IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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

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<p><a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of <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>’s in-house logistics department in 2007.</p>
<p>JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, <a href="https://www.thestandard.com.hk/section-news/section/2/229859/JD-Logistics-gets-ball-rolling-for-US%244b-IPO" target="_blank" rel="noopener">according to press reports</a>. </p>
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<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-initiation-the-flow-of-things" target="_blank" data-smartkarma-citation="insights:48279" rel="noopener">JD Logistics IPO Initiation: The Flow of Things</a>, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.</p>
<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-prioritizing-market-share-gains-over-margins" target="_blank" data-smartkarma-citation="insights:50976" rel="noopener">JD Logistics IPO: Prioritizing Market Share Gains over Margins</a>,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. </p>
</div><div><div><div class="content-highlight"><p>In this note, we update our forecasts and valuation presented in <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-valuation-first-look" target="_blank" data-smartkarma-citation="insights:48384" rel="noopener">JD Logistics IPO: Valuation First Look</a> for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. </p></div></div></div>


JD Logistics (JDL HK) is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of JD.com Inc (ADR) (JD US)’s in-house logistics department in 2007.
JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, according to press reports. 

In JD Logistics IPO Initiation: The Flow of Things, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.
In JD Logistics IPO: Prioritizing Market Share Gains over Margins,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. 
In this note, we update our forecasts and valuation presented in JD Logistics IPO: Valuation First Look for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. 

JD Logistics IPO: Valuation and Forecast Update

Japan Specialist

Mark Chadwick

<p style="text-align: start;">Shareholders are the owners, and owners have the power. I doubt that John Lennon would have written a song about shareholders, but if he had, that is what he would have said.  </p>
<p style="text-align: start;">Shareholders would have been eagerly anticipating this year’s proxy season in Japan. Over the past three years, momentum had been building, with more and more shareholders exercising their right to put proposals to the will of the majority. </p>
<p style="text-align: start;">COVID-19 has probably taken some of the wind out of the activists’ sails, at least for this year. Still, we count fourteen proposals delivered so far and we dig a little deeper into the upcoming votes at <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a> , <a href="https://www.smartkarma.com/entities/shinsei-bank-ltd" target="_blank" data-smartkarma-citation="entities:16897:1" rel="noopener">Shinsei Bank (8303 JP)</a> , <a href="https://www.smartkarma.com/entities/mitsubishi-logistics-corp" target="_blank" data-smartkarma-citation="entities:11909:1" rel="noopener">Mitsubishi Logistics (9301 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-mining-smelting-co" target="_blank" data-smartkarma-citation="entities:15998:1" rel="noopener">Mitsui Mining &amp; Smelting Co (5706 JP)</a> </p>

Shareholders are the owners, and owners have the power. I doubt that John Lennon would have written a song about shareholders, but if he had, that is what he would have said.  
Shareholders would have been eagerly anticipating this year’s proxy season in Japan. Over the past three years, momentum had been building, with more and more shareholders exercising their right to put proposals to the will of the majority. 
COVID-19 has probably taken some of the wind out of the activists’ sails, at least for this year. Still, we count fourteen proposals delivered so far and we dig a little deeper into the upcoming votes at Takeda Pharmaceutical (4502 JP) , Shinsei Bank (8303 JP) , Mitsubishi Logistics (9301 JP) and Mitsui Mining &amp; Smelting Co (5706 JP) 

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<p>In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of dollars, credit spreads exploded, 'risk-free' rate curves steepened dramatically, investment funds blew up, the very structure of money markets was briefly in question. Central banks around the world have acted in coordinated fashion to stem the tide of panic. The US Fed has stepped in with QE Forever, providing trillions of dollars of balance sheet and funding to stabilise systemic risk, and governments have announced trillions of dollars of stimulus packages to try to cushion economies from short-term restrictive social policies meant to stem the slow the spread of COVID-19 and lessen long-term economic damage from loss of life and work.</p><p><em>Amidst this, the Nikkei 225/TOPIX ratio has gone through something of a rough patch. </em></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/379/original/Screenshot%202020-03-29%20at%206.18.38%20PM.png?1585477145" class="editor-image img-responsive" data-smartkarma-image-id="125379"></figure><p></p><p>There is (obviously) a <em>forest-for-the-trees</em> argument to be made here. I'll stipulate that. But investors are expected to do their job come inclement weather, global pestilence, pandemic, or war - that is their job as stewards. Right now, an enormous part of that is second-guessing what <em>other</em> investors will do. </p><p>This insight is a walk through the conditions which enabled and perhaps prompted the wild swings in some of the major constituents in Nikkei 225 and what caused the major swings in Nikkei vs. TOPIX. </p>

