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.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a>  is a leading music streaming platform in China and the company is backed-by <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">NetEase Inc (NTES US)</a> , one of the largest games and entertainment company in China. The company has filed for an IPO to list its shares on the Hong Kong Stock Exchange (HKEx) and according to news media outlets, the company plans to raise proceeds of about US$1bn.</p><p>Cloud Village generates revenues from online music services and social entertainment services (live streaming) and the competes with <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a>  in China and the two companies operate similar business models and are backed by two large internet companies in China.</p><p><a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> has a large paid user base compared to Cloud Village and generates operating profits whereas Cloud Village has not yet been able to make gross margins though gross losses are declining. However, TME is currently probed by the State Administration of Market Regulation (SAMR) in China over its past deals. TME is formed by the acquisition of Kugou and Kuwo apps and the regulators have informed TME should expect to give up exclusive music rights and may even be forced to sell its previously acquired businesses of Kugou and Kuwo in 2016. Kugou and Kuwo account for about 64% of the total MAUs of TME’s online music streaming business and having to let go of these two businesses will wipe out a significant portion of TME’s users and revenues.</p><p>In this insight, we examine Cloud Village’s business model, its segments and financials. We plan to compare the company’s financials and KPIs against TME in a follow-up insight.</p>

Cloud Village (CLV HK)  is a leading music streaming platform in China and the company is backed-by NetEase Inc (NTES US) , one of the largest games and entertainment company in China. The company has filed for an IPO to list its shares on the Hong Kong Stock Exchange (HKEx) and according to news media outlets, the company plans to raise proceeds of about US$1bn.Cloud Village generates revenues from online music services and social entertainment services (live streaming) and the competes with Tencent Music (TME US)  in China and the two companies operate similar business models and are backed by two large internet companies in China.Tencent Music (TME US) has a large paid user base compared to Cloud Village and generates operating profits whereas Cloud Village has not yet been able to make gross margins though gross losses are declining. However, TME is currently probed by the State Administration of Market Regulation (SAMR) in China over its past deals. TME is formed by the acquisition of Kugou and Kuwo apps and the regulators have informed TME should expect to give up exclusive music rights and may even be forced to sell its previously acquired businesses of Kugou and Kuwo in 2016. Kugou and Kuwo account for about 64% of the total MAUs of TME’s online music streaming business and having to let go of these two businesses will wipe out a significant portion of TME’s users and revenues.In this insight, we examine Cloud Village’s business model, its segments and financials. We plan to compare the company’s financials and KPIs against TME in a follow-up insight.

Cloud Village IPO: Improving Financials and Less Fear of Regulatory Crackdowns for Investors

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

<p>In our previous note <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> we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme of a general crackdown on overseas listings for Chinese companies. </p>
<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>
<div>
<p>In this note, we'll talk about the implications of the recent China regulatory announcements.</p>
</div>

In our previous note China ADRs - Kanzhun, Full Truck and Didi - Regulators Sending a Message, we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme of a general crackdown on overseas listings for Chinese companies. 

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. 



In this note, we'll talk about the implications of the recent China regulatory announcements.


China ADRs - Now the Message Is Loud and Getting Clearer

<div>
<p><a href="https://www.smartkarma.com/entities/xpeng-motors" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng Motors (XPEV US)</a> raised around US$2bn via a listing in Hong Kong. In this note, we will talk about the trading dynamics and the updates since our last note, <a href="https://www.smartkarma.com/insights/xpeng-motors-hk-listing-will-probably-be-hot-given-strong-momentum-but-past-deal-didn-t-do-well" target="_blank" rel="noopener">Xpeng Motors HK Listing - Will Probably Be Hot Given Strong Momentum but past Deal Didn’t Do Well.</a></p>
</div>
<div>
<p>We have covered the IPO in:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/xpeng-motors-pre-ipo-lots-to-like-with-solid-backing-from-investors" target="_blank" data-smartkarma-citation="insights:42126" rel="noopener">Xpeng Motors (小鹏汽车) Pre-IPO - Lots to like with Solid Backing from Investors</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/xpeng-motors-visited-a-store-fairly-priced-but-with-recharging-problem" target="_blank" data-smartkarma-citation="insights:42283" rel="noopener">Xpeng Motors (小鹏汽车): Visited a Store, Fairly Priced, But with Recharging Problem</a> </li>
<li><a href="https://www.smartkarma.com/insights/xpeng-motors-pre-ipo-car-comparison-and-p7-performance-test" target="_blank" data-smartkarma-citation="insights:42386" rel="noopener">Xpeng Motors (小鹏汽车) Pre-IPO - Car Comparison and P7 Performance Test</a></li>
<li>
<a href="https://www.smartkarma.com/insights/xpeng-motors-pre-ipo-peer-comparison-and-valuation" target="_blank" data-smartkarma-citation="insights:42389" rel="noopener">Xpeng Motors (小鹏汽车) Pre-IPO - Peer Comparison and Valuation</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/xpeng-ipo-riding-the-momentum" target="_blank" data-smartkarma-citation="insights:42503" rel="noopener">Xpeng Motors (小鹏汽车) IPO - Riding the Momentum</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/xpeng-motors-trading-nio-leading-the-charge" target="_blank" data-smartkarma-citation="insights:42616" rel="noopener">Xpeng Motors (小鹏汽车) Trading - NIO Leading the Charge</a> </li>
</ul>
</div>
<div>
<p>And the previous placement in:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/xpeng-motors-placement-level-the-playing-field" target="_blank" rel="noopener">Xpeng Motors (小鹏汽车) Placement - Level the Playing Field</a></li>
</ul>
</div>


