China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>In his second day on the job, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> new chief executive Nicolas Aguzin expressed his confidence in Hong Kong's outlook as a continued gateway to China, and vowed to promote HKEx role in the connectivity. Although his carefully prepared speech did not outline more detail actions and strategic plan, investors still applauded his stance as new CEO and more diversified management at <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK), </a>the 2nd large exchange in Asia. </li>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> May ADT (Average Daily Turnover) continue to stay at high growth, delivering amazing 33% year-over-year growth in the month (but growth rate slowed from April). The outperformance is partially helped by the easy comparable from last year. For first 5 months of year 2021, HKEx ADT has delivered the year-over-year growth rate to 70%. IPO market remains robust. Total raised fund has reached HK$184 billion, almost 7x the IPO size in same period last year.</li>
<li>HKEx also disclosed its latest listing rule change for main board. The profitability requirement has been raised first time in 26 years, but is much lower than the original proposal.  We believe the original proposal has met with strong opposition from smaller companies and sponsors for listings. HKEx aims to improve listing companies quality and governance, which will be long term positive for HKEx. We remain bullish on <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>  and have TP HKD 550. </li>
</ul>


In his second day on the job, HKEX (388 HK) new chief executive Nicolas Aguzin expressed his confidence in Hong Kong's outlook as a continued gateway to China, and vowed to promote HKEx role in the connectivity. Although his carefully prepared speech did not outline more detail actions and strategic plan, investors still applauded his stance as new CEO and more diversified management at HKEX (388 HK), the 2nd large exchange in Asia. 

HKEX (388 HK) May ADT (Average Daily Turnover) continue to stay at high growth, delivering amazing 33% year-over-year growth in the month (but growth rate slowed from April). The outperformance is partially helped by the easy comparable from last year. For first 5 months of year 2021, HKEx ADT has delivered the year-over-year growth rate to 70%. IPO market remains robust. Total raised fund has reached HK$184 billion, almost 7x the IPO size in same period last year.
HKEx also disclosed its latest listing rule change for main board. The profitability requirement has been raised first time in 26 years, but is much lower than the original proposal.  We believe the original proposal has met with strong opposition from smaller companies and sponsors for listings. HKEx aims to improve listing companies quality and governance, which will be long term positive for HKEx. We remain bullish on HKEX (388 HK)  and have TP HKD 550. 


HKEx(388.HK): A Key Exchange to Connect China and the World, New CEO Said

APAC IPOs & Placements

Zhen Zhou, Toh

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.

Equity Capital Markets

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.
In Hong Kong, JD Logistics debuted 14% higher on Friday but traded down throughout the day to close just 3.3% above IPO price. The loss of momentum throughout the day could be the result of the market reconciling the fact that JDL will unlikely meet the fast entry/early inclusion criteria for FTSE and MSCI, as discussed in our update notes this week. 

JD Logistics (京东物流) Update Note - Index Inclusion Requirements - Still Has Some Way to Go
JD Logistics (京东物流) IPO Trading - Decent Demand + Updates to JD.com Valuation 
JD Logistics (京东物流) IPO - Updated Index Implications and Impact on JD.com (京东) HoldCo Valuation 
JD Logistics (京东物流) IPO - Widening Its Lead 
JD Logistics (京东物流) Pre-IPO - Index Implications - It Will Cut Close 
JD Logistics (京东物流) Pre-IPO - Quick Note - New PHIP with 1Q21 Results Changes Narrative 
JD Logistics (京东物流) Pre-IPO - PHIP Updates and Fine-Tuning Valuation 
JD Logistics (京东物流) Pre-IPO - Thoughts on Valuation 
JD Logistics (京东物流) Pre-IPO - Peer Comparison - Shielded from Price War 
JD Logistics (京东物流) Pre-IPO - Tethered to JD Group and Looking Beyond

Other upcoming trading debuts next week include Central China Management in Hong Kong on Monday and Monde Nissin in the Philippines on Tuesday. We liked Monde Nissin’s IPO given it is a well-known brand, has high market share coupled with potentially bright growth prospects.  

