ECM Daily Briefs | Smartkarma

In today’s briefing:

Shift Up IPO Book Building Results Analysis
Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down
Chenqi Technology Pre-IPO – PHIP Updates – Sales Growth Accelerated but Sustainability in Question
Sanil Electric IPO: The Bear Case
Shanghai Voicecomm IPO Preview: Superior Growth Profile and Collaboration With Baidu on ERNIE Bot

Shift Up IPO Book Building Results Analysis

Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).

Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

By Travis Lundy

Today, Toenec Corp (1946 JP) – an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
This is surprising. It suggests there are more selldowns to come. It’s also “big” at 88 days of ADV and about 26% of Max Real World Float (85% retail).
This is an odd sell-down. Chubu EPCO obviously doesn’t want to buy it in. That means overhang for years.

Chenqi Technology Pre-IPO – PHIP Updates – Sales Growth Accelerated but Sustainability in Question

Chenqi Technology Limited (CT HK) is looking to raise US$130m in its upcoming Hong Kong IPO, after downsizing from an earlier reported float of US$300m.
Chenqi Technology (Chenqi) is a mobility technology and service company in China, founded by the GAC Group and Tencent.
In our previous note, we talked about the company’s historical performance. In this note, we talk about its PHIP updates.

Sanil Electric IPO: The Bear Case

Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
In Sanil Electric IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on rapidly slowing growth, high customer concentration, mid-tier revenue growth and mid-tier FCF margin compared to peers.

Shanghai Voicecomm IPO Preview: Superior Growth Profile and Collaboration With Baidu on ERNIE Bot

By Andrei Zakharov

Shanghai Voicecomm Information Technology Co., an IT solution provider for enterprise-level users in China, plans to price its IPO by July 10, 2024 and raise ~HK$664M.
CICC is leading the offering in Hong Kong and the IPO is expected to be priced at HK$152.10 per H share, implying a market cap of ~HK$5.4B or ~$690M.
Cornerstone investors have agreed to acquire ~1.8M H shares, representing 41% of the offer shares or ~5% of the total outstanding shares.

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Jul 01

Daily Brief ECM: Timee Pre-IPO – Peer Comparison – Stronger Growth Has Allowed It to Close the Margin Gap and more

In today’s briefing:

Timee Pre-IPO – Peer Comparison – Stronger Growth Has Allowed It to Close the Margin Gap
ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India

Timee Pre-IPO – Peer Comparison – Stronger Growth Has Allowed It to Close the Margin Gap

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In an earlier note, we looked at the firm’s past performance. In this note, we undertake a peer comparison.

ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, we looked at the upcoming mega-listing for Hyundai Motor India.
On the placement front, the week was dominated by the cross-shareholding unwinds in Aisin (7259 JP) and Mitsui & Co Ltd (8031 JP).

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Jun 30

Daily Brief ECM: Sanil Electric IPO: The Bull Case and more

In today’s briefing:

Sanil Electric IPO: The Bull Case
SF Holding Pre-IPO: Dominance in Domestic Time-Definite (Air) Express Is a Durable Differentiator

Sanil Electric IPO: The Bull Case

Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
The IPO is a pure primary raise of 7.6 million shares at an IPO price range of KRW24,000-30,000. Book building will run from 9 to 15 July.
The bull case rests on US-led rapid revenue growth, high barriers to entry, good revenue visibility, improving margins, top-quartile margin performance and modest leverage.

SF Holding Pre-IPO: Dominance in Domestic Time-Definite (Air) Express Is a Durable Differentiator

By Daniel Hellberg

SF Holding’s time-definite express service differentiates it from Chinese rivals
We believe SF dominates China’s domestic inter-city air express segment
High exposure to air service mostly beneficial, with few risks, in our view

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Jun 29

Daily Brief ECM: Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential and more

In today’s briefing:

Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential
Sanil Electric IPO Industry Analysis

Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential

By Tina Banerjee

Emcure Pharmaceuticals seeks to raise INR19.5B in upcoming IPO through a fresh issue of INR8B and an OFS of 11.4M shares. IPO price band has been set at INR960–1,008.
The issue will open for subscription on July 3 and close on July 5. Bidding for anchor investors will open on July 2. Lot size for bidding is 14 shares.
IPO proceeds will be used to repay debt. As at March 31, 2024, the company’s outstanding borrowings stood at INR21B against cash balance of INR2B.

Sanil Electric IPO Industry Analysis

With the development of new and renewable energy, transmission and distribution network bottlenecks are worsening in many countries, and there is a strong demand for new transmission and distribution networks.
China is virtually excluded from competition for the US market. This situation has resulted in increased new orders for companies such as Sanil Electric.
Our base case valuation of Sanil Electric is target price of 58,593 won, which is 95% higher than the high end of the IPO price range (30,000 won).

