Equity Capital Markets

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Hyundai Motor India IPO: Valuation Insights

Hyundai Motor India (1342Z IN), a subsidiary of Hyundai Motor (005385 KS), aims to raise up to US$3.3 billion at a valuation of US$19 billion.
We previously discussed the IPO in Hyundai Motor India IPO: The Bull Case, Hyundai Motor India IPO: The Bear Case and Hyundai Motor India IPO: The Investment Case.
Our valuation analysis suggests that the IPO price range of Rs1,865-1,960 per share is attractive. Therefore, we would participate in the IPO.

2. Horizon Robotics Pre-IPO – PHIP Updates – More of the Same, Lots to Watch Out For

Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
In this note, we talk about the recent updates from its filings.

3. ECM Weekly (14th Oct 2024) – Tokyo Metro, Rigaku, Hyundai, China Res, Swiggy, USS, Akeso, Shiyue

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 live IPOs front, the two Japanese IPOs, Tokyo Metro (9023 JP) and Rigaku Holdings (268A JP) appeared attractively priced. The same couldn’t be said about Hyundai Motor India.
On the placements front, there were deals in Hong Kong, Japan and India.

4. China Resources Beverage IPO – Volatility Makes Pricing a Bit Tricky

China Resources Beverage (CRB HK) is looking to raise up to US$650m in its Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

5. Akeso Biopharma Placement – The Placing Price Is Not Cheap Despite Positive Business Progress

By Xinyao (Criss) Wang

HARMONi-2 results are impressive and the overall data is solid and reliable. The NMPA has approved NDA of ebronucimab and sNDA of cadonilimab. Akeso’s fundamentals have indeed undergone positive changes.
Akeso’s current market capitalization already partially reflects the positive expectation about the future successful FDA approval of AK112. In our view, the Placing Price is not cheap.
When the market value falls back to below RMB45 billion is a more comfortable valuation to buy Akeso, and below RMB35 billion market value provides a golden opportunity.

6. Hyundai Motor India IPO: The Good, The Bad and The Valuation. Not for Quick Gain Seekers

Hyundai Motor India (HMIL) ‘s USD 3 billion+ IPO opens today, 15th October, at 10:00 am IST. The bidding will remain open until 4:30 pm IST on 17th October.
Near-Term Outlook: Limited Short-Term Gain Potential. While Hyundai is likely to outperform Maruti Suzuki given the valuation discount, it may underperform the broader sector in the near term.
Long-Term Opportunity: For investors with a longer-term horizon, Hyundai presents a relatively low-risk opportunity. Its established brand and world-class manufacturing facilities offer the potential for steady, long-term growth.

7. FCP Capital Sends a Proposal to KT&G to Buy Korea Ginseng Corp for 1.9 Trillion Won

On 14 October, FCP Capital sent a proposal to KT&G to purchase Korea Ginseng Corp for 1.9 trillion won.
Although KT&G stated that it has no intentions to sell Korea Ginseng Corp, this proposal highlights the ongoing pressure by FCP Capital to improve further value in KT&G.
The 1.9 trillion won in proposed purchase price is higher than the 1.2 trillion won to 1.3 trillion won that KT&G revealed as the intrinsic value of Korea Ginseng Corp.

8. CR Beverage (2460 HK) IPO: Valuation Insights

China Resources Beverage (CRB HK), China’s largest purified drinking water company, has launched its HKEx IPO to raise up to US$650 million.
We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
Our valuation analysis suggests that CR Beverage is attractively valued at the IPO price range. Therefore, we would participate in the IPO.

9. Horizon Robotics IPO – Peers Are Down a Lot, Its Valuation Isn’t

Horizon Robotics is looking to raise up to US$696m in its Hong Kong IPO.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

10. Horizon Robotics (9660 HK) IPO: The Bull Case

Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
Horizon ranked fourth among all global ADAS and AD solution providers in China by solution installation volume in 2023 and 1H24, with a market share of 9.3% and 15.4%, respectively.
The bull case rests on a large TAM, a blue-chip customer base, a robust backlog, a core business in good health, a high gross margin, and a strong balance sheet.