Monde Nissin Pre-IPO - The Positives - High Market Share 
Monde Nissin Pre-IPO - The Negatives - High Debt, Div Payments, Floundering MA 
Monde Nissin Pre-IPO - Peer Comparison for Food Business 
Monde Nissin Pre-IPO - Peer Comparison for Meat Alternative Business 
Monde Nissin Pre-IPO - Thoughts on Valuation 
Monde Nissin Pre-IPO - Not Cheap but Sensible

On the other hand, Central China Management traded 14% below IPO price in the grey market despite pricing close to the top-end of its price range.
Central China Management (中原建业) IPO - Concentrated Exposure
It has also been a busy week in the placement space across Asia.  
Leading in deal size was Country Garden Service, where the company raised US$2bn via a combination of US$1.35bn (upsized from US$1bn) from shares and US$650m (upsized from US$500m) from convertible bonds. Books were said to be multiple times covered from long-only investors, existing shareholders and hedge funds.
Country Garden Placement - Opportunistic Raise Ahead of HSI Inclusion but with Good Reason
Weimob raised US$601m from an equity combo with a US$301m primary placement and US$300m convertible bond issue. Shares were priced 6% discount and traded well since, closing 16.1% above the deal price, a day after the deal (on Wednesday).
Weimob (微盟) Placement - A Different Beast than Before - Tencent’s Support Helps Too
Kintor Pharmaceutical raised US$151m from a top-up placement this week. It was reported that books saw strong participation from long-only investors, healthcare specialists and existing shareholders. Part of the deal includes a sell-down by the co-founder. 
Kintor Pharma (开拓药业) Placement - Still Riding the COVID Momentum
In Japan, Skylark is looking to raise about US$365m in its global follow-on offering. Given the uncertain outlook, we think that it will need to be priced closer to 10% discount to undisturbed price level. The deal will price on Monday.
Skylark Placement - Uncertainty Looms, Needs to Price at Low End of Range
In Singapore, Frasers Logistics &amp; Commercial Trust raised US$252m in Singapore. Funds will be used to purchase six new properties in Europe. This marks their first foray into UK Logistics. Books were 2.8x covered with demand from long-only investors, companies and multi-strategy investors.
Frasers Logistics Placement - Consistent Performance, Accretive Deal
Other placements this week include, A Living Smart City Services and E-House China raising US$420m and US$101m, respectively. Both have held up well with the latter closing right at its deal price on Friday. Notably, E-House China’s placement was a selldown by Country Garden which still has about 4% stake post-selldown. Refined chemical supplier, China Risun, raised US$266m and struggled to hold above its deal price. 
We continued our coverage on CARsgen with a valuation note. The company began pre-marketing its US$500m IPO on Monday. Betta Pharmaceuticals also secured listing approval this week for its US$800m IPO. They will begin pre-marketing next week and we have covered the deal earlier.

CARsgen (科济药业) Pre-IPO: Scientific bet on new CAR-T targets
CARsgen (科济药业) Pre-IPO: Thoughts on Valuation
Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out

We also initiated a biotech focused contract research organisation, Novotech Holdings, this week. The company is looking to raise US$1.5bn in its upcoming IPO. The firm is 74.6% owned by TPG. 
Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation
This week, we began coverage on fresh food and FMCG retailer, WM Tech. They operate Wumart and Metro China brands.  
WM Tech Pre-IPO - Digitalization Efforts Coming Through but Not Well Substantiated
We also initiated on spicy-snack maker, Weilong Delicious Global, looking to raise US$1bn in its upcoming Hong Kong IPO. The firm boasts an impressive line-up of Pre-IPO backers which includes Hillhouse, Tencent, Yunfeng Capital and Sequoia etc. 

Weilong Delicious Global Pre-IPO - The Positives - Fast Growth, Strong Backers
Weilong Delicious Global Pre-IPO - The Negatives - Spicy Valuation

In terms of the IPO pipeline, there were a number of new filings as well. In Hong Kong, Cloud Village which operates NetEase Music app and is looking to raise US$1bn while online-merge-offline (OMO) tutoring service platform, Jiayi Education will likely raise more than US$100m. 
In the US, Keep, a Chinese fitness app, and Meicai, a platform that connects restaurants and vegetable producers, filed confidentially for a US$500m IPO each. Tencent-backed online job listing site, Kanzhun, filed this week for its US$800m US IPO and began pre-marketing this week. We also covered Warburg and Softbank-backed Zhangmen Education.

