Brief IPOs & Placements: Hyundai Autoever IPO Pricing: Likely to Be a Dull Event Given No Growth Story & Glovis Merger and more

In this briefing:

1. Hyundai Autoever IPO Pricing: Likely to Be a Dull Event Given No Growth Story & Glovis Merger
2. HLX02: Innovation Could Overtake
3. Aruhi Placement – Bigger than the IPO but Good Track Record and Price Performance Should Help

1. Hyundai Autoever IPO Pricing: Likely to Be a Dull Event Given No Growth Story & Glovis Merger

• Hyundai Autoever offers a total 3,510,000 shares. Split is 9.9% primary and 90.1% secondary. Shares are preliminarily priced at ₩40,000~44,000. This puts the company value at ₩840~924bil. Bookbuilding will be Mar 13~14.
• Valuation is a bit aggressive. It is being heard that local institutions are not particularly excited about this IPO mainly because of Autoever’s 90% captive business. That is, growth story isn’t looking fancy. At a 17x PER on Autoever’s FY19 expected earnings, it is sitting in the middle of the indicative price band. There shouldn’t be much room to play around.
• The major shareholder was expected to sell as much as 50% of their shares through secondary distribution. Actual offering size is much smaller. This sparks the speculation that Autoever will soon be merged with Glovis. Much smaller offering size may be for facilitating the merger. It can pave a less controversial path for another merger attempt with Mobis.
• But this speculation can render this IPO meaningless though. I expect this IPO will be a dull event. I wouldn’t avoid it completely though. Stable income stream and connected car are are still something worthy. I’d buy them at the right price. Low end should be the right price.

2. HLX02: Innovation Could Overtake

The oncology treatment landscape in China is evolving rapidly as the government has prioritized access to innovative drugs to meet this significant unmet need. In particular, investors considering the Shanghai Henlius Biotech (1566213D HK) listing should be aware of the emergence of a drug that potentially is superior to Roche Holding AG (ROG SW)‘s Herceptin (and Shanghai Henlius’ HLX02) for the treatment of patients with HER2-positive breast cancer (and ultimately HER2-positive gastric cancer). While there should be good demand for cheaper alternatives to Herceptin, the availability of a superior alternative potentially shortens the lifecycle of Herceptin biosimilars. 

China has only recently “modernized” its drug approval and reimbursement, so there is little precedent to rely upon to estimate the speed and magnitude of changes in the market. As brokers rollout forecasts for the company and HLX02, investors should ask if the numbers somehow reflect this risk.

We do not have a view of the offering, but tag this Insight as Bearish because we are highlighting a potential risk.

3. Aruhi Placement – Bigger than the IPO but Good Track Record and Price Performance Should Help

Carlyle, along with SBI, plans to sell the rest of its stake in Aruhi Corp (7198 JP) for around US$280m.

Aruhi listed in Dec 2017, when Carlyle sold 18m shares. This is the second and final tranche of shares owned by Carlyle.  The total sale accounts for 41% of the company’s outstanding shares making it a relatively large deal to digest. 

However, the shares have done well since listing and the stock scores well on our framework. Valuations appear reasonable, if the company is able to achieve its mid-term targets.