Oct 13

Weekly Top Ten Equity Capital Markets – Oct 13, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Rigaku Holdings IPO – Upside Remains Attractive

Rigaku Holdings (268A JP) is looking to raise up to US$756m in its Japan IPO.
Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
In our earlier notes, we looked at the firm’s past performance and discussed our thoughts on valuation. In this note, we look at Rigaku’s valuation at the final indicative range.

2. Tokyo Metro IPO Valuation Analysis

Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.

3. Hyundai Motor India Sets IPO Price Range

Hyundai Motor India (1342Z IN) has set an IPO price range of 1,865 to 1,960 rupees per share, aiming for a valuation as high as US$19 billion.
Hyundai Motor (005380 KS) is selling a 17.5% stake in Hyundai Motor India in this public offering. Hyundai Motor India IPO is scheduled to trade starting 22 October.
Our updated base case valuation of Hyundai Motor India is market cap of US$19.7 billion based on P/E of 25.9x our estimated net profit of 64.1 billion INR.

4. USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%

Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering.
Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.

5. Hyundai Motor India IPO – RHP Updates, Valuation Getting Tricky

Hyundai Motor (005387 KS) is looking to raise around US$3.3bn 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 our previous notes, we looked at the company’s past performance. In this note, we will talk about its RHP updates and valuations.

6. Hyundai Motor India IPO: Analysis of Latest Financials Signal Challenging Year Ahead

After 3 years of strong revenue and profits growth, Hyundai Motor India is likely to face a challenging year ahead based on the analysis of 1QFY2025 financials provided in RHP.
Hyundai Motor India (1342Z IN)‘s strong exports growth in FY2025 will not offset the weakness in domestic sales. This could result in low single-digit revenue growth for the year.
Increased royalty costs starting in FY2025, coupled with impact of lower cash reserves after special dividend paid out to parent will likely compress profit margins compared to the previous year.

7. Tokyo Metro IPO – Will Price at the Top, but Isn’t Particularly Cheap

Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.4bn in its Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

8. Akeso Placement – Opportunistic Raise, past Deal Record Has Been Mixed but Relative Size Is Small

Akeso Biopharma Inc (9926 HK) is looking to raise around US$200m from its primary placement. Proceeds from the placement will be used for R&D.
Past deals in the name haven’t done well recently but the shares have been doing well and the deal size remains small.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

9. CR Beverage IPO: Valuation First-Look

China Resources Beverage (CRB HK), China’s largest purified drinking water company, is premarketing an HKEx to raise US$0.5-1 billion.
We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
In this note, we present our forecasts and examine CR Beverage’s potential valuation range for the first time.

10. Rigaku Holdings (268A JP) IPO: Valuation Insights

Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement, and testing instruments. It is seeking to raise up to US$737 million.
We previously discussed the IPO in Rigaku Holdings (268A JP) IPO: The Bull Case and Rigaku Holdings (268A JP) IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Rigaku is attractively valued at the IPO price compared to peer multiples.

Oct 06

Weekly Top Ten Equity Capital Markets – Oct 6, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Tokyo Metro IPO – Thoughts on Valuation

Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about valuations.

2. Tokyo Metro (9023 JP) IPO: Valuation Insights

Tokyo Metro (9023 JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
We previously discussed the IPO in Tokyo Metro (9023 JP) IPO: The Bull Case and Tokyo Metro (9023 JP) IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Tokyo Metro is attractively valued at the IPO price compared to peer multiples.

3. Tokyo Metro IPO – Peer Comparison – Pre-COVID to 1Q25

Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
We have looked at the company’s past performance in our previous note. In this note, we will undertake a peer comparison.

4. Rigaku Holdings (268A JP) IPO: The Bull Case

Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
In Japan, Rigaku’s XRD (X-ray diffraction) has a high market share of 75%. Around 70% of its revenue is derived from customers outside Japan.
The bull case rests on high customer switching costs, peer-leading revenue growth, top-quartile profitability, FCF generation, and low leverage.

5. Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins

Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.

6. K Bank IPO – Should Price Below Its Range

By Akshat Shah, Aequitas Research

K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
In our previous note, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we will talk about valuations.

