In this briefing:
- Shenwan Hongyuan (申万宏源) A+H: No Reason for a Valuation Premium
- So-Young (新氧) Pre-IPO Review – Au Naturel
- Tenaga Nasional Placement – Past Deals Have Done Ok but This One Might Not Be as Lucky
- Shenwan Hongyuan IPO Preview: Struggling to Stand Out
- Guotai Junan Placement: A Reasonable Price for Reasonable Performance
1. Shenwan Hongyuan (申万宏源) A+H: No Reason for a Valuation Premium
Shenwan Hongyuan started institutional book building today. We have covered the fundamentals of the company in our previous insight (Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business). In this insight, we will discuss:
- Valuation comparison with peers
- A-H premium history of Chinese brokers
- Key metrics of past Chinese brokers listing in the H-share market
- Concerns of liquidity
2. So-Young (新氧) Pre-IPO Review – Au Naturel
So-Young (SY US) is looking to raise US$150m in its upcoming IPO. The company filed its prospectus with the SEC on Monday.
The company operates online platforms (mobile, website, and WeChat mini program) for discovering, evaluating, and reserving medical aesthetic services in China. It helps medical aesthetic service providers acquire customers through user generated content and other creative content format.
In this insight, we will look at the company’s business model, analyze its financial and operating performance, review the competitive landscape and point out some questions for management.
3. Tenaga Nasional Placement – Past Deals Have Done Ok but This One Might Not Be as Lucky
Khazanah plans to raise around US$260m via selling 85m share in Tenaga Nasional (TNB MK). We have covered three such placements since 2015 and most have ended up doing ok, if not well.
- US$440m in 2015: Tenaga Nasional (TNB MK) – Take the deal, strong earnings growth likely to continue
- US$290m in 2016: Tenaga Nasional Placement – Strong Track Record and a Potential Dividend Increase
- US$115m in 2017: Tenaga Nasional Placement – A Small Deal Size Relative to Previous Sell Down
Out of the three previous placement, Khazanah was the seller for the first two (2015 and 2016). Hence, this deal is unlikely to be a huge surprise. However, the stocks recent performance hasn’t been great and the replacement of the CEO seems to have raised more questions than it answers.
4. Shenwan Hongyuan IPO Preview: Struggling to Stand Out
Shenwan Hongyuan Hk (218 HK) is a Chinese securities firm which is backed by Chinese state-owned investment firm, Central Huijin, a 57% shareholder. It listed on the Shenzhen Stock Exchange in January 2015 and seeking to raise $1.5 billion through a Hong Kong listing. Shenwan Hongyuan will start book-building on Thursday according to press reports.
Securities firms had a tough 2H18 due to unfavourable stock market conditions and rising competition in China and Hong Kong. In 2019, the share prices of securities firms have markedly risen YTD due to the strong index performance and rising trading volumes. Overall, Shenwan Hongyuan fundamentals are reflective of a mid-tier firm struggling to stand out.
5. Guotai Junan Placement: A Reasonable Price for Reasonable Performance
Guotai Junan Securities (H) (2611 HK), a Chinese securities firm, has launched a primary placement to raise HK$2.7 billion ($345 million) at a placing price of HK$16.34. The placing price is a 7% discount to the last close price of HK$17.64.
In 2019, the share prices of Chinese securities firms have markedly risen YTD due to the strong index performance and rising trading volumes. We believe Guotai Junan’s fundamentals are reasonable due to its mid-tier revenue growth and top-quartile margins. Overall, we would participate in the placing.
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