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.

Equity Capital Markets

JD.com Inc (ADR) / Equity Capital Markets

<ul>
<li>On 23rd Dec, Tencent declared a dividend in the form of distribution in specie of 457.326m shares of JD.com, i.e. 1 share of JD.com for every 21 shares of Tencent.</li>
<li>While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.</li>
<li>In this note, we look at Tencent’s shareholding in order to decipher the impact on JD.com’s shares once the distribution is settled to determine who the sellers could be.</li>
</ul>


On 23rd Dec, Tencent declared a dividend in the form of distribution in specie of 457.326m shares of JD.com, i.e. 1 share of JD.com for every 21 shares of Tencent.
While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.
In this note, we look at Tencent’s shareholding in order to decipher the impact on JD.com’s shares once the distribution is settled to determine who the sellers could be.


JD.com Tencent Div Distribution - The US$10bn Overhang

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 Bottom-Up

<ul>
<li>We are outright negative on regional e-commerce names leading into earnings as a small miss could spark a significant sell-off in the current market conditions.</li>
<li>Even though most regional EC names including <a href="https://www.smartkarma.com/entities/coupang-inc" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> are down by around 65%, we fear that there’s further downside risk in a rising interest rate environment.</li>
<li>In the meantime, we expect Coupang to miss 4Q21 revenue when they report on Thursday. In addition, Coupang has the biggest downside potential as it is expensive compared to peers.</li>
</ul>


We are outright negative on regional e-commerce names leading into earnings as a small miss could spark a significant sell-off in the current market conditions.
Even though most regional EC names including Coupang (CPNG US) are down by around 65%, we fear that there’s further downside risk in a rising interest rate environment.
In the meantime, we expect Coupang to miss 4Q21 revenue when they report on Thursday. In addition, Coupang has the biggest downside potential as it is expensive compared to peers.


Coupang Earnings Preview: More Room to Fall

Event-Driven

<ul>
<li>On 2nd Dec 2021, Securities Exchange Commission (SEC) issued Final amendments to implement the Holding Foreign Companies Accountable Act (HFCAA).</li>
<li>On 24th Mar 2021, SEC had issued Amendments, Seeks Public Comment on HFCAA. This was a follow up on the HFCAA.</li>
<li>In this note, we'll talk about the final amendments and its possible timelines and implications, and a possible trade setup.</li>
</ul>


On 2nd Dec 2021, Securities Exchange Commission (SEC) issued Final amendments to implement the Holding Foreign Companies Accountable Act (HFCAA).
On 24th Mar 2021, SEC had issued Amendments, Seeks Public Comment on HFCAA. This was a follow up on the HFCAA.
In this note, we'll talk about the final amendments and its possible timelines and implications, and a possible trade setup.


China ADRs Delisting - US Tightens and HK Loosens Requirements - Long/Short Basket Trade

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>Nikkei reports that a high ranking CCP official has suggested that the platforms possessing personal data should return around 20-30% of the revenue generated to the common prosperity cause. </li>
<li>We expect big tech to lose competitiveness as the government takes control of the use of personal data. Meanwhile the Chinese economic slowdown is a double blow to big tech. </li>
<li>If remaining investors lose faith and exit, big tech can trade at around 1.0-1.5x price to book in the next few years.</li>
</ul>


Nikkei reports that a high ranking CCP official has suggested that the platforms possessing personal data should return around 20-30% of the revenue generated to the common prosperity cause. 
We expect big tech to lose competitiveness as the government takes control of the use of personal data. Meanwhile the Chinese economic slowdown is a double blow to big tech. 
If remaining investors lose faith and exit, big tech can trade at around 1.0-1.5x price to book in the next few years.


<p><a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a> is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 113 billion. Due to the competition from e-commerce platforms, Gome endured a tough time during the last four years with revenue declining at an annual compound rate of 12.9%. The company’s operating losses peaked at CNY 3.8 billion in 2020.</p><p>Nevertheless, the future looks bright for Gome Retail as they have managed to transform the traditional brick and mortar retail business to an omni-channel model. In addition, the shift in government policy to eradicate unfair competition and encourage domestic consumption, especially in lower-tier cities could accelerate Gome’s omni-channel revival.</p>

Gome Electrical Appliances (493 HK) is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 113 billion. Due to the competition from e-commerce platforms, Gome endured a tough time during the last four years with revenue declining at an annual compound rate of 12.9%. The company’s operating losses peaked at CNY 3.8 billion in 2020.Nevertheless, the future looks bright for Gome Retail as they have managed to transform the traditional brick and mortar retail business to an omni-channel model. In addition, the shift in government policy to eradicate unfair competition and encourage domestic consumption, especially in lower-tier cities could accelerate Gome’s omni-channel revival.

