Daily China: Tencent: A Brief Statistical Review of Game Approvals and more

In this briefing:

1. Tencent: A Brief Statistical Review of Game Approvals
2. Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
3. Viva Biotech (维亚生物) IPO: When CRO Becomes Early Stage Biotech Investor
4. Korea M&A Spotlight: Nexon’s Founder Plans to Sell; Will Tencent Buy Nexon?
5. Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results

1. 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.

2. Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation

Weimob.com (1260480D CH),  a Tencent Holdings (700 HK) and GIC investee company, plans to raise up to US$135m in its Hong Kong IPO.

I’ve covered most aspects of the deal in my earlier insight, Weimob Pre-IPO – Can Be Steamrolled by Tencent, Anytime, where I spoke about the over-reliance on Tencent, high attrition rates and acquisition costs for SMBs, and the increasing contribution of its ads business.

In this insight, I’ll provide an update from the latest filings, comment on valuations and run the deal through our IPO framework.

3. Viva Biotech (维亚生物) IPO: When CRO Becomes Early Stage Biotech Investor

Viva Biotechnology, a China-based drug discovery company, is seeking to raise USD 200m to list on the Hong Kong Stock Exchange. In this insight, we cover the following topics:

• Services provided by Viva. 
• Revenue model of the company.
• The CRO market.
• The company’s history and shareholders.
• Our initial thoughts on valuation.

• WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different
• Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect

4. Korea M&A Spotlight: Nexon’s Founder Plans to Sell; Will Tencent Buy Nexon?

It was reported today that Nexon Co Ltd (3659 JP)’s founder Kim Jung-Joo plans to sell a controlling stake in Nexon’s holding company NXC Corp for at least 10 trillion won ($8.9 billion). Kim Jung-Joo and other related parties plan to sell their entire 98.64% stake in NXC Corp, which owns a 47.98% stake in Nexon. The 10 trillion won or more anticipated acquisition price for NXC Corp would include a significant management premium. Nexon Group’s shareholding structure is basically as follows: Kim Jung-Joo → Nexon (Japan) → Nexon Korea → About 10 affiliates. 

One of the reasons why the Nexon’s founder Kim Jung-Joo, who is only 50 years old, is trying to sell his entire stake in Nexon may have been due to the recent allegations about him giving about $380,000 worth of Nexon stock (prior to its listing) to his old high school classmate (who is now a senior public prosecutor) for free. Kim Jung-Joo has repeatedly faced allegations and attended numerous court hearings on this matter in the past two years. He may have gotten a bit tired from all these allegations. 

Given the enormous size of this acquisition, the two leading Korean game companies including NCsoft Corp (036570 KS) and Netmarble Games (251270 KS) are not likely to purchase Nexon. Rather, the leading contender to buy Nexon right now is likely to be Tencent Holdings (700 HK). The sheer huge size of this deal will represent one of the largest M&A deals in Asia in 2019. 

5. Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results

Hansoh Pharma, a leading generic pharmaceutical manufacturer, filed an application to list on the Hong Kong Stock Exchange. In our previous insight, we have covered the company’s core products and pipeline candidates. We also mentioned the recent regulatory development that affects the industry of generic drug manufacturers, in particular, the recent 4+7 City Centralized Tender Results (4+7 城市药品集中采购). 

• Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
• WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different

• Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect
• Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO
• Junshi Bioscience (君实医药) IPO: Thoughts on Valuation (Part 2)
• Junshi Bioscience (君实医药) IPO: Early in Application but Behind in Key Indications (Part 1)
• CanSino Biologics (康希诺) IPO: Promising Pre-Clinical Results but Vaccine Scandal Weighs (Part 1)

• AOBiome Therapeutics IPO: Hope for Natural Therapeutic Treatment
• Stealth Biotherapeutics IPO: Cure the Symptoms but Not the Cause (Part 1)
• Innovent Biologics (信达生物) IPO: Pricing the PD-1 and Biosimilars Competition (Part 2)
• Innovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
• MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
• Hua Medicine (华领医药) IPO: Thoughts on Valuation
• Hua Medicine (华领医药) IPO: Reviving Roche’s Failed Attempt?
• BeiGene (百济神州) IPO: Dual-Listing with Upside Capped in the Near Term
• Ascletis Pharma (歌礼制药) IPO: Valuation Not Justified by Ganovo and Ravidasvir NPV (Part 3)
• Ascletis Pharma (歌礼制药) IPO: Three Valuation Risk Factors (Part 2)
• Ascletis Pharma (歌礼制药) IPO: Emerging Player in the Crowded HCV Drug Market
• China Isotope & Radiation IPO: Oligopoly, Visible Growth and High Barrier to Entry
• Zai Lab IPO: Thoughts on Valuation, Risks and Upsides (Part 2)
• Zai Lab IPO: Experienced Team, Promising In-Licensing Drug Pipeline (Part 1)