This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Big ¥500bn Honda (7267) Offering Is Small
- Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
- Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
- At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!
2. Timee (215A JP) IPO: The Bull Case
- Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
- Timee’s app allows users to work shifts as short as one hour at restaurants, convenience stores, and hotels, with quick payment for their work.
- The bull case rests on favourable market trends, best-in-class revenue growth, good retention rates, credible growth drivers, and top-quartile EBITDA margins.
3. 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).
4. Honda (7267 JP): A US$3.3 Billion Secondary Offering
- Honda Motor (7267 JP) has announced a secondary offering of up to 298.9 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY535 billion (US$3.3 million).
- The offering is another sign that the unwinding of cross-shareholdings is catching pace as part of Japan’s corporate governance reforms.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 17 and 22 July (likely 17 July).
5. Aisin (7259 JP): The Current Playbook
- Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
- The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.
6. 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.
7. 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).
8. Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals
- 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).
- We have covered the background of the deal in our earlier note, Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO.
- In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.
9. Honda Motor Placement – Large in Size, Relatively Small in Other Terms
- A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP) .
- The possibility of such a selldown was flagged earlier in the week by Reuters. Thus, the deal is well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
10. Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down
- 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.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Mitsui & Co (8031) – ¥100bn Overnight Equity Offering
- 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.
2. Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
- 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.
3. 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.
4. 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).
5. 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.
6. 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.
7. 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).
8. 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.
9. 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.
10. Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule
- 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.
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 Preview
- Hyundai Motor India is getting ready to complete its IPO in 2H 2024. Hyundai Motor India plans to offer up to 142.2 million shares (17.5% stake) to investors.
- Hyundai Motor (005380 KS) currently owns a 100% stake in Hyundai Motor India. The IPO of Hyundai Motor India could raise as much as US$3 billion.
- If Hyundai Motor India (HMI) is valued at US$25 billion and HMC sells a 17.5% stake in the company, HMC’s remaining stake in HMI would be worth nearly US$21 billion.
2. Kagome (2811) – Well-Flagged Slightly Dilutive Equity Financing for High ROIC Purchase
- In January, Kagome Co Ltd (2811 JP) announced an acquisition of an additional 50% stake in a US equity affiliate. It is transformational. Incremental ROIC is truly excellent.
- At the time, they said they’d finance the purchase with a bridge loan but would sell treasury shares for ¥25bn or less to cover it. They announced the shelf then.
- Friday they announced the Offering. Today shares fell 8+%. This is now cheap.
3. Hyundai Motor India IPO: Key Facts and Financials at a Glance
- Hyundai Motor India’s proposed IPO is an offer for sale by its parent, Hyundai Motor Company, Korea, and reported to raise USD3 billion, potentially making it India’s largest IPO ever.
- Hyundai Motor India’s sales growth has been driven by strong domestic and export sales, both in volume and unit realisation.
- With SUVs now making up 62% of Hyundai Motor India’s domestic volumes, up from 45% in FY2021, the shift towards premium models has boosted profit margins.
4. Webtoon Entertainment (WBTN US) IPO: Valuation Insights
- Webtoon Entertainment (WBTN US) is a global storytelling platform. Webtoon has launched a Nasdaq IPO to raise US$270-315 million at a US$18.00 to US$21.00 price range.
- We previously discussed the IPO in Webtoon Entertainment IPO: The Bull Case and Webtoon Entertainment (WBTN US) IPO: The Bear Case.
- In this note, we outline our forecasts and valuation. Our valuation analysis suggests that Webtoon is attractively valued at the IPO price range.
5. Webtoon Entertainment (WBTN US) IPO: The Bear Case
- Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
- In Webtoon Entertainment 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 declining organic revenue, declining Korean paying ratio, a peaking Japan growth driver, optimistic market sizing, and unsustainable low marketing spending.
6. Kagome Placement – Very Well Flagged Deal but Liquidity Might Be a Concern
- Kagome Co Ltd (2811 JP) aims to raise around US$140m to repay debt used to fund the acquisition of Ingomar in Jan 2024.
- At the time of the acquisition, the company has stated its intention to part finance the acquisition via issuance of treasury shares
- In this note, we will talk about the placement and run the deal through our ECM framework.