7. Swiggy Pre-IPO Tearsheet

Swiggy (1255298D IN) Swiggy is looking to raise about US$1.25bn in its upcoming India IPO. The deal will be run by Kotak, Citi, Jefferies, Avendus, JPM, BofA and ICICI.
Swiggy Limited (Swiggy) is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
The platform can also be used to make restaurant reservations (Dineout), event bookings (SteppinOut), product pick-up/drop-off services (Genie) and other hyperlocal commerce activities (Swiggy Minis).

8. China Resources Beverage Pre-IPO – Updated Thoughts on Valuation

China Resources Beverage (CRB HK) is looking to raise up to US$1bn in its upcoming Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
In our earlier notes, we talked about the company’s past performance and provided our initial thoughts on valuations. In this note, we will relook at valuations post its PHIP updates.

9. China Resources Beverage Pre-IPO – PHIP Updates – Revenue Slowing, Margins Growing

China Resources Beverage (CRB HK) is looking to raise up to US$1bn in its upcoming Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
In our earlier notes, we talked about the company’s past performance and provided our thoughts on valuations. In this note, we will look at updates from its most recent filings.

10. Rigaku Holdings (268A JP) IPO: The Bear Case

Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
In Rigaku Holdings (268A JP) 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 weakening forward growth indicators, China revenue risk, rising cash conversion cycles, mid-tier FCF margin and large post-IPO share overhang.

Sep 29

Weekly Top Ten Equity Capital Markets – Sep 29, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Tokyo Metro (9023 JP) IPO: The Bull Case

Tokyo Metro (TKYMETRO JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
Tokyo Metro is held 53.42% by the Minister of Finance and 46.58% by the Tokyo Metropolitan Government.
The bull case rests on a core high-quality asset, future growth drivers, top-quartile profitability, high FCF generation, and peer-leading dividend payout.

2. Tokyo Metro IPO – The Positives – Quasi-Monopoly Status

Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its upcoming Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
In this note, we talk about the positive aspects of the deal.

3. New Fast Entry Rule for KOSPI 200 & KOSDAQ 150: Post-IPO Price Swings Ramping Up

Besides ranking in the top 50 by market cap, it must also meet a minimum float-adjusted cap for K200 fast entry: at least 50% of the 50th-ranked stock’s market cap.
Even if new stocks meet KRX’s float cap, their actual float share volume may still be low, risking inflation from local pension funds’ preemptive passive inflows post-listing.
This could reduce predictability for KOSPI 200 fast entry, increasing price swings post-listing and forcing traders to develop new volatility strategies after IPOs.

4. K Bank IPO – Peer Comparison – Lags Its Main Peer on Most Fronts

K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
In our previous note, we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

5. Sino-American Silicon GDR Offering – Relatively Large One to Digest, Although Discount Is Attractive

Sino American Silicon Products (5483 TT) is looking to raise US$287m in its GDRs offering. Proceeds will be used to purchase overseas raw materials, repay bank loans and purchase machinery.
Similar to previous GDR listings, the deal has had a long drawn out approval process. Thus, the deal is a very well flagged one.
The deal is a relatively large one to digest at 15.7 days of the stock’s three month ADV.

6. ECM Weekly (23rd Sep 2024) – Tokyo Metro, Midea, Intermestic, Sagility, Belstar, Kuaishou, Bajaj HF

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, Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN) hogged much of the limelight this week as well.
On the placements front, there were a few large US$400m+ placements across the region this week.

7. Tokyo Metro (9023 JP) IPO: The Bear Case

Tokyo Metro (9023 JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
In Tokyo Metro (9023 JP) 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 mid-tier revenue growth, low revenue diversification, the highest leverage among peers and a sizeable post-IPO share overhang.

8. Rigaku IPO – The Positives – Catering to a Range of End Industries, and Track Record Has Been Strong

By Shifara Samsudeen, ACMA, CGMA, LightStream Research

Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
In this note, we will talk about the positive aspects of the deal.

9. Rigaku Holdings IPO: Initial Thoughts

Rigaku Holdings (268A JP) provides cutting-edge analytical solutions centered on X-ray technology globally. The company is one of the largest players globally in X-ray diffraction instrument market.
The company has filed for an IPO on the Tokyo Stock Exchange and plans to raise proceeds of around US$900m from the IPO at a potential valuation of US$2bn.
In this insight, we discuss Rigaku’s business model, key drivers, financials and outlook for the company.

