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

<p><a href="https://www.smartkarma.com/entities/anjuke" target="_blank" data-smartkarma-citation="entities:33003:1" rel="noopener">Anjuke (ANJ HK)</a> is the largest online marketing platform for new and existing properties by revenue in 2020, according to iResearch. Anjuke is a subsidiary of 58.com. Anjuke’s shareholders include <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> (14.3% stake), General Atlantic (7.7%), Warburg Pincus (7.9%), <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a> and <a href="https://www.smartkarma.com/entities/agile-property-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15784:1" rel="noopener">Agile Property Holdings (3383 HK)</a>. It is seeking to raise $1 billion through an HKEx IPO, according to press reports.</p><p>Anjuke is using its core online marketing services business, which is cash generative, to fund its foray into transaction services, a market where <a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> dominates. However, this growth is margin dilutive as transaction services is structurally a lower margin business. We think that the compromise is acceptable as investors continue to be willing to pay up for high-growth tech companies. </p><div class="content-highlight"><p>The key negative is that Anjuke is saddled with debt related to the privatisation of 58.com in September 2020 - <a href="https://www.smartkarma.com/insights/58-com-s-privatisation-enters-into-definitive-agreement" target="_blank" data-smartkarma-citation="insights:40366" rel="noopener">58.com’s Privatisation Enters into Definitive Agreement</a>. While the healthy cash generation should comfortably service the debt, potential IPO investors could be turned off by the view that the IPO is a way of the privatisation consortium (which arguably privatised 58.com to the detriment of minorities) to make a quick buck. Notwithstanding the optics of the privatisation and relisting trade which tend to enrich insiders at the expense of minorities, we believe that the Anjuke IPO is worth a close look.</p></div>

Anjuke (ANJ HK) is the largest online marketing platform for new and existing properties by revenue in 2020, according to iResearch. Anjuke is a subsidiary of 58.com. Anjuke’s shareholders include Tencent Holdings (700 HK) (14.3% stake), General Atlantic (7.7%), Warburg Pincus (7.9%), Country Garden Holdings Co (2007 HK) and Agile Property Holdings (3383 HK). It is seeking to raise $1 billion through an HKEx IPO, according to press reports.Anjuke is using its core online marketing services business, which is cash generative, to fund its foray into transaction services, a market where KE Holdings Inc (BEKE US) dominates. However, this growth is margin dilutive as transaction services is structurally a lower margin business. We think that the compromise is acceptable as investors continue to be willing to pay up for high-growth tech companies. The key negative is that Anjuke is saddled with debt related to the privatisation of 58.com in September 2020 - 58.com’s Privatisation Enters into Definitive Agreement. While the healthy cash generation should comfortably service the debt, potential IPO investors could be turned off by the view that the IPO is a way of the privatisation consortium (which arguably privatised 58.com to the detriment of minorities) to make a quick buck. Notwithstanding the optics of the privatisation and relisting trade which tend to enrich insiders at the expense of minorities, we believe that the Anjuke IPO is worth a close look.

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.

Alibaba Group Holding  / Equity Capital Markets

<div>
<p>On 24th Mar 2021, Securities Exchange Commission (SEC) issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs fell by 7.5% on average. </p>
<p>We have covered various aspects of this topic before in our prior note, links to which are below. In this note, I'll talk about the SEC updates.</p>
</div>
<div>
<p>In our previous notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang,</a> published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. </li>
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a> published in May 2020, we looked at the recent developments and provided an revised short-list</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a>, published in May 2020, we spoke about the implication of the act which had made its way through the senate.</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-pipeline-looks-rich-have-three-years-to-move" target="_blank" rel="noopener">China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move</a>, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. </li>
</ul>
</div>


On 24th Mar 2021, Securities Exchange Commission (SEC) issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs fell by 7.5% on average. 
We have covered various aspects of this topic before in our prior note, links to which are below. In this note, I'll talk about the SEC updates.


In our previous notes:




China ADRs Secondary Listing Deep-Dive: Yin and Yang, published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. 

In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List published in May 2020, we looked at the recent developments and provided an revised short-list
In China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home, published in May 2020, we spoke about the implication of the act which had made its way through the senate.
In China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. 



China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

<ul class="">
<li>Revenue grew by 58% yoy in 4Q20 and 53% in 2020.</li>
<li>BEKE broke even in 4Q20 and 2020.</li>
<li>Home sales increased significantly in January and February.</li>
<li>Commission rate has been rising in the market.</li>
<li>We believe the stock price has an upside of 25%.</li>
</ul>


Revenue grew by 58% yoy in 4Q20 and 53% in 2020.
BEKE broke even in 4Q20 and 2020.
Home sales increased significantly in January and February.
Commission rate has been rising in the market.
We believe the stock price has an upside of 25%.