7. Webtoon Entertainment IPO – Further Thoughts on Valuation – Acquisitions, Buyouts
- Webtoon Entertainment (WBTN US) is looking to raise up to US$315m in its US IPO, down from an earlier reported float of US$500m.
- 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 share additional thoughts on valuation.
8. Sensetime Placement – Seems Highly Opportunistic
- SenseTime Group (20 HK) aims to raise up to US$263m via selling around 4.5% stake.
- Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
- In this note, we will talk about the placement and run the deal through our ECM framework.
9. ECM Weekly (17th June 2024)-Shift Up, Webtoon, Quantum, Guzman, MaoGeping, Johor Plant, Telix, Atour
- 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 continued to look at Shift Up (462870 KS), Guzman Y Gomez and Webtoon Entertainment (WBTN US), along with Mao Geping Cosmetics.
- On the placement front, there were quite a few deals in India, while Atour Lifestyle Holdings (ATAT US) was the major Asia linked offerings.
10. Guzman Y Gomez IPO Trading – Strong Demand, Not All Shares in Escrow
- Guzman Y Gomez raised around US$221m in its upsized Australian IPO.
- GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
- We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. ECM Weekly (10th June 2024) – Webtoon, Shift Up, QuantumPharm, Guzman, Kakaopay, Telix, Yankuang
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, we looked at Guzman Y Gomez (0817833D AU), QuantumPharm (QUP HK) and Webtoon Entertainment (WBTN US) this week.
- On the placement front, there were a few deals across Hong Kong, Australia and Japan.
2. Lalatech IPO: Using YMM:US as Main Comp, Equity Valuation of US$11-12 Bn (Or More) Justifiable
- Based on returns and margins, US-listed Full Truck Alliance is best comp
- Lalatech probably deserves premium valuation multiples vs Full Truck Alliance
- An equity valuation of US$11bn+ justifiable; will investors look at recent flops?
3. Atour Lifestyle Holdings Placement – Well Flagged Deal, past Selldowns Have Done Well
- Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a secondary selldown.
- This will be the third selldown by Legend Capital in just over a year’s time. Hence, the deal is well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
4. Guzman Y Gomez IPO – Peer Comp and Thoughts on Valuations
- Guzman Y Gomez (GYG) now plans to raise US$221m, an increase from its earlier target of US$160m, in its Australian IPO.
- GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
- We have looked at the company’s performance in our past notes. In this note, we talk about valuations.
5. Shift Up IPO – Refiling and Other Updates, Not Ranked at the Top Anymore
- Shift Up (462870 KS) plans to raise up to US$320m in its South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- We have looked at the company’s performance, undertaken a peer comparison and talked about valuations in our past notes. In this note, we talk about the refiling and other updates.
6. Mao Geping Cosmetics Pre-IPO – Riding on the Founder’s Reputation
- Mao Geping Cosmetics is looking to raise around US$300m in its upcoming Hong Kong IPO.
- Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
- In this note, we look at the company’s past performance.
7. Clarifying BRV’s Post-Block Deal Lockup Conditions Involving Ecopro Materials
- In Korea, the lockup period for block deals is set by the seller and underwriters, not by law, and can be adjusted if both parties agree.
- BRV obtained consent from Goldman, UBS, and KB for a second block deal after assessing that many initial buyers had sold their shares.
- Understanding this lockup structure provides key insights into predicting when the next block deal might occur.
8. Webtoon Entertainment IPO: The Bull Case
- Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
- Webtoon is the leading web-comic player in all its major geographies, including Korea, the US and Japan. Naver Corp (035420 KS) and LY (4689 JP) are the primary shareholders.
- The bull case rests on a large TAM, rising monthly active users, strong constant currency growth supported by monetisation initiatives, a shift to profitability, and cash generation.
9. Webtoon Entertainment Pre-IPO – Peer Comparison – Relatively Small in Operating Scale as a Platform
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In our previous note, we talked about the company’s historical performance. In this note, we undertake a peer comparison.
10. QuantumPharm IPO Trading – Lukewarm Insti Demand Combined with a Tight Float at Listing
- QuantumPharm (QUP HK) raised US$126m from its Hong Kong IPO.
- QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics
- Mmg Ltd (1208 HK) today announced a 2:5 Rights Offering to raise US$1.15bn at HK$2.62/share in order to pay down debt from their recent Botswanan copper mine acquisition.
