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.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users. Kanzhun has filed for a Nasdaq IPO to raise proceeds of $800 million, according to press reports.  In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-initiation-search-and-employ" target="_blank" data-smartkarma-citation="insights:51969" rel="noopener">Kanzhun IPO Initiation: Search and Employ</a>, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we concluded that the Kanzhun story warrants a closer look.<div class="content-highlight">In this note, we compare Kanzhun’s key financial metrics to its listed peers, <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> and <a href="https://www.smartkarma.com/entities/wise-talent-information-tech" target="_blank" data-smartkarma-citation="entities:27177:1" rel="noopener">Wise Talent Information Tech (6100 HK)</a>/Tongdao Liepin. 51jobs is in the midst of a $79.05 in cash privatisation bid from a consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, 51job's CEO since 2000 - <a href="https://www.smartkarma.com/insights/51job-s-updated-privatisation-bid" target="_blank" data-smartkarma-citation="insights:51071" rel="noopener">51job’s Updated Privatisation Bid</a>. Our analysis suggests that Kanzhun provides a growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers.   </div>

Kanzhun (BZ US) is the largest online recruitment platform in China, as measured by the average MAU in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users. Kanzhun has filed for a Nasdaq IPO to raise proceeds of $800 million, according to press reports.  In Kanzhun IPO Initiation: Search and Employ, we opined that Kanzhun’s strong growth in users and fast-paced revenue growth suggests another “growth at all costs” strategy. Encouragingly, the high revenue visibility, declining loss margin and cash generation suggest that Kanzhun can eventually deliver this growth profitability. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we concluded that the Kanzhun story warrants a closer look.In this note, we compare Kanzhun’s key financial metrics to its listed peers, 51 Job Inc Adr (JOBS US) and Wise Talent Information Tech (6100 HK)/Tongdao Liepin. 51jobs is in the midst of a $79.05 in cash privatisation bid from a consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, 51job's CEO since 2000 - 51job’s Updated Privatisation Bid. Our analysis suggests that Kanzhun provides a growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers.   

Kanzhun IPO: Growth/Margin Trade-Off Vs Peers

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.

Renesas Electronics / Equity Capital Markets

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:<ul>
<li dir="ltr" aria-level="1">US$2.8bn bn in 2017 <a href="https://www.smartkarma.com/insights/renesas-electronics-placement-additional-thoughts-on-valuation-flotation-and-ownership" target="_blank" rel="noopener">Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership</a></li>
<li dir="ltr" aria-level="1">US$2.4bn in 2018 <a href="https://www.smartkarma.com/insights/renesas-placement-tighter-effective-discount-and-placement-overhangs-but-statistic-supports-a-bid" target="_blank" rel="noopener">Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid</a></li>
</ul>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:
US$2.8bn bn in 2017 Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership
US$2.4bn in 2018 Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

<a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> is the largest online recruitment platform in China, as measured by the average monthly active users (MAU) in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users as is positioned in the mid-to-high-end segment (white and gold-collar users) compared to local peers.Kanzhun is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (12.2% of outstanding shares), Banyan Partners (9.4%), Coatue Management (7.8%), <a href="https://www.smartkarma.com/entities/goldman-sachs-group-inc" target="_blank" data-smartkarma-citation="entities:785:1" rel="noopener">Goldman Sachs Group (GS US)</a> (7.3%), Sequoia Capital and Tiger Global. Kanzhun has filed for a Nasdaq IPO to raise proceeds of $800 million, according to press reports.  Kanzhun is a play on the gradual shift of the China recruitment service market to online platforms. China’s online recruitment market size as measured by revenue is forecasted to increase from RMB55.1 billion in 2020 to RMB223.4 billion in 2025 (CAGR of 32.3%), according to CIC. The penetration rate of online recruitment to the total market is forecasted to increase from 32% in 2020 to 50% in 2025, according to CIC.<div class="content-highlight">
Kanzhun is well-positioned to benefit from this sizeable market opportunity, in our view. At first sight, the strong growth in users and fast-paced revenue growth but ongoing losses suggests another “growth at all costs” strategy. In comparison, local listed peers such as <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> and <a href="https://www.smartkarma.com/entities/wise-talent-information-tech" target="_blank" data-smartkarma-citation="entities:27177:1" rel="noopener">Wise Talent Information Tech (6100 HK)</a> are growing much slower but are profitable.
Encouragingly, Kanzhun's high revenue visibility and declining loss margin suggest that Kanzhun can eventually deliver high growth with profits. The upfront payment model of the online recruitment market means that like its peers, Kanzhun is cash generative. For investors willing to brave the current market selloff in high growth stocks, we think that the Kanzhun story warrants a closer look.  
</div>