10. K Bank IPO: Valuation Insights

K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
We previously discussed the IPO in K Bank IPO: The Bear Case and K Bank IPO: The Bull Case.
We examine the syndicate’s valuation methodology. Our analysis suggests that K Bank is unattractively valued in the IPO price range. We would pass on the IPO.

Sep 22

Weekly Top Ten Equity Capital Markets – Sep 22, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Midea Group H Share Listing (300 HK): Trading Debut

Midea Group Co Ltd A (000333 CH) priced its H Share at HK$54.80 to raise HK$31,014 million (US$4.0 billion) in gross proceeds. The H Share will be listed tomorrow.
The H Share listing price implies an AH discount of 21.4% at the A Share price of RMB63.51. This compares to Haier Smart Home (6690 HK)‘s AH discount of 13.8%.
Futu grey market data shows that the H Shares closed 5.1% higher at HK$57.60. Our valuation analysis suggests that the H Share listing price is attractive.

2. Midea Group: Offer Upsized at Top Tier. Updated Valuation Analysis

Midea Group(000333 CH) has increased the shares on offer in Hong Kong by 15% to 565.9 million shares, priced at the top end of the range at HKD54.8 per share.
With strong investor interest, the company may exercise an over allotment option that could take the deal size to USD 4.6 billion.
Midea’s Hong Kong pricing reflects a nearly 21% discount to its A-share closing price, compared to the average 33% discount for dual-listed companies between Hong Kong and Shanghai or Shenzhen.

3. Pre-IPO Midea Group H Share – Here Are the Risks Behind

By Xinyao (Criss) Wang

For the reasons why Midea is eager to IPO in HK, investors shouldn’t just look at the surface of its glory, but delve into the “real motives” behind capital operations.
The policy of subsidizing the trade-in of home appliances belongs to “early overdraft of demand” and is unsustainable. Valuation logic for the performance increment brought by such policy is P/B.
If Midea cannot achieve the expected breakthroughs in To B business or internationalization in 2025-2026 to hedge against the weak domestic business, Midea’s performance/valuation in following years would inevitable decline.

4. Auckland Airport Placement – Large NZ$1.4bn Raising, with ACC’s Overhang to Contend With

Auckland Intl Airport (AIA NZ) is looking to raise NZ$1.4bn (US$863m) in its primary follow-on offering. The offering includes a NZ$1.2bn underwritten placement, together with a NZ$200m non-underwritten retail offer.
The underwritten placement alone is a large one for the stock to digest at 168 days of three month ADV.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

5. Kuaishou Placement – US$480m Secondary Block Deal a Small One to Digest

DCM Investments is looking to raise US$484m via selling its remaining stake in Kuaishou Technology (1024 HK).
While the current block deal isn’t entirely well flagged per se, it appears that DCM has since been trimming its stake on the open market.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

6. Bajaj Housing Finance IPO – Valuation Might Get Stretched from Demand Overflow

Bajaj Housing Finance (BHF IN) raised around US$800m in its India IPO.
BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
In our previous notes, we looked at the company’s past performance and valuation. In this note, we will talk about the trading dynamics.

7. K Bank IPO – The Positives – Fast Growth

K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
In this note, we talk about the positive aspects of the deal.

8. K Bank IPO Valuation Analysis

Our base case valuation of K Bank is target price of 9,151 won per share, which is 4% lower than the low end of the IPO price range.
Given the lack of upside in our target price relative to the IPO price range, we would avoid in subscribing to the IPO.
Our base case valuation is based on 1.6x P/B multiple using the company’s equity post IPO (2.35 trillion won).

9. ECM Weekly (16th Sep 2024) – Midea, Bajaj Housing, 99 Speed, P N Gadgil, Hozon, Trial, NextDC, Via

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, Midea Group Co Ltd A (000333 CH) hogged much of the limelight this week, although Bajaj Housing Finance (BHF IN) created some history as well.
We covered the Nextdc Ltd (NXT AU) and Terumo Corp (4543 JP) placements and looked at the possible deals in Trial Holdings (5882 JP) and Via Technologies (2388 TT).