Xpeng Motors (XPEV US) raised around US$2bn via a listing in Hong Kong. In this note, we will talk about the trading dynamics and the updates since our last note, Xpeng Motors HK Listing - Will Probably Be Hot Given Strong Momentum but past Deal Didn’t Do Well.


We have covered the IPO in:




Xpeng Motors (小鹏汽车) Pre-IPO - Lots to like with Solid Backing from Investors 

Xpeng Motors (小鹏汽车): Visited a Store, Fairly Priced, But with Recharging Problem 
Xpeng Motors (小鹏汽车) Pre-IPO - Car Comparison and P7 Performance Test

Xpeng Motors (小鹏汽车) Pre-IPO - Peer Comparison and Valuation 

Xpeng Motors (小鹏汽车) IPO - Riding the Momentum 

Xpeng Motors (小鹏汽车) Trading - NIO Leading the Charge 



And the previous placement in:



Xpeng Motors (小鹏汽车) Placement - Level the Playing Field



Xpeng Motors HK Trading - More Hot with Instis that Retail

Alpha-Centric ESG Research

Kyle Rudden

<p>Well, that sure escalated quickly.</p><p>Early last week, in the Insight <a href="https://www.smartkarma.com/insights/pre-ipo-esg-analysis-didi-s-exemplary-esg-achievements-eclipsed-by-regulatory-risks-and-uncertainty" target="_blank" data-smartkarma-citation="insights:53687" rel="noopener">Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty</a>, I juxtaposed <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi's (DIDI US)</a> relatively strong ESG results in areas under its control with serious concerns about regulatory risk outside of its direct control.</p><p>Late last week, days after DiDi's successful US$4.4 billion initial public offering, Chinese regulators ordered the removal of DiDi's business-critical ride-hailing apps from online app markets, until the company rectifies "serious violations" pertaining to collection and use of customer data.</p><p>DiDi is down 5.3% so far (delayed open today).</p><p>Regulatory risk was central to my thesis in the first Insight. I hardly anticipated this, but I referred to regulatory risk as real, near-term, tangible investment risk; not just some fuzzy ESG risk. Given that, I felt obliged to follow up. At the same time, however, this news is covered <em>ad nauseam.</em></p><p>No sense in beating a dead horse with a broken record.</p><p>So, I decided to do something different. That statement about regulatory risk being a real tangible investment risk is primarily based on anecdotal evidence – i.e., when regulators flex their muscle, stocks go down, not up. But "anecdotal" isn't good enough.</p><p>Which is why I took this opportunity to quantify the impacts of adverse regulatory events in China. Specifically, with event studies measuring abnormal returns around major regulatory events across four broad categories. That's what most of this Insight is about. But back to DiDi for a moment.</p><p>Regulatory risk and uncertainty for DiDi is much worse today than it was last week. Typically, the opposite would be true; a negative event out in the open is better than a possible event lurking in the shadows. But not this time. Barring an immediate change of heart by the PRC, this is bad.</p><p>Therefore, downgrading to bearish.</p>

Well, that sure escalated quickly.Early last week, in the Insight Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty, I juxtaposed DiDi's (DIDI US) relatively strong ESG results in areas under its control with serious concerns about regulatory risk outside of its direct control.Late last week, days after DiDi's successful US$4.4 billion initial public offering, Chinese regulators ordered the removal of DiDi's business-critical ride-hailing apps from online app markets, until the company rectifies "serious violations" pertaining to collection and use of customer data.DiDi is down 5.3% so far (delayed open today).Regulatory risk was central to my thesis in the first Insight. I hardly anticipated this, but I referred to regulatory risk as real, near-term, tangible investment risk; not just some fuzzy ESG risk. Given that, I felt obliged to follow up. At the same time, however, this news is covered ad nauseam.No sense in beating a dead horse with a broken record.So, I decided to do something different. That statement about regulatory risk being a real tangible investment risk is primarily based on anecdotal evidence – i.e., when regulators flex their muscle, stocks go down, not up. But "anecdotal" isn't good enough.Which is why I took this opportunity to quantify the impacts of adverse regulatory events in China. Specifically, with event studies measuring abnormal returns around major regulatory events across four broad categories. That's what most of this Insight is about. But back to DiDi for a moment.Regulatory risk and uncertainty for DiDi is much worse today than it was last week. Typically, the opposite would be true; a negative event out in the open is better than a possible event lurking in the shadows. But not this time. Barring an immediate change of heart by the PRC, this is bad.Therefore, downgrading to bearish.