Kanzhun (BZ US) is the largest online recruitment platform in China, as measured by the average monthly active users (MAU) in 2020, according to CIC. Its BOSS Zhipin mobile app connects job seekers and enterprise users as is positioned in the mid-to-high-end segment (white and gold-collar users) compared to local peers.Kanzhun is backed by Tencent (700 HK) (12.2% of outstanding shares), Banyan Partners (9.4%), Coatue Management (7.8%), Goldman Sachs Group (GS US) (7.3%), Sequoia Capital and Tiger Global. Kanzhun has filed for a Nasdaq IPO to raise proceeds of $800 million, according to press reports.  Kanzhun is a play on the gradual shift of the China recruitment service market to online platforms. China’s online recruitment market size as measured by revenue is forecasted to increase from RMB55.1 billion in 2020 to RMB223.4 billion in 2025 (CAGR of 32.3%), according to CIC. The penetration rate of online recruitment to the total market is forecasted to increase from 32% in 2020 to 50% in 2025, according to CIC.
Kanzhun is well-positioned to benefit from this sizeable market opportunity, in our view. At first sight, the strong growth in users and fast-paced revenue growth but ongoing losses suggests another “growth at all costs” strategy. In comparison, local listed peers such as 51 Job Inc Adr (JOBS US) and Wise Talent Information Tech (6100 HK) are growing much slower but are profitable.
Encouragingly, Kanzhun's high revenue visibility and declining loss margin suggest that Kanzhun can eventually deliver high growth with profits. The upfront payment model of the online recruitment market means that like its peers, Kanzhun is cash generative. For investors willing to brave the current market selloff in high growth stocks, we think that the Kanzhun story warrants a closer look.  


Kanzhun IPO Initiation: Search and Employ

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 Bottom-Up

<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> hold reported its 4Q and full-year FY03/21 financial results on Monday (17th of May 2021).Recruit marginally beat its full-year revenue guidance with a consolidated revenue of ¥2,269.3bn in FY03/2021 versus the guidance of ¥2,224.6bn. The company’s consolidated EBITDA was ¥241.6bn compared to guidance of ¥231.9bn.On a year-on-year basis, the company’s 4Q revenues grew by 4.0% whereas EBITDA margin declined 440bps to 5.0% compared to 9.4% a year ago. Although the HR tech segment is gradually recovering from the COVID-19 impact, the other two segments have not performed that favourably.At a FY2 EV/EBITDA multiple of 18.6x Recruit looks expensive to us compared to both its peers. <a href="https://www.smartkarma.com/entities/temp-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1428:1" rel="noopener">Persol Holdings (2181 JP)</a> , the second largest staffing company in Japan after Recruit, is trading at a FY2 EV/EBITDA of 7.3x while Yahoo Japan (4689 JP), which earns around 70% of its EBITDA from advertising related businesses, is trading at an FY2 EV/EBITDA of 10.7x (owned by Z Holdings).

Recruit Holdings (6098 JP) hold reported its 4Q and full-year FY03/21 financial results on Monday (17th of May 2021).Recruit marginally beat its full-year revenue guidance with a consolidated revenue of ¥2,269.3bn in FY03/2021 versus the guidance of ¥2,224.6bn. The company’s consolidated EBITDA was ¥241.6bn compared to guidance of ¥231.9bn.On a year-on-year basis, the company’s 4Q revenues grew by 4.0% whereas EBITDA margin declined 440bps to 5.0% compared to 9.4% a year ago. Although the HR tech segment is gradually recovering from the COVID-19 impact, the other two segments have not performed that favourably.At a FY2 EV/EBITDA multiple of 18.6x Recruit looks expensive to us compared to both its peers. Persol Holdings (2181 JP) , the second largest staffing company in Japan after Recruit, is trading at a FY2 EV/EBITDA of 7.3x while Yahoo Japan (4689 JP), which earns around 70% of its EBITDA from advertising related businesses, is trading at an FY2 EV/EBITDA of 10.7x (owned by Z Holdings).