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

Prosus N.V. provides internet based services. The Company focuses on investments in internet, digital media, e-commerce retailing, and consumer internet companies. Prosus serves customers worldwide.

Hainan Island Construction Co Ltd.  is a property development company. The Company also operates regional malls and hotels.

Guangzhou Friendship Group Co., Ltd operates supermarkets and department stores in Guangzhou, China.  The Company sells a variety of consumer products, including apparel, food and beverages, electronics, jewelry, cosmetics, and electric appliances.  Guangzhou Friendship also leases real estate properties.

Guangzhou Friendship Group Co, Ltd. (000987 CH)

Golden Eagle Retail Group Limited operates department stores in China. The Company's stores target mid-range and high-end market segments in China, and contain various functions and amenities such as dining, entertainment, beauty and personal care, cinemas, and preschool education in addition to their core function as an international department store.

Tianjin Quanye Bazaar (Group) Co., Ltd. owns and operates department stores and supermarkets, as well as sells general merchandise on a wholesale basis. Tianjin Quanye also provides storage and cargo delivery services, and invests in real estate and interior decoration businesses.

Xian International Medical Investment Co Ltd is principally engaged in the medical services industry.

Xian International Medical Invest (000516 CH)

Wangfujing Group Co., Ltd. owns and operates department stores in Beijing, Guangzhou, Chengdu, Wuhan, and other cities in China.  The Company also develops residential real estate.

Dollar General Corporation operates a chain of discount retail stores located primarily in the southern, southwestern, midwestern, and eastern United States. The Company offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health, beauty, pet supplies, and non-consumables such as seasonal merchandise.

Trent Limited operates a chain of retail stores that sell fashion apparel, cosmetics, perfumery products and toiletry items. The Company sells apparel for men, women and children. Trent sells its cosmetics products under the "Westside" and "Trent" brand names.

Dollar Tree, Inc. operates a discount variety store chain in the United States. The Company sells an assortment of everyday general merchandise at the $1.00 price point.

Pan Pacific International Holdings Corporation operates discount stores which sell consumer electronics, daily necessities, groceries, watches, and sporting goods. The Company mostly operates small scale stores based in Tokyo.

Pan Pacific International Holdings (7532 JP)

Target Corporation operates general merchandise discount stores. The Company focuses on merchandising operations which includes general merchandise and food discount stores and a fully integrated online business. Target also offers credit to qualified applicants through its branded proprietary credit cards.

Naspers Limited operates in the technology industry. The Company invests in global internet companies across the world.

Next Plc conducts retailing, home shopping, and customer services management operations.  The Company's retail stores sell ladies wear, mens wear, childrens wear, and housewares.

Avenue Supermarts Ltd. (ASL) owns and operates hypermarkets and supermarkets. The Company offers products such as garments, footwears, toys and games, bed and bath linen, stationery, grocery, household, and electronic products. ASL operates throughout India.

Dollarama Inc. operates as an online marketplace. The Company offers cleaning, school, office, home, kitchen, food, health, beauty, hardware, electronics, toys, and pets products, as well as provides delivery services. Dollarama serves customers in Canada.

MercadoLibre, Inc. operates an online trading site for the Latin American markets. The Company's website allows businesses and individuals to list items, conduct sales, and purchases online in either a fixed-price and auction format. MercadoLibre offers classified advertisements for motor vehicles, vessels, aircraft, and real estate, as well as online payment services.

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

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PDD Holdings (PDD US)

JD.com Tencent Div Distribution - The US$10bn Overhang

On 23rd Dec 21, Tencent declared a dividend in the form of distribution in specie of 1 share of JD.com for every 21 shares of Tencent. The shares...

Sumeet Singh

Coupang Earnings Preview: More Room to Fall

With Coupang possibly having the biggest downside potential among leading EC players in the region, we would choose it over others names to have a...

Oshadhi Kumarasiri

China ADRs Delisting - US Tightens and HK Loosens Requirements - Long/Short Basket Trade

On 2nd Dec 2021, SEC issued Final amendments to implement the Holding Foreign Companies Accountable Act. In this note we will talk about the final...

Sumeet Singh

China Considering a Data Tax on Big Tech

Investors are starting to rethink their investments in the Chinese tech space and the idea that investors should avoid Chinese tech stocks amidst...

Oshadhi Kumarasiri

Gome Retail: Time to Shop

At 1.96x price to book, Gome does not look especially cheap considering it’s current liquidity levels. However, we believe the worst has passed for...

Oshadhi Kumarasiri

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