Brief IPOs & Placements: Lyft IPO: Valuation Analysis (Prudent Investment or Quasi-Gambling?) and more

In this briefing:

1. Lyft IPO: Valuation Analysis (Prudent Investment or Quasi-Gambling?)
2. Platinum Asset Management Placement –  Co-Founder Selling + Weak Earnings Momentum
3. Sun Car Insurance Agency (盛世大联) IPO: Over Valued Vs P&C Companies
4. Lyft IPO: Key Takeaways from In-Depth Interviews with Drivers
5. Wisetech Global Placement – Past Deal Did Well but Valuations Looks Stretched

1. Lyft IPO: Valuation Analysis (Prudent Investment or Quasi-Gambling?)

Our base case forecast is Case 2 (among three scenarios analysis), which suggests an implied market cap of $21 billion or $75 per share. Given that our intrinsic value of the company does not provide enough upside versus the likely IPO price, we would AVOID this deal. 

Even if the company is able to complete this IPO, raising nearly $2.0-2.5 billion, it is very possible that the company may need to come back to the market in two or three years in a secondary share offering, which would dilute the existing shareholders. This is probably the biggest risk I see with the Lyft IPO right now. 

Our base case financial forecast for Lyft assumes the following:

• Sales growth rate (CAGR from 2018 to 2030) – 26.6%
• Year in which Lyft turns operating profit positive – 2025
• Operating margin in 2030 – 15.0%

2. Platinum Asset Management Placement –  Co-Founder Selling + Weak Earnings Momentum

The co-founder of  Platinum Asset Management (PTM AU), Kerr Neilson, and Judith Neilson are looking to sell 30m shares of the company at a fixed price of A$5.00. 

The deal scores poorly on our framework due to its poor track record, large deal size, weak earnings momentum and relatively expensive valuation. The selldown comes after the company weak 1H FY19 results last month which could put pressure on share price in the near term.

3. Sun Car Insurance Agency (盛世大联) IPO: Over Valued Vs P&C Companies

Sun Car Insurance Agency is a leading automobile insurance agency and B2B2C automobile after-sales service provider in China. The company is listed in the NEEQ board since 2014 and is raising up to USD 167 million to list in Hong Kong. In this insight we cover:

• The company’s two major business lines, the automobile insurance agency and automobile butler services
• The industry backdrop
• The company’s shareholder
• Our thought on valuation

4. Lyft IPO: Key Takeaways from In-Depth Interviews with Drivers

• In-depth interviews with two full-time drivers reveal that Lyft Inc (0812823D US) has disrupted the incumbent Yellow Cab in NY City due to better take-home income economics for drivers.
• Bargaining and pricing power favor LYFT (vs. drivers) as LYFT could provide the volume (sufficient number of rides per day) for drivers.
• LYFT’s path to profitability depends on 1) the further scale-up of network effect 2) diversification of transportation-related business and 3) progress in autonomous cars’ unit cost economics.
• Given its track record as a disruptive force, investors could be willing to pay up (over 5.0x P/S multiple) for LYFT, making the IPO a hot deal.

5. Wisetech Global Placement – Past Deal Did Well but Valuations Looks Stretched

Wisetech Global (WTC AU) plans to raise US$177m/AUD250m in order to shore-up its balancesheet for future acquistiions. 

The company has done exceedingly well since listing and even its past fund raising delivered good returns. However, the deal scores a mixed score on our framework as valuations appear strecthed with the stock trading above analysts target price. Thus, the deal might warrant a large discount.