Pinduoduo (PDD US) is looking to raise about US$1.5bn in its follow-up offering. The placement is a mix of primary and secondary selldown.
The deal scores poorly on our framework due to its large deal size and expensive valuation relative to peers. We find that the timing of the placement to be peculiar and the large overhang post-offering is a worry. Banyan’s selldown in this placement suggested that principal shareholders may progressively look to exit their stakes contrary to our previous assumption and their shares will add pressure to the share price in the near-term.
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When we previously argued that the Koolearn IPO was ‘hurtling towards losses’, its latest PHIP update provided little reprieve to our postulation. Further analysis on the latest update can be found below the fold.
Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018).
The company spent significantly on online promotion, but we believe that online promotion is not useful.
We also believe online marketing expenditures are not a productive use of the Company’s cash, as Koolearn’s brand was already well known among consumers due to its parent company, New Oriental.
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When we previously argued that the Koolearn IPO was ‘hurtling towards losses’, its latest PHIP update provided little reprieve to our postulation. Further analysis on the latest update can be found below the fold.
Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018).
The company spent significantly on online promotion, but we believe that online promotion is not useful.
We also believe online marketing expenditures are not a productive use of the Company’s cash, as Koolearn’s brand was already well known among consumers due to its parent company, New Oriental.
Maoyan Entertainment was priced at HKD 14.8/share and will start trading today. We summarize the latest information with updates on our valuation in this short note, prior to the trading debut. Our recent studies on the movies slotted to launch during the Chinese New Year period suggest that the box office during the CNY period could be a positive catalyst to Maoyan, which lists right before the CNY.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Maoyan Entertainment was priced at HKD 14.8/share and will start trading today. We summarize the latest information with updates on our valuation in this short note, prior to the trading debut. Our recent studies on the movies slotted to launch during the Chinese New Year period suggest that the box office during the CNY period could be a positive catalyst to Maoyan, which lists right before the CNY.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Happy Lunar New Year to everyone from Aequitas Research!
It has been a fairly quiet week leading up to Chinese New Year but it is not stopping Maoyan Entertainment (1896 HK) from listing on Monday. The IPO was priced at the bottom end of its offering range. The last we checked, it traded up 3% in the grey market on Friday. Ke Yan, CFA, FRM will follow up with a short note of his thoughts on post-IPO trading dynamics and bookbuild subscription levels.
Other updates on IPO in Hong Kong include Sinochem Energy allowing its IPO application to lapse while Koolearn (1373356D HK) and Shangde Qizhi Education re-filed for IPO. Edvantage, another new education IPO (and likely to be borderline US$100m deal size) filed for Hong Kong listing this week as well.
China Tower (788 HK)‘s lock-up will be expiring on the 8th of February and Ke Yan, CFA, FRM mentioned in his insight that any potential placement will be a good opportunity to accumulate the stock. Placements from cornerstone investors will likely be a liquidity event.
In India, Chalet Hotels Limited (CHALET IN) closed its bookbuild with a tepid overall demand of 1.57x. The silver lining for the IPO is that the institutional tranche saw a healthy 4.6x demand, similar to that of Lemon Tree Hotels (LEMONTRE IN) in terms of weak overall but strong institutional demand, which ended up performing well in its IPO.
Other upcoming India IPOs include Mazagon Dock Shipbuilders Ltd (9155507Z IN) and Embassy REIT which were said to be seeking listing towards the end of February. Sterling and Wilson is also looking to file its INR50bn IPO with the Sebi soon.
In Japan, Wingarc1st announced its IPO bookbuild to start on the 25th of February and will be listing in March. It is estimated to be raising about US$380m.
Accuracy Rate:
Our overall accuracy rate is 72% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
Edvantage Group (Hong Kong, ~US$100m)
Koolearn (Hong Kong, re-filed)
Shangde Qizhi Education Group (Hong Kong, re-filed)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Happy Lunar New Year to everyone from Aequitas Research!
It has been a fairly quiet week leading up to Chinese New Year but it is not stopping Maoyan Entertainment (1896 HK) from listing on Monday. The IPO was priced at the bottom end of its offering range. The last we checked, it traded up 3% in the grey market on Friday. Ke Yan, CFA, FRM will follow up with a short note of his thoughts on post-IPO trading dynamics and bookbuild subscription levels.
