In this briefing:
- ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)
- Dreamtech IPO: Valuation Analysis
- Ab InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
- ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)
- Daiwa House REIT Placement – Well-Flagged but Barely Accretive to DPU
1. ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)
In our first insight (link here) covering ByteDance, we discuss ByteDance’s app matrix, the differentiating factors of ByteDance and the key difference between its Jinri Toutiao app and Tencent News.
In this insight, we will discuss in details its next blockbuster app, Tiktok. Similar to Jinri Toutiao, it is utilizing AI technology for content curation. In addition to that, the app also uses AI technology to beautify content producers. Compared to text-based content, the short-video content is more viral.
In the next insight, we will look at the company’s overseas expansion, past series of financing and valuation.
2. Dreamtech IPO: Valuation Analysis
- The bookbuilding of the Dreamtech Co Ltd (192650 KS) IPO will start in about 6 business days. This report provides a valuation analysis of this company. Dreamtech makes modules and sensors for smartphones, auto vehicles, home appliances, and health care products. In late January 2019, the company reduced the IPO price range to 11,000 won to 13,000 won (from 13,400 won to 16,700 won previously).
- The comps have better sales growth, net margin, and net profit growth than the company. However, Dreamtech has slightly better ROE and balance sheet strength than the comps. Therefore, we believe it is appropriate to put a 10-20% discount on the comps’ average P/E valuation of 17.6x in 2017 and 2018.
- Our base case valuation of the company is 13,961 won, which is only 7% higher than the high end of the IPO price range (13,000 won). Thus, given the lack of enough upside, we would avoid this deal. However, if the deal is priced at the low end of the IPO price range (11,000 won), it could potentially be attractive. Our base case valuation is based on 15x P/E, which is a 15% discount to the average P/E multiples of its peers in 2017 and 2018. We also used net profit of 29.1 billion won, which is the average estimated net profit of the company in 2017 and 2018.
3. Ab InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
Anheuser Busch Inbev Sa/Nv (ABI BB), the world’s largest brewer, is looking to list its Asian operations in order to lighten its debt burden. The listing will probably be in Hong Kong and the company could raise around US$5bn at a valuation of around US$70bn, as per media reports, which will make it one of the largest listings for 2019. Earlier this month, the company picked JPM and MS to lead the deal.
When listed, the company will be the third biggest brewer in China and the largest in South Korea and Australia.
While we have to wait for the application proof to be filed later this year to get more details on the operations, in this insight I’ll take a early look at the Asian operations using the data already available in the parent’s annual and quarterly reports. I’ll primarily address where the business is now and how it has shaped up over the past few years.
4. ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)
ByteDance, an emerging TMT player in China and one of the challengers to the BAT’s dominance in China, is said to be preparing for 2019 listing. It will be the largest Chinese TMT listing this year as the company was valued at USD 75 billion in the pre-IPO fundraising, closed in October 2018.
In this insight, we will discuss ByteDance’s business, in particular, how the text-based media distribution platform Jinri Toutiao (今日头条) built the foundation of the company, and paved ways for the short-video distribution platform Watermelon Video (西瓜视频), Volcano Video (火山视频), and Tiktok (抖音).
In our next insight, we will discuss how Tiktok became successful and the company’s overseas expansion.
5. Daiwa House REIT Placement – Well-Flagged but Barely Accretive to DPU
Daiwa House Reit Investment (8984 JP) (DHR) is raising about US$329m in its placement to fund the acquisition of properties.
The deal scores well on our framework owing to strong price and earnings momentum. The assets to be acquired are a good mix of logistics, retail, and hotel.
However, the properties to be acquired mostly have an NOI yield lower than the average NOI yield of DHR’s existing assets in the respective asset classes. Despite increasing the portfolio value by almost 10%, the ten properties are only expected to be 1.37% accretive to DPU.
That said, DHR’s acquisition has been well-flagged as it was highlighted in its September presentation.
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