Brief IPOs & Placements: Futu Holdings IPO Trading Update – Might Be Trading a Little Too High and more

In this briefing:

1. Futu Holdings IPO Trading Update – Might Be Trading a Little Too High
2. New Century Hotel (浙江開元酒店) Trading Update – Low Free Float, Poor Liquidity
3. Homeplus REIT IPO: A Key Landmark Deal in the History of the Korean REIT Market

1. Futu Holdings IPO Trading Update – Might Be Trading a Little Too High

Futu Holdings Ltd (FHL US)‘s IPO was priced at the top-end at US$12/ADS raising a total of US$160m, including the US$70m raised from General Atlantic via a concurrent private placement.

In my earlier insights, I looked at the company’s background,  past financial performance, scored the deal on our IPO framework and compared it to Tiger Brokers: 

• Futu Holdings Pre-IPO – Great Metrics but in a Commoditised Industry, 
• Futu Holdings Pre-IPO – FY18 Updates And Quick Thoughts on Valuation,
• Futu Holdings IPO – Given the Team, Execution, and Backers, Might Be Worth a Look at the Low-End, and
• Futu Holdings IPO Quick Note – Comparison with Tiger Brokers – Same Market, Different Economics

In this insight, I will re-visit some of the deal dynamics, comment on share price drivers and provide a table with implied valuations.

2. New Century Hotel (浙江開元酒店) Trading Update – Low Free Float, Poor Liquidity

Zhejiang New Century Hotel Management Group (1158 HK) (NCH) raised about US$136m at HK$16.50 per share, just slightly below the mid point of its IPO price range. We have previously covered the IPO in:

• New Century Hotel (浙江開元酒店) Pre-IPO – Improved Profitability Not Driven by Underlying Operations
• New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

3. Homeplus REIT IPO: A Key Landmark Deal in the History of the Korean REIT Market

The Homeplus REIT IPO is surely a key landmark deal in the 20 year history of the Korean REIT market. We have a positive view on the Homeplus REIT IPO and believe it has a good chance of generating 6-9% return per year (including dividends and capital appreciation) in the next three years. The Homeplus REIT is geared towards the investors who are happy with 6-9% annual returns with relatively low downside risk. For the investors that are seeking 10%+ annual returns, this deal is probably not suitable for them. 

The following are the five major factors why we believe the Homeplus REIT market will be a success: 

• Stable dividend yield of 6-7%.
• Opportunity to get included in a global REIT index (such as EPRA Developed Asia Index).
• Supermarkets related REITs are viewed safer than residential and commercial office building related REITs globally.
• Global investors have wanted to invest in a big, liquid, safe retail REIT with stable dividends in Korea for a long time. The Homeplus REIT possesses many of these characteristics.