Other updates on IPO in Hong Kong include Sinochem Energy allowing its IPO application to lapse while Koolearn (1373356D HK) and Shangde Qizhi Education re-filed for IPO. Edvantage, another new education IPO (and likely to be borderline US$100m deal size) filed for Hong Kong listing this week as well.
China Tower (788 HK)‘s lock-up will be expiring on the 8th of February and Ke Yan, CFA, FRM mentioned in his insight that any potential placement will be a good opportunity to accumulate the stock. Placements from cornerstone investors will likely be a liquidity event.
In India, Chalet Hotels Limited (CHALET IN) closed its bookbuild with a tepid overall demand of 1.57x. The silver lining for the IPO is that the institutional tranche saw a healthy 4.6x demand, similar to that of Lemon Tree Hotels (LEMONTRE IN) in terms of weak overall but strong institutional demand, which ended up performing well in its IPO.
Other upcoming India IPOs include Mazagon Dock Shipbuilders Ltd (9155507Z IN) and Embassy REIT which were said to be seeking listing towards the end of February. Sterling and Wilson is also looking to file its INR50bn IPO with the Sebi soon.
In Japan, Wingarc1st announced its IPO bookbuild to start on the 25th of February and will be listing in March. It is estimated to be raising about US$380m.
Accuracy Rate:
Our overall accuracy rate is 72% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
Edvantage Group (Hong Kong, ~US$100m)
Koolearn (Hong Kong, re-filed)
Shangde Qizhi Education Group (Hong Kong, re-filed)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
China Tower Corp, the owner and operator and telecommunication tower network in China, listed on August 8th last year. Over the past six months, the stock has returned 35% with the addition of a number of global investors to its share registry.
As it heads into lock-up expiry in Feb, in this insight we would like to examine China Tower’s performance since listing.
We note that China Tower has delivered a decent set of results for 3Q2018 and it will be a key beneficiary of China’s push into 5G built-up with little uncertainty.
The current valuation of the company was still lower than international tower providers.
With the improving operating metrics and stable income, we believe there are still upsides for China Tower Corp post-lock-up expiry.
Bharat Hotels (BHOT IN) plans to raise around US$150m in its Indian IPO in order to pay down debt. The company owns and operates 12 luxury hotels under “The LaLiT” brand and two mid-market hotels under “The LaLiT Traveller” brand.
BH has been reporting a steady improvement in operations led by a pick-up in occupancy levels. This has resulted in 30% EBITDA CAGR over FY14-18.
However, only three out of its 12 hotels seem to be performing consistently and have been increasing their contribution to EBITDA, which was at 76% by FY18. In addition, a comparison with its peer group seems to imply that the company still has some more catching up to do.
In October 2018,Dreamtech Co Ltd (192650 KS) first provided its initial IPO prospectus but due to difficult market conditions, it withdrew its IPO last year. Dreamtech is trying to complete its IPO again this year for a listing in March. Established in 1988, Dreamtech makes modules and sensors for smartphones, auto vehicles, home appliances, and health care products.
The bankers have reduced the IPO price range to 11,000 won to 13,000 won (from 13,400 won to 16,700 won previously). The mid-point of the IPO price range has been reduced by 20% versus its first try at the IPO in 4Q18.
The bankers used 15 companies including SEMCO and SimmTech as comparable companies to Dreamtech. The average P/E of the comps is 14.6x (based on the annualized net profit in 1Q-3Q18). The bankers then took the annualized net profit of Dreamtech in 1Q-3Q18 and applied this P/E multiple which resulted in an implied market cap of 540.5 billion won or implied price of 17,286 won. After applying an additional 24.7% – 36.3% IPO discount, this resulted in the IPO price range of 11,000 won to 13,000 won.
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CStone Pharma (CSTONE HK) is a biopharmaceutical company which is developing a pipeline of 14 drug candidates of which 9 are in clinical development. CStone has started pre-marketing for a Hong Kong IPO to raise around $400 million, according to press reports.
CStone has four late-stage clinical drug candidates who are CS1001, invosidenib, avapritinib and CS3009. A key priority is to add on around 10 pivotal clinical trials for the late-stage drug candidates to advance them to commercialisation in China. Overall, we believe that the prospectus of the four late-stage clinical drug candidates is mixed.