- It was a sizeable acquisition, and the near-term EV/EBITDA of the acquisition is 10x or above. The longer-term EV/EBITDA is in the 3s based on expansion later this decade.
- The Rights Offering is underwritten, supported by its 67.5% owner. SOUTHBOUND holds 10+%. There are short dynamics, arb dynamics, “don’t wanna spend more” dynamics. There’s a path here.
2. Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April
- On 5 June, Shift Up announced that it will be postponing its IPO to July. The original book building period for the institutional investors was from 3 to 13 June.
- The final book building date has been postponed to 27 June. The subsequent public offering subscription for general investors was also postponed to 2 to 3 July.
- A major investment positive of Shift Up is enormous initial success of Stellar Blade which was the best selling game in the U.S. and numerous other countries in April 2024.
3. Webtoon Entertainment IPO Preview
- Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).
- Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.
- Webtoon Entertainment is one of the largest Korean company related IPOs in 2024.
4. What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?
- FSS wants Nikke’s MAU data to address revenue concerns. They also seek April and May sales data for Stellar Blade to address valuation concerns despite its recent launch.
- Shift Up updated the prospectus with Nikke’s increasing MAU data but didn’t include Stellar Blade sales data. FSS may request further revisions, possibly delaying the IPO again.
- Nikke’s MAU has risen but plateaued versus the previous quarter, and uncertainty surrounds Stellar Blade’s April-May sales, potentially impacting IPO pricing.
5. Yankuang Energy Placement – Doesn’t Appear Well Flagged Although Deal Size Is Large
- Yankuang Energy Group (1171 HK) is looking to raise up to US$608m through a primary follow-on, via selling 270m H-shares.
- The deal is a somewhat large one to digest, at 10.6 days of three month ADV and 2.7% of current mcap.
- In this note, we will talk about the placement and run the deal through our ECM framework.
6. Sakura Internet Placement – Beneficiary of the AI-Wave Looking to Double Down
- Sakura internet (3778 JP) is looking to raise US$127m from its primary follow-on. Proceeds will be used towards purchasing GPU servers, and constructing new data center facilities.
- While 11% of total shares outstanding are offered here, the deal would be easily digested by the market, representing just 0.8 days of its three month ADV.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
7. MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue
- Mmg Ltd (1208 HK) will raise HK$9.1bn (US$1.2bn) through 2 rights shares for every 5 existing shares rights offering. The rights price is HK$2.62, a 24.7% discount to the TERP.
- The rights proceeds will be used to repay existing debt, which will allow it to use other funds to better support the ongoing development of the operating mines.
- MMG shares should continue to decline heading into the ex-rights date. The shares go ex-rights on 11 June, and the rights start trading from 24 June to 2 July (inclusive).
8. Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the positive aspects of the deal.
9. Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the not-so-positive aspects of the deal.
10. Raspberry Pi IPO Valuation Analysis
- Raspberry Pi is expected to raise about £157 million in this IPO. The conditional trading for this IPO is expected to be take place on 11 June.
- We estimate Raspberry Pi to generate sales of US$342.1 million (up 28.7% YoY) and operating profit of US$48.5 million (up 29.3% YoY) in 2024.
- Our base case valuation of Raspberry Pi is market cap of £772 million or £4 per share (43% higher than the high end of the initial IPO price range).
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Exedy Corporation Placement – Relatively Large One, Although Buyback Should Aid Share Price
- Aisin (7259 JP) is looking to raise US$290m from selling its entire stake in Exedy Corp (7278 JP).
- While the selldown doesn’t seem to be particularly well-flagged, this appears to be another cross-shareholder unwind in Japan.
- In this note, we will talk about the placement and run the deal through our ECM framework.
2. Barito Renewables Lockup Expiry – US$8bn Lockup Expiry for Largest Indonesian Market Cap Stock
- Barito Renewables Energy (BREN IJ) raised around US$200m in its Indonesian IPO, after pricing at the top end at IDR780/share. Its eight-month lockup will expire on 29th May 2024.
- Barito Renewables (BR) is Indonesia’s largest geothermal power producer, and the third-largest globally by installed capacity, as per the firm.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
3. Alibaba/JD.com: Thoughts On The Recent Convertible Bond Issuance
- Alibaba Group Holding (9988 HK) and JD.com (9618 HK) both announced the issuance of convertible debt last week (Alibaba on May 23 and JD.com on May 21).
