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

<p>We previously examined <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> and expressed our concerns regarding the company’s unit cost dynamics mentioning that the FY21 operating loss is a sign that Zomato is incapable of generating profits even from its most loyal customers who stuck with the company during the hardest days of COVID-19.</p><p>The offer period begins tomorrow (will continue till 16<sup>th</sup> July 2021) at a price range of INR 72.0-76.0 per share, which implies a market cap range of INR 569.6-596.2bn.</p>

We previously examined Zomato (ZOM IN) and expressed our concerns regarding the company’s unit cost dynamics mentioning that the FY21 operating loss is a sign that Zomato is incapable of generating profits even from its most loyal customers who stuck with the company during the hardest days of COVID-19.The offer period begins tomorrow (will continue till 16th July 2021) at a price range of INR 72.0-76.0 per share, which implies a market cap range of INR 569.6-596.2bn.

Zomato IPO Valuation: Making Losses In Most Favorable Circumstances

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<p>In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.</p><p>Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. </p><p>We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.</p><p>In this insight, we will highlight outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK) as a result of negative regulatory news flows.</p>

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK) as a result of negative regulatory news flows.

Hong Kong Connect Flows: $2.2bn Outflows and the Regulatory Newsflow

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Alibaba Group Holding  / Equity Capital Markets

<div>
<p>In our previous notes <a href="https://www.smartkarma.com/insights/china-adrs-kanzhun-full-truck-and-didi-regulators-sending-a-message" target="_blank" rel="noopener">China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message </a>and <a href="https://www.smartkarma.com/insights/china-adrs-now-the-message-is-loud-and-getting-clearer" target="_blank" rel="noopener">China ADRs - Now the Message Is Loud and Getting Clearer, </a>we spoke about the recent crackdown on the three US listed firms along with the general crackdown on overseas listings for Chinese companies. </p>
<p>The Cyberspace Administration of China (CAC) came out with draft cyber security review measures. </p>
</div><div><p>We have looked at the ADRs in the past, 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>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-sec-notice-instead-of-three-probably-have-four-years-till-2025-correction-overdone" target="_blank" rel="noopener">China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone, </a> we spoke about the new SEC notice and its implications. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-a-new-act-aims-to-put-an-end-to-china-adr-ipos" target="_blank" rel="noopener">China ADRs - A New Act Aims to Put an End to China ADR IPOs</a>, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies.</li>
</ul></div>


In our previous notes China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message and China ADRs - Now the Message Is Loud and Getting Clearer, we spoke about the recent crackdown on the three US listed firms along with the general crackdown on overseas listings for Chinese companies. 
The Cyberspace Administration of China (CAC) came out with draft cyber security review measures. 
We have looked at the ADRs in the past, 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. 
In China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone,  we spoke about the new SEC notice and its implications. 
In China ADRs - A New Act Aims to Put an End to China ADR IPOs, we spoke about the No IPOs for Unaccountable Actors Act, which aims to prohibit IPO on U.S. exchanges for Chinese companies.


China ADRs - Draft Cyber Security Review Measures - ADRs Listing Likely Shut, HK Might Face Delay

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/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. </p></div><div><p>Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>. </p></div><div>
<p>In <a href="https://www.smartkarma.com/insights/zomato-ipo-initiation-emerging-appetites" target="_blank" data-smartkarma-citation="insights:54141" rel="noopener">Zomato IPO Initiation: Emerging Appetites</a>, we stated that that the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. In <a href="https://www.smartkarma.com/insights/zomato-ipo-results-point-to-a-favourable-trajectory" target="_blank" data-smartkarma-citation="insights:54220" rel="noopener">Zomato IPO: Results Point to a Favourable Trajectory</a>, we noted that the FY21 results support our view that Zomato has attractive fundamentals. </p>
<div class="content-highlight"><p>Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. </p></div>
</div>

Zomato (ZOM IN) is a leading food delivery platform in India. Zomato has two core business-to-customer (B2C) offerings which are Food delivery and Dining-out. It also has a business-to-business (B2B) offering called Hyperpure and Zomato Pro, the customer loyalty program which encompasses both food delivery and dining-out. Zomato will launch its IPO on 14 July at an IPO price range of Rs72-76 per share. The IPO will raise up to Rs93.75 billion ($1.3 billion) with a primary/secondary split of 96%/4%. The selling shareholder is Info Edge India (INFOE IN). 
In Zomato IPO Initiation: Emerging Appetites, we stated that that the food delivery market in India is effectively a duopoly between Zomato and Swiggy. Zomato claims to be larger but the key differentiator will be execution to drive growth with positive unit economics. On this front, Zomato has demonstrated a commendable track record. In Zomato IPO: Results Point to a Favourable Trajectory, we noted that the FY21 results support our view that Zomato has attractive fundamentals. 
Our relative valuation suggests that Zomato is overvalued at the IPO price range for its forecasted growth. Our base-case DCF valuation is Rs62.84 per share, which is 15% below the mid-point of the IPO price range. Consequently, while we like the fundamentals, we think that the IPO price range is unattractive and are inclined to remain on the sidelines. 


