Brief IPOs & Placements: Sea Ltd (SE US): Placing Price Leaves Money on the Table and more

In this briefing:

1. Sea Ltd (SE US): Placing Price Leaves Money on the Table
2. Meituan Dianping (美团点评): Thoughts Before Lock-Up Expiry
3. NIO’s (蔚来) Guidance Makes Selling upon Lock-Expiry More Compelling
4. Hyundai Autoever IPO Valuation Analysis

1. Sea Ltd (SE US): Placing Price Leaves Money on the Table

Sea Ltd (SE US) announced that it would raise gross proceeds of $1.35 billion after increasing the size of its placement from 50 million to 60 million ADS. The placement is priced at $22.50 per ADS, 6.5% discount to its last close price. Tencent Holdings (700 HK), as well as one of Sea’s directors, are expected to buy 6.3 million ADS in the placement. The placing is expected to close on or about 8 March 2019.

2. Meituan Dianping (美团点评): Thoughts Before Lock-Up Expiry

Meituan Dianping, the largest O2O platform in China, was listed on September 20th last year and lock-up expiry will be on March 20th. The stock has returned -13% since listing. 

• As it heads into lock-up expiry on March 20th, we will examine Meituan Dianping shareholder structure and potential shares up for sale.
• Meituan was included by MSCI recently and will be eligible for the Hong Kong Connect soon thanks to rule amendment.
• The company delivered a decent topline growth in 3Q2018 but its profit fell short of expectation. We highlight potentials from the food supply chain solution. We also discuss implication from MoBike acquisition.
• We review our SOTP valuation of Meituan and believe there is an upside. 

3. NIO’s (蔚来) Guidance Makes Selling upon Lock-Expiry More Compelling

NIO Inc (NIO US) fell 17% in its after-hour trading session post announcement of its Q4 results.  The company turned a gross profit in Q4 while the number of cars delivered in the full year 2018 was 11,348 has beaten their own 10,000 cars target. The company is currently trading 62% above its IPO price.

However, the worrying part lies in its guidance which could mean that pre-IPO investors have more compelling reasons to lock-in some profits upon lock-up expiry.

4. Hyundai Autoever IPO Valuation Analysis

Hyundai Autoever Corp (0978519D KS) IPO institutional investors bookbuilding starts in about seven days. In conclusion, we believe a 11-13x EV/EBIT valuation multiples are appropriate for Hyundai Autoever. These multiples are between the average comps multiples and slightly lower multiples than Samsung SDS’ level. Our base case implied market cap is 1.25 trillion won, representing 59,454 won, or 35% higher than the high end of the IPO price range of 44,000 won. As such, we would take this deal. 

To value Hyundai Autoever, we prefer to use EV/EBIT multiples. However, we have also referenced P/Sales and P/E multiples based valuations for comparison purposes. The comps have better sales growth, operating profit growth, and balance sheet strength. However, Hyundai Autoever has better net margin and ROE. 

We believe that Hyundai Autoever should trade at lower EV/EBIT multiples than Samsung SDS but similar to higher multiples than POSCO ICT and Lotte Data Communications. Hyundai Autoever is expected to play a key role in the Hyundai Motor Group’s push to become a leading global player of autonomous driving in the coming decade.