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Ebang (EBANG HK) is a Chinese designer of bitcoin mining machines which are sold under the Ebit brand. Ebang refiled its draft prospectus with HKEX on 20 December 2018, but the IPO plans of cryptocurrency related companies are in a state of flux. Last week, the CEO of the Hong Kong Exchanges and Clearing, said that companies seeking to go public in Hong Kong should show consistency in their business models, in response to questions about the IPO applications of Bitmain Technologies Ltd (1374554D CH), Canaan Inc. (CANAAN HK) and Ebang.
While 1H18 results were strong, Ebang cautions that it experienced significant decreases in revenue and gross profit for 3Q18 compared to 2Q18. In the absence of any 3Q18 financial metrics, we scrutinised the financial accounts to find clues on the extent of the slowdown. Our analysis of the financial accounts’ leading indicators points to a rapid slowdown.
Chalet Hotels (Chalet) is an owner, developer, and asset manager of luxury hotels. The company has grown its revenue and EBITDA at 15.8% and 22.8% CAGR from FY2016 to FY2018. The growth has been driven by the consistent improvement of its average occupancy rate which in turn drove RevPAR higher.
However, the company is embroiled in litigation with Hindustan Aeronautics (HNAL IN) which could result in the company incurring significant costs. Along with the impending renewal of the licensing agreement in 2020 and 2021, there is much to be worried about the company’s near-term outlook and its highly leveraged balance sheet may leave the company backed up into a corner.
In this insight, we will look at the company financial and operating performance, compare hotels’ operating metrics to the industry average, and compare its valuation to other Indian hotel peers. We will also run the deal through our IPO framework.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Starting with placements this week, we had a relatively small Recruit Holdings (6098 JP) block sold by Toppan Printing (7911 JP). The stock traded below its deal price of JPY2,762 for the most part of the first-day post-placement. It bounced back on Friday to close just 0.6% above its deal price. We were bullish about the placement because it was a tiny deal relative to its three-month ADV.
There was also a small Ihh Healthcare (IHH MK) secondary block on Thursday after markets have closed. The deal was about US$80m and got priced at MYR5.56, the bottom-end of the price range.
For deals that have launched, there are Maoyan Entertainment (EPLUS HK) and Chalet Hotels. Maoyan will be pricing on the 28th of January while Chalet Hotels will open its book on the 29th of January and swiftly close on the 31st.
Earlier this week, we also heard that Dexin China, a property developer mostly based on Zhejiang Province, was seeking listing approval to list in Hong Kong whereas Global Switch, a UK-based data center operator, will meet banks next week in London to choose arrangers for a Hong Kong IPO of about US$1bn in 2019.
Other than that, another pharma company, Jubilant Pharma, is looking to list on the US market after getting tepid interests from investors for an SGX listing. It was initially looking to raise about US$500m. Fang Holdings Limited (SFUN US), a Chinese real estate internet portal, has also submitted a confidential filing to the SEC for a proposed spin-off of its research unit, China Index Holdings.
Accuracy Rate:
Our overall accuracy rate is 71.9% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
No new IPO filings
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in:
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
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Maoyan Entertainment (EPLUS HK) is the largest online movie ticketing service provider in China. The mid-point of Maoyan’s IPO price range of HK$14.8-20.4 per share implies a market value of $2.5 billion (HK$19.8 billion). Five cornerstone investors have agreed to buy $30 million or 10% of the offering at the IPO mid-point. The cornerstone investors are Imax China Holding (1970 HK), Hylink Digital Solutions, Prestige of The Sun, Welight Capital and Xiaomi Corp (1810 HK).
Our analysis suggests Maoyan is being offered at a material premium to a peer group of major Chinese internet companies. Due to challenging prospects faced by Maoyan as outlined in our previous research, we believe a premium rating is unwarranted. Consequently, we are inclined to sit out this IPO.
HET has grown its revenue at an impressive 73% CAGR from 2015 to 2017 and has been accompanied by gross margin expansion. The strong growth was supported by improving operating metrics such as an increase in student enrollment and average spending.
However, HET has been making losses and continues to spend more than its net billing. It is unclear whether HET had already achieved break even for its proprietary courses before expanding into its CCtalk platform. But from its high level of expenses, it seems unsustainable for HET to be relying heavily on the sales and marketing spending to get users to purchase online courses.