10. K Bank IPO: The Bull Case

K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
K Bank began operations in April 2017 as the first internet-only bank in Korea. KT Corp (030200 KS) and Woori Bank (000030 KS) are the two largest shareholders.
The bull case rests on rising market share, solid deposit growth, robust loan book growth, stable NIM, rising margins and a low NPL ratio.

Sep 15

Weekly Top Ten Equity Capital Markets – Sep 15, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Midea Group H Share Listing (300 HK): Valuation Insights

Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.
Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

2. Midea Group HK IPO Valuation Analysis

By Shifara Samsudeen, ACMA, CGMA, LightStream Research

We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares.
We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
Pricing of this offering is expected to be completed on 13 September and listing on 17 September.

3. Midea HK Listing: Valuation Insights

Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.

4. Midea A/H Listing – Bigger Deal, Better Pricing

Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the deal background in our previous notes. In this note, we talk about valuations.

5. K Bank IPO – The Biggest IPO in Korea in 2024

K Bank is the biggest IPO in Korea in 2024. The IPO price range is from 9,500 won to 12,000 won. It is offering 82 million shares in this IPO.
According to the bankers’ valuation, the expected market cap of the company is from 4.0 trillion won to 5.0 trillion won.
The IPO deal size is 779 billion (US$579 million) to 984 billion won (US$732 million).

6. Pre-IPO Midea Group H Share (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.

7. Terumo Placement Follow-Up – Correction Has Been Inline with Recent Cross-Shareholding Unwind

A group of shareholders are looking to raise around US$1.36bn from selling ~5% stake in Terumo Corp (4543 JP).
We have covered the background of the deal in our earlier note, Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

8. Terumo (4543 JP): The Current Playbook

Since the US$1.4 billion secondary placement announcement, Terumo Corp (4543 JP)’s shares are down 3.5% from the undisturbed price of JPY2,771 per share (29 August).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Terumo’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 10 September. Despite Kokusai and Honda’s disappointing performance, the average large Japanese placement tends to generate positive returns.

9. LG Electronics India IPO: Potential Big Gains. Booming Demand, Buoyant Valuations

By Nitin Mangal, Trudence Capital Advisors

LG Electronics’s India business IPO could be valued above USD 7 billion, exceeding market expectations, driven by its dominant position in India’s growing home appliances market and strong sector valuations.
Favourable market conditions and robust sector growth make now an ideal time for LG Electronics (066570 KS) to launch its India IPO, securing high investor interest and compelling valuations.
In a recent interview, LG Electronics(066570 KS) CEO William Cho mentioned that an Indian market debut is one of several options being considered to revitalise the company’s consumer electronics business.

10. Bajaj Housing Finance IPO- Forensic Analysis

Bajaj Housing Finance (BHF IN) upcoming IPO is worth INR 65.6 bn, comprising of fresh issue worth INR 35.6 bn and offer for sale worth INR 30 bn.
The company reports strong KPIs and has been better than peers in several aspects. AUM growth is strong and is driven by Developer Financing and Lease Rental Discounting.
There are few important cautions regarding the NHB observations and assignments.

Sep 08

Weekly Top Ten Equity Capital Markets – Sep 8, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Midea Group H Share Listing: AH Discount Views

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

2. Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health

By Shifara Samsudeen, ACMA, CGMA, LightStream Research

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified.

3. Midea: Thoughts on HK Listing and Valuation

Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
Midea Group Co Ltd A (000333 CH) has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

4. Key Things to Watch in Ecopro HN’s Big Rights Offering

Ecopro HN announced a ₩200 billion rights issue, offering 5.67 million shares (a 40% capital increase) with a stockholder allocation rate of 0.3 per share.
The extended timeline likely results from the issuer’s 20% discount push, with Daishin, an underdog banker, extending it to boost subscriptions despite risking price stability.
The strategy is to time entry when the stock rights and subscription costs create a solid spread versus the spot price, despite increased volatility making price predictions harder.

5. Hamamatsu Photonics Placement – Peculiar Timing

Toyota Motor (7203 JP) aims to raise around US$190m via selling over a 4% stake in Hamamatsu Photonics Kk (6965 JP).
This is another cross-shareholding unwind and hence, won’t be a huge surprise. Although given the recent share price weakness, the timing appears peculiar.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

6. Bajaj Housing Finance IPO – Will Trade at a Premium

By Ethan Aw, Aequitas Research

Bajaj Housing Finance (BHF IN) is looking to raise around US$800m in its India IPO.
BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
In our previous notes, we looked at the company’s past performance. In this note, we will talk about valuations.

