In this briefing:
- Last Week in GER Research: Huya, Bilibili and Qutoutiao
- Telecom Review (April 2019): DTAC Calls for Truce With CAT
- Organo (6368 JP): Company Visit Notes and Conclusions
- Las Vegas Sands: Singapore Expansion Impacts Our Valuation Now, Long Before Projected 2025 Debut
- ECM Weekly (6 April 2019) – Bilibili, Huya, Qutoutiao, Polycab, PNB Metlife, CIMC Vehicle
1. 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
2. Telecom Review (April 2019): DTAC Calls for Truce With CAT
On April 4, we attended the DTAC shareholders’ meeting and listened to how management defended their strategic decisions in various areas such as legal settlements, marketing, and spectrum bidding. This is our take on their responses to various issue:
- Settlement with CAT. DTAC plans to do a further settlement worth Bt9.05bn nett with CAT to resolve all past bilateral issues, but will resume paying dividends in H2’19.
- Spectrum. Since they still have less spectrum than both AIS and True Move, we can’t really fault them for bidding for the 900MHz spectrum, especially since competition has come down considerably.
- Marketing. Like AIS, they are looking beyond just voice airtime. Mobile gaming is one area they will look at. DTAC’s subsidy on game-centric iPhones and the data airtime that comes with it is significantly more than both True Move and AIS.
- Others. They also managed to get a raise for the Chairman and do finishing touches on the PaySabai (a payment platform) consolidation. In our view, these are really formalities at this phase, since PaySabai is pretty much wholly owned.
3. Organo (6368 JP): Company Visit Notes and Conclusions
- Organo has rebounded from December’s sharp sell-off, but remains attractively valued on a long-term view, in our estimation.
- New orders for water treatment systems from the semiconductor and other industries were up 22% year-on-year and exceeded sales by 33% in the nine months to December.
- According to management, orders continued to exceed sales in the three months to March, but are likely to drop below sales in 1H of FY Mar-20 due to the downturn in memory ICs.
- But the situation is not dire, as overall silicon wafer shipments and demand for image sensors both continue to rise, while foundry is doing better than memory.
- Longer term, management expects growth driven by IIoT, power devices, electric vehicles, and a cyclical recovery in memory. The biggest uncertainty is Chinese domestic demand.
- Some orders have been deferred by one or two quarters, but the company has so far not suffered any cancellations. With a one-year lag from order to revenue recognition for larger projects, management believes it has sufficient visibility to predict improvement in 2H.
- Management has no plans to revise FY Mar-19 guidance, which is for a 14.9% increase in sales, a 43.9% increase in operating profit and a 33.1% increase in net profit to ¥322.5 per share. At ¥3,200 (Friday, April 5 closing price), this translates into a P/E ratio of 9.9x.
- In our estimation, this is cheap enough to be of interest to long-term investors. In the meantime, the calculations of Japan Analytics show upside to a no-growth valuation. Little or no growth appears to be the most likely scenario for FY Mar-20.
Organo is Japan’s second-ranking industrial water treatment company after Kurita Water Industries (6370). Both provide ultra-pure water processing equipment and related products and services to the semiconductor industry. Kurita ranks first in Japan and Korea, Organo ranks first in Taiwan, and both companies compete in China.
4. Las Vegas Sands: Singapore Expansion Impacts Our Valuation Now, Long Before Projected 2025 Debut
- LVS at $64 has runway to $80 by Q4 this year with more core catalysts than many peers.
- Just announced Singapore expansion solidifies LVS first mover MICE advantage as developer of choice in other jurisdictions.
- Singapore outlook adds credibility to LVS pole position in race for Japan IR license before year’s end, adding ballast to our PT.
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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