In this briefing:
- Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price
- ECM Weekly (2 February 2019) – Maoyan, China Tower, Dexin, Chalet Hotels, Bharat Hotels, Wingarc1st
- Semiconductor Memory Business Shrinking Fast
- Fiscally-Prudent Budget Benefits Farmers, Informal Workers; Lower Policy Rate to Spur Faster Growth
- India: Budget 2019 – Hello Populism
1. Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price
Asian LNG spot prices have dropped for a short time below the UK NBP gas price, reversing the established trend that sees Asian LNG offering a premium to the European LNG price benchmarks. This note takes a look at the latest trends in the LNG markets and the renewed plans unveiled by Qatar to challenge its competitors, in particular, those from the US.
2. ECM Weekly (2 February 2019) – Maoyan, China Tower, Dexin, Chalet Hotels, Bharat Hotels, Wingarc1st
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.
Happy Lunar New Year to everyone from Aequitas Research!
It has been a fairly quiet week leading up to Chinese New Year but it is not stopping Maoyan Entertainment (1896 HK) from listing on Monday. The IPO was priced at the bottom end of its offering range. The last we checked, it traded up 3% in the grey market on Friday. Ke Yan, CFA, FRM will follow up with a short note of his thoughts on post-IPO trading dynamics and bookbuild subscription levels.
Other updates on IPO in Hong Kong include Sinochem Energy allowing its IPO application to lapse while Koolearn (1373356D HK) and Shangde Qizhi Education re-filed for IPO. Edvantage, another new education IPO (and likely to be borderline US$100m deal size) filed for Hong Kong listing this week as well.
China Tower (788 HK)‘s lock-up will be expiring on the 8th of February and Ke Yan, CFA, FRM mentioned in his insight that any potential placement will be a good opportunity to accumulate the stock. Placements from cornerstone investors will likely be a liquidity event.
In India, Chalet Hotels Limited (CHALET IN) closed its bookbuild with a tepid overall demand of 1.57x. The silver lining for the IPO is that the institutional tranche saw a healthy 4.6x demand, similar to that of Lemon Tree Hotels (LEMONTRE IN) in terms of weak overall but strong institutional demand, which ended up performing well in its IPO.
Other upcoming India IPOs include Mazagon Dock Shipbuilders Ltd (9155507Z IN) and Embassy REIT which were said to be seeking listing towards the end of February. Sterling and Wilson is also looking to file its INR50bn IPO with the Sebi soon.
In Japan, Wingarc1st announced its IPO bookbuild to start on the 25th of February and will be listing in March. It is estimated to be raising about US$380m.
Accuracy Rate:
Our overall accuracy rate is 72% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
- Edvantage Group (Hong Kong, ~US$100m)
- Koolearn (Hong Kong, re-filed)
- Shangde Qizhi Education Group (Hong Kong, re-filed)
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
- China’s Sinochem Energy lets Hong Kong IPO application lapse
- India’s Cleartrip eyes IPO as it plans Gulf expansion
- Blackstone set to IPO inaugural $1 billion Reit before March
- Bursa Malaysia’s outgoing CEO says IPO pipeline for 2019 looks strong
- China to Scrap Price, Debut Gain Limits to Entice Tech IPOs
Smartkarma Community’s this week Analysis on Upcoming IPO
- Ebang IPO Preview: Balance Sheet Indicators Point to a Significant Slowdown
- Chalet Hotels IPO Review – Backed up into a Corner
- CStone Pharma IPO Preview: Mixed Prospects of Late-Stage Clinical Drug Candidates
- IPO Radar: KTB Securities, the Only Korean Broker in Thailand
- Shanghai Henlius (复宏汉霖) IPO: Not an Impressive Biosimilar Portfolio
- Dreamtech: Trying for an IPO Again at a Lower Price
- Bharat Hotels Pre-IPO – Catching up with Peers
- China Tower Corp: Trading Idea Before Lock-Up Expiry
- Dexin China (德信中国) Pre-IPO – Related Party Transactions and Partial Asset Listing
List of pre-IPO Coverage on Smartkarma
3. Semiconductor Memory Business Shrinking Fast
Earnings have been announced for Intel, Samsung, SK hynix, and Western Digital, and the memory business is clearly undermining all of these companies’ earnings. In this Insight I review each of the companies to show where they are, and will explain what the future holds for them as today’s oversupply unfolds.
4. Fiscally-Prudent Budget Benefits Farmers, Informal Workers; Lower Policy Rate to Spur Faster Growth
India’s finance minister, Piyush Goyal (standing in for Arun Jaitley, who was hospitalised for cancer treatment just 8 days ago) delivered a spectacular interim Budget — sustaining fiscal prudence while selectively providing rational, market-oriented support to farmers, the middle-class and workers in the unorganised sector. Unlike the Congress party’s dole/hand-out schemes (such as the 2009 and Dec2018 farm-loan waivers) which act as a disincentive to work, the BJP’s are carefully-designed to provide supplemental income while still rewarding those actually working or making timely repayments of loans.
The government’s net market borrowing in the fiscal year-to-date (April-November 2018) was down 21% YoY — helped by 16.7% YoY growth in corporate tax and 16.1% YoY increase in income tax revenue. Given that CPI inflation has moderated sharply to 2.2% YoY in December 2018 (and 2.3% YoY the previous month), there is now scope for the RBI to undo last year’s policy error and cut the policy rate by 50bp. This could be spread out over two MPC meetings (although we think it would be better to do it in one move next week). The spur to growth will be substantial, enabling real GDP to accelerate to 8% YoY growth in FY2019/20.
The most transformative step, however, entails a pension scheme for the “unorganised sector” (where workers currently have virtually no rights whatsoever, in contrast with the gold-plated safeguards available to organised-sector workers, which act as a deterrent to enhanced organised-sector employment). In order to obtain a future pension of Rs3000 per month, unorganised-sector workers will be required to contribute Rs100 monthly during their working years. (That it is contribution-based and not a hand-out is another positive). By thus self-identifying themselves, at least 100 million unorganised-sector workers will be better counted. Eventually, the vast gulf in safeguards/protections between organised and unorganised-sector workers can begin to be bridged if the latter can be identified. In bridging that vast gulf lies the prospect of a much more flexible labour market in future. Through universal health insurance, universal access to bank accounts, universal sanitation, and free access to clean cooking gas for rural women, this government has provided a comprehensive basis for civilised living that half of India previously lacked. When combined with the GST, insolvency & bankruptcy code, and a flexible labour market, the groundwork has been laid for India to be propelled toward average annual real GDP growth of 10% over the next five years. With interest rates set to decline, and growth set to strengthen, we recommend staying Overweight Indian equities.
5. India: Budget 2019 – Hello Populism
The NDA Government presented its 5th and final budget before they face elections in a few months’ time. This budget should have been a non-event due to the long followed tradition in which outgoing governments do not present a proper budget but only present a short vote-on-account (which essentially is just taking approval for routine government expenditure till the time the new government is in place). But it was known this would not be a non-event given the political scenario and the media was full of rumours of what the government may or may not announce in the budget. But we were looking for just 2 things in the budget: first, whether the government will take a decisive populist turn and second while the government will meet the fiscal math, are the assumptions underlying those credible. And sadly, the answer to the first question was a yes and to the second question a no. But perversely, this will not matter, at least in the short-run due to the fact that full fledged implementation in a short-period is not possible and secondly, by the time the full year fiscal deficit numbers are out, elections would be over and focus would shift to the new government and its budget.
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