In this briefing:
- Chalet Hotels IPO Review – Backed up into a Corner
- ECM Weekly (26 January 2019) – Maoyan, CStone Pharma, Polycab India, Hujiang Edu
- CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
- China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
- Recruit Holdings Placement – A Tiny, Long Overdue Sell Down
1. Chalet Hotels IPO Review – Backed up into a Corner
Chalet Hotels Limited (CHALET IN) is looking to raise up to US$234m in its upcoming IPO.
Chalet Hotels (Chalet) is an owner, developer, and asset manager of luxury hotels. The company has grown its revenue and EBITDA at 15.8% and 22.8% CAGR from FY2016 to FY2018. The growth has been driven by the consistent improvement of its average occupancy rate which in turn drove RevPAR higher.
However, the company is embroiled in litigation with Hindustan Aeronautics (HNAL IN) which could result in the company incurring significant costs. Along with the impending renewal of the licensing agreement in 2020 and 2021, there is much to be worried about the company’s near-term outlook and its highly leveraged balance sheet may leave the company backed up into a corner.
In this insight, we will look at the company financial and operating performance, compare hotels’ operating metrics to the industry average, and compare its valuation to other Indian hotel peers. We will also run the deal through our IPO framework.
2. ECM Weekly (26 January 2019) – Maoyan, CStone Pharma, Polycab India, Hujiang Edu
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.
Starting with placements this week, we had a relatively small Recruit Holdings (6098 JP) block sold by Toppan Printing (7911 JP). The stock traded below its deal price of JPY2,762 for the most part of the first-day post-placement. It bounced back on Friday to close just 0.6% above its deal price. We were bullish about the placement because it was a tiny deal relative to its three-month ADV.
There was also a small Ihh Healthcare (IHH MK) secondary block on Thursday after markets have closed. The deal was about US$80m and got priced at MYR5.56, the bottom-end of the price range.
For deals that have launched, there are Maoyan Entertainment (EPLUS HK) and Chalet Hotels. Maoyan will be pricing on the 28th of January while Chalet Hotels will open its book on the 29th of January and swiftly close on the 31st.
In terms of upcoming IPOs, we are hearing that CStone Pharma (CSTONE HK) is looking to pre-market in Hong Kong next week while Hansoh Pharmaceutical (HANSOH HK) will be looking to launch its US$1bn IPO in next month. Ke Yan, CFA, FRM has written early thoughts on the IPOs in:
- CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
- Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
- Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results
Earlier this week, we also heard that Dexin China, a property developer mostly based on Zhejiang Province, was seeking listing approval to list in Hong Kong whereas Global Switch, a UK-based data center operator, will meet banks next week in London to choose arrangers for a Hong Kong IPO of about US$1bn in 2019.
Other than that, another pharma company, Jubilant Pharma, is looking to list on the US market after getting tepid interests from investors for an SGX listing. It was initially looking to raise about US$500m. Fang Holdings Limited (SFUN US), a Chinese real estate internet portal, has also submitted a confidential filing to the SEC for a proposed spin-off of its research unit, China Index Holdings.
Accuracy Rate:
Our overall accuracy rate is 71.9% for IPOs and 63.8% for Placements
(Performance measurement criteria is explained at the end of the note)
No new IPO filings
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
- Asia’s thirst for beer adds fizz to mega-brewer’s plans for IPO
- Chinese cryptocurrency exchanges seek reverse mergers in Hong Kong
- Market, bankers pin hope on Chalet Hotels for breaking lull in IPO launches
- Hong Kong exchange head clarifies listing rules as IPO hopes dim for cryptocurrency giant Bitmain
Smartkarma Community’s this week Analysis on Upcoming IPO
- CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
- Maoyan Entertainment IPO Valuation: Press the Skip Button
- Hujiang Education (沪江教育) Pre-IPO – Spending More than It Earns
- Polycab India Limited Pre-IPO – Market Leader with Steady Growth but with a Few Unanswered Question
- Maoyan Entertainment (猫眼娱乐) IPO: Turning Profitable, Thoughts on Valuation
- Ecopro BM IPO Preview: The World’s #2 Player in the NCA High Nickel-Based Cathode Materials
List of pre-IPO Coverage on Smartkarma
3. CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
CStone Pharma is raising up to USD 400 million via a listing on the Hong Kong Stock Exchange. In this insight, we will discuss the following topics:
- The company’s background
- Details of pipeline drug candidates
- Potential market size for the key products
- Shareholders and investors
- Summary of our likes and concerns
- Questions for management meetings
We will leave the discussion of valuation for our next insight.
Our coverage on healthcare and biotech listing
- Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
- WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different
- Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect
- Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO
- Junshi Bioscience (君实医药) IPO: Thoughts on Valuation (Part 2)
- Junshi Bioscience (君实医药) IPO: Early in Application but Behind in Key Indications (Part 1)
- CanSino Biologics (康希诺) IPO: Promising Pre-Clinical Results but Vaccine Scandal Weighs (Part 1)
- AOBiome Therapeutics IPO: Hope for Natural Therapeutic Treatment
- Stealth Biotherapeutics IPO: Cure the Symptoms but Not the Cause (Part 1)
- Innovent Biologics (信达生物) IPO: Pricing the PD-1 and Biosimilars Competition (Part 2)
- Innovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
- MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
- Hua Medicine (华领医药) IPO: Thoughts on Valuation
- Hua Medicine (华领医药) IPO: Reviving Roche’s Failed Attempt?
- BeiGene (百济神州) IPO: Dual-Listing with Upside Capped in the Near Term
- Ascletis Pharma (歌礼制药) IPO: Valuation Not Justified by Ganovo and Ravidasvir NPV (Part 3)
- Ascletis Pharma (歌礼制药) IPO: Three Valuation Risk Factors (Part 2)
- Ascletis Pharma (歌礼制药) IPO: Emerging Player in the Crowded HCV Drug Market
- China Isotope & Radiation IPO: Oligopoly, Visible Growth and High Barrier to Entry
- Zai Lab IPO: Thoughts on Valuation, Risks and Upsides (Part 2)
- Zai Lab IPO: Experienced Team, Promising In-Licensing Drug Pipeline (Part 1)
4. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in:
- China Kepei Edu (科培教育) Pre-IPO Review – A Well Run Private Higher Education Company
- China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
5. Recruit Holdings Placement – A Tiny, Long Overdue Sell Down
Toppan Printing (7911 JP) is looking to sell 10.5m shares in Recruit Holdings (6098 JP) for about US$263m. Post-placement, Toppan Printing will still have about 6% stake (103m shares) in Recruit Holdings.
The deal scores well on our framework owing to its strong price and earnings momentum and stellar track record. However, it was offset by its relatively expensive valuation compared to peers. The selldown by Toppan Printing is tiny relative to the three-month ADV which the market would likely be able to absorb. The sell down is also long overdue considering that Toppan Printing skipped the 2016 secondary offering in which many shareholders have participated.
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