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Jun 28

Daily Brief ECM: Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind and more

In today’s briefing:

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO
Aisin (7259 JP): A US$1.1 Billion Secondary Offering
LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market
Timee Pre-IPO – The Negatives – Competition Could Stiffen
Initial Thoughts on LG Electronics India IPO
Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth
Cirrus Aircraft Pre-IPO – Refiled PHIP Updates – Customer Demand Remains Strong

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

By Travis Lundy

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO

Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
While the deal appears well-flagged, given that it is part of the cross-shareholding unwind theme in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Aisin (7259 JP): A US$1.1 Billion Secondary Offering

Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).

LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market

By Sanghyun Park

LG Electronics’ Indian subsidiary, fully owned, saw 2023 sales grow 17% to ₩3.3T and net profit rise 14% to ₩231.3B, driven by strong appliance demand.
LG Electronics aims for a ₩5T-₩6T valuation, planning to sell 15-20% of their Indian subsidiary to raise at least $500M.
LG Electronics plans to invest the $500M raised into their EV components business, moving quickly with the IPO due to urgent funding needs in the downturn-hit sector.

Timee Pre-IPO – The Negatives – Competition Could Stiffen

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the not so positive aspects of the deal.

Initial Thoughts on LG Electronics India IPO

According to local media, LG Electronics is reviewing for a potential IPO of LG Electronics India. LG Electronics has approached JP Morgan and Morgan Stanley to be potential IPO underwriters.
If LG Electronics’ Indian subsidiary is listed, it is expected to be able to raise at least $500 million from the stock market.
Post IPO, the market value of LG Electronics India is estimated to be between $2.1 billion (3 trillion won) and $4.3 billion (6 trillion won).

Webtoon Entertainment IPO Trading – Not Cheap Given the Lack of Growth

Webtoon Entertainment (WBTN US) raised around US$315m in its US IPO, after pricing the deal at the top of the range at US$21/share.
Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
In our previous notes, we talked about the company’s historical performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we talk about the trading dynamics.

Cirrus Aircraft Pre-IPO – Refiled PHIP Updates – Customer Demand Remains Strong

Cirrus Aircraft (0153126D US) seeks to raise up to US$100m in its upcoming HK IPO, after downsizing from an earlier reported float of US$200m.
Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
We had covered the company’s performance and PHIP updates in our earlier notes. In this note, we talk about its refiled PHIP updates.

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Jun 27

Daily Brief ECM: Timee Pre-IPO – The Positives – Exponential Growth Since Inception and more

In today’s briefing:

Timee Pre-IPO – The Positives – Exponential Growth Since Inception
Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers
Mexican Airlines – Capacity Management to Drive Bumper 2024; Gains Beyond Difficult
Pre-IPO Bayzed Health Group – Here Are the Concerns and Potential Risks

Timee Pre-IPO – The Positives – Exponential Growth Since Inception

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the positive aspects of the deal.

Sanil Electric IPO – Strong Profitability Growth, but Highly Dependent on Its Top Customers

Sanil Electric (062040 KS) is looking to raise up to US$164m in its Korean IPO.
Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards. As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
In this note, we talk about the company’s historical performance.

Mexican Airlines – Capacity Management to Drive Bumper 2024; Gains Beyond Difficult

By Neil Glynn

We update forecasts for Mexican carriers Aeromexico, Viva Aerobus and Volaris following extremely strong 1Q results, driven by capacity management.
We expect each carrier to produce record performances in 2024 as pricing gains continue through the year.
However, we expect market conditions to normalise beyond 2024 and see further gains as a lot more difficult, particularly given drag from higher aircraft ownership costs.

Pre-IPO Bayzed Health Group – Here Are the Concerns and Potential Risks

By Xinyao (Criss) Wang

Bayzed’s business model is similar to that of Hygeia and Inkon Life Technology. However, Bayzed’s profit margin is largely lagging behind peers. This makes us concerned about its future profitability.
The nationwide expansion of oncology hospitals is very challenging. Bayzed’s expansion pace may not be as fast as expected if it hopes to control the quality of expansion.
Due to “heavy asset” model, Bayzed would continue to face capital pressure.The latest valuation of Bayzed in 2023 is RMB2.625 billion. We think Bayzed’s valuation should be lower than peers.

