In this briefing:
- HK Connect Discovery Weekly: Air China and Great Wall Motor (2019-04-04)
- Last Week in GER Research: Huya, Bilibili and Qutoutiao
- Nexon Sale: Nexon Japan Tender Price Estimations
- Trade War/China Strategy/Credit Growth/Bonds/Taiwan
- ECM Weekly (6 April 2019) – Bilibili, Huya, Qutoutiao, Polycab, PNB Metlife, CIMC Vehicle
1. HK Connect Discovery Weekly: Air China and Great Wall Motor (2019-04-04)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we will highlight Air China and Great Wall Motor.
2. Last Week in GER Research: Huya, Bilibili and Qutoutiao
Below is a recap of the key IPO/placement research produced by the Global Equity Research team. This week, we update on the bevvy of placements offered by various companies. After placements by Pinduoduo (PDD US) and Sea Ltd (SE US) , we saw more offerings from HUYA Inc (HUYA US) , Bilibili Inc (BILI US) and Qutoutiao Inc (QTT US). We update on these three offerings and perhaps big picture, this could reflect a signalling inflection point in these shares. More details below
In addition, we have provided an updated calendar of upcoming catalysts for EVENT driven names below.
Best of luck for the new week – Arun, Venkat and Rickin
3. Nexon Sale: Nexon Japan Tender Price Estimations
This post estimates Nexon Japan tender price. For this, I use the same approach that a local PE named “MBK Partners” would use based on EBITDA multiple and IRR on a 3 year exit. From their position, the only proven value-up path would be KOSPI moving. MBK must try to stay as conservative as possible. Whatever Netmarble value addition should be an extra when deciding on a tender price. So, I base my estimation solely based on KOSPI moving effect. For this, I use NCsoft as a sole valuation comp.
4. Trade War/China Strategy/Credit Growth/Bonds/Taiwan
China News That Matters
- Praying the US-China end-game is near
- What to do about China?
- Stability, phew. Or just a false dawn?
- OTC bonds sell like hot cakes
- Even worse than a trade war…
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.
5. ECM Weekly (6 April 2019) – Bilibili, Huya, Qutoutiao, Polycab, PNB Metlife, CIMC Vehicle
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
Placements activity picked up momentum this week as evidenced by the number of follow-on offerings launched by a handful of US-listed Chinese tech companies. It all started with Qutoutiao Inc (QTT US) ‘s follow-on offering, then followed by Bilibili Inc (BILI US)‘s equity + convertible note placement, and ending the week with HUYA Inc (HUYA US)‘s follow-on offering and Baozun Inc. (BZUN US)‘s convertible bond and placement.
On the other hand, Ruhnn Holding Ltd (RUHN US)‘s debut this week had been a total disaster. It closed 37% below its IPO price on the first day. This is the worst first-day performance among Chinese ADRs (deal size >US$100m) in the past six months.
Back in Hong Kong, Dongzheng Automotive Finance (2718 HK) also broke its IPO price on the first day after relaunching at a much lower price. As per our trading update note, considering that there will be greenshoe support, we thought that the risk to reward could be favorable for a trade (from its first day mid-day price of HK$2.57).
As for placements, Ronshine China Holdings (3301 HK) seems to have made its equity raise a yearly affair. The company is back to tap the equity market through a top-up placement and it has done the same in 2017 and 2018. The initial deal size was small, US$122m, but was upsized later on. The share price traded well post-placement, closing 9.5% above its deal price of HK$10.95 on Thursday.
For upcoming IPOs, we heard that Leong Hup International (LEHUP MK) has started pre-marketing and Sumeet Singh had already shared his early thoughts on the company in Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward.
We are also waiting for Shenwan Hongyuan Hk (218 HK) and CIMC Vehicle Group Co Ltd (1706044D HK) to launch their IPO since they already been approved on the HKEX. Ke Yan, CFA, FRM had also analyzed the two companies in his notes:
- Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
- CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
Map Aktif Adiperkasa PT (MAPA IJ) will be closing its bookbuild for its follow-on offering next Tuesday (pricing on Wednesday). We heard that books are already covered as of Thursday.
Accuracy Rate:
Our overall accuracy rate is 72.4% for IPOs and 63.5% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
- Changliao AKA 派派(Hong Kong, ~US$100m)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
News on Upcoming IPOs
- Leong Hup – comeback sunny side up
- Polycab India eyes to raise around Rs 1,345 crore through IPO
- Carlyle-backed Metropolis Healthcare’s IPO nears halfway mark on second day
- Eagle Hospitality Trust eyes Singapore IPO to raise up to US$575m
- Cancer Treatment Firm Plans Hong Kong IPO
- Goldman-Backed Chinese Online Pet Store Boqii Plans IPO
- China drone maker EHang delays IPO plan, eyes private funding-sources
This week Analysis on Upcoming IPO
- Map Aktif Follow-On Offering – Lace up for a Potential Long Run
- Zhongliang (中梁地产) Pre-IPO Review – Incredible Growth Bogged Down by Related Party Transactions
- CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
- PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
- Polycab India Limited IPO – Probably Near Peak Margins, Improvements Unexplained
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