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.

Event-Driven

<div><p>On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> reluctantly sold US$10bn worth of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> shares.  <span>I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. </span></p></div><div><p>We have covered the previous placement in our earlier note, <a href="https://www.smartkarma.com/insights/tencent-placement-huge-deal-in-size-small-in-relative-terms-succumbing-to-the-holdco-discount" target="_blank" rel="noopener">Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount</a> and spoken about the implications of the lock-up expiry in our Feb 2021 note <a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade</a>.</p></div><div><p>In this note, I’ll talk about the updates since then.</p></div>

On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. We have covered the previous placement in our earlier note, Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount and spoken about the implications of the lock-up expiry in our Feb 2021 note Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade.In this note, I’ll talk about the updates since then.

Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>On Friday, the S&amp;P Dow Jones Global Index team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20210312-1336360/1336360_march2021-5146-shuf-pr.pdf" target="_blank" rel="noopener">announced</a> changes to the S&amp;P500 Index. </p><div><div><div><blockquote>
<p>NEW YORK, March 12, 2021: S&amp;P Dow Jones Indices will make the following index adjustments to the S&amp;P 500, S&amp;P 100, S&amp;P MidCap 400 and S&amp;P SmallCap 600 to ensure each index is more representative of its market capitalization range. The changes will be effective prior to the open of trading on Monday, March 22, 2021 to coincide with the quarterly rebalance:</p>
<p>NXP Semiconductors NV (NASD:NXPI) will replace Flowserve Corp. (NYSE:FLS) in the S&amp;P 500, Flowserve will replace Edgewell Personal Care Co. (NYSE:EPC) in the S&amp;P MidCap 400, and Edgewell Personal Care will replace Exterran Corp. (NYSE:EXTN) in the S&amp;P SmallCap 600. Exterran is no longer representative of the small-cap market space.</p>
<p>S&amp;P MidCap 400 constituents Penn National Gaming Inc. (NASD:PENN), Generac Holdings Inc. (NYSE:GNRC) and Caesars Entertainment Inc. (NASD:CZR) will all move to the S&amp;P 500, replacing SL Green Realty Corp. (NYSE:SLG), Xerox Holdings Corp. (NYSE:XRX) and Vontier Corp (NYSE:VNT), all of which will move to the S&amp;P MidCap 400.</p>
<p>S&amp;P 500 constituents Broadcom Inc. (NASD:AVGO), T-Mobile US Inc. (NASD:TMUS) and Linde plc (NYSE:LIN) will replace Allstate Corp. (NYSE:ALL), Kinder Morgan Inc. (NYSE:KMI) and Schlumberger NV (NYSE:SLB) in the S&amp;P 100. Allstate, Kinder Morgan, and Schlumberger will remain in the S&amp;P 500.</p>
</blockquote></div></div></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/535/original/Screenshot+2021-03-15+at+9.22.00+PM.png?1615814543" class="editor-image img-responsive" data-smartkarma-image-id="194535"></figure></section><hr><p>This should lead to US$17.7-21.3bn to buy of the four names based on prices at Friday's close, and US$3.2-3.9bn to sell of the outgoing names. Some of this will be crossed off internally, but a bunch of it will have to trade on the market. </p><p>There are five trading days to get this done, and the average buy is 11-13 days of ADV. The sells are slightly higher. Quiddity estimates are below.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/537/original/Screenshot+2021-03-15+at+9.29.12+PM.png?1615815053" class="editor-image img-responsive" data-smartkarma-image-id="194537"></figure></section><p><a href="https://www.smartkarma.com/entities/penn-national-gaming-inc" target="_blank" data-smartkarma-citation="entities:5588:1" rel="noopener">Penn National Gaming (PENN US)</a> looks like it is the least-impacted by this move at only 4.3-5.1 days of ADV but I remind observers that passive funds will need to own the same percentage of the Voting Rights Float (i.e. if there are 100 shares out and there are 20 shares shorted, there would also be 20 shares additionally purchased on the long side, but the 97.6% float on PENN is 97.6% of 100, not of 120) for all companies in the basket. </p>
<p>PENN's impact in terms of ADV is low because average daily volume is a much higher percentage of float shares than the other companies. </p>
<p>PENN and <a href="https://www.smartkarma.com/entities/caesars-entertainment-corp" target="_blank" data-smartkarma-citation="entities:15532:1" rel="noopener">Caesars Entertainment (CZR US)</a> may end up seeing some non-negligible impact, and substantially higher-than-normal trading volume because of their recent history as speculative vehicles.</p>
<p>Both PENN and CZR trade at somewhat lofty multiples based on last year's EBITDA, but both get to the low to mid teens by two years from now.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/539/original/20210312+SP500+Inclusion+PENN+CompTable+4.png?1615815530" class="editor-image img-responsive" data-smartkarma-image-id="194539"></figure></section><section class="figure"><p>PENN has tracked an index (equal-weighted, daily-rebalanced) of the above-listed peers reasonably well over the past 12 months, but the 5-year log chart tells you that there have been moments of sustained underperformance. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/550/original/20210312+SP500+Inclusion+PENN+Price+1.png?1615815938" class="editor-image img-responsive" data-smartkarma-image-id="194550"></figure></section><p>It is easier to see this on a chart of the ratio, as below, which suggests that to revisit recent highs against its Peer Basket Index, the shares would have to gain a bit more than 10%.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/552/original/20210312+SP500+Inclusion+PENN+Ratio+2.png?1615816061" class="editor-image img-responsive" data-smartkarma-image-id="194552"></figure></section><p></p>
<p>Looking forward for the next few years, PENN trades at a slightly higher-than-Peer Basket average EV/EBIT ratio (using current EV and the average of FY+2 and FY+3 consensus EBIT).*</p>
<div class="content-remarks"><p>* Note that the two lines - green and light blue - represent different ways of looking at the same data. The light blue line is the average EV/EBIT ratio across the 10-name basket. The light green line is the average of the sum of the EVs and the sum of the EBITs, averaged over the two years. These two methods are shown because extreme numbers can cause dramatic changes in ratios ($50bn of EV and $100mm of EBIT is a multiple of 500. Move the EBIT to $10mm (a small move in the grand scheme of things) and the ratio moves to EV/EBIT of 5,000x which will impact a ratio of only 10-20 inputs.  </p></div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/555/original/20210312+SP500+Inclusion+PENN+EVEBIT+3.png?1615816220" class="editor-image img-responsive" data-smartkarma-image-id="194555"></figure></section><p>Is this outperformance due to improving forecasts since last summer?  Not really. Kind of middle of the pack. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/575/original/Screenshot+2021-03-15+at+10.16.39+PM.png?1615817831" class="editor-image img-responsive" data-smartkarma-image-id="194575"></figure></section><p>If one uses the S&amp;P guidance as to tracking funds and the quantity to buy using the pre-announcement price of <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a>, there should be $3.2bn of PENN to buy using Friday's closing price. I expect it is more than that.</p>
<p>The options positioning does not seem to be substantial enough to drive a short gamma squeeze but keen observers know, that can change. Existing shorts across the four names could be covered out of care, but it is not clear that will be a big driver either, though the short on PENN is reasonably substantial as a portion of the inclusion buy quantity. There will be considerable crossing within shops as funds trade out of S&amp;P Midcap 400 and into S&amp;P500.</p>
<p>All in all, there are some interesting things to look at in this event. </p>
<p>Conclusions are below the fold.</p>
<p></p></section>