In this insight, we will look into the company’s financial and operating performance, regulatory risks regarding K12 courses, aggressive spending on sales and marketing, and the performance of other online education companies.
Polycab India (POLY IN) plans to raise around US$280m in its IPO through a mix of selling primary and secondary shares. It is the largest manufacturer of wires and cables in India with a 12% market share, as per CRISIL research. The company has also recently entered the consumer electrical segments.
Sales growth has been decent while margin expansion has helped the company to report much higher PATMI growth. Although, cash flow from operations has lagged earnings growth as working capital requirements have been volatile. In addition, receivables quality seems to be deteriorating. To add to that the rationale for the dealers and employees rationalization hasn’t been clearly explained.
In this insight, I’ve covered the above points, compared the company to its listed peers and commented on valuations. Should the deal be offered at multiples close to its wires and cables peers, it might still be interesting.
Maoyan Entertainment (formerly Entertainment Plus) launched its institutional book building last Friday. We covered the company’s background, industry backdrop, financials, shareholders and the regulatory overhang in our previous two notes.
In this note, we will look at the recent development of the company, based on the data from the prospectus and our channel checks. We will also discuss the valuation of the company.
Just as Pinduoduo (PDD US) lock-up expiry date (22nd January) is approaching, there was news of a massive bug that could result in an RMB20bn loss for PDD. According to the company’s official Weibo account, the bug has already been rectified and a police report has been filed.
In this insight, we will analyze the potential impact of the bug and the number of shares that could potentially be sold upon lock-up expiry.
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Chalet Hotels (Chalet) is an owner, developer, and asset manager of luxury hotels. The company has grown its revenue and EBITDA at 15.8% and 22.8% CAGR from FY2016 to FY2018. The growth has been driven by the consistent improvement of its average occupancy rate which in turn drove RevPAR higher.
However, the company is embroiled in litigation with Hindustan Aeronautics (HNAL IN) which could result in the company incurring significant costs. Along with the impending renewal of the licensing agreement in 2020 and 2021, there is much to be worried about the company’s near-term outlook and its highly leveraged balance sheet may leave the company backed up into a corner.
In this insight, we will look at the company financial and operating performance, compare hotels’ operating metrics to the industry average, and compare its valuation to other Indian hotel peers. We will also run the deal through our IPO framework.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Starting with placements this week, we had a relatively small Recruit Holdings (6098 JP) block sold by Toppan Printing (7911 JP). The stock traded below its deal price of JPY2,762 for the most part of the first-day post-placement. It bounced back on Friday to close just 0.6% above its deal price. We were bullish about the placement because it was a tiny deal relative to its three-month ADV.
There was also a small Ihh Healthcare (IHH MK) secondary block on Thursday after markets have closed. The deal was about US$80m and got priced at MYR5.56, the bottom-end of the price range.
For deals that have launched, there are Maoyan Entertainment (EPLUS HK) and Chalet Hotels. Maoyan will be pricing on the 28th of January while Chalet Hotels will open its book on the 29th of January and swiftly close on the 31st.
Earlier this week, we also heard that Dexin China, a property developer mostly based on Zhejiang Province, was seeking listing approval to list in Hong Kong whereas Global Switch, a UK-based data center operator, will meet banks next week in London to choose arrangers for a Hong Kong IPO of about US$1bn in 2019.
Other than that, another pharma company, Jubilant Pharma, is looking to list on the US market after getting tepid interests from investors for an SGX listing. It was initially looking to raise about US$500m. Fang Holdings Limited (SFUN US), a Chinese real estate internet portal, has also submitted a confidential filing to the SEC for a proposed spin-off of its research unit, China Index Holdings.
Accuracy Rate:
Our overall accuracy rate is 71.9% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
No new IPO filings
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in:
Toppan Printing (7911 JP) is looking to sell 10.5m shares in Recruit Holdings (6098 JP) for about US$263m. Post-placement, Toppan Printing will still have about 6% stake (103m shares) in Recruit Holdings.
The deal scores well on our framework owing to its strong price and earnings momentum and stellar track record. However, it was offset by its relatively expensive valuation compared to peers. The selldown by Toppan Printing is tiny relative to the three-month ADV which the market would likely be able to absorb. The sell down is also long overdue considering that Toppan Printing skipped the 2016 secondary offering in which many shareholders have participated.
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Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