- Both have mentioned that the reasons for the issuance are the low funding cost (0.25% coupon for JD.com and 0.5% for Alibaba) and to fund their current share repurchase program.
- I think the convertible debt structures makes sense and it is beneficial for both companies to buy back as much as possible at the current share price.
4. Shift Up IPO – Thoughts on Valuations – Bear/Base/Bull
- Shift Up (462870 KS) plans to raise up to US$320m in its South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- We have looked at the company’s performance in our past notes. In this note, we talk about valuations.
5. Shift Up IPO: Valuation Insights
- Shift Up (462870 KS) is Korea’s leading game development studio. It is seeking to raise up to US$320 million.
- We previously discussed the IPO in Shift Up IPO: The Investment Case.
- We examine the syndicate’s valuation methodology. Our analysis suggests that Shift Up is attractively valued in the IPO price range. We would participate in the IPO.
6. Shift Up IPO: The Investment Case
- Shift Up (462870 KS) is Korea’s leading game development studio. It is seeking to raise up to US$320 million.
- Shift Up now focuses only on game development and has a policy of publishing games in cooperation with global partners such as Tencent (700 HK) and Sony Corp (6758 JP).
- The investment case rests on a stellar game development track record, several growth drivers, high profitability and cash generation.
7. Hoshino Resorts REIT Placement – Another Raising to Fund an Accretive Acquisition
- Hoshino Resorts Reit (3287 JP) is looking to raise US$125m from a primary follow-on. Proceeds will be used to acquire the OMO7 Osaka asset.
- The REIT has been active on the acquisition front, undertaking a number of capital raisings in recent years.
- In this note, we will talk about the placement and run the deal through our ECM framework.
8. Shift Up IPO – Peer Comparison – Small in Size but Ranks High on Growth and Margins
- Shift Up (462870 KS) plans to raise up to US$320m in its upcoming South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- In our previous note, we looked at the company’s past performance. In this note, we will undertake a peer comparison.
9. ASMedia GDR Offering – Well Flagged, and Momentum Has Been Strong Leading into the Offering
- Asmedia Technology (5269 TT) is looking to raise up to US$335m in its global depository receipts (GDRs) offering.
- Overall, the deal would be a relatively small one for the stock to digest at just 5.6 days of its three month ADV.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
10. ECM Weekly (27th May 2024) – Renesas, AUB, Modec, Tata Tech, MUFG, Shift Up, Novelis, Shulan
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Go Digit managed to do well despite somewhat tepid subscription rates, while Shift Up (462870 KS) was looking to be the next hot listing in Korea.
- On the placement front, Renesas Electronics (6723 JP) mega-block kept the cross-shareholding unwind going.
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1. Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)
- Today post-close, Denso Corp (6902 JP) (via BofA) announced a selldown of 78,127,800 shares of Renesas Electronics (6723 JP). This is the latest in a line of block exits.
- There was the 130mm offering in November last year by INCJ. There was 123mm shares in Jan 2024 by NEC and Hitachi. A month later, 50mm shares from Mitsubishi Electric.
- In general, they have been absorbed, but one hasn’t needed to buy in the market. Some have broken price. Here, the pricing range is aggressive.
2. Shift Up IPO Preview
- Shift Up (462870 KS) is getting ready to complete its IPO in KOSPI in June 2024. Established in 2013, Shift Up is one of the leading game developers in Korea.
- The IPO price range is 47,000 won to 60,000 won. The IPO offering amount is 340.8 billion won to 435 billion won.
- According to the bankers’ valuation, the market capitalization range of the company ranges from 2.73 trillion won to 3.4 trillion won. This is the second largest IPO in Korea YTD.
3. MODEC (6296 JP): The Current Playbook
- Since the US$535 million secondary placement announcement, Modec Inc (6269 JP)’s shares are down 15% from the undisturbed price of JPY3,320 per share (14 May).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Modec’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 22 May. Investors who have participated in previous large Japanese placements tend to secure positive returns.
4. Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well
- Denso Corp (6902 JP) is looking to raise US$1.39bn from selling a portion of its stake in Renesas Electronics (6723 JP).
