Brief IPOs & Placements: Hansoh Pharma IPO Preview: A Decent Story Tarnished by a Huge Pre-IPO Dividend and more

In this briefing:

1. Hansoh Pharma IPO Preview: A Decent Story Tarnished by a Huge Pre-IPO Dividend
2. MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well
3. CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2)
4. Embassy Office Parks REIT – Good Assets but Projections Might Be a Tad Too Bullish
5. Ecopro BM IPO: Valuation Analysis

1. Hansoh Pharma IPO Preview: A Decent Story Tarnished by a Huge Pre-IPO Dividend

Hansoh Pharmaceutical (HANSOH HK) claims to be one of the few R&D driven Chinese pharmaceutical companies. According to press reports, Hansoh aims to launch its Hong Kong IPO to raise $1 billion this month. Over the track record period, Hansoh’s financial performance shows accelerating revenue growth, relatively stable margins and solid cash generation.

2. MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well

Mapletree Industrial Trust (MINT SP) plans to raise around US$130m to part fund its recent acquisitions. 

The deal scores well on our framework given the company’s good track record and recent price momentum. In addition, past deals have done well. Furthermore, when the acquisition of 18 Tai Seng was announced the company had also highlighted that it could look to raise equity to part fund the acquisition. Thus, the deal isn’t likely to be a surprise for existing unitholders.

However, as per the company’s own forecast’s the deal is likely to be only marginally accretive adding less than 1% to DPU. Thus, even though its well flagged and past deals have done well, short-term returns might be limited. 

3. CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2)

CStone Pharma, a Wuxi Apptec related biotech company, plans to raise USD 300m to list on the Hong Kong Stock Exchange. In our previous insight (link here), we have discussed CStone’s drug candidate pipeline, founders, management team and investors.

In this insight, we will provide a detailed valuation breakdown for its key products. Our base case post-money valuation for CStone is USD 1.4 bn, which is 30% above its pre-IPO valuation of USD 1.05 bn but at the low end of the guided valuation range. 

• CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
• Viva Biotech (维亚生物) IPO: When CRO Becomes Early Stage Biotech Investor
• Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results

• Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
• WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different

• Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect
• Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO
• Junshi Bioscience (君实医药) IPO: Thoughts on Valuation (Part 2)
• Junshi Bioscience (君实医药) IPO: Early in Application but Behind in Key Indications (Part 1)
• CanSino Biologics (康希诺) IPO: Promising Pre-Clinical Results but Vaccine Scandal Weighs (Part 1)

• AOBiome Therapeutics IPO: Hope for Natural Therapeutic Treatment
• Innovent Biologics (信达生物) IPO: Pricing the PD-1 and Biosimilars Competition (Part 2)
• Innovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
• MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
• Hua Medicine (华领医药) IPO: Thoughts on Valuation
• Hua Medicine (华领医药) IPO: Reviving Roche’s Failed Attempt?
• BeiGene (百济神州) IPO: Dual-Listing with Upside Capped in the Near Term
• Ascletis Pharma (歌礼制药) IPO: Valuation Not Justified by Ganovo and Ravidasvir NPV (Part 3)
• Ascletis Pharma (歌礼制药) IPO: Three Valuation Risk Factors (Part 2)
• Ascletis Pharma (歌礼制药) IPO: Emerging Player in the Crowded HCV Drug Market
• China Isotope & Radiation IPO: Oligopoly, Visible Growth and High Barrier to Entry
• Zai Lab IPO: Thoughts on Valuation, Risks and Upsides (Part 2)
• Zai Lab IPO: Experienced Team, Promising In-Licensing Drug Pipeline (Part 1)

4. Embassy Office Parks REIT – Good Assets but Projections Might Be a Tad Too Bullish

Embassy Office Parks REIT (EOP IN) plans to raise around US$1bn in its India IPO. EOP will primarily hold office assets in Bengaluru, Pune and Noida with a total portfolio size of US$4.2bn. The REIT is sponsored by two reputed real estate firms/investors and will be the only one of its kind in India.

The company expects all the assets to report positive rental reversion and higher occupancy over the next few years. However, this hasn’t been the case over the past few years when the industry backdrop was as supportive. In addition, the inclusion of solar assets in the portfolio doesn’t seem to be add much to the allure of the REIT but it adds more to the yield.

5. Ecopro BM IPO: Valuation Analysis

• The bookbuilding of the Ecopro BM Co Ltd (247540 KS) IPO starts on February 14th. Ecopro BM Co Ltd (247540 KS) specializes in making cathode active materials for rechargeable batteries that are used in EVs and electrical energy storage systems (ESS). Ecopro BM is the second largest global player after Sumitomo in the NCA high nickel-based cathode materials with market share of nearly 35%.
• Our base case valuation of the company suggests a market cap of 1.2 trillion won or implied price per share of 56,003 won, which is 31% higher than the high end of the IPO price range of 42,900 won. Therefore, we would take this deal. We used an estimated P/E of 25.3x (10% premium to the comps’ average of 23x) and an estimated net profit of 49.3 billion won in 2019 to derive our base case valuation. The high end of the valuation sensitivity analysis is 67,764 won, which would be 58% higher than the high end of the IPO price range of 42,900 won. 
• Ecopro BM has stronger sales growth and operating margins than its peers. However, its peers have stronger balance sheet with slightly higher returns on equity. We would give special points to the company’s stronger sales growth which is an indication of greater customer demand. Therefore, we think it is appropriate to provide a 10-20% premium valuation to Ecopro BM versus its peers based on the P/E analysis.