In this briefing:
- Wuxi Apptec (药明康德) IPO: What You Need to Know Before the Trading Debut
- Tencent Music IPO: Price Target Hit; Risk/Reward Now More Balanced and Key Next Steps
- Macro Debt Risks in China According to the PBOC
- Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
- Trade Me (TMZ NZ): Hellman & Friedman Could Again Counter-Bid Apax, but Modestly
1. Wuxi Apptec (药明康德) IPO: What You Need to Know Before the Trading Debut
Wuxi Apptec’s USD 1 billion IPO was priced at HKD 68/share and will start trading today. We summarize the latest information with updates on our valuation in this short note, prior to the trading debut.
Our previous coverage on Wuxi Apptec listing
- WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different
- WuXi Apptec (药明康德) IPO:Upside at Middle and Low End
- Wuxi Apptec (药明康德) IPO: Pricing Update Before Book Close
2. Tencent Music IPO: Price Target Hit; Risk/Reward Now More Balanced and Key Next Steps
Tencent Music Entertainment (TME US) rallied up 14% on day one of trade to hit our PT and closed up c8% on its first day of trade. Given the skepticism/ambivalence on the story, poor macro backdrop, weak recent listings from China in the US alongside a full-sized deal and a mid-December launch, this day one performance is a solid result in our view. We outline some further thoughts and next steps for the TME story below.
A recap of the trade: We recommended buying Tencent Music at the low end of the range ($13) and we estimated a base-case fair value of 14% upside. Tencent music rallied up 14% intraday on its first day of trade and closed up c8%. We think this is a fairly good result given the skepticism/ambivalence on the name alongside a weak macro backdrop and a mid-December deal-launch.
Historical week one trade provides mixed support for further gains:
Long-term – we prefer TME to Spotify but recent events give us pause on the cautious near-term view for Spotify:
Updated DCF Valuation:
GER view:
More details below…
3. Macro Debt Risks in China According to the PBOC
If there is one thing China is acutely aware of it is the debt risks. For many years, I questioned whether China even understood the enormity of its debt risks. Due to a number of factors, I have actually become quite convinced that yes they do understand these debt risks. It should be emphasized that just because they understand the size and enormity of the debt risks does not mean they are going to take corrective steps that in normal financial markets we would expect (I will return to this point later). However, they do clearly grasp the underlying risks of the debt buildup.
4. Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
Xinyi Energy Holdings Ltd (1671746D HK) is a solar farm operator seeking a listing on Hongkong stock exchange raising up to US$680M (including Greenshoe). The company announced a price range of HK$1.89/share to HK$2.42/share valuing the company between HK$12.5B to HK$16B. The company is issuing 1.9B shares and 282M shares of Greenshoe as part of the IPO. The offer price will be announced on 13th December. The shares are expected to trade on Hongkong Stock Exchange on the 21st December.
Based on GER’s analysis valuations appear rich and the investors should avoid the IPO which are priced at a significant premium at the lower end of offer price compared to its peers.
5. Trade Me (TMZ NZ): Hellman & Friedman Could Again Counter-Bid Apax, but Modestly
Trade Me (TME NZ), the largest online auction platform operating in New Zealand, has entered into a scheme implementation agreement with Apax Partners. Apax Partners has upped its bid for Trade Me from NZ$6.40 to $6.45 a share, to match Hellman & Friedman’s bid.
Hellman & Friedman has until the shareholder vote scheduled for April 2019, to make a binding offer which is superior to Apax Partners, according to press reports. While Hellman & Friedman will likely have one last roll of the dice with an improved bid, we continue to believe that that the formal “winning” bid is unlikely to present a material bump.