- DENSO’s selldown is a small one at just 4.3 days of ADV. While there is an overhang of around 4% of TSO, DENSO will be locked up for 270 days.
- In this note, we will talk about the placement and run the deal through our ECM framework.
5. Shift Up IPO – The Negatives – Changing Monetisation Model, Censorship Issues
- Shift Up (462870 KS) plans to raise up to US$320m in its upcoming South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- In this note, we talk about the not-so-positive aspects of the deal.
6. Shift Up IPO Valuation Analysis
- Our base case valuation of Shift Up is target price of 95,510 won, which is 59% higher than the high end of the IPO price range (60,000 won).
- We believe Shift Up deserves higher valuation multiples than its peers mainly due to higher sales growth, much higher operating margins, and higher ROE.
- Since its launch in April of this year, Stellar Blade (PS console game) has ranked first in sales in eight countries, including the United States, United Kingdom, Canada, and Japan.
7. Shift Up IPO – The Positives – All Games Have Done Well
- Shift Up plans to raise up to US$320m in its upcoming South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- In this note, we talk about the positive aspects of the deal.
8. Raspberry Pi IPO Preview
- Established in 2012, Raspberry Pi is getting ready to complete its IPO in London soon. Raspberry Pi provides small, single-board computers.
- Raspberry Pi is backed by Sony and ARM Holdings. Nearly 72% of the company’s sales come from commercial customers embedding its products into various consumer devices and other systems.
- The company generated sales of US$265.8 million (up 41.5% YoY) and operating profit of US$37.5 million (up 87% YoY) in 2023.
9. Lalatech Holdings: FCF Growth Accelerated, Margins Improved, Fair Value May Be North of $10B
- Lalatech Holdings, a technology based global logistics company, has updated its application for Hong Kong IPO and disclosed financial results for 2023.
- Lalatech Holdings is aiming to raise up to $1B and the company’s IPO looks imminent in the coming months as cash flow growth accelerated, while margins and profitability improved.
- My fair valuation of Lalatech Holdings is close to $10B and investors should buy into upcoming IPO given the company’s substantial scale, massive network effects and operating efficiency.
10. Go Digit IPO Trading – Low Subscription Rate, Not All Shares Are Locked Up
- Go Digit General Insurance raised around US$315m in its India IPO.
- Go Digit General Insurance is a digital full stack insurance company, offering motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products.
- We have looked at the company’s performance in our past note. In this note, we talk about the trading dynamics.
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1. YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
- It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
- Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.
2. Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
- The deal is a large one to digest at 81 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. MODEC (6296 JP): A US$535 Million Secondary Offering
- Modec Inc (6269 JP) has announced a secondary offering of up to 25.2 million shares (including overallotment). The largest shareholder, Mitsui E&S Holdings (7003 JP), is the seller.
- MODEC’s goal with the secondary offering is to reconfigure its shareholder mix to have a diverse base of shareholders who support its long-term strategies and a better tradable share ratio.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 22 and 28 May (likely 22 May).
4. Hyundai Heavy Industries Block – Not Well Flagged and Recent Korean Deals Haven’t Done Well
- HD Korea Shipbuilding & Offshore Engineering (009540 KS) is looking to raise approximately US$258m, via selling 2.6m shares (2.9% of TSO) of HD Hyundai Heavy Industries (329180 KS) stock.
- The deal is a large one to digest at 14.6 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
5. Giant Biogene Placement – Has Been Doing Well but Doesn’t Need the Cash
- Giant Biogene (2367 HK) aims to raise up to US$205m via a top-up placement.
- We have followed the company since listing and its recent performance has been great. Although it doesn’t seem to need the cash.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
6. ECM Weekly (13th May 2024) – Hyundai Marine, Zeekr, Swiggy, Indegene, Aadhar, TBO, Wuxi XDC, ASMedia
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, after a stellar showing by HD Hyundai Marine Solution (443060 KS), the coming week will be a busy one for India listings.
- On the placement front, there were no major deals during the week. We did look at Asmedia Technology (5269 TT) planned GDR, and Wuxi XDC’s upcoming lockup expiry.
7. Olympus Corp (7733 JP): ¥100B Buyback Plan Offers an Attractive Exit Opportunity Amid Bleak Outlook
- Olympus Corp (7733 JP) has announced a buyback plan for up to 60M shares, representing 5.15% of outstanding shares, by spending ¥100B from May 13 to December 31, 2024.