In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of dollars, credit spreads exploded, 'risk-free' rate curves steepened dramatically, investment funds blew up, the very structure of money markets was briefly in question. Central banks around the world have acted in coordinated fashion to stem the tide of panic. The US Fed has stepped in with QE Forever, providing trillions of dollars of balance sheet and funding to stabilise systemic risk, and governments have announced trillions of dollars of stimulus packages to try to cushion economies from short-term restrictive social policies meant to stem the slow the spread of COVID-19 and lessen long-term economic damage from loss of life and work.Amidst this, the Nikkei 225/TOPIX ratio has gone through something of a rough patch. There is (obviously) a forest-for-the-trees argument to be made here. I'll stipulate that. But investors are expected to do their job come inclement weather, global pestilence, pandemic, or war - that is their job as stewards. Right now, an enormous part of that is second-guessing what other investors will do. This insight is a walk through the conditions which enabled and perhaps prompted the wild swings in some of the major constituents in Nikkei 225 and what caused the major swings in Nikkei vs. TOPIX. 

Breaking Down Wild Nikkei 225 Component Moves

Event-Driven

<p>Last week in <a href="https://www.smartkarma.com/insights/japan-passive-boj-heading-for-trouble-with-nikkei-225" target="_blank" data-smartkarma-citation="insights:21980">JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225</a> I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. </p><h2>NOT, MAYBE, and LIKELY Problems</h2><p><strong>NOT A PROBLEM:</strong> The fact that the BOJ owned 80.7% of the ETFs outstanding at the end of June.</p><p><strong>MAYBE A PROBLEM:</strong> The fact that BOJ-owned ETFs own 15% or more of 6 names on a look-through basis and more than 10% of 30+ names looks a bit odd.</p><p><strong>LIKELY A PROBLEM:</strong> Based on June month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the <a href="https://www.smartkarma.com/insights/japan-passive-boj-heading-for-trouble-with-nikkei-225" target="_blank">previous insight</a>), over the next 12 months the BOJ would purchase 16-18% of the remaining real float in Fast Retailing, and even more of <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart UNY Holdings Co Ltd (8028 JP)</a>, as well as more than 5% of the remaining float of a half dozen other names in its ETF ownership universe.</p><h2>What To Do?</h2><p>The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. </p><p>That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.</p>

Last week in JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225 I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. NOT, MAYBE, and LIKELY ProblemsNOT A PROBLEM: The fact that the BOJ owned 80.7% of the ETFs outstanding at the end of June.MAYBE A PROBLEM: The fact that BOJ-owned ETFs own 15% or more of 6 names on a look-through basis and more than 10% of 30+ names looks a bit odd.LIKELY A PROBLEM: Based on June month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the previous insight), over the next 12 months the BOJ would purchase 16-18% of the remaining real float in Fast Retailing, and even more of FamilyMart UNY Holdings Co Ltd (8028 JP), as well as more than 5% of the remaining float of a half dozen other names in its ETF ownership universe.What To Do?The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.