KE (BEKE): The Estate Agency Grew 53% and Housing Market Continues to Boom

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. </p><p><strong>Highlights</strong></p><p><strong>Coupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. </strong>Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).</p><p><strong>Greensill has collapsed with Vision Fund exposure of up to $2bn. </strong>That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.</p><p><strong>Vision Fund’s public portfolio is down 14% since Q3 results</strong>. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.   </p>

It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. HighlightsCoupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).Greensill has collapsed with Vision Fund exposure of up to $2bn. That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.Vision Fund’s public portfolio is down 14% since Q3 results. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.   

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

<div><p>Coupang, one of the largest product e-commerce players in Korea, raised around US$4.2bn in its US listing via a mix of selling primary and secondary shares. </p></div><div><p>In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, talk about the trading dynamics and provide a valuation table at different  share price levels.</p></div><div><p>We've covered various aspects of the deal in our earlier insights: </p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/coupang-pre-ipo-the-positives-fast-growth-sticky-customers" target="_blank" rel="noopener">Coupang Pre-IPO - The Positives - Fast Growth, Sticky Customers</a>, </li>
<li><a href="https://www.smartkarma.com/insights/coupang-pre-ipo-the-negatives-horrendous-data-disclosures-including-no-mention-of-ott-launch" target="_blank" rel="noopener">Coupang Pre-IPO - The Negatives - Horrendous Data Disclosures, Including No Mention of OTT Launch</a></li>
<li><a href="https://www.smartkarma.com/insights/coupang-pre-ipo-fair-bit-of-competition-but-it-s-doing-better-than-most-local-peers" target="_blank" rel="noopener">Coupang Pre-IPO - Fair Bit of Competition but It’s Doing Better than Most Local Peers</a></li>
<li><a href="https://www.smartkarma.com/insights/coupang-pre-ipo-earnings-forecast-and-valuation" target="_blank" rel="noopener">Coupang Pre-IPO - Earnings Forecast and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/coupang-ipo-momentum-play-unequal-lock-up-index-inclusion" target="_blank" rel="noopener">Coupang IPO - Momentum Play, Unequal Lock-Up, Index Inclusion</a></li>
<li><a href="https://www.smartkarma.com/insights/coupang-ipo-quick-note-peers-move-down-range-moves-up-ripe-for-trading" target="_blank" rel="noopener">Coupang IPO - Quick Note - Peers Move Down, Range Moves Up. Ripe for Trading.</a></li>
</ul></div>

Coupang, one of the largest product e-commerce players in Korea, raised around US$4.2bn in its US listing via a mix of selling primary and secondary shares. In our previous note, links to which are below, we have spoke about various aspects of the deal. In this note, talk about the trading dynamics and provide a valuation table at different  share price levels.We've covered various aspects of the deal in our earlier insights: 

Coupang Pre-IPO - The Positives - Fast Growth, Sticky Customers, 
Coupang Pre-IPO - The Negatives - Horrendous Data Disclosures, Including No Mention of OTT Launch
Coupang Pre-IPO - Fair Bit of Competition but It’s Doing Better than Most Local Peers
Coupang Pre-IPO - Earnings Forecast and Valuation
Coupang IPO - Momentum Play, Unequal Lock-Up, Index Inclusion
Coupang IPO - Quick Note - Peers Move Down, Range Moves Up. Ripe for Trading.


Coupang IPO Trading - Most Hit near Term Peak on the First Day - Key Trading/Lock-Up Dates

China

KE Holdings Inc. operates as an integrated online and offline platform for housing transactions and services. The Company offers existing and new home sales, home rentals, home renovation, real estate financial solutions, and other services. KE Holdings conducts businesses in China.

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KE Holdings (BEKE US)

Anjuke IPO Initiation: Home Truths

Anjuke is seeking to raise $1 bn through an HKEx IPO. Notwithstanding the optics of the privatisation and relisting trade, we believe that the...

Arun George

China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone

On 24th Mar 2021, SEC issued Amendments, Seeks Public Comment on Holding Foreign Companies Accountable Act. On the back of this, large China ADRs...

Sumeet Singh

KE (BEKE): The Estate Agency Grew 53% and Housing Market Continues to Boom

Grew by 58% yoy in 4Q20 and 53% in 2020. Broke even in 4Q20 and 2020. Home sales area increased significantly in January and February. Commission...

Ming Lu

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

Vision Fund is having an interesting week: Coupang's IPO priced at a premium (+2.8bn in incremental gains) but portfolio company Greensill has...

Kirk Boodry

Coupang IPO Trading - Most Hit near Term Peak on the First Day - Key Trading/Lock-Up Dates

Coupang, one of the largest product e-commerce players in Korea, raised around US$4.2bn in its US listing via a mix of selling primary and...

Sumeet Singh

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