- The company has posted mixed FY24 results, with revenue beating and operating and net profits missing guidance. Olympus has guided for just 9% revenue growth for FY25.
- Overall business outlook of the company seems to be bleak. With limited upside potential expected, it will be wise to tender shares through the company’s buyback offer.
8. ZEEKR IPO: Strong First-Day Return and Upsized Offering
- ZEEKR, a rapidly growing premium EV maker, has successfully completed its IPO and raised ~$441M. The offering was priced at the top of the range at $21 per share.
- The company sold a total of 21M ADSs, up from the initial target of 17.5M shares. ZEEKR’s stock soared more than 30% following its strong debut on NYSE on Friday.
- Geely Auto, Mobileye and CATL have acquired ~14.3M ADSs and overall investor sentiment was positive. I believe ZEEKR may succeed as a high-volume EV maker worldwide.
9. Lalatech Holdings Limited Pre-IPO – Refiling Updates – Continues to Improve, Valuation Gap Narrowing
- Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO.
- Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.
- We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.
10. Aadhar Housing Finance IPO Trading – More Loved by Institutional Investors than Retail
- Aadhar Housing Finance(AHF) raised around US$360m in its India IPO, via selling a mix of primary and secondary shares.
- AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
- We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.
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1. ZEEKR (ZK US) IPO: Valuation Insights
- ZEEKR (ZK US), a premium Chinese BEV manufacturer and a subsidiary of Geely Auto (175 HK), has launched an IPO to raise up to US$368 million.
- We previously discussed the IPO in ZEEKR IPO: The Bull Case, ZEEKR IPO: The Bear Case and ZEEKR IPO: Latest Updates as the IPO Process Restarts.
- The IPO price range values ZEEKR at a material discount to peers’ multiples. We would be inclined to participate in the IPO.
2. HD Hyundai Marine Solution IPO Trading – Strong Demand and Peers Continue to Rise
- HD Hyundai Marine Solution (443060 KS) had raised around US$539m in its Korean IPO, after pricing the deal at the top end of KRW83,400/share.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In this note, we will talk about the demand for the deal and other trading dynamics.
3. Zeekr IPO – Missed Targets and Related Party Deals – We Would Stick to the Bottom-End
- ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$370m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance in our earlier notes. In this note, we talk about the updates from its recent filings and have a relook at valuations.
4. Aadhar Housing Finance IPO – Larger and Slower, at a Reasonable Discount
- Aadhar Housing Finance (AHF) is now looking to raise around US$360m in its India IPO, via selling a mix of primary and secondary shares.
- AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
- We have looked at the company’s performance in our past note. In this note, we talk about valuations.
5. ECM Weekly (6th May 2024) – Aadhar, Indegene, TBO Tek, Super Hi, China Resources Bev, Honasa, Worley
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, a number of deals were launched in India, while HD Hyundai Marine Solution (443060 KS) will list in the coming week.
- On the placement front, the two deals in Australia, WorleyParsons Ltd (WOR AU) and Endeavour Group /Australia (EDV AU) delivered opposing results.
6. Swiggy Pre-IPO Early Look – Innovation Leader, Profitability Laggard
- Swiggy aims to raise US$1.25bn in its upcoming India IPO. The company has filed confidentially for its IPO, which is likely to be launched towards the end of the year.
- Swiggy, along with Zomato, operates a duopoly that has come to dominate the food delivery market in India. In 1H24, Swiggy serviced over 274,000 restaurants via its 370,000 delivery partners.
- In this note, we will take an early look at the company based on the publicly available financials.
7. Innospace IPO Preview
- Innospace is getting ready to complete its IPO in June 2024. According to bankers’ valuation, the implied market cap of Innospace is from 347 billion won to 434 billion won.
- Innospace engages in the satellite launch vehicle production and launch service business.
- The company estimates its sales to increase from 0.2 billion won in 2023 to 2.0 billion won in 2024, 47.8 billion won in 2025, and 97.2 billion won in 2026.
8. Zeekr IPO Trading – Not as Cheap as It Looks but Float Is Tiny
- ZEEKR (ZK US), a premium EV brand by Geely, raised around US$440m in its US listing, after the deal was upsized and priced at the top.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance and provided our thoughts on valuations in our earlier notes. In this note, we talk about the trading dynamics.
