In this briefing:
- China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help
- Xinyi Solar Placement – Past Deals Have Done Well, Improvement in Sentiment Should Help
- NIO (NIO US): Lock-Up Expiry – This Could Get Messy
- Yingcheng Intl (银城国际) – Quick Post-IPO Trading Update
- Sea Ltd (SE US): The Bear Case – A One-Hit Wonder?
1. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help
A shareholder of China Gas Holdings (384 HK) is looking to sell about 142m shares worth approximatel US$443m. This is a clean-up trade.
The deal scores well on our framework owing to its pristine track record of outperformance and decent earnings momentum. It is also a clean-up trade, hence, no overhang on its share price.
However, the performance of prev deals show that placements larger than HK$3bn tend to perform flat over one-month period whereas placements with smaller deal size did well.
2. Xinyi Solar Placement – Past Deals Have Done Well, Improvement in Sentiment Should Help
Xinyi Solar Holdings (968 HK) is looking to raise about US$170m in its top-up placement with an upsize option of 225m shares.
The deal scored well on our framework owing to its good track record, strong earnings and price momentum. The company’s 2H 2018 result had marginally beaten estimates while the news of China potentially reversing its effort to reduce solar subsidy has helped improve the overall sentiment of Xinyi Solar. On top of that, the past deals have generally done well.
3. NIO (NIO US): Lock-Up Expiry – This Could Get Messy
Yesterday, NIO Inc (NIO US)’s share tumbled 20% on the back of poor 1Q19 guidance. NIO warned that deliveries of ES8, its electric SUV, have been sluggish so far in 2019 and scrapped plans to build its Shanghai Manufacturing Plant. NIO blamed the slump on uncertainty over government subsidies for electric vehicles, China’s slowing economy and disruption caused by the Chinese New Year holidays.
The weak guidance could not come at a worse time as its six-month lock-up period expires on 11 March 2019. We continue to remain bears on NIO and believe that the lock-up expiry will lead to further share price weakness.
4. Yingcheng Intl (银城国际) – Quick Post-IPO Trading Update
Yincheng International Holdi (1902 HK) raised US$100m in at HK$2.38 per share, at the mid-point of its IPO price range. We have previously covered the IPO in:
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
5. Sea Ltd (SE US): The Bear Case – A One-Hit Wonder?
Despite burning through $700mn in cash in 2018, investors decided to give another $1.3bn to Sea Ltd (SE US) . We believe investors should treat Sea Ltd with caution for the following reasons:
A significant slowdown in e-commerce
Is the gaming division a one-hit wonder?
Expecting another 800mn cash burn into 2019
Consensus has priced in further upgrades while cash flow metrics worst in the sector
NB. Our team has taken both sides of the Sea Ltd investment case as we think this makes for better decision making and encourages unique thinking within our team. We strongly recommend that investors read my colleague Arun’s positive notes on the company listed below, if you have not already done so.
Sea Ltd (SE US): Placing Price Leaves Money on the Table
Sea Ltd (SE US): Placement a Good Opportunity to Enter an Attractive Story
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