On Friday, the S&amp;P Dow Jones Global Index team announced changes to the S&amp;P500 Index. 
NEW YORK, March 12, 2021: S&amp;P Dow Jones Indices will make the following index adjustments to the S&amp;P 500, S&amp;P 100, S&amp;P MidCap 400 and S&amp;P SmallCap 600 to ensure each index is more representative of its market capitalization range. The changes will be effective prior to the open of trading on Monday, March 22, 2021 to coincide with the quarterly rebalance:
NXP Semiconductors NV (NASD:NXPI) will replace Flowserve Corp. (NYSE:FLS) in the S&amp;P 500, Flowserve will replace Edgewell Personal Care Co. (NYSE:EPC) in the S&amp;P MidCap 400, and Edgewell Personal Care will replace Exterran Corp. (NYSE:EXTN) in the S&amp;P SmallCap 600. Exterran is no longer representative of the small-cap market space.
S&amp;P MidCap 400 constituents Penn National Gaming Inc. (NASD:PENN), Generac Holdings Inc. (NYSE:GNRC) and Caesars Entertainment Inc. (NASD:CZR) will all move to the S&amp;P 500, replacing SL Green Realty Corp. (NYSE:SLG), Xerox Holdings Corp. (NYSE:XRX) and Vontier Corp (NYSE:VNT), all of which will move to the S&amp;P MidCap 400.
S&amp;P 500 constituents Broadcom Inc. (NASD:AVGO), T-Mobile US Inc. (NASD:TMUS) and Linde plc (NYSE:LIN) will replace Allstate Corp. (NYSE:ALL), Kinder Morgan Inc. (NYSE:KMI) and Schlumberger NV (NYSE:SLB) in the S&amp;P 100. Allstate, Kinder Morgan, and Schlumberger will remain in the S&amp;P 500.
This should lead to US$17.7-21.3bn to buy of the four names based on prices at Friday's close, and US$3.2-3.9bn to sell of the outgoing names. Some of this will be crossed off internally, but a bunch of it will have to trade on the market. There are five trading days to get this done, and the average buy is 11-13 days of ADV. The sells are slightly higher. Quiddity estimates are below.Penn National Gaming (PENN US) looks like it is the least-impacted by this move at only 4.3-5.1 days of ADV but I remind observers that passive funds will need to own the same percentage of the Voting Rights Float (i.e. if there are 100 shares out and there are 20 shares shorted, there would also be 20 shares additionally purchased on the long side, but the 97.6% float on PENN is 97.6% of 100, not of 120) for all companies in the basket. 
PENN's impact in terms of ADV is low because average daily volume is a much higher percentage of float shares than the other companies. 
PENN and Caesars Entertainment (CZR US) may end up seeing some non-negligible impact, and substantially higher-than-normal trading volume because of their recent history as speculative vehicles.
Both PENN and CZR trade at somewhat lofty multiples based on last year's EBITDA, but both get to the low to mid teens by two years from now.
PENN has tracked an index (equal-weighted, daily-rebalanced) of the above-listed peers reasonably well over the past 12 months, but the 5-year log chart tells you that there have been moments of sustained underperformance. 
It is easier to see this on a chart of the ratio, as below, which suggests that to revisit recent highs against its Peer Basket Index, the shares would have to gain a bit more than 10%.

