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

<p><a href="https://www.smartkarma.com/entities/anjuke" target="_blank" data-smartkarma-citation="entities:33003:1" rel="noopener">Anjuke (ANJ HK)</a> is the largest online marketing platform for new and existing properties by revenue in 2020, according to iResearch. Anjuke is a subsidiary of 58.com. Anjuke’s shareholders include <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> (14.3% stake), General Atlantic (7.7%), Warburg Pincus (7.9%), <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a> and <a href="https://www.smartkarma.com/entities/agile-property-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15784:1" rel="noopener">Agile Property Holdings (3383 HK)</a>. It is seeking to raise $1 billion through an HKEx IPO, according to press reports.</p><p>Anjuke is using its core online marketing services business, which is cash generative, to fund its foray into transaction services, a market where <a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> dominates. However, this growth is margin dilutive as transaction services is structurally a lower margin business. We think that the compromise is acceptable as investors continue to be willing to pay up for high-growth tech companies. </p><div class="content-highlight"><p>The key negative is that Anjuke is saddled with debt related to the privatisation of 58.com in September 2020 - <a href="https://www.smartkarma.com/insights/58-com-s-privatisation-enters-into-definitive-agreement" target="_blank" data-smartkarma-citation="insights:40366" rel="noopener">58.com’s Privatisation Enters into Definitive Agreement</a>. While the healthy cash generation should comfortably service the debt, potential IPO investors could be turned off by the view that the IPO is a way of the privatisation consortium (which arguably privatised 58.com to the detriment of minorities) to make a quick buck. Notwithstanding the optics of the privatisation and relisting trade which tend to enrich insiders at the expense of minorities, we believe that the Anjuke IPO is worth a close look.</p></div>

Anjuke (ANJ HK) is the largest online marketing platform for new and existing properties by revenue in 2020, according to iResearch. Anjuke is a subsidiary of 58.com. Anjuke’s shareholders include Tencent Holdings (700 HK) (14.3% stake), General Atlantic (7.7%), Warburg Pincus (7.9%), Country Garden Holdings Co (2007 HK) and Agile Property Holdings (3383 HK). It is seeking to raise $1 billion through an HKEx IPO, according to press reports.Anjuke is using its core online marketing services business, which is cash generative, to fund its foray into transaction services, a market where KE Holdings Inc (BEKE US) dominates. However, this growth is margin dilutive as transaction services is structurally a lower margin business. We think that the compromise is acceptable as investors continue to be willing to pay up for high-growth tech companies. The key negative is that Anjuke is saddled with debt related to the privatisation of 58.com in September 2020 - 58.com’s Privatisation Enters into Definitive Agreement. While the healthy cash generation should comfortably service the debt, potential IPO investors could be turned off by the view that the IPO is a way of the privatisation consortium (which arguably privatised 58.com to the detriment of minorities) to make a quick buck. Notwithstanding the optics of the privatisation and relisting trade which tend to enrich insiders at the expense of minorities, we believe that the Anjuke IPO is worth a close look.

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<p>We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.</p><p>COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.</p><div><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

<div><p><a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> is a combination of <em>Lianjia</em>, China's leading real estate brokerage brand, and <em>Beike</em>, China's leading integrated online and offline platform for housing transactions. KE has launched its IPO at a price range of $17-19 per ADS. At the mid-point of the IPO price range, KE will raise net proceeds of $1,841 million.</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-initiation-home-truths" target="_blank" rel="noopener">our initiation note</a>, we stated that our analysis suggests that if you consider the 1Q20 performance as a one-off (supported by the strong recovery in 2Q20), KE's financial performance is heading in the right direction with strong revenue growth and rising margins. In our <a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-updated-filings-point-to-a-v-shaped-recovery" target="_blank" rel="noopener">follow-on note</a> which examined the 1H20 results, we stated that the 1H20 results showed a strong recovery across all financial metrics. We concluded that KE has attractive fundamentals. Overall, we think that a reasonable valuation and solid indication of interest from investors makes KE tempting at the proposed pricing range. </p></div></div></div>

KE Holdings Inc (BEKE US) is a combination of Lianjia, China's leading real estate brokerage brand, and Beike, China's leading integrated online and offline platform for housing transactions. KE has launched its IPO at a price range of $17-19 per ADS. At the mid-point of the IPO price range, KE will raise net proceeds of $1,841 million.In our initiation note, we stated that our analysis suggests that if you consider the 1Q20 performance as a one-off (supported by the strong recovery in 2Q20), KE's financial performance is heading in the right direction with strong revenue growth and rising margins. In our follow-on note which examined the 1H20 results, we stated that the 1H20 results showed a strong recovery across all financial metrics. We concluded that KE has attractive fundamentals. Overall, we think that a reasonable valuation and solid indication of interest from investors makes KE tempting at the proposed pricing range. 