7. Premier Energies IPO Trading – Very Strong Insti Demand, Looks Ready to Pop

Premier Energies Limited (0377949D IN) raised around US$337m after pricing the deal at the top end of the range at INR450 / share.
It also executes engineering, procurement, and construction (EPC) projects and provides follow-up operation and maintenance (O&M) services.
We have looked at various aspects of the deal in our previous notes. In this note, we talk about demand and trading dynamics.

8. CICT Placement – Accretive Acquisition, Should Be Favored by Existing Unitholders

Capitaland Integrated Commercial Trust (CICT SP) is looking to raise around S$350m (US$267m) in its primary placement. Included in the issuance is a preferential offering to raise an additional S$757m.
The proceeds will be geared towards acquiring a 50% interest in the ION Orchard mall from its Sponsor.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

9. Midea Group: Initial Thoughts on the Hong Kong IPO Listing

Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
In the past five days, Midea’s price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.

10. The Born Korea IPO Preview

The Born Korea is getting ready to complete its IPO in Korea in November. The total IPO offering is expected to range from 69 billion won to 84 billion won.
Based on the bankers’ valuation, the expected market cap of the company ranges from 357 billion won to 419 billion won.
The Born Korea was founded by Baek Jong-Won, the most famous celebrity chef in Korea.

Sep 01

Weekly Top Ten Equity Capital Markets – Sep 1, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. Terumo (4543 JP) Secondary Offering – Smaller Than It Looks

On Thursday 29 August, Terumo Corp (4543 JP) announced a secondary offering where 7 major cross-holders would sell just under 5% of the shares outstanding to international investors.
In recent quarters, Terumo has seen better consensus EPS growth than Peers in recent quarters, and Peers have underperformed. Right now, Terumo isn’t ‘cheap’ but consensus growth is strong.
This back-end demand in this case has enough moving parts that it bears a closer look.

2. Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics

A group of shareholders are looking to raise around US$1.36bn from selling ~5% stake in Terumo Corp (4543 JP).
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative 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.

3. Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics

Kioxia is getting ready to complete its IPO in Japan as soon as in October. Kioxia’s valuation is expected to exceed JPY 1.5 trillion (about USD 10.3 billion).
SK Hynix’s stake in Kioxia (through Bain led consortium) is 19%. SK Hynix’s stake in Kioxia would rise to 34% if the CBs are converted into equity.
The IPO of Kioxia has mixed implications for SK Hynix which is a major shareholder. However, the IPO of Kioxia has a more direct negative impact on Samsung Electronics.

4. Kioxia IPO Early Re-Look – Better Placed This Time Around

Kioxia Holdings (6600 JP) aims to list in Japan by Oct 2024 at a valuation of over US$10bn, as per media reports.
Kioxia is a manufacturer and a global leader in flash memory and solid state drives for smartphones, PCs, enterprise servers and data centers
In this note, we take an early look at the possible listing.

5. Terumo (4543 JP): A US$1.4 Billion Secondary Offering

Terumo Corp (4543 JP) has announced a secondary offering of up to 73.2 million shares, worth JPY203 billion (US$1.4 billion) at the last close.
The secondary offering facilitates the exit of large shareholders. Terumo also announced a buyback worth a maximum of JPY30 billion or 15 million shares.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 September (likely 10 September).

6. Interglobe Aviation (Indigo) Placement – Another US$800m+ Deal, This Time by the Correct Co-Founder

InterGlobe Aviation Ltd (INDIGO IN)’s co-founder, Rakesh Gangwal, aims to raise around US$850m via selling around 3.8% stake in Indigo.
He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia. He has sold many times before.
In this note, we will talk about the lockup dynamics and possible placement.