Looking forward for the next few years, PENN trades at a slightly higher-than-Peer Basket average EV/EBIT ratio (using current EV and the average of FY+2 and FY+3 consensus EBIT).*
* Note that the two lines - green and light blue - represent different ways of looking at the same data. The light blue line is the average EV/EBIT ratio across the 10-name basket. The light green line is the average of the sum of the EVs and the sum of the EBITs, averaged over the two years. These two methods are shown because extreme numbers can cause dramatic changes in ratios ($50bn of EV and $100mm of EBIT is a multiple of 500. Move the EBIT to $10mm (a small move in the grand scheme of things) and the ratio moves to EV/EBIT of 5,000x which will impact a ratio of only 10-20 inputs.  
Is this outperformance due to improving forecasts since last summer?  Not really. Kind of middle of the pack. 
If one uses the S&amp;P guidance as to tracking funds and the quantity to buy using the pre-announcement price of Tesla Motors (TSLA US), there should be $3.2bn of PENN to buy using Friday's closing price. I expect it is more than that.
The options positioning does not seem to be substantial enough to drive a short gamma squeeze but keen observers know, that can change. Existing shorts across the four names could be covered out of care, but it is not clear that will be a big driver either, though the short on PENN is reasonably substantial as a portion of the inclusion buy quantity. There will be considerable crossing within shops as funds trade out of S&amp;P Midcap 400 and into S&amp;P500.
All in all, there are some interesting things to look at in this event. 
Conclusions are below the fold.


Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

US equities rebounded on Tuesday with the S&amp;P up 1.4% and the Nasdaq 3.7% higher. Tesla  jumped 19% higher after upbeat China car sales data. US 10Y Treasury yields eased to 1.53%. European equities were more muted with the DAX and CAC up 0.4% while the FTSE was up 0.2% with Eurozone GDP shrinking 0.7% QoQ in Q4, down 4.9% YoY. US IG CDS spreads were 1bp tighter and HY was 2.6bp tighter. EU main CDS spreads were 0.8bp tighter and crossover spreads tightened 4bp. Primary markets in Asia remain relatively quiet despite many deals in the pipeline. Asian equity markets are up 0.5% and Asia ex-Japan CDS spreads were up by 1.5bp.

BAIC, Woori Card Launch $ Bonds; Macro; Rating Changes; New Bond Issues; Talking Heads; Top Gaine...