Kanzhun Pre-IPO - Bumble Meets Linkedin
Zhangmen Education (掌门教育) - Leader in one-on-one market but there are concerns

There was also news of Ximalaya potentially heading for a Hong Kong IPO instead, after getting pressured by regulators despite having filed its prospectus with the SEC earlier this month.
Last but not least, we looked at the potential trade surrounding the lock-up expiry of Nongfu Spring. IPO lock-up expires on 8th Sept 21, and its controlling shareholders, and remaining pre-IPO investors will be eligible to sell then. 

Nongfu Spring Pre-IPO - The Positives - Leaves One Thirsty for More
Nongfu Spring Pre-IPO - The Negatives - Doesn’t Need to List or Expand Production Facilities
Nongfu Spring Pre-IPO - Peer Comparison - Superior Margins and Growth
Nongfu Spring Pre-IPO - First Stab at Valuation
Nongfu Spring Pre-IPO - PHIP Updates
Nongfu Spring Pre-IPO - Updates to Valuation
Nongfu Spring IPO - Not Cheap by Any Measure but Is a Quality Name
Nongfu Spring IPO Trading Update - Strong Subscription Levels, in a League of Its Own
Nongfu Spring Lock-Up Could Correct the Tiny Float and Limited Trading

Accuracy Rate:Our overall accuracy rate is 73.8% for IPOs and 67.3% for Placements (Performance measurement criteria is explained at the end of the note)New IPO filings this week  

Cloud Village Inc. (Hong Kong, US$1bn)
Jiayi Education (Hong Kong, &gt;US$100m)
Full Truck Alliance (US, US$1.5 bn)
Kanzhun (US, US$800m)
News on Upcoming IPOs  

Hong Kong/China

Jiayi Education Files for Hong Kong Initial Public Offering
TikTok owner ByteDance launches share buyback after shelving IPO plans
GLP weighs HK listing for US$4bn China logistics assets
NetEase Cloud Music plans US$1bn HK IPO
Online Health-Care Platform ClouDr Said to Mull $500 Million IPO
CARsgen pre-markets US$500m HK IPO
Central China Management prices HK IPO near top
SenseTime pushes ahead with IPO plans
Betta Pharma wins approval for US$800m HK listing
China’s first batch of infra-REIT listings set to raise Rmb31.4bn
InnoCare Pharma to raise Rmb4bn from Star IPO
Yuexiu Services to pre-market HK IPO on Tuesday

US/China ADRs
Chinese Veggie Supplier Meicai Files Confidentially for U.S. IPO
SoftBank, Tencent-backed Keep plans US$500m US IPO
Chinese trucking platform For-U nets $200m in Series E round ahead of US IPO
Tencent-backed Kanzhun pre-markets Nasdaq IPO of up to US$800m
China Dynamics considers Nasdaq listing
Full Truck Alliance to pre-market US$1.5bn NYSE IPO next Monday
China presses Ximalaya to drop US for Hong Kong as listing venue - sources
India
Travel portal ixigo seeks to raise up to $240m via IPO route
Pharmeasy eyes IPO at $3 billion valuation, buys rival Medlife
Jhunjhunwala backed Star Health set to file for IPO
Paytm Is Said to Target $3 Billion IPO, Largest Ever for India
Metro Brands plans IPO filing in July
ESAF Small Finance Bank to refile DRHP with Sebi for IPO
HDFC Bank's NBFC arm holds IPO plans; to raise over Rs 8,600 crore via debt
Indian IPOs set for tech test
Others
Novare eyes public offer
Robinsons REIT sets P26.6-B IPO in end-August
PEXA IPO in limbo following takeover bid
Bukalapak plans up to US$300m IPO in July
Kalbe Farma Plans to Offer Distribution, Logistic Unit in IPO
Gold Miner Archi Said to Seek Orders for Jakarta IPO Next Week
Thai State Tollway Operator Mulls IPO to Fund New Projects
IGB Commercial REIT plans June IPO launch
Analysis on Upcoming IPOs

Name
Insight

Hong Kong

Anjuke
Anjuke Pre-IPO - Mixed (Positive and Negative) Developments 


Angelalign
Angelalign (时代天使) Pre-IPO: Medical Device Player with Consumer Feature 


Angelalign
Angelalign (时代天使) Pre-IPO: Deserves a Premium to Peers 


Betta Pharma
Betta Pharma (贝达医药) A+H: Tier 2 Player Struggled to Break Out 


Broncus
Broncus (堃博医疗) Pre-IPO: Big Potential to Be Tested 


ByteDance
ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)