7. Keppel Infra Trust Placement – While the Raising Is Relatively Large, Its past Deals Have Done Well

Keppel Infrastructure Trust (KIT SP) is looking to raise around S$206m (US$158m) in its primary placement.
Proceeds will be used to pay down its bridge loan facility linked to its Ventura acquisition. KIT also appears to have secured its unitholders’ approval for the raising earlier.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

8. Hyundai Motor India IPO Valuation Analysis

Our base case valuation of Hyundai Motor India is market cap of US$18.6 billion, based on P/E of 24.4x our estimated net profit of 64.1 billion INR in FY25.
There have been some increasing concerns about Hyundai Motor India paying out higher royalty to its parent Hyundai Motor and dividend to shareholders, which could lower profit.
According to a recent article by livemint, the expected valuation of Hyundai Motor India has fallen to about USD16 billion to USD20 billion.

9. STCube: Rights Offering Capital Raise of 89 Billion Won

STCube announced it plans to increase capital by 89 billion won (13 billion won through a third party rights offering and 75.7 billion won through shareholder preferred capital increase).
We have a positive view of STCube’s capital raise and there could be some alpha generating returns in our view.
The fact that the company’s share price surged nearly 5x from the last rights offering in May 2022 (to October 2022) is likely to positively impact capital raise this time.

10. Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
So investors have to decide whether they want to catch the falling knife.

Aug 25

Weekly Top Ten Equity Capital Markets – Aug 25, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. COLOWIDE (7616) – UGLY Register On Expensive Co Needs a Capital Construct Upgrade, Won’t Get It Here

Colowide Co Ltd (7616 JP) is an industrial fastish-food operator in Japan. They sell several dozen kinds of cuisine under several dozen brands, owned and franchised in Japan and overseas.
The company “philosophy” is “Everything we do is for our customers and employees.” The stock is up 30% in 10yrs. It pays no dividend, but it pays a big yutairimawari.
This means Real World Float is 100% owned by retail who want restaurant coupons. This offering will be bought by index, short covers, and another 20-30k coupon holders.

2. Colowide Placement – Needs a Very Large Correction

Colowide Co Ltd (7616 JP) aims to raise around US$230m in order to fund its prospective M&A transactions over the next few years
While the company has undertaken a number of M&A transactions in the past, it hasn’t clearly stated its intended targets for this round.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

3. Peptron Rights Issue: The 25% Discount Is an Attractive Outright Position Opportunity

Peptron’s lack of single-stock futures means no risk-free arbitrage but also less speculative selling, making the 25% discount an attractive outright position opportunity.
The low capital increase rate may stabilize the stock price, and more forfeited shares could lower the cost of securing subscription rights during the trading window.
Consider buying rights during the trading period or targeting forfeited shares. Conservatively estimate the final offering price range to set a profitable cost for securing rights.

4. Lumir IPO Preview

Lumir is getting ready to complete its IPO on KOSDAQ in September. The IPO which is expected to raise between 49.5 billion won to 61.5 billion won.
Lumir specializes in the development of observation satellite technology including image data processing devices and onboard computers for a number of government satellite series.
Lumir had sales of 12.1 billion won (up 90.5% YoY) in 2023. Its sales surged by 477% YoY to reach 8.2 billion won in 1H24.

5. Bajaj Housing Finance Pre-IPO – Peer Comparison – Bigger and Faster

Bajaj Housing Finance (BHF IN) is looking to raise around US$830m in its upcoming India IPO.
BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
We have looked at the company’s past performance in our earlier notes. In this note we will undertake a peer comparison.

6. Hyosung Siblings’ Cross-Transfers Are Done: The 10%+ Hyosung Corp Stake Block Deal Remains

By Akshat Shah, Aequitas Research

The Hyosung siblings swapped ₩60B in shares over August 13-14, raising the elder brother’s Hyosung Corp stake to 40.9% and lowering HS Hyosung below 3%.
The younger brother must sell additionally at least 11.2% of his 14.2% Hyosung Corp stake. The elder brother may buy, but his cash position and 40% stake limit his need.
This block deal will be the first to apply the new pre-disclosure rule. So, we should use it to test how the rule affects price movements for better entry timing.

7. Ecom Express Pre-IPO Tearsheet

Ecom Express Limited (1062300D IN) is looking to raise about US$310m in its upcoming India IPO. The deal will be run by Axis, IIFL Securities, Kotak and UBS.
Ecom Express operates a pan-India express logistics network covering first-mile pick-up, mid-mile transportation and last-mile delivery as well as reverse logistics (returns) and fulfilment services (warehousing).
According to Redseer, the company had the widest pan-India coverage and in Tier 2+ regions compared to its peers, covering over 27,000 PIN codes, as of March 31, 2024.

