APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC 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

Tam Jai International / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/tam-jai-international-co-ltd" target="_blank" data-smartkarma-citation="entities:34227:1" rel="noopener">Tam Jai International (2271 HK)</a> is looking to raise up to US$179m in its Hong Kong IPO.Tam Jai International is a restaurant chain operator of the TamJai and SamGor branded fast casual restaurant chain in Hong Kong with operations also in Mainland China and Singapore.  As of the latest practicable date (13th September 2021), the firm operated a total of 156 restaurants, comprising 79 TamJai restaurants and 77 SamGor restaurants, of which 150 were located in Hong Kong, three in Mainland China and the remaining three in Singapore. As per Euromonitor, the firm ranks No. 1 among Asian noodle specialty restaurants in Hong Kong. Overall, the firm's earnings have been resilient despite facing setbacks in its track period (i.e. COVID-19 and the Hong Kong riots). Margins have expectedly fallen as rent expenses outpaced revenue, but the firm plans to expand overseas which if successful, would warrant a valuation closer to its higher valued China-based peers.

Tam Jai International (2271 HK) is looking to raise up to US$179m in its Hong Kong IPO.Tam Jai International is a restaurant chain operator of the TamJai and SamGor branded fast casual restaurant chain in Hong Kong with operations also in Mainland China and Singapore.  As of the latest practicable date (13th September 2021), the firm operated a total of 156 restaurants, comprising 79 TamJai restaurants and 77 SamGor restaurants, of which 150 were located in Hong Kong, three in Mainland China and the remaining three in Singapore. As per Euromonitor, the firm ranks No. 1 among Asian noodle specialty restaurants in Hong Kong. Overall, the firm's earnings have been resilient despite facing setbacks in its track period (i.e. COVID-19 and the Hong Kong riots). Margins have expectedly fallen as rent expenses outpaced revenue, but the firm plans to expand overseas which if successful, would warrant a valuation closer to its higher valued China-based peers.

Tam Jai International IPO - Favourable Risk to Reward at Low End

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Around 9.5 months after <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a> <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a Going-Private Transaction, the Offer was granted unconditional approval by the State Administration for Market Regulation (SAMR) on the 12 July. 
Apparently, that wasn't the final approval as the regulators continued to overhaul and tweak China's tech sector. In its<a href="http://ir.sogou.com/2021-08-09-Sogou-Announces-Second-Quarter-2021-Results" target="_blank" rel="noopener"> 2Q21 results</a> (announced on the 9 August) Sogou said it expected the merger with Tencent to complete in the 2H21.
Yesterday, Sogou <a href="http://ir.sogou.com/2021-09-23-Sogou-Announces-Completion-of-Going-Private-Transaction" target="_blank" rel="noopener">announced</a> the completion of the merger and shares have been suspended. Payment will be made "as soon as practical". 
Hong Kong's Standard <a href="https://www.thestandard.com.hk/section-news/section/17/234417/Tencent-Sogou-merger-first-after-overhauls" target="_blank" rel="noopener">reported</a> yesterday that Tencent's news and content unit Tencent Kandian will absorb most of Sogou's business and employees.  After merging with Sogou, the search engine segment will be the core business of Tencent Kandian. Tencent was permitted to take up the 60.9% in Sogou it did not already own provided it established a "special mechanism" to ensure data security.
So that's done. This is a short-form merger - there was no vote. Dissension rights are now afforded for short-form mergers and I would expect some investors to take up those rights.  
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Separately, <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> pockets ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$857mn. 
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More below the fold.
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Around 9.5 months after Tencent (700 HK) and Chinese search-engine Sogou Inc (SOGO US) entered into a definitive agreement for a Going-Private Transaction, the Offer was granted unconditional approval by the State Administration for Market Regulation (SAMR) on the 12 July. 
Apparently, that wasn't the final approval as the regulators continued to overhaul and tweak China's tech sector. In its 2Q21 results (announced on the 9 August) Sogou said it expected the merger with Tencent to complete in the 2H21.
Yesterday, Sogou announced the completion of the merger and shares have been suspended. Payment will be made "as soon as practical". 
Hong Kong's Standard reported yesterday that Tencent's news and content unit Tencent Kandian will absorb most of Sogou's business and employees.  After merging with Sogou, the search engine segment will be the core business of Tencent Kandian. Tencent was permitted to take up the 60.9% in Sogou it did not already own provided it established a "special mechanism" to ensure data security.
So that's done. This is a short-form merger - there was no vote. Dissension rights are now afforded for short-form mergers and I would expect some investors to take up those rights.  


Separately, Sohu.com Inc (SOHU US) pockets ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$857mn. 


More below the fold.


Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Quantitative Analysis

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 24.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent Holdings Limited (700 HK) (HKD 414.6 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 212.6 million worth of buybacks), Hopson Development Holdings Limited (754 HK) (HKD 116.6 million worth of buybacks).

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 24.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent Holdings Limited (700 HK) (HKD 414.6 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 212.6 million worth of buybacks), Hopson Development Holdings Limited (754 HK) (HKD 116.6 million worth of buybacks).