Recruit Holdings: Recovery in HR Tech but Other Segments Still Struggling

Event-Driven

<a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> announced an updated non-binding privatisation proposal. As a reminder, on 17 September 2020, 51job disclosed a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per common share. The updated proposal keeps the bid price unchanged but discloses the formation of a consortium. The initial consortium members are DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The unchanged offer price is a premium of 25.38% to the VWAP during the last 30 days and an 18.82% premium to the VWAP during the last 30 days preceding the original proposal (on 17 September 2020). The press release mentions that the initial consortium members hold 17.62% of the total voting power of the issued and outstanding shares. The initial consortium members will not sell their shares in any other competing transaction.As 51job is incorporated in the Cayman Islands, for the privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. Reaching the two-thirds threshold rests on the consortium’s ability to rope in <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> which holds 34.8% of outstanding shares. We think that the use of the phrase “initial consortium members” suggests that Recruit is close to joining the consortium or selling into the bid. We also note that Ocean Link’s successful privatisation of <a href="https://www.smartkarma.com/entities/58-com-inc-adr" target="_blank" data-smartkarma-citation="entities:2563:1" rel="noopener">58.Com Inc Adr (WUBA US)</a> through a consortium bodes well for roping in Recruit. <div class="content-highlight">Our analysis suggests that the initial consortium members along with supporting shareholders and/or additional consortium members could potentially hold 39.4 million shares representing 58.5% of outstanding shares. This level of support should be enough to get past the two-thirds shareholder approval threshold. At the current share price of $67.60, the gross spread is 17%.</div>

51 Job Inc Adr (JOBS US) announced an updated non-binding privatisation proposal. As a reminder, on 17 September 2020, 51job disclosed a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per common share. The updated proposal keeps the bid price unchanged but discloses the formation of a consortium. The initial consortium members are DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The unchanged offer price is a premium of 25.38% to the VWAP during the last 30 days and an 18.82% premium to the VWAP during the last 30 days preceding the original proposal (on 17 September 2020). The press release mentions that the initial consortium members hold 17.62% of the total voting power of the issued and outstanding shares. The initial consortium members will not sell their shares in any other competing transaction.As 51job is incorporated in the Cayman Islands, for the privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. Reaching the two-thirds threshold rests on the consortium’s ability to rope in Recruit Holdings (6098 JP) which holds 34.8% of outstanding shares. We think that the use of the phrase “initial consortium members” suggests that Recruit is close to joining the consortium or selling into the bid. We also note that Ocean Link’s successful privatisation of 58.Com Inc Adr (WUBA US) through a consortium bodes well for roping in Recruit. Our analysis suggests that the initial consortium members along with supporting shareholders and/or additional consortium members could potentially hold 39.4 million shares representing 58.5% of outstanding shares. This level of support should be enough to get past the two-thirds shareholder approval threshold. At the current share price of $67.60, the gross spread is 17%.

Japan

Recruit Holdings Co. Ltd. operates information providing services in human resource, housing, bridal, travel, restaurants, beauty, automobiles, and education and more. The company also operate staffing services and advertising business.

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Recruit Holdings (6098 JP)

Kanzhun IPO: Growth/Margin Trade-Off Vs Peers

We compare Kanzhun’s key financial metrics to its listed peers, 51jobs and Liepin. Kanzhun provides a growth/revenue visibility vs margin/cash...

Arun George

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. The current deal would be of somewhat...

Sumeet Singh

Kanzhun IPO Initiation: Search and Employ

Kanzhun has filed for an $800 m raise, according to press reports. For investors willing to brave the current market selloff in high growth stocks,...

Arun George

Recruit Holdings: Recovery in HR Tech but Other Segments Still Struggling

Recruit’s 4Q FY03/21 financials show a recovery cf. first three quarters of FY03/21, driven by the HR Technology segment while the company’s other...

Shifara Samsudeen, ACMA, CGMA

51job’s Updated Privatisation Bid

The updated non-binding privatisation proposal keeps the $79.05 offer price unchanged but introduces a consortium. At the current share price of...

Arun George

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