8. Hero Fincorp Pre-IPO – The Positives – Riding on the Parent’s Brand

Hero FinCorp (HF) is looking to raise around US$438m in its upcoming India IPO.
HF is a non-deposit taking NBFC. It offers a suite of financial products catering primarily to the retail segment and the MSME customer segment in India.
In this note, we talk about the positive aspets of the deal.

9. Zomato Placement – Momentum Is Very Strong, past Ant Related Deals Have Been Mixed

AntFin is looking to raise around US$400m by selling around 2% of Zomato (ZOMATO IN).
Ant Group had earlier sold some of its stake in Nov 2023 and Mar 2024, with the deals producing a mixed bag result.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

10. 99 Speedmart Holdings IPO – Digestible Valuation

99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$530m in its Malaysia IPO. The IPO will be a mix of primary and secondary shares.
99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
In our previous notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison and discuss our thoughts on valuation.

Aug 18

Weekly Top Ten Equity Capital Markets – Aug 18, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.

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1. WeRide IPO: High-Risk Venture Investment and Unproven Business Model

By Andrei Zakharov

WeRide, a pure-play autonomous driving company with operations in 7 countries, may raise up to $120M in upcoming IPO in the United States.
WeRide is expected to IPO this week. The company’s amended prospectus puts the price range per ADS at $15.50 to $18.50, implying a market cap of ~$4.6B at the midpoint.
The company has raised ~$1.4B in equity financing to date and was backed by Qiming Venture Partners and the venture capital fund of the Renault Nissan Mitsubishi Alliance, among others.

2. Brainbees (FirstCry) IPO Trading – Decent Subscription and Valuation

BrainBees Solutions (FirstCry) raised around US$500m in its India IPO.
FirstCry is India’s largest multi-channel retailing platform for Mothers’, Babies’ and Kids’ products in terms of GMV, for the year ending Dec 2022 (9M23), according to RedSeer.
In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.

3. WeRide IPO – Stiff Competition and Bleak Sentiment. Premium Valuation Doesn’t Help

WeRide (WRD US) is looking to raise US$119m in its US IPO.
WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
We had looked at the firm’s past performance in our earlier notes. In this note, we discuss our thoughts on valuation.

4. China Resources Beverage Pre-IPO – Thoughts on Valuation

China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
In our earlier notes, we talked about the company’s past performance and undertook a peer comparison. In this note, we will look at valuations.

5. Hindustan Zinc OFS Early Look – Due for a Correction, Large Selling Pressure Looming

Vedanta Ltd (VEDL IN) is looking to raise US$760m from selling some stake in Hindustan Zinc (HZ IN).
Overall, while the deal would represent just 2.6% of the firm’s outstanding shares, the deal is a large one to digest at 41 days of the stock’s three month ADV.
In this note, we take an early look at the deal, and comment on the deal dynamics.

6. ECM Weekly (12th Aug 2024) – Ola Electric, Brainbees, WeRide, Akum, CR Beverages, Eternal Beauty

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, the prior week witnessed a number of listings with divergent results.
Given the market volatility, there was only one large placements in the prior week.

7. WeRide (WRD US) IPO: The Bear Case

By Akshat Shah, Aequitas Research

WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise up to US$119 million through a Nasdaq IPO and US$321 million through a concurrent private placement.
In WeRide (WRD US) 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 a volatile revenue profile, high customer concentration risk, widening losses that raise doubts on the path to profitability, elongated cash collection cycles and cash burn.

8. P N Gadgil Jewellers Pre-IPO – Strong Revenue Growth but Margin Worry Persists

P N Gadgil Jewellers (1742652D IN) looking to raise up to US$132m in its upcoming India IPO.
P N Gadgil Jewellers (PNGJ) is an Indian organized jewellery player. Its product offerings include traditional as well as modern and functional jewellery designs, in gold, diamond, silver and platinum.
In this note, we look at the company’s historical performance.

9. Ola Electric (OLAELEC IN) : Soaring High – How Much Higher Can It Go?