In this briefing:
- Chengdu Expressway (成都高速) IPO Review – Well-Managed but Unexciting
- Healius (HLS AU): An Unattractive Bid
- Future Metals Curve in China
- Weimob IPO Valuation: Optically Cheap
- Tencent: A Brief Statistical Review of Game Approvals
1. Chengdu Expressway (成都高速) IPO Review – Well-Managed but Unexciting
Chengdu Expressway Company Limited (1785 HK) is looking to raise US$112m in its upcoming IPO.
The expressways that CEC operate are integral in Chengdu’s transport network. The expressways have been upgraded and expanded consistently over the past three years which has led to an increase in traffic and toll revenue. However, in terms of valuation, CEC will likely trade at a valuation closer to small expressway peers which implies a 10% downside.
In this insight, we will look at the company’s financial and operational performance, toll payment model, and compare its valuation to Hong Kong-listed expressway peers. We will also run the deal through our IPO framework.
2. Healius (HLS AU): An Unattractive Bid
Healius (HLS AU), formerly known as Primary Health Care (PRY AU), is a leading Australian owner of GP clinics and pathology centres. On 3 January 2018, Healius received an unsolicited and highly conditional proposal from Jangho Group Co Ltd A (601886 CH) for A$3.25 cash per share.
We believe that Jangho’s bid is opportunistic and unattractive. Also, if Jangho puts in an improved bid, getting regulatory blessing will be an uphill task.
3. Future Metals Curve in China
Metals are an important part of China’s economic prowess. Specifically, metals are a spoke in the economic wheel with fortunes of commodities and real estate all centered around metals. As we look at metals futures, we see that most metals futures are very flat.
4. Weimob IPO Valuation: Optically Cheap
Weimob.com (1260480D CH) is a combination of a SaaS software and an adtech (targeted marketing) business which has started book building to raise gross proceeds of $108-135 million. According to press reports, Weimob is being viewed favourably by investors as it is being offered at a “cheap” valuation of 18-23x 2019 P/E.
However, the valuation of 18-23x 2019 P/E is optically cheap. Our analysis suggests that including capitalised R&D, Weimob is being offered at a material premium to a peer group of major Chinese internet companies. Notably, our forecasts do not adjust for the capitalised contract acquisition costs which would further increase Weimob’s P/E multiple. Consequently, we believe that the proposed IPO price range is unattractive and would sit out this IPO.
5. Tencent: A Brief Statistical Review of Game Approvals
Paused for eight months, China’s authority resumed the domestic game approval in December. The first batch of 80 games was approved recently.
Since the last round of game application approval, the stock price of Tencent Holdings (700 HK) has fallen by 26%. Stock price reacted positively to the recent progress of game approval.
In this insight, we try to assess the significance of recent progress with a statistical approach.
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