In this briefing:
- ECM Weekly (9 March 2019) – Lyft, Shenwan Hongyuan, RHB Bank, Sea Ltd, Xinyi Solar, China Gas
- ESR Cayman Pre-IPO – A Giant in the Making
- 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
1. ECM Weekly (9 March 2019) – Lyft, Shenwan Hongyuan, RHB Bank, Sea Ltd, Xinyi Solar, China Gas
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.
It has been a fairly hectic week. We have been busy writing on upcoming IPOs, post-IPO events, and, to top it all off, there were four placements (Sea Ltd, RHB Bank, Xinyi Solar, and China Gas) this week.
Hong Kong’s ECM activity seems to be picking up momentum. Starting off with approvals, Viva Biotech (1577881D HK) and Dongzheng Automotive Finance (2718 HK) filed their respective PHIP on HKEX. Ke Yan, CFA, FRM had previously written on Viva Biotech here while we are currently working on Dongzheng Automotive Finance (2718 HK) and also heard that Dongzheng Auto Finance had already kicked off pre-marketing on Monday.
For upcoming IPOs with completed bookbuilds, Yincheng International Holding (1902 HK) traded flat on debut (expected for a small and leveraged developer) while Zhejiang New Century Hotel Management Group (1158 HK), which had Ctrip and GreenTree as cornerstone investors, will list next Monday.
As for early coverage on IPOs, Sumeet Singh had already given a broad overview of ESR Cayman (ESR HK)‘s business. He will be following up with more detailed analyses in the coming weeks.
In the US, Futu Holdings Ltd (FHL US) debuted well on Friday, trading up to as high as US$17 per share before closing just above US$15 but still well above the IPO price. We had been slightly more conservative because it is not exactly a very exciting company doing something groundbreaking but the management background in tech appears strong and there are no corporate governance issues.Sumeet Singh will update on trading liquidity and post-IPO analysis next week.
For pipeline IPOs, we heard that Ehang is planning its US IPO and it is looking to raise about US$500m. This is the Chinese drone manufacturer which made waves just over a year ago with a video of a team testing its autonomous aerial vehicle shown in the video below. Suffice to say, if and when the IPO launches, it will be interesting.
Ruhnn had also filed for IPO this week and we heard that pre-marketing will start next week while bookbuild will likely launch end of the month. This is an Alibaba-backed e-commerce influencer platform and we will be analyzing the company soon.
We had also been exploring potential trade ideas surrounding lock-up expiry such as Nio (蔚来) Lock-Up Expiry – Scattered Pre-IPO Investors to Be the Sellers and Meituan Dianping (美团点评): Thoughts Before Lock-Up Expiry. NIO’s lock-up expiry had been an unfortunate case of poor outlook guidance in Q4 coinciding with lock-up expiry coming on the week after (11th March).
Accuracy Rate:
Our overall accuracy rate is 72.1% for IPOs and 63.6% for Placements
(Performance measurement criteria is explained at the end of the note)
![](https://static-prod.smartkarma.com/images/media/000/081/405/original/Total-Deals-Since-Inception-Accuracy-Rate-Since-Inception-_chartbuilder%20%289%29.png?1552108384)
New IPO filings
- Ruhnn (the U.S, ~US$200m)
- Sun Car Insurance (Hong Kong, >US$100m)
- Sichuan Languang Justbon Services (Hong Kong, ~US$100m)
- Mabpharm (Hong Kong, re-filed)
- Intellicentrics (Hong Kong, CLSA sole-sponsor, likely to be <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.
![](http://www.smartkarma.com/assets/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)
News on Upcoming IPOs
- Chinese drone maker EHang plans US IPO
- Airport REIT could finance Singapore’s massive infrastructure ambitions
- PNB MetLife Insurance IPO likely in Q2FY20
Smartkarma Community’s this week Analysis on Upcoming IPO
- Lyft IPO Preview
- Lyft IPO Preview: Maybe We’ll Just Walk?
- LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
- Embassy Office Parks REIT – Comparison with AIT and a Look at the Required Yield
- Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
- Polycab IPO: Largest Cables Player, Asset-Heavy Low ROE Model = Vulnerable to Govt Capex Slowdown
- Hyundai Autoever IPO Valuation Analysis
2. ESR Cayman Pre-IPO – A Giant in the Making
ESR Cayman (ESR HK) aims to raise up to US$1.5bn in its planned Hong Kong listing, as per media reports. The company is backed by Warburg Pincus and counts APG, the Netherlands’ largest pension provider, as one of its main investors.
ESR operates an end-to-end model starting from development of the asset to divesting it to one of its private funds and/or REITs. It operates in China, Japan, South Korea, Australia, Singapore and India. AUM has grown rapidly over the past few years as the company has undertaken a number of acquisitions in the recent past.
In this insight, I’ll touch upon the company’s business model and provide an overview of its operations.
3. 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.
4. 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.
5. 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.
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.