In this briefing:
- Japan Post Insurance Placement – Performance of Other Big Deals Indicates a Need for Correction
- Last Week in GER Research: Huya, Bilibili and Qutoutiao
- ECM Weekly (6 April 2019) – Bilibili, Huya, Qutoutiao, Polycab, PNB Metlife, CIMC Vehicle
- Japan Post Insurance Placement – 3x the IPO Size – Basics and Index Impact
- Huya Offering: Everyone Else Was Doing It Excuse
1. Japan Post Insurance Placement – Performance of Other Big Deals Indicates a Need for Correction
Japan Post Holdings (6178 JP) (JPH) plans to raise up to US$3.3bn via selling its stake in Japan Post Insurance (7181 JP) (JPI). The size of the deal has been adjusted downwards owing to the buyback conducted today morning.
I’ve covered some of the background and index weightage impact in my earlier insight: Japan Post Insurance Placement – 3x the IPO Size – Basics and Index Impact. For people interested in reading more about the history and background, I’ve covered the IPO and JPH sell down in the below series of insights:
- All three IPOs: When the bank is cheap and holdco discount makes the mothership cheaper, then who needs insurance?
- JPI IPO: Three’s a crowd – A minnow amongst giants risks getting lost in the chatter
- JPB IPO: Dividend yield looks enticing versus JGBs yield, while risks are similar
- JPH IPO: Final call to board the mothership. They don’t come much cheaper than this.
- JPH Placement: Japan Post Holdings Placement – Similar Reasons, Similar Price Will Probably Yield Similar Returns
In this insight, I’ll run the deal through our framework and analyze the performance of some of the other sizeable deals in the recent past.
2. Last Week in GER Research: Huya, Bilibili and Qutoutiao
Below is a recap of the key IPO/placement research produced by the Global Equity Research team. This week, we update on the bevvy of placements offered by various companies. After placements by Pinduoduo (PDD US) and Sea Ltd (SE US) , we saw more offerings from HUYA Inc (HUYA US) , Bilibili Inc (BILI US) and Qutoutiao Inc (QTT US). We update on these three offerings and perhaps big picture, this could reflect a signalling inflection point in these shares. More details below
In addition, we have provided an updated calendar of upcoming catalysts for EVENT driven names below.
Best of luck for the new week – Arun, Venkat and Rickin
3. ECM Weekly (6 April 2019) – Bilibili, Huya, Qutoutiao, Polycab, PNB Metlife, CIMC Vehicle
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.
Placements activity picked up momentum this week as evidenced by the number of follow-on offerings launched by a handful of US-listed Chinese tech companies. It all started with Qutoutiao Inc (QTT US) ‘s follow-on offering, then followed by Bilibili Inc (BILI US)‘s equity + convertible note placement, and ending the week with HUYA Inc (HUYA US)‘s follow-on offering and Baozun Inc. (BZUN US)‘s convertible bond and placement.
On the other hand, Ruhnn Holding Ltd (RUHN US)‘s debut this week had been a total disaster. It closed 37% below its IPO price on the first day. This is the worst first-day performance among Chinese ADRs (deal size >US$100m) in the past six months.
Back in Hong Kong, Dongzheng Automotive Finance (2718 HK) also broke its IPO price on the first day after relaunching at a much lower price. As per our trading update note, considering that there will be greenshoe support, we thought that the risk to reward could be favorable for a trade (from its first day mid-day price of HK$2.57).
As for placements, Ronshine China Holdings (3301 HK) seems to have made its equity raise a yearly affair. The company is back to tap the equity market through a top-up placement and it has done the same in 2017 and 2018. The initial deal size was small, US$122m, but was upsized later on. The share price traded well post-placement, closing 9.5% above its deal price of HK$10.95 on Thursday.
For upcoming IPOs, we heard that Leong Hup International (LEHUP MK) has started pre-marketing and Sumeet Singh had already shared his early thoughts on the company in Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward.
We are also waiting for Shenwan Hongyuan Hk (218 HK) and CIMC Vehicle Group Co Ltd (1706044D HK) to launch their IPO since they already been approved on the HKEX. Ke Yan, CFA, FRM had also analyzed the two companies in his notes:
- Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
- CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
Map Aktif Adiperkasa PT (MAPA IJ) will be closing its bookbuild for its follow-on offering next Tuesday (pricing on Wednesday). We heard that books are already covered as of Thursday.
Accuracy Rate:
Our overall accuracy rate is 72.4% for IPOs and 63.5% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
- Changliao AKA 派派(Hong Kong, ~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.
News on Upcoming IPOs
- Leong Hup – comeback sunny side up
- Polycab India eyes to raise around Rs 1,345 crore through IPO
- Carlyle-backed Metropolis Healthcare’s IPO nears halfway mark on second day
- Eagle Hospitality Trust eyes Singapore IPO to raise up to US$575m
- Cancer Treatment Firm Plans Hong Kong IPO
- Goldman-Backed Chinese Online Pet Store Boqii Plans IPO
- China drone maker EHang delays IPO plan, eyes private funding-sources
This week Analysis on Upcoming IPO
- Map Aktif Follow-On Offering – Lace up for a Potential Long Run
- Zhongliang (中梁地产) Pre-IPO Review – Incredible Growth Bogged Down by Related Party Transactions
- CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
- PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
- Polycab India Limited IPO – Probably Near Peak Margins, Improvements Unexplained
4. Japan Post Insurance Placement – 3x the IPO Size – Basics and Index Impact
Yesterday, post-market close, Japan Post Holdings (6178 JP)(JPH) announced that it will sell 185m shares (including over-allotment) or 30.8% of Japan Post Insurance (7181 JP)(JPI) amounting to US$4bn. JPI plans to buy back up to 50m shares out of these, leaving around US$3.1bn worth of stock to be placed. Out of these 185m shares, 30% will be placed with foreigners.
The selldown is part of the government’s plan for privatization under which JPH is supposed to reduce its stake in JPI and Japan Post Bank (7182 JP)(JPB) to around 50%. This was highlighted in the IPO of the three entities in 2015. Thus, the deal is not totally unexpected but the timing of it was never certain. For people interested in more about the history and background, we’ve covered the IPO and JPH sell down in the below series of insights:
- All three IPOs: When the bank is cheap and holdco discount makes the mothership cheaper, then who needs insurance?
- JPI IPO: Three’s a crowd – A minnow amongst giants risks getting lost in the chatter
- JPB IPO: Dividend yield looks enticing versus JGBs yield, while risks are similar
- JPH IPO: Final call to board the mothership. They don’t come much cheaper than this.
- JPH Placement: Japan Post Holdings Placement – Similar Reasons, Similar Price Will Probably Yield Similar Returns
In this insight, I’ll comment on some of the deal dynamics and index weighting impact.
5. Huya Offering: Everyone Else Was Doing It Excuse
Follow-on offerings by Chinese ADRs are the flavour of the day. Hot on the heels of Qutoutiao Inc (QTT US) and Bilibili Inc (BILI US), HUYA Inc (HUYA US) filed for a potential $550 million public offering without presenting any details on the new ADS being offered. Also, certain selling shareholders will offer shares in the offering.
Huya is one of the few recent Chinese “new-economy” IPOs which has lived up to the hype by delivering a creditable post-IPO financial performance. While Huya has proven to be a good IPO, we believe this follow-on offering is highly opportunistic and would be tempted to participate only at a large discount.
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