PRC Shows DiDi Who's Boss: An Analysis of Adverse Regulatory Events on Stock Prices

<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, raised around US$4.4bn 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>We have covered the deal background and financials overview in our previous notes<a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-one-of-asia-s-largest-ipos-this-year-tearsheet" target="_blank" rel="noopener"></a>:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<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>.</li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-has-a-principal-agent-problem-rumoured-target-valuation-is-a-stretch" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-pre-ipo-competitive-in-car-hailing-uncompetitive-in-others-generally-valuable" target="_blank" rel="noopener">DIDI (滴滴) Pre-IPO: Competitive in Car Hailing, Uncompetitive In “Others”, Generally Valuable</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-peer-comparison" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Peer Comparison</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-valuation" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-pre-ipo-bull-case-index-inclusion-uber-exit" target="_blank" rel="noopener">DiDi Chuxing Pre-IPO - Bull Case, Index Inclusion, Uber Exit</a></li>
<li><a href="https://www.smartkarma.com/insights/didi-chuxing-ipo-at-fair-value-with-partial-lock-up-and-index-inclusion-pulling-it-either-way" target="_blank" rel="noopener">DiDi Chuxing IPO - At Fair Value, with Partial Lock-Up and Index Inclusion Pulling It Either Way</a></li>
</ul>
</div>
<div>
<p>In this note, we will talk about the trading dynamics.</p>
</div>


DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, raised around US$4.4bn in its US listing. It is backed by Softbank Group (9984 JP) and Tencent (700 HK), along with other investors.


We have covered the deal background and financials overview in our previous notes:




DiDi Chuxing Pre-IPO - One of Asia’s Largest IPOs This Year - Tearsheet.
DiDi Chuxing Pre-IPO - Has a Principal Agent Problem, Rumoured Target Valuation Is a Stretch
DIDI (滴滴) Pre-IPO: Competitive in Car Hailing, Uncompetitive In “Others”, Generally Valuable
DiDi Chuxing Pre-IPO - Peer Comparison
DiDi Chuxing Pre-IPO - Valuation
DiDi Chuxing Pre-IPO - Bull Case, Index Inclusion, Uber Exit
DiDi Chuxing IPO - At Fair Value, with Partial Lock-Up and Index Inclusion Pulling It Either Way



In this note, we will talk about the trading dynamics.


DiDi Chuxing IPO Trading - Upsize Will Ensures Index Inclusion, Lock-Up Remains a Wildcard

China

NetEase, Inc. operates as an leading internet technology company providing online services including content, community, communication, and commerce. The Company develops and operates online games, electronic commerce, internet media, innovative business, and other businesses. NetEase expands its businesses to Japan, North American, and other other international markets.

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NetEase (9999 HK)

Cloud Village IPO: Improving Financials and Less Fear of Regulatory Crackdowns for Investors

Cloud Village competes with TME who is currently probed by the SAMR over its past deals involving the acquisition of Kugou and Kuwo who account for...

Shifara Samsudeen, ACMA, CGMA

China ADRs - Now the Message Is Loud and Getting Clearer

In our previous note we spoke about the recent crackdown on the three US listed firms. Since then more news has been coming in along the same theme...

Sumeet Singh

Xpeng Motors HK Trading - More Hot with Instis that Retail

Xpeng Motors (XPEV US) raised around US$2bn via a listing in Hong Kong. In this note, we will talk about the trading dynamics and the updates since...

Sumeet Singh

PRC Shows DiDi Who's Boss: An Analysis of Adverse Regulatory Events on Stock Prices

Last week, I wrote about DiDi's regulatory risk. This week, it's worse. Hence the downgrade. But this is mostly an analysis of how regulatory...

Kyle Rudden

DiDi Chuxing IPO Trading - Upsize Will Ensures Index Inclusion, Lock-Up Remains a Wildcard

DiDi Chuxing (DIDI US), the world’s largest mobility technology platform, raised around US$4.4bn in its US listing. It is backed by Softbank Group...

Sumeet Singh

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