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.

Event-Driven

<p>As a reminder, <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> entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS on 21 June. The consortium consists of DCP, Ocean Link Partners, <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> and Mr Rick Yan, the CEO since 2000. </p><p>The merger was expected to close during the second half of 2021. The merger required shareholders representing two-thirds of shares present and voting to approve the deal. </p><p>However, since the announcement of the definitive agreement, the gross spread reached a high of 33% on 29 October largely due to the radio silence on the deal completion. In the current uncertain Chinese regulatory climate, 51job did little to soothe investors’ nerves by failing to even mention the privatisation deal in its 2Q21 results released on 24 September.</p><p>Encouragingly, the shares climbed 10% on 2 November due to the release of a Schedule 13D filing on 1 November which highlighted the consortium’s acquisition facilities agreement of $1.8 billion entered on 21 October and Mr Rick Yan’s facility agreement of $450 million entered on 28 October, both with China Merchants Bank. </p><p>We think that the signing of the acquisition facilities is a significant step towards deal completion. While the privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period, the offer is reasonable in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  </p><div class="content-highlight"><p>The announcement on 21 June stated that Mr Rick, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We continue to think that this level of support should be enough to get past the two-thirds shareholder approval threshold. The gross spread to the offer price is 17.3% at the last close price of $67.40 per ADS. </p></div>

As a reminder, 51 Job Inc Adr (JOBS US) entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS on 21 June. The consortium consists of DCP, Ocean Link Partners, Recruit Holdings (6098 JP) and Mr Rick Yan, the CEO since 2000. The merger was expected to close during the second half of 2021. The merger required shareholders representing two-thirds of shares present and voting to approve the deal. However, since the announcement of the definitive agreement, the gross spread reached a high of 33% on 29 October largely due to the radio silence on the deal completion. In the current uncertain Chinese regulatory climate, 51job did little to soothe investors’ nerves by failing to even mention the privatisation deal in its 2Q21 results released on 24 September.Encouragingly, the shares climbed 10% on 2 November due to the release of a Schedule 13D filing on 1 November which highlighted the consortium’s acquisition facilities agreement of $1.8 billion entered on 21 October and Mr Rick Yan’s facility agreement of $450 million entered on 28 October, both with China Merchants Bank. We think that the signing of the acquisition facilities is a significant step towards deal completion. While the privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period, the offer is reasonable in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  The announcement on 21 June stated that Mr Rick, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We continue to think that this level of support should be enough to get past the two-thirds shareholder approval threshold. The gross spread to the offer price is 17.3% at the last close price of $67.40 per ADS. 

51job’s Privatisation Spread Risk/Reward

<p><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> has entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS. The 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).</p><p>As a reminder, on 17 September 2020, 51job announced a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per ADS. On 4 May 2021, the proposal was updated by disclosing the formation of an initial consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The offer price remained unchanged. Today's announcement notes that <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>, the largest shareholder which represents 34.8% of outstanding shares, has joined the consortium. </p><p>The privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period. Some shareholders may be reticent about accepting the bid given the stonking share price performance of peer, <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a>, which is trading almost 2x its IPO price. However, we note that the privatisation offer is attractive in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  </p><div class="content-highlight"><p>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. Rick Yan, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We think that this level of support should be enough to get past the two-thirds shareholder approval threshold. </p></div>

51 Job Inc Adr (JOBS US) has entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS. The 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).As a reminder, on 17 September 2020, 51job announced a non-binding privatisation proposal from DCP Capital Partners, a PE firm in Asia, at $79.05 in cash per ADS. On 4 May 2021, the proposal was updated by disclosing the formation of an initial consortium consisting of DCP, Ocean Link Partners and Mr Rick Yan, the CEO since 2000. The offer price remained unchanged. Today's announcement notes that Recruit Holdings (6098 JP), the largest shareholder which represents 34.8% of outstanding shares, has joined the consortium. The privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period. Some shareholders may be reticent about accepting the bid given the stonking share price performance of peer, Kanzhun (BZ US), which is trading almost 2x its IPO price. However, we note that the privatisation offer is attractive in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  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. Rick Yan, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We think that this level of support should be enough to get past the two-thirds shareholder approval threshold. 