ByteDance
ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance
ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)


ByteDance
ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 


ByteDance
ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 


ByteDance
ByteDance (字节跳动) Pre-IPO: Why Facebook Should Worry About TikTok 


ByteDance
ByteDance (字节跳动) Pre-IPO - Globally the Most Downloaded App for Jan 2020 Driven by India 


ByteDance
ByteDance (字节跳动) Pre-IPO: Global Ambition Meets Regulatory Challenges 


CARSgen
CARsgen (科济药业) Pre-IPO: Scientific Bet on New CAR-T Targets 


CARSgen
CARsgen (科济药业) Pre-IPO: Thoughts on Valuation 


Chaoju
Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive 


Dida
Dida Pre-IPO - Making Hay While Big Brother Retreats 


Dida
Dida Pre-IPO - Earnings Forecast and First Stab at Valuation 


Dida
Dida Pre-IPO - Peer Comparison - Lagging in Scale, Leading in Profitability 


Edding Grp
Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 


Edding Grp
Edding Group (亿腾医药) Pre-IPO: Notes from Latest Financials and Its Related Party 


Hanyu
Shanghai Hanyu (捍宇医疗) Pre-IPO: Not a Straight-A but Listing at Right Time 


Intco Med
Intco Medical (英科医疗) A+H: From China No.1 to Global No. 1 


Kilcoy
Kilcoy Global Foods Pre-IPO - Rapid Earnings Growth on the Back of Margin Improvement 


Kilcoy
Kilcoy Global Foods Pre-IPO - A Lot of Things Still Remain Unexplained 


Kindstar
Kindstar (康圣环球) Pre-IPO: Issues with Scalability 


Kindstar
Kindstar (康圣环球) Pre-IPO: Is It Worth the Premium? 


Novotech
Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation 


RemeGen

RemeGen (荣昌生物) Pre-IPO: Thoughts on Valuation of RC18 and RC48 


SH Bio-heart

Shanghai Bio-Heart (上海百心安) Pre-IPO: Needs a Long Runway 


Toplist

Toplist China Pre-IPO - Overwhelmingly More Negatives than Positives 


Tasly

Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 


WeDoctor

WeDoctor (微医) Pre-IPO -App Walk Through - The Online Medical Directory and More 


WeDoctor

WeDoctor (微医) Pre-IPO - A More Focused Online Medical Svc Provider than Ping An Good Doctor 


WeDoctor

We Doctor (微医) Pre-IPO - Peer Comparison - Picking Its Battles Wisely 


WeDoctor

We Doctor (微医) Pre-IPO - Forecasts, Early Thoughts on Valuation, and Acquisition Gripes 


Weilong

Weilong Delicious Global Pre-IPO - The Positives - Fast Growth, Strong Backers 


Weilong

Weilong Delicious Global Pre-IPO - The Negatives - Spicy Valuation 


WM Tech

WM Tech Pre-IPO - Digitalization Efforts Coming Through but Not Well Substantiated 


Youran Dairy

China Youran Dairy(悠然牧业) Pre-IPO - A Leader Pulling Ahead in a Fragmented Market 


Youran Dairy

China Youran Dairy(悠然牧业) Pre-IPO - PHIP Updates - Much Better Disclosure 


Youran Dairy

China Youran Dairy(悠然牧业) Pre-IPO - Peer Comparison - Youran Is the Leader 

India

Aadhar Housing

Aadhar Housing Finance Pre-IPO - Decent past Growth but Comes with Weird Disclosures 


ASK

ASK Investment Managers Pre-IPO - Riding on a Wave of Wealth 


Anmol Ind
Anmol Industries Pre-IPO Quick Take - No Growth, Generous Payments to Founders


Bharat Hotel
Bharat Hotels Pre-IPO - Catching up with Peers 


Bajaj En
Bajaj Energy Pre-IPO - Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 


CMS Info
CMS Info Systems Pre-IPO - When a PE Sells to Another PE... Only One Gets the Timing Right


Crystal Crop
Crystal Crop Protection Pre-IPO - DRHP Raises More Questions than in Answers


ESAF SFB

ESAF Small Finance Bank Pre-IPO - Growing Fast but Remains Highly Dependant on a Related Party 


Flemingo 
Flemingo Travel Retail Pre-IPO - Its a Different Business in Every Country


