma-citation="entities:32185:1" rel="noopener">Zhihu Technology (ZH US)</a> announced its IPO terms. It plans to raise up to $632.5 million offering 55 million ADSs. The IPO price range is from $9.50 to $11.5 per share. At the mid point of the IPO price range, the company would be valued at $6.2 billion. At the high end of the IPO price range ($11.5 per share), it would be valued at $6.8 billion. Along with the IPO, Zhihu also plans to raise $250 million in a private placement to Alibaba, JD.com, Tencent, and Lilith Games.</p><div class="content-highlight"><p>Our base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively. We do believe that there will be a first day pop for this IPO and expect its market cap could reach the high end of the valuation sensitivity analysis (market cap of $9.0 billion or $15.2 per share). In the first few days of trading post IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO. </p></div>

Zhihu Technology (ZH US) announced its IPO terms. It plans to raise up to $632.5 million offering 55 million ADSs. The IPO price range is from $9.50 to $11.5 per share. At the mid point of the IPO price range, the company would be valued at $6.2 billion. At the high end of the IPO price range ($11.5 per share), it would be valued at $6.8 billion. Along with the IPO, Zhihu also plans to raise $250 million in a private placement to Alibaba, JD.com, Tencent, and Lilith Games.Our base case and high case implied market caps of the company are $7.1 billion ($12 per share) and $9.0 billion ($15.2 per share), respectively. We do believe that there will be a first day pop for this IPO and expect its market cap could reach the high end of the valuation sensitivity analysis (market cap of $9.0 billion or $15.2 per share). In the first few days of trading post IPO, we expect the company's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to $15.2 per share). We have a positive view of the Zhihu IPO. 

<p><a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> is a Chinese online video platform themed around anime, manga, and game fandom and targeted at the young generations in China. Bilibili ranked top five in terms of brand awareness in Gen Z+ users among video-centric platforms in China in 2020, according to iResearch. Bilibili passed its Hong Kong listing committee hearing and could raise up to $3 billion through a secondary listing, according to press reports. </p><p>Bilibili’s focus on Gen Z+ users allows it to benefit from their growing consumption needs in conjunction with their increasing spending power. Bilibili is one of the fastest-growing major Chinese internet companies. The revenue growth is increasingly fuelled by the creation of more consumption scenarios and higher paying user conversion. Largely due to the high growth narrative, Bilibili gets a free pass from investors on the widening losses and FCF burn. Nevertheless, Bilibili’s ambition is to deliver operating leverage and FCF generation over the medium-term, which is reflected in consensus estimates. </p><div class="content-highlight"><p>Overall, Bilibili has made great strides in expanding its user base (Gen Z to Gen Z+) and subsequently monetising this expanded user base through the diversification of its revenue streams and lowering its reliance on key games titles. The top-line metrics are strong, and the bottom-line metrics will likely improve in the medium term, in our view. Overall, we believe that Bilibili is fairly valued at the last close, and would look at any share price weakness to add/build a position. </p></div>

Bilibili Inc (BILI US) is a Chinese online video platform themed around anime, manga, and game fandom and targeted at the young generations in China. Bilibili ranked top five in terms of brand awareness in Gen Z+ users among video-centric platforms in China in 2020, according to iResearch. Bilibili passed its Hong Kong listing committee hearing and could raise up to $3 billion through a secondary listing, according to press reports. Bilibili’s focus on Gen Z+ users allows it to benefit from their growing consumption needs in conjunction with their increasing spending power. Bilibili is one of the fastest-growing major Chinese internet companies. The revenue growth is increasingly fuelled by the creation of more consumption scenarios and higher paying user conversion. Largely due to the high growth narrative, Bilibili gets a free pass from investors on the widening losses and FCF burn. Nevertheless, Bilibili’s ambition is to deliver operating leverage and FCF generation over the medium-term, which is reflected in consensus estimates. Overall, Bilibili has made great strides in expanding its user base (Gen Z to Gen Z+) and subsequently monetising this expanded user base through the diversification of its revenue streams and lowering its reliance on key games titles. The top-line metrics are strong, and the bottom-line metrics will likely improve in the medium term, in our view. Overall, we believe that Bilibili is fairly valued at the last close, and would look at any share price weakness to add/build a position. 

Bilibili Secondary Listing: A Big-Sum Game

China

JOYY Inc. operates a global social media platform. The Company offers platform which enables users to interact with each other in real time through online live media by creating, sharing, and enjoying a vast range of entertainment content and activities. JOYY serves customers in China.

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JOYY (YY US)

Waterdrop IPO: Valuation Insights

Waterdrop has launched its IPO to raise net proceeds of $301.6 million at the mid-point of the price range of $10-12. The price range is full at...

Arun George

Baidu: Attractive Short Term Entry Point Following SEC Statement and Block Sales

In this insight, I analyse the impact of recent share price movements on Baidu’s valuation and what that implies for the Core Search and Non...

Wium Malan, CFA

Zhihu IPO: Trading Debut

Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range, according to press reports. Despite the recent de-rating of...

Arun George

Zhihu IPO Valuation Analysis

In the first few days of trading post IPO, we expect Zhihu's market cap to be trading in the mid-to-high end of our valuation analysis ($12 to...

Douglas Kim

Bilibili Secondary Listing: A Big-Sum Game

Bilibili could raise up to $3 bn through a secondary listing, according to press reports. It is fairly valued at the last close and would look at...

Arun George

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