Equity Capital Markets

<div><p><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 <em>BOSS Zhipin</em> mobile app connects job seekers and enterprise users. </p></div><div><p>Kanzhun has priced its IPO at $19.00 per ADS to raise gross proceeds of $912 million, <a href="https://www.ifre.com/story/2913154/kanzhun-prices-nasdaq-ipo-at-top-to-raise-us912m-smlgvfl3m3" target="_blank" rel="noopener">according to IFR</a>. At the final IPO price of $19 per share, Kanzhun will have a market cap of $7.6 billion. The IPO got off to a strong start due to indications of interest for $375 million worth of ADSs in the offering from existing investors (Sequoia Capital and Tiger Global) and new investors (UBS Asset Management, GIC and Mubadala Investment).</p></div><div><p>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. We concluded that the Kanzhun story warrants a closer look. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-growth-margin-trade-off-vs-peers" target="_blank" data-smartkarma-citation="insights:52333" rel="noopener">Kanzhun IPO: Growth/Margin Trade-Off Vs Peers</a>, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:52575" rel="noopener">Kanzhun IPO: Valuation Insights</a> we noted that the IPO price range is attractive. </p></div><div><div><div class="content-highlight"><p>Updating for the final IPO net raise, our base-case DCF derived price target of $21.02 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets for market share and/or terminal EBIT margin. </p></div></div></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 priced its IPO at $19.00 per ADS to raise gross proceeds of $912 million, according to IFR. At the final IPO price of $19 per share, Kanzhun will have a market cap of $7.6 billion. The IPO got off to a strong start due to indications of interest for $375 million worth of ADSs in the offering from existing investors (Sequoia Capital and Tiger Global) and new investors (UBS Asset Management, GIC and Mubadala Investment).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. We concluded that the Kanzhun story warrants a closer look. In Kanzhun IPO: Growth/Margin Trade-Off Vs Peers, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. In Kanzhun IPO: Valuation Insights we noted that the IPO price range is attractive. Updating for the final IPO net raise, our base-case DCF derived price target of $21.02 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets for market share and/or terminal EBIT margin. 

<div><p><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 <em>BOSS Zhipin</em> mobile app connects job seekers and enterprise users. </p></div><div>
<p>At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, Kanzhun will have a market cap of $7.2 billion. At the mid-point of the IPO price range, the net proceeds are $817.2 million. New and existing shareholders have indicated a total of $375 million of the IPO (43.4% of the ADSs at the mid-point of the IPO price range). The indications of interest from new investors are from UBS Asset Management ($100 million), GIC ($100 million) and Mubadala Investment ($75 million). The indications of interest from existing investors are from Sequoia Capital and Tiger Global.</p>
<p>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. We concluded that the Kanzhun story warrants a closer look. In <a href="https://www.smartkarma.com/insights/kanzhun-ipo-growth-margin-trade-off-vs-peers" target="_blank" data-smartkarma-citation="insights:52333" rel="noopener">Kanzhun IPO: Growth/Margin Trade-Off Vs Peers</a>, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. </p>
<div class="content-highlight"><p>In this note, we present our forecasts and valuation analysis. On a relative valuation basis and at the IPO price range, Kanzhun is fairly valued on growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Our base-case DCF value is $20.84 per ADS which is a 16% upside to the mid-point of the IPO price range. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we think that the IPO price range is attractive. </p></div>
</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. 
At the mid-point of the proposed IPO price range of $17.00-19.00 per ADS, Kanzhun will have a market cap of $7.2 billion. At the mid-point of the IPO price range, the net proceeds are $817.2 million. New and existing shareholders have indicated a total of $375 million of the IPO (43.4% of the ADSs at the mid-point of the IPO price range). The indications of interest from new investors are from UBS Asset Management ($100 million), GIC ($100 million) and Mubadala Investment ($75 million). The indications of interest from existing investors are from Sequoia Capital and Tiger Global.
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. We concluded that the Kanzhun story warrants a closer look. In Kanzhun IPO: Growth/Margin Trade-Off Vs Peers, we opined that Kanzhun provides growth and revenue visibility vs margin and cash generation trade-off in comparison to its listed peers. 
In this note, we present our forecasts and valuation analysis. On a relative valuation basis and at the IPO price range, Kanzhun is fairly valued on growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Our base-case DCF value is $20.84 per ADS which is a 16% upside to the mid-point of the IPO price range. For investors willing to brave the risk that the current market selloff in high growth stocks persists, we think that the IPO price range is attractive. 


<p><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 <em>BOSS Zhipin</em> 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.  </p><p>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.</p><div class="content-highlight"><p>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.   </p></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

Japan

MEITEC CORPORATION provides high-end engineering outsourcing services targeting the R&D sector in various industries such as automobile, telecommunication, semiconductors, consumer electronics, and industrial machinery.