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Jun 26

Daily Brief ECM: Sanil Electric IPO Valuation Analysis and more

In today’s briefing:

Sanil Electric IPO Valuation Analysis
Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory

Sanil Electric IPO Valuation Analysis

Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (95% higher than the high end of the IPO price).
Sanil Electric has higher sales growth, operating margins, and ROE than the comps.
We estimate Sanil Electric to generate sales of 283.4 billion won (up 32.1% YoY) and operating profit of 79 billion won (up 69.6% YoY) in 2024.

Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory

Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In this note, we talk about the not-so-positive aspects of the deal.

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Jun 25

Daily Brief ECM: Mitsui & Co (8031) – ¥100bn Overnight Equity Offering and more

In today’s briefing:

Mitsui & Co (8031) – ¥100bn Overnight Equity Offering
Mitsui & Co Placement – Another Cross-Shareholding Unwind, This Is a Small One to Digest
Japan Hotel REIT Placement – Relatively Large Deal but It Is Accretive
Avanse Financial Services Pre-IPO Tearsheet
Hyundai Motor India Pre-IPO – The Positives – Quasi-Local, Riding the SUV Wave

Mitsui & Co (8031) – ¥100bn Overnight Equity Offering

By Travis Lundy

Today after the close, Mitsui & Co Ltd (8031 JP) announced that MS&AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) would sell 14.9mm shares in an offering.
This will get priced today or tomorrow, sold to institutional investors. This is ¥107bn, 4 days of ADV and 1% of shares out. It is not dilutive.
Mitsui & Co has a buyback program with ¥123bn left til end-Sep, when presumably it will reload. Looks easy today, but measuring Mitsui & Co vs Peers is less flattering.

Mitsui & Co Placement – Another Cross-Shareholding Unwind, This Is a Small One to Digest

MS&AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) are looking to raise US$691m from trimming their respective stakes in Mitsui & Co Ltd (8031 JP).
While this appears to be another cross-shareholding unwind in Japan, we would argue that the selldown isn’t outright well-flagged given the uncertainty of timing the selldown.
In this note, we will talk about the placement and run the deal through our ECM framework.

Japan Hotel REIT Placement – Relatively Large Deal but It Is Accretive

Japan Hotel Reit Investment (8985 JP) aims to raise around US$214m to partly fund the acquisition of four hotel assets.
The company has undertaken a number of deals in the past, most of which have managed to perform well.
In this note, we will talk about the placement and run the deal through our ECM framework.

Avanse Financial Services Pre-IPO Tearsheet

Avanse Financial Services (1288481D IN) is looking to raise up to US$419m in its upcoming India IPO. The bookrunners will be JPM, Nomura, Kotak, Avendus, Nuvama Wealth and SBI Capital.
Avanse Financial Services (AFS) is an education focused non-banking financial company (NBFC) operating in India.
It offers full stack education products ranging from education loans for students to growth capital for education institutions through education infrastructure loans.

Hyundai Motor India Pre-IPO – The Positives – Quasi-Local, Riding the SUV Wave

Hyundai Motor (005387 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In this note, we talk about the positive aspects of the deal.

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Jun 24

Daily Brief ECM: MMG (1208 HK): Rights Trade Playbook and more

In today’s briefing:

MMG (1208 HK): Rights Trade Playbook
Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule
Sanil Electric IPO Preview
ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

MMG (1208 HK): Rights Trade Playbook

On 4 June, MMG (1208 HK) announced plans to raise HK$9.1bn (US$1.2bn) through 2 rights shares for every five existing shares rights offering, with a rights price of HK$2.62.
Since the rights issue announcement, MMG shares have declined by 16.2% to the undisturbed price and by 8.0% compared to the TERP of HK$3.48 per share.
MMG’s trading pattern has diverged from Link REIT/Yuexiu’s rights trading due to the statement on 18 May that the Peruvian mine is not liable for a 30% withholding tax.

Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule

By Sanghyun Park

The new pre-disclosure rule starting July 24th will reshape business practices. Local institutions are now preparing by launching dedicated block deal funds, targeting 40 to 80 deals annually.
No rule bars short-sellers from block deals post-pre-disclosure. Local institutions are planning to exploit this, anticipating sellers favoring club deals under new July rules, potentially stabilizing prices for hedge strategies.
Access to club deals will be crucial post-July in Korea’s block deal market. Effective short-selling instruments are also vital with the ban extended until March next year.

Sanil Electric IPO Preview

Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share.
The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July.
Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants.

ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, Guzman provided some hope to the Australian market, while Webtoon Entertainment (WBTN US) and Allied Blenders & Distillers will soon test their respective markets.
There was no dearth of placement this week, with large deals in Hong Kong, New Zealand and India.

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Jun 23

Daily Brief ECM: Webtoon Entertainment IPO: Favorable Risk/Reward IPO Valuation and Limited Downside Potential and more