Emami Cem

Emami Cement Pre-IPO - Still in Ramp Up Phase but Shares Pledge Might Lead to an Early IPO 


NSE
NSE IPO Preview- Not Only Fast..its Risky and Expensive


NSE
National Stock Exchange Pre-IPO Review - Bigger, Better, Stronger but a Little Too Fast for Some


LIC

Life Insurance Corporation of India Pre-IPO - Early Take on India's Largest IPO 


Penna Cem

Penna Cement - Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 


PNB Met
PNB Metlife Pre-IPO Quick Take - Doesn't Stack up Well Versus Its Larger Peers


Samhi Hotels

Samhi Hotels Pre-IPO - Assets and Borrowings Are Growing, but Earnings Haven’t Kept Pace 


Sona Comstar

Sona Comstar Pre-IPO - Inconsistent Growth, Patchy Disclosures 


Zomato

Zomato Pre-IPO - Filings Lack Narrative, a Little Bit of History Helps 


Zomato

Zomato Pre-IPO - Food Delivery Revenue Was Probably up 16x 

Malaysia

QSR
QSR Brands Pre-IPO - As Healthy as Fast Food

The U.S.

ForU

ForU Worldwide Pre-IPO - Mostly Negatives 


Hello Inc

Hello Inc (哈罗出行) Pre-IPO - Nowhere near Being Sustainable 


Kanzhen

Kanzhun Pre-IPO - Bumble Meets Linkedin 


Soulgate

Soulgate Pre-IPO - Unsustainable Virtual Connection 


Qiniu

Qiniu Cloud (七牛云) Pre-IPO: PaaS Doesn't Warrant a Premium 


Ximalaya

Ximalaya Pre-IPO - The Positives - A Whole Lot of Listening 


Ximalaya

Ximalaya Pre-IPO - The Negatives 


Ximalaya

Ximalaya Pre-IPO - Peer Comparison 


Ximalaya

Ximalaya Pre-IPO - Earnings Forecast and Valuation 


Ximalaya

Ximalaya (XIMA): Has Large Market Share, But Small Competitors Have Big Bosses. 



ECM Weekly (30th May 2021) - JD Log, Monde Nissin, Weilong Deli, Kanzhun, CARsgen, WM Tech, Novotech

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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Novotech Holdings / Equity Capital Markets

Novotech is a leading biotech focused contract research organization in Asia Pacific. The company is looking to raise up to USD 1.5bn via a Hong Kong listing.The company has a long history of operation since 1997 and was formed by a merger of two companies. It has a customer focus on biotech companies with its flexible services, particularly services in the clinical research stage. We like the company's leading market position in Australia/New Zealand and South Korea. The company is run by a decent team and has obtained investments from a strong line-up of investors. It has been growing at a rate above the industry average but it only turned profitable in 2020. Looking at the company's pre-IPO valuation, we think the investors have been bullish on the prospect of margin improvement.

Novotech is a leading biotech focused contract research organization in Asia Pacific. The company is looking to raise up to USD 1.5bn via a Hong Kong listing.The company has a long history of operation since 1997 and was formed by a merger of two companies. It has a customer focus on biotech companies with its flexible services, particularly services in the clinical research stage. We like the company's leading market position in Australia/New Zealand and South Korea. The company is run by a decent team and has obtained investments from a strong line-up of investors. It has been growing at a rate above the industry average but it only turned profitable in 2020. Looking at the company's pre-IPO valuation, we think the investors have been bullish on the prospect of margin improvement. 

Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation

China

Largest biotech specialist contract research organization (CRO) in Asia

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Novotech Holdings (NVT HK)

HKEx(388.HK): A Key Exchange to Connect China and the World, New CEO Said

HKEX (388 HK) first 5 months ADT has grown 70% year-over-year, and IPO market remains robust. Total raised fund has reached HK$184 billion, almost...

Roger Xie

ECM Weekly (30th May 2021) - JD Log, Monde Nissin, Weilong Deli, Kanzhun, CARsgen, WM Tech, Novotech

Aequitas Research puts out a weekly update on the deals that have been covered by the team recently along with updates for upcoming IPOs.

Zhen Zhou, Toh

Novotech Pre-IPO: Biotech Focused CRO at Hefty Pre-IPO Valuation

Novotech has an interesting value proposition as a biotech focused CRO in the APAC region. The company has a decent growth in the past but we think...

Ke Yan, CFA, FRM

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