KE Holdings (Beike) IPO: Valuation Insights

<p><a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> is a combination of <em>Lianjia</em>, China's leading real estate brokerage brand, and <em>Beike</em>, China's leading integrated online and offline platform for housing transactions. KE’s GTV (gross transaction value) market share for existing and new home sales and home rentals through brokerage services in China increased from 11.5% in 2018 to 19.2% in 2019, according to CIC. KE is backed by <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> (12.3% stake), <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>’s Vision Fund (10.2%) and Hillhouse (5.3%). It is seeking to raise $2 billion through an IPO on the New York Stock Exchange, according to press reports.</p><div class="content-highlight"><p>Instead of holding off the IPO process due to a 1Q20 ravaged by the COVID-19 outbreak, KE pressed ahead as it “<em>believes that our fundamental value, rather than external circumstances, is the key factor of a successful IPO.</em>” Our analysis suggests that if you consider the 1Q20 performance as a one-off (supported by the strong recovery in 2Q20), its financial performance is heading in the right direction with strong revenue growth and rising margins. While the cash generation is weak, it is due to industry-specific circumstances. Overall, we believe that the KE IPO is worth a close look.</p></div>

KE Holdings Inc (BEKE US) is a combination of Lianjia, China's leading real estate brokerage brand, and Beike, China's leading integrated online and offline platform for housing transactions. KE’s GTV (gross transaction value) market share for existing and new home sales and home rentals through brokerage services in China increased from 11.5% in 2018 to 19.2% in 2019, according to CIC. KE is backed by Tencent Holdings (700 HK) (12.3% stake), Softbank Group (9984 JP)’s Vision Fund (10.2%) and Hillhouse (5.3%). It is seeking to raise $2 billion through an IPO on the New York Stock Exchange, according to press reports.Instead of holding off the IPO process due to a 1Q20 ravaged by the COVID-19 outbreak, KE pressed ahead as it “believes that our fundamental value, rather than external circumstances, is the key factor of a successful IPO.” Our analysis suggests that if you consider the 1Q20 performance as a one-off (supported by the strong recovery in 2Q20), its financial performance is heading in the right direction with strong revenue growth and rising margins. While the cash generation is weak, it is due to industry-specific circumstances. Overall, we believe that the KE IPO is worth a close look.

KE Holdings (Beike) IPO Initiation: Home Truths

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a fairly good idea that Didi Chuxing drives one-quarter of that, whilst an impairment at Grab is also likely. Beyond that, we believe ride hailing and selected eCommerce (Ola Cabs, Guazi are the largest), struggling start-ups (Oyo Hotels and CloudMinds lead this group) and bankruptcies (Brandless for sure but possibly Zume, Opendoor, Getaround and Fair) can account for most of the downside. We expect that Covid-19 is going to feature strongly when results are presented but many of these companies were hurting before the impact of the pandemic became clear and it is possible that further impairments are still to come. Softbank share have recently outperformed in the bear market rally and (probably) share repurchases but we would be cautious.</p>

In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a fairly good idea that Didi Chuxing drives one-quarter of that, whilst an impairment at Grab is also likely. Beyond that, we believe ride hailing and selected eCommerce (Ola Cabs, Guazi are the largest), struggling start-ups (Oyo Hotels and CloudMinds lead this group) and bankruptcies (Brandless for sure but possibly Zume, Opendoor, Getaround and Fair) can account for most of the downside. We expect that Covid-19 is going to feature strongly when results are presented but many of these companies were hurting before the impact of the pandemic became clear and it is possible that further impairments are still to come. Softbank share have recently outperformed in the bear market rally and (probably) share repurchases but we would be cautious.

Softbank Group: Deep Dive into Vision Fund's $10bn in Expected Valuation Losses for This Quarter

United States

Zillow Group, Inc. provides e-commerce services. The Company provides information about homes, real estate listings, and mortgages through their website and mobile applications. Zillow serves homeowners, buyers, sellers, renters, and real estate professionals throughout the United States.

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Zillow Group Inc A (ZG US)

Anjuke IPO Initiation: Home Truths

Anjuke is seeking to raise $1 bn through an HKEx IPO. Notwithstanding the optics of the privatisation and relisting trade, we believe that the...

Arun George

IAC / ANGI 2Q20: Doubling Down

We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world...

Aaron Gabin

KE Holdings (Beike) IPO: Valuation Insights

KE Holdings Inc (BEKE US) is a combination of Lianjia, China's leading real estate brokerage brand, and Beike, China's leading integrated online...

Arun George

KE Holdings (Beike) IPO Initiation: Home Truths

KE Holdings Inc (BEKE US) is a combination of Lianjia, China's leading real estate brokerage brand, and Beike, China's leading integrated online...

Arun George

Softbank Group: Deep Dive into Vision Fund's $10bn in Expected Valuation Losses for This Quarter

In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a...

Kirk Boodry

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