JAPAN PASSIVE:  The Nikkei 225 Baskets if BOJ Changes

<p>One week ago in <a href="https://www.smartkarma.com/insights/the-boj-s-ongoing-etf-impact-is-a-nikkei-225-reshuffle-in-the-cards" target="_blank" data-smartkarma-citation="insights:17331">The BOJ's Ongoing ETF Impact - Is a Nikkei 225 Reshuffle in the Cards?</a> I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. </p><h2>NOT, MAYBE, and LIKELY Problems</h2><p><strong>NOT A PROBLEM:</strong> The fact that the BOJ owned 80.3% of the ETFs outstanding at the end of January (now higher because the BOJ has spent an additional 292.4bn yen in the first seven trading days of February) is not a problem. </p><p><strong>MAYBE A PROBLEM:</strong> The fact that BOJ-owned ETFs own 18% of <a href="https://www.smartkarma.com/entities/18107" target="_blank" data-smartkarma-citation="entities:18107:1">Advantest Corp (6857 JP)</a> and 16.3% of <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing Co Ltd (9983 JP)</a> <em>may</em> be a problem. </p><p><strong>LIKELY A PROBLEM:</strong> Based on January month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the <a href="https://www.smartkarma.com/insights/the-boj-s-ongoing-etf-impact-is-a-nikkei-225-reshuffle-in-the-cards" target="_blank">previous insight</a>), over the next 12 months the BOJ would purchase 18.3% of the remaining float in Fast Retailing, 8.7% of the remaining float in <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart UNY Holdings Co Ltd (8028 JP)</a>, 6.2% of the remaining float in <a href="https://www.smartkarma.com/entities/13236" target="_blank" data-smartkarma-citation="entities:13236:1">Konami Holdings Corp (9766 JP)</a>, and 5+% of the remaining float of five other stocks.</p><h2>What To Do?</h2><p>The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. </p><p>Last week, the proposed dollar-weighted long basket outperformed the proposed DW short basket every day of the week, with the 50-name long basket outperforming the 40-name short basket by 4.8%. On an equal-weighted basis, the proposed long basket outperformed the short basket four days out of five for 2.9% outperformance. </p><p>That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.</p>

One week ago in The BOJ's Ongoing ETF Impact - Is a Nikkei 225 Reshuffle in the Cards? I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. NOT, MAYBE, and LIKELY ProblemsNOT A PROBLEM: The fact that the BOJ owned 80.3% of the ETFs outstanding at the end of January (now higher because the BOJ has spent an additional 292.4bn yen in the first seven trading days of February) is not a problem. MAYBE A PROBLEM: The fact that BOJ-owned ETFs own 18% of Advantest Corp (6857 JP) and 16.3% of Fast Retailing Co Ltd (9983 JP) may be a problem. LIKELY A PROBLEM: Based on January month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the previous insight), over the next 12 months the BOJ would purchase 18.3% of the remaining float in Fast Retailing, 8.7% of the remaining float in FamilyMart UNY Holdings Co Ltd (8028 JP), 6.2% of the remaining float in Konami Holdings Corp (9766 JP), and 5+% of the remaining float of five other stocks.What To Do?The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. Last week, the proposed dollar-weighted long basket outperformed the proposed DW short basket every day of the week, with the 50-name long basket outperforming the 40-name short basket by 4.8%. On an equal-weighted basis, the proposed long basket outperformed the short basket four days out of five for 2.9% outperformance. That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.

Japan

Mitsubishi Logistics Corporation provides warehousing, logistics, and other distribution services in Japan, the United States, and Asia.  The Company operates ground, port-harbor, and international intermodal transport as well as real estate leasing.

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Mitsubishi Logistics (9301 JP)

JD Logistics IPO: Valuation and Forecast Update

JD Logistics is set to launch its IPO to raise $3-4 bn in May. The rumoured $40 bn valuation is fair, particularly in the context of its...

Arun George

Japan Proxy Season - Power to the People

Shareholders are the owners, and owners have the power. I doubt that John Lennon would have written a song about shareholders, but if he had, that...

Mark Chadwick

Breaking Down Wild Nikkei 225 Component Moves

In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of...

Travis Lundy

JAPAN PASSIVE: The Nikkei 225 Baskets if BOJ Changes

Last week in JAPAN PASSIVE: BOJ Heading For Trouble with Nikkei 225 I discussed the BOJ's past and current ETF purchasing selection, ownership,...

Travis Lundy

Trading the BOJ-Nikkei 225 Baskets

One week ago in The BOJ's Ongoing ETF Impact - Is a Nikkei 225 Reshuffle in the Cards? I discussed the BOJ's past and current ETF purchasing...

Travis Lundy

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