Equity Bottom-Up

<p>11 weeks ago yesterday, for the end of 2020, I published my report <a href="https://www.smartkarma.com/insights/2021-high-conviction-shinsei-bank" target="_blank" data-smartkarma-citation="insights:46544" rel="noopener">2021 High Conviction - Shinsei Bank</a> idea. Since the close of the next day, the shares are up 46.7%. </p><p>A large part of that performance has been due to the rise in the TOPIX Bank Index - up 26.7% in the same period. Much of that move has occurred in the past five weeks as <em>The Great Rotation, </em>driven by higher rates, a steeper curve, and inflationary expectations, has propelled last year's losers to this year's winners, and <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a>, SaaS stocks, junk stocks, and others have underperformed. </p><p>But there were a couple of other bits in the story too. A buyback, an asset sale, and understanding of the float dynamics given the over-arching goal of <a href="https://www.smartkarma.com/entities/shinsei-bank-ltd" target="_blank" data-smartkarma-citation="entities:16897:1" rel="noopener">Shinsei Bank (8303 JP)</a> and its shareholders is to be able to get the government out of its shares (and accompanying oversight) it purchased in March 2000. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/195/original/Screenshot+2021-03-10+at+1.09.10+AM.png?1615309764" class="editor-image img-responsive" data-smartkarma-image-id="193195"></figure><p></p></section><p>This insight provides a brief update to those inputs.</p>

11 weeks ago yesterday, for the end of 2020, I published my report 2021 High Conviction - Shinsei Bank idea. Since the close of the next day, the shares are up 46.7%. A large part of that performance has been due to the rise in the TOPIX Bank Index - up 26.7% in the same period. Much of that move has occurred in the past five weeks as The Great Rotation, driven by higher rates, a steeper curve, and inflationary expectations, has propelled last year's losers to this year's winners, and Tesla Motors (TSLA US), SaaS stocks, junk stocks, and others have underperformed. But there were a couple of other bits in the story too. A buyback, an asset sale, and understanding of the float dynamics given the over-arching goal of Shinsei Bank (8303 JP) and its shareholders is to be able to get the government out of its shares (and accompanying oversight) it purchased in March 2000. This insight provides a brief update to those inputs.

2021 High Conviction Update - Shinsei Bank Float Squeeze to Mitigate Near-Term

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> announced today that it plans to complete its IPO at $32 to $34 per share, from the previous IPO price range of $27 to $30 per share.</p><p>We continue to believe that there will be a "first day pop" for the Coupang IPO. We believe that the first day pop could be somewhere between the mid-to-high end of our valuation range which his from $35 to $47.3 per share.</p><p>If the IPO is priced at $33 per share, we believe the first day pop could be as high as $80.4 billion in market cap or $47.3 per share. Despite the first day pop, we find it difficult for Coupang to maintain such frothy valuations ($80 billion or $47.3 per share levels) for an extended period of time so our base case 6-12 months remains $35 per share ($60 billion in market cap).</p>

Coupang (CPNG US) announced today that it plans to complete its IPO at $32 to $34 per share, from the previous IPO price range of $27 to $30 per share.We continue to believe that there will be a "first day pop" for the Coupang IPO. We believe that the first day pop could be somewhere between the mid-to-high end of our valuation range which his from $35 to $47.3 per share.If the IPO is priced at $33 per share, we believe the first day pop could be as high as $80.4 billion in market cap or $47.3 per share. Despite the first day pop, we find it difficult for Coupang to maintain such frothy valuations ($80 billion or $47.3 per share levels) for an extended period of time so our base case 6-12 months remains $35 per share ($60 billion in market cap).

Coupang - Slightly Raises IPO Price Range & The "First Day Pop"

United States

Tesla Inc. operates as a multinational automotive and clean energy company. The Company designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, and related products and services. Tesla owns its sales and service network and sells electric power train components to other automobile manufacturers.

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Tesla (TSLA US)

Tencent Placement Lock-Up Expiry - Block and Buyback Linked Holdco Trade Update

On 22nd March 2018, in Hong Kong one of the largest overnight placements was launched. On that day, Naspers sold US$10bn worth of Tencent shares....

Sumeet Singh

S&P500 March Rebalance: $18-21bn 1-Way

The S&P 500 March 2021 rebalance sees $18-21bn to buy and 20% of that to sell = a $15-20bn funding sell on Friday's close. A few hours in, I see...

Travis Lundy

BAIC, Woori Card Launch $ Bonds; Macro; Rating Changes; New Bond Issues; Talking Heads; Top Gaine...

US equities rebounded on Tuesday with the S&P up 1.4% and the Nasdaq 3.7% higher. Tesla jumped 19% higher after upbeat China car sales data....

BondEvalue

2021 High Conviction Update - Shinsei Bank Float Squeeze to Mitigate Near-Term

Shinsei Bank has performed dramatically well in the last 11 weeks since the High Conviction Idea. A lot of that has been float compression. Some of...

Travis Lundy

Coupang - Slightly Raises IPO Price Range & The "First Day Pop"

Coupang (CPNG US) announced today that it plans to complete its IPO at $32 to $34 per share, from the previous IPO price range of $27 to $30 per...

Douglas Kim

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