Brief China: CanSino Biologics (康希诺) IPO: Valuation Update (Part 3) and more

In this briefing:

1. CanSino Biologics (康希诺) IPO: Valuation Update (Part 3)
2. Momo (MOMO): Paying Users Up 17%, Benefiting from Bankrupt Competitors, 80% Upside
3. Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability
4. Ruhnn IPO Preview: Hard to Stay Red-Hot for Long

1. CanSino Biologics (康希诺) IPO: Valuation Update (Part 3)

CanSino is a China-based biotechnology company with a focus on vaccine development. In our previous insight (link to Part 1 and Part 2), we have discussed CanSino’s drug pipeline, the competitive landscape, and the valuation. 

As the company is starting pre-marketing, we will provide an updated valuation based on new information obtained from the approved application document. Our base case valuation for CanSino is USD 856 million on a pre-money basis. Majority of the rNPV based SOTP valuation still comes from its meningococcal conjugate vaccine (MCV2 and MCV4). Over the past few months, the company has completed Phase III for MCV4 and submitted NDA (new drug application) for MCV2 candidates.

2. Momo (MOMO): Paying Users Up 17%, Benefiting from Bankrupt Competitors, 80% Upside

• The stock price has risen 32% after the short seller J Capital slammed it.
• MOMO’s paying user base of live video increased 22% yoy in 3Q18 and 17% yoy in 4Q2018 even though the live show market shrank in 2018.
• We believe MOMO will benefit from small competitors’ bankruptcy.
• The growth rate of the main business revenues stopped declining.
• Our P/E band suggests upside of 80% for MOMO’s stock price.

3. Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability

• Conference call with Meituan Dianping (3690 HK) reveals that ballooning losses from new initiatives (incl. one-off expenses) largely contributed to record quarterly EBIT losses in 4Q18.
• Importantly, this masks Meituan Core’s (combined food delivery and in-store, hotel & travel divisions) continued progress toward profitability.
• Management is bullish on every division’s outlook in 2019, particularly guiding for 1) balanced growth and profitability strategy for food delivery and 2) disciplined investments in new initiatives.
• Meituan attractively trades at 2.9x 2019E P/S, only around half of peers’ valuation (5.5x).  

4. Ruhnn IPO Preview: Hard to Stay Red-Hot for Long

Ruhnn Holding Ltd (RUHN US) is an e-commerce platform which drives sales through KOLs (key opinion leaders). Ruhnn is the largest internet KOL facilitator in China as measured by revenue, the number of online stores and GMV in 2018 according to Frost & Sullivan. Ruhnn is backed by Alibaba Group Holding (BABA US), an 8.6% shareholder, and is seeking to raise $200 million through a Nasdaq IPO.