TechnoPro Holdings, Inc. offers services and solutions in mechanical and electronic design, IT and software development, and wide range of technological fields through outsourcing. The Company also has presence in biological, chemical and construction management businesses.

OUTSOURCING Inc. provides outsourcing services for manufacturing companies. The Company mainly provides services for industries such as food, electric equipment, transport machine, chemical, and metal.  Outsourcing also provides worker dispatching service.

BeNext-Yumeshin Group Co. provides temporary help services. The Company provides personnel staffing services, technician staffing services, overseas staffing services, and other services. BeNext-Yumeshin Group also provides office building leasing, restaurants management, vocational training, and other services.

en-japan inc. provides Internet-based recruiting solutions. The Company provides recruitment information for job seekers. en-japan's web site allows member employers to access its database of job seekers. The Company also provides recruitment consulting services.

Funai Soken Holdings Inc. provides management and financial consulting services.  The Company, through its subsidiaries, also operates logistics information, publishing, and real estate businesses.

JAC Recruitment Co., Ltd. provides recruiting agency services. The Company focuses on international business area that includes job offers from foreign companies and overseas subsidiaries of Japanese companies.

Pasona Group Inc. manages companies that provide placement and staffing services for clients in the information technology sector.

NOMURA Co., Ltd. is a contractor of displays and interior designs.  The Company mainly plans and provides display services for commercial, cultural, and exhibition facilities.  Nomura produces displays, interior designs, and promotional and advertising materials.

WEATHERNEWS INC. provides custom weather forecasting services for a wide variety of clients.  The Company is a systems integrator for industrial quality weather monitoring systems.  Systems are designed around a client's individual requirement.  Weathernews provides content using a variety of technologies, including the Internet, television, radio, and cellular phone.

BlueFocus Communication Group Co., Ltd. provides public relation services and brand management services for corporations.  The Company's services include brand promotion, product promotion, hazard management, function management, digital media sales, and social responsibilities services.

Bluefocus Communication Group Co, Ltd. (300058 CH)

Huron Consulting Group Inc. is an independent provider of financial and operational consulting services. The company provides services to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized and large businesses, leading academic institutions, healthcare organizations and the law firms.

Applus Services, S.A. provides certification services. The Company offers consultancy, engineering, inspection, non-destructive testing, technical assistance, and type approval.

Hays Plc provides specialist recruitment and human resource services for clients and candidates requiring permanent and temporary, professional and technical staff.

PageGroup PLC operates as a recruitment consultancy. The Company provides permanent, contract, and temporary recruitment services for executives, qualified professionals, and clerical professionals across a broad range of industries. PageGroup offers its services worldwide.

GlobalData plc provides research and consulting solutions for the healthcare, ICT and consumer industries. The Company offers insight and expertise to medical and pharmaceutical markets.

RITES Limited provides engineering services. The Company offers transport infrastructure consultancy, railway inspection, rolling stock leasing and maintenance, airport construction management, industrial and electrical engineering, and other related services. RITES serves customers worldwide.

CRA International Inc. is an economic and business consulting firm that serves a broad range of clients.  The Company provides legal and regulatory consulting and business consulting to clients such as law firms, corporations, government agencies, utilities, and national and international trade associations.

Centre Testing International Group Co Ltd provides testing and inspecting services for industrial products and consumer products. The Company's other services include life-science related and trade-related testing services.

ICF International, Inc. provides management, technology, policy consulting, and implementation services primarily to the U.S. federal government, as well as to other government, commercial and international clients.

Visional, Inc. develops application products. The Company develops a system that promotes industrial digital transformation and other services. Visional provides its services throughout Japan.

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Visional (4194 JP)

51job’s Privatisation Spread Risk/Reward

We think that the signing of the acquisition facilities is a significant step towards deal completion. The gross spread to the offer price is 17.3%...

Arun George

51job Enters into a Definite Agreement

51 job has entered into a definitive agreement for privatisation at $79.05 in cash per ADS. We think that the current level of support should be...

Arun George

Kanzhun IPO: Trading Debut

Kanzhun has priced its IPO at $19 per ADS to raise $912 m. Our DCF sensitivity analysis points to a meaningful upside based on achievable targets...

Arun George

Kanzhun IPO: Valuation Insights

At the mid-point, Kanzhun will raise net proceeds of $817.2 m. For investors willing to brave the risk that the market selloff in high growth...

Arun George

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

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