Event-Driven

<p><a href="https://www.smartkarma.com/entities/rlx-technology-inc" target="_blank" data-smartkarma-citation="entities:31113:1" rel="noopener">RLX Technology Inc (RLX US) </a>raised around US$1.4bn in its US listing in Jan 2021. RLX was the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value. RLX only sells its e-vapor products in China.</p><p>While the company didn’t have cornerstone investors in the deal, it did have a lot of pre-IPO investors. The lock-up will expire over the next few days.</p><div><p>Links to our previous notes:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-positives-fast-growth-low-penetration" target="_blank" data-smartkarma-citation="insights:46797" rel="noopener">RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration</a> </li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-the-negatives-limited-track-record-and-missing-international-ops" target="_blank" data-smartkarma-citation="insights:46836" rel="noopener">RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-rlx-store-visits-to-relx-and-its-competitors" target="_blank" rel="noopener">RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-pre-ipo-peer-comparison-and-valuation" target="_blank" rel="noopener">RLX Technology Pre-IPO - Peer Comparison and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-technology-ipo-valuation-has-more-than-doubled-in-two-months" target="_blank" rel="noopener">RLX Technology IPO - Valuation Has More than Doubled in Two Months</a></li>
<li><a href="https://www.smartkarma.com/insights/rlx-tech-rlx-stock-down-48-after-amendment-to-tobacco-law" target="_blank" rel="noopener">RLX Tech (RLX): Stock Down 48% After Amendment to Tobacco Law</a></li>
</ul></div>

RLX Technology Inc (RLX US) raised around US$1.4bn in its US listing in Jan 2021. RLX was the largest branded e-vapor company in China with a market share of closed-system e-vapor products in terms of retail sales value. RLX only sells its e-vapor products in China.While the company didn’t have cornerstone investors in the deal, it did have a lot of pre-IPO investors. The lock-up will expire over the next few days.Links to our previous notes:

RLX Technology Pre-IPO - The Positives - Fast Growth, Low Penetration 
RLX Technology Pre-IPO - The Negatives - Limited Track Record, and Missing International Ops
RLX Technology Pre-IPO (RLX): Store Visits to Relx and Its Competitors
RLX Technology Pre-IPO - Peer Comparison and Valuation
RLX Technology IPO - Valuation Has More than Doubled in Two Months
RLX Tech (RLX): Stock Down 48% After Amendment to Tobacco Law


RLX Lock-Up Expiry- Stung by Regulation, What Early Investors Do Will Be Telling, >US$1bn Comes Free

China

Meituan operates as a web based shopping platform for locally found consumer products and retail services. The Company offers deals of the day by selling vouchers on local services and entertainment, dining, delivery, and other services. Meituan provides its services throughout China.

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Meituan (3690 HK)

Zomato IPO Valuation: Making Losses In Most Favorable Circumstances

Zomato made an operating loss of INR 4.9bn in FY21, indicating its impotence in generating profits even in the most favorable circumstances....

Oshadhi Kumarasiri

Hong Kong Connect Flows: $2.2bn Outflows and the Regulatory Newsflow

We highlight Hong Kong Connect outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK) due to negative regulatory newsflows.

Ke Yan, CFA, FRM

China ADRs - Draft Cyber Security Review Measures - ADRs Listing Likely Shut, HK Might Face Delay

In our previous notes we spoke about the recent crackdown on the three US listed firms. The Cyberspace Administration of China (CAC) recently came...

Sumeet Singh

Zomato IPO: Valuation Insights

Our DCF valuation is Rs62.84 per share, 15% below the mid-point of the IPO price range. While we like the fundamentals, the IPO price range is...

Arun George

RLX Lock-Up Expiry- Stung by Regulation, What Early Investors Do Will Be Telling, >US$1bn Comes Free

RLX Technology Inc (RLX US) raised around US$1.4bn in its US listing in Jan 2021.RLX sells e-vapor products in China. The lock-up will expire over...

Sumeet Singh

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