Brief IPOs & Placements: New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short and more

In this briefing:

1. New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short
2. CStone Pharma (基石药业) Post-IPO: Strong Debut but Lacks near Term Catalysts
3. Futu Holdings Pre-IPO – FY18 Updates And Quick Thoughts on Valuation

1. New Century Hotel (浙江開元酒店) IPO Review – Higher ADR and RevPAR than Peers but Margins Fall Short

Zhejiang New Century Hotel Management Group (1158 HK) (NCH) is looking to raise up to US$179m in its upcoming IPO.

NCH is riddled with related party transactions, from the sales of consumer goods, carpets and wine to having 24% of its hotel management revenue come from related parties. There had been a handful of small acquisitions and disposals but it all seemed to be just reshuffling of assets between NCH and the controlling shareholder with no clear strategy. 

Key metrics show that even though NCH is operating at higher ADR and RevPAR compared to peers, it ultimately falls short in terms of EBITDA and net margins. It also has the lowest occupancy rate.

In this insight, we will focus on corporate governance issues, peer metric comparison, and relative valuation with listed hotel operators. 

2. CStone Pharma (基石药业) Post-IPO: Strong Debut but Lacks near Term Catalysts

CStone Pharma’s IPO was priced at HKD 12.00/share and started trading today. In this insight, we summarize the allocation, the use of proceeds and recap our view on our valuation. We also look at past few biotech listings and discuss our thoughts on the market sentiments. We are of the view that despite a strong debut performance, CStone lacks near term catalysts that can continue to drive performance after the first day. 

Our Previous Coverage of CStone

• CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
• CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2)

3. Futu Holdings Pre-IPO – FY18 Updates And Quick Thoughts on Valuation

Futu Holdings Ltd (FHL US) plans to raise around US$300m in its US IPO. The company is backed by Tencent Holdings (700 HK) , Matrix Partners and Sequoia.

In my earlier insight, Futu Holdings Pre-IPO – Great Metrics but in a Commoditised Industry, I looked at the company’s background and past financial performance along with some of the other firms that are competing in the same space. 

This insight covers the positive and negative takeaways from the FY18 updated filing and also includes our thoughts on valuation.