9. Lalatech IPO: New Filing Shows March From Losses To Profits Between 2021 and 2023
- In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
- We also evaluate which drivers are likely to generate future improvements
- Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view
10. TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation
- TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
- TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
- In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Worley Placement – Largest Shareholder Selling at an Attractive Discount
- DAR Group is looking to raise A$1.5bn (US$983m) from selling the majority of its stake in WorleyParsons Ltd (WOR AU).
- DAR had attempted to privatize Worley in late 2016. Failing that attempt, it has been adding to its stake over the years.
- As the deal isn’t a cleanup, there will be an overhang post-deal, although its a relatively small one at just 4.5% of DAR’s remaining stake; locked up for 30 days
2. Endeavour Group Placement – While There Is an Overhang, Selldown Now Appears Well Flagged
- Woolworths Ltd (WOW AU) is looking to raise A$468m (US$305m) from selling its stake in Endeavour Group /Australia (EDV AU).
- Endeavour Group was demerged from Woolworths in Jun 2021 and it runs the drinks and hospitality business of Woolworths.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
3. SHEIN IPO: The Biggest IPO in 2024 in London?
- Although Shein has yet to formally announce the listing destination, there is a growing anticipation that the listing venue could be London, rather than New York.
- It has been reported that the company has more than doubled its net profit to more than US$2 billion in 2023.
- The company is currently seeking a corporate value of nearly US$70 billion to US$90 billion in the Shein IPO which would be one of the biggest IPOs globally in 2024.
4. Super Hi International US ADS – Has Been Doing Well but Doesn’t Really Need the Cash
- Super Hi International Holding (9658 HK) aims to raise around US$100m in its US ADR IPO. MS and Huatai are on the deal.
- Super Hi International (SHI) is a Chinese cuisine restaurant brand, operating Haidilao hot pot restaurants in the international market.
- In this note, we talk about the deal dynamics and the listing impact.
5. Indegene Limited Pre-IPO: Subscribe on Profitable Niche Business Model and Attractive Valuation
- Indegene Limited (1864095D IN) has set IPO price band at INR430–452 per share. The IPO consists of fresh issue as well as OFS by existing shareholders.
- Considering FY24 annualized post-IPO EPS of INR13.48, Indegene seeks a P/E valuation of 31.9–33.5x.
- Considering niche business focus, proven execution capability, marquee clientele, long-standing client relationship, life science focus, and comprehensive offering, Indegene’s valuation seems quite attractive.
6. China Resources Beverage Pre-IPO – The Positives – Strong Position in Its Main Market
- 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 this note, we talk about the positive aspects of the deal.
7. ECM Weekly (29th Apr 2024) – IDEA, Kokusai, J&T, Krafton, Horizon, Oceana, ChaPanda, 99 Speed, Afcon
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Sichuan Baicha Baidao Industrial (2555 HK) and Mobvoi (2438 HK)‘s listing doesn’t really help the HK sentiment.
- On the placement front, Vodafone Idea (IDEA IN) managed to do well, while Krafton (259960 KS) followed Samsung Electronics (005930 KS) footsteps.
8. Indegene Pre-IPO – RHP Updates – Client Base Continued to Grow, and Margins Have Begun Stabilizing
- Indegene Limited (1864095D IN) is looking to raise about US$220m in its upcoming India IPO.
- Indegene is a “digital-first” commercialisation firm with an exclusive focus on the global life sciences industry.
- We looked at the firm’s past performance in an earlier note. In this note, we look at the RHP updates.
9. Pre-IPO Ximalaya – The Potential Risks and the Outlook
- The key to Ximalaya turning losses into profits is not the outstanding performance in revenue side, but rather the effective cost control. The Company seems to have encountered growth bottleneck.
- To achieve long-term stable profits, it’s necessary to continuously optimize content quality, improve user experience, and expand paying user scale, but Ximalaya has shown “signs of fatigue” in this regard.
- AI technology brings big room for imagination, but the question here is how much would truly translate into a leap in financial performance? Ximalaya’s valuation could be lower than peers.
10. China Resources Beverage Pre-IPO – The Negatives – Remains a Minnow in Other Markets
- 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 this note, we talk about the not-so-positive aspects of the deal.