Hong Kong Buybacks: Five Weeks of Tencent Buybacks

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> has had a disastrous year, ever since the IPO of their FinTech arm, <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>, was pulled last minute in November 2020. Since then, they have faced continued regulatory hurdles, including an RMB18.2bn anti-monopoly fine, which has culminated in a 51% share price drop, since its November 2020 peak, which means that Alibaba is currently trading on only a 14.3x forward PE ratio. Given that this is nearly 4 standard deviations below its 5-year historical average trading range, and that this multiple would imply only a 0.72x PEG ratio, for a company with an extremely strong net cash balance sheet, delivering returns on capital well above its cost of capital, with positive free cash flow generation, and a $15bn share buyback program, indicates that there is a massive disconnect between long-term Buy-side expectations and near-term Sell-side estimates. Looking at the reported group financials over this period it does not seem as though the regulatory impact has been that significant on core operations. The key concern, however, is that Alibaba is losing market share in its core businesses. In this insight, I take a closer look at the broader Chinese retail market, as well as the Chinese digital advertising market (I estimate that Alibaba still generates more than 40% of its Chinese commerce revenue, and roughly 1/3rd of group revenue, from marketing activities), to analyse Alibaba’s relative revenue share loss. Finally, I also revisit current valuation levels and analyse what this implies for its Core Commerce operations.

Alibaba Group (9988 HK) has had a disastrous year, ever since the IPO of their FinTech arm, Ant Financial Services Group (6688 HK), was pulled last minute in November 2020. Since then, they have faced continued regulatory hurdles, including an RMB18.2bn anti-monopoly fine, which has culminated in a 51% share price drop, since its November 2020 peak, which means that Alibaba is currently trading on only a 14.3x forward PE ratio. Given that this is nearly 4 standard deviations below its 5-year historical average trading range, and that this multiple would imply only a 0.72x PEG ratio, for a company with an extremely strong net cash balance sheet, delivering returns on capital well above its cost of capital, with positive free cash flow generation, and a $15bn share buyback program, indicates that there is a massive disconnect between long-term Buy-side expectations and near-term Sell-side estimates. Looking at the reported group financials over this period it does not seem as though the regulatory impact has been that significant on core operations. The key concern, however, is that Alibaba is losing market share in its core businesses. In this insight, I take a closer look at the broader Chinese retail market, as well as the Chinese digital advertising market (I estimate that Alibaba still generates more than 40% of its Chinese commerce revenue, and roughly 1/3rd of group revenue, from marketing activities), to analyse Alibaba’s relative revenue share loss. Finally, I also revisit current valuation levels and analyse what this implies for its Core Commerce operations.

Alibaba: How Much Core Market Share Loss Has Been Priced In?

Shui on Xintiandi / Equity Capital Markets

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.Shui on Xintiandi is a leading investor and manager of commercial properties in the PRC. As per Knight Frank, it is one of the largest private commercial property owners and operators in Shanghai by total gross floor area (GFA). As of Jun 2021, the firm had a portfolio of 13 commercial properties which occupied 2m sqm of GFA, and had a combined valuation of RMB53.1bn. Its properties are spread across Shanghai, Wuhan, Nanjing, Foshan and Chongqing, where Shanghai properties accounted for 52.7% and 71.9% of total GFA and valuation, respectively.

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.Shui on Xintiandi is a leading investor and manager of commercial properties in the PRC. As per Knight Frank, it is one of the largest private commercial property owners and operators in Shanghai by total gross floor area (GFA). As of Jun 2021, the firm had a portfolio of 13 commercial properties which occupied 2m sqm of GFA, and had a combined valuation of RMB53.1bn. Its properties are spread across Shanghai, Wuhan, Nanjing, Foshan and Chongqing, where Shanghai properties accounted for 52.7% and 71.9% of total GFA and valuation, respectively.

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent (700 HK)

Tam Jai International IPO - Favourable Risk to Reward at Low End

Tam Jai International (2271 HK) is looking to raise up to US$179m in its Hong Kong IPO. Tam Jai International is a restaurant chain operator of the...

Clarence Chu

Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

Would Zhang look to take the company private? If possible, I would. An Offer would be self-funding, and he further benefits via listing Changyou on...

David Blennerhassett

Hong Kong Buybacks: Five Weeks of Tencent Buybacks

We highlight that the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Xiaomi (1810 HK), Hopson (754 HK).

Ke Yan, CFA, FRM

Shui on Xintiandi Pre-IPO Tearsheet

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.

Clarence Chu

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tam Jai International IPO - Favourable Risk to Reward at Low End

Tam Jai International (2271 HK) is looking to raise up to US$179m in its Hong Kong IPO. Tam Jai International is a restaurant chain operator of the...

Clarence Chu

Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

Would Zhang look to take the company private? If possible, I would. An Offer would be self-funding, and he further benefits via listing Changyou on...

David Blennerhassett

Hong Kong Buybacks: Five Weeks of Tencent Buybacks

We highlight that the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Xiaomi (1810 HK), Hopson (754 HK).

Ke Yan, CFA, FRM

Alibaba: How Much Core Market Share Loss Has Been Priced In?

In this insight, I analyse Chinese retail sales and digital advertising market share changes and what is implied by Alibaba’s current valuation...

Wium Malan, CFA

Shui on Xintiandi Pre-IPO Tearsheet

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.

Clarence Chu