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

<ul>
<li>PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.</li>
<li>The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.</li>
<li>In this note, we'll talk about the latest developments, possible outcomes and implications.</li>
</ul>


PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we'll talk about the latest developments, possible outcomes and implications.


China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Bottom-Up

We believe that <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a> is a special situation that warrants a close look from the long side.  Our recent checks in the live broadcasting broadcasters and agencies suggest that broadcasters see a surge in traffic/new viewers from BIDU in recent weeks.  BIDU traffic is of lower quality than YY as BIDU’s existing business model for live streaming is ecommerce.  YY, on the other hand, discusses tips for broadcasters.  <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  has opened multiple entries to YY.  For example, all viewers of Haokan Video (short video sub of <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> ) now have access to YY subsidiaries.  Haokan is said to have 30MM DAU through independent Haokan App, and 110 MM DAU through all apps in Baidu ecosystem in 2019.  Assuming YY can convert 1% DAU to paying users, that is 26% boost to YY existing paying users.

We believe that JOYY (YY US) is a special situation that warrants a close look from the long side.  Our recent checks in the live broadcasting broadcasters and agencies suggest that broadcasters see a surge in traffic/new viewers from BIDU in recent weeks.  BIDU traffic is of lower quality than YY as BIDU’s existing business model for live streaming is ecommerce.  YY, on the other hand, discusses tips for broadcasters.  Baidu (BIDU US)  has opened multiple entries to YY.  For example, all viewers of Haokan Video (short video sub of Baidu (BIDU US) ) now have access to YY subsidiaries.  Haokan is said to have 30MM DAU through independent Haokan App, and 110 MM DAU through all apps in Baidu ecosystem in 2019.  Assuming YY can convert 1% DAU to paying users, that is 26% boost to YY existing paying users.

BIDU-YY Live Streaming Integration Update: Unlocking Deep Value in YY

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
Back in May 2016, a buyout group comprising <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>'s founder Lei Jun terminated its US$2.5bn Offer for <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a>, on account of heightened regulatory scrutiny. At the time, Lei was JOYY's chairman. The buyout group also comprised CEO David Xueling Li. The non-binding Offer price for ~64% of shares out not held by the buyout group was US$68.50/share.  
Fast forward to 16 November last year, <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> <a href="https://ir.baidu.com/news-releases/news-release-details/baidu-acquire-joyys-live-streaming-business-china" target="_blank" rel="noopener">announced</a> it had entered into definitive agreements with JOYY to acquire its domestic video-based entertainment live streaming business in China ("YY Live"), for US$3.6bn. 
Two days later, Muddy Water had a <a href="https://www.muddywatersresearch.com/research/yy/1/" target="_blank" rel="noopener">slightly less favourable</a> take on Baidu "buying growth". 
JOYY and certain of its current and former officers and directors were named as defendants in a federal putative securities class action filed on the 20 November 2020, alleging that they made material misstatements and omissions in documents filed with the SEC regarding certain of the allegations contained in the MW report.
On the 8 February, JOYY <a href="https://ir.joyy.sg/static-files/0aeb5b77-b567-4621-bb81-dea6177cdfa6" target="_blank" rel="noopener">disclosed</a> the conclusion of the independent review, which concluded that the allegations raised and conclusions reached in that MW report about JOYY's YY Live business were not substantiated.
The Baidu sale has been substantially completed, with certain customary matters remaining to be completed  - namely SAMR. 
The New News
Reuters is reporting that Chairman David Li and Lei Jun are reloading an Offer for JOYY. Reportedly they are looking to offer US$75-$100/share, or a market cap of US$7.8bn at the top end of that range.
More below the fold.
</div>


Back in May 2016, a buyout group comprising Xiaomi Corp (1810 HK)'s founder Lei Jun terminated its US$2.5bn Offer for JOYY (YY US), on account of heightened regulatory scrutiny. At the time, Lei was JOYY's chairman. The buyout group also comprised CEO David Xueling Li. The non-binding Offer price for ~64% of shares out not held by the buyout group was US$68.50/share.  
Fast forward to 16 November last year, Baidu (9888 HK) announced it had entered into definitive agreements with JOYY to acquire its domestic video-based entertainment live streaming business in China ("YY Live"), for US$3.6bn. 
Two days later, Muddy Water had a slightly less favourable take on Baidu "buying growth". 
JOYY and certain of its current and former officers and directors were named as defendants in a federal putative securities class action filed on the 20 November 2020, alleging that they made material misstatements and omissions in documents filed with the SEC regarding certain of the allegations contained in the MW report.
On the 8 February, JOYY disclosed the conclusion of the independent review, which concluded that the allegations raised and conclusions reached in that MW report about JOYY's YY Live business were not substantiated.
The Baidu sale has been substantially completed, with certain customary matters remaining to be completed  - namely SAMR. 
The New News
Reuters is reporting that Chairman David Li and Lei Jun are reloading an Offer for JOYY. Reportedly they are looking to offer US$75-$100/share, or a market cap of US$7.8bn at the top end of that range.
More below the fold.


Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.</li>
<li>It is the right approach for Singapore – a voluntary best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.</li>
<li>No surprise ratings methodology changes. No en masse upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.</li>
</ul>


The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.
It is the right approach for Singapore – a voluntary best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.
No surprise ratings methodology changes. No en masse upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.


Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

<ul>
<li>Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names. </li>
<li>Of these companies, only two are expected to be EBITDA positive in FY22. </li>
<li>They are <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a> and <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com (SOHU US)</a>. This insight looks at both names. </li>
</ul>


Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names. 
Of these companies, only two are expected to be EBITDA positive in FY22. 
They are JOYY (YY US) and Sohu.com (SOHU US). This insight looks at both names. 


Negative EVs: JOYY & Sohu's Steep Discount To Net Cash

China

JOYY Inc. operates a global social media platform. The Company offers platform which enables users to interact with each other in real time through online live media by creating, sharing, and enjoying a vast range of entertainment content and activities. JOYY serves customers in China.

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JOYY (YY US)

China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US...

Sumeet Singh

BIDU-YY Live Streaming Integration Update: Unlocking Deep Value in YY

YY to broadcaster on May 21: “YY and Baidu live streaming channels will start sharing data. We asked our live broadcasters to welcome the new...

JL Warren Capital

JOYY (JOYY US): Rumoured Privatisation

A little over three years after entering into an SPA, Baidu (9888 HK) has now terminated discussions with JOYY (YY US) as the closing conditions...

David Blennerhassett

Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

Singapore's Code of Conduct for ESG ratings is more light-handed than other regulation-based approaches, but therein lies the "less risk and more...

Kyle Rudden

Negative EVs: JOYY & Sohu's Steep Discount To Net Cash

I'd tilt slightly towards Sohu. It did successfully sell Sogou; whereas Joyy failed to sell YY live. That may provide some insight as to how the...

David Blennerhassett

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