In this briefing:
- Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go
- Alpha Smart – Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
- Wuxi Apptec (药明康德) IPO: What You Need to Know Before the Trading Debut
- Tencent Music IPO: Price Target Hit; Risk/Reward Now More Balanced and Key Next Steps
- Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
1. Fosun Tourism IPO Trading Update – Low Traded Volume and Fair Value Indicate It Has a Long Way to Go
Fosun Tourism (1992 HK)‘s IPO was priced at the low-end, HKD15.60/share. The retail tranche was undersubscribed while the institutional tranche was said to be moderately over-subscribed. I have covered most aspects of the deal in my earlier insights:
- Fosun Tourism Pre-IPO – No Improvement or Major Changes in Club Med Since the Acquisition
- Fosun Tourism IPO – Fair Value Is Probably Below Low-End
In this insight, I’ll provide an update on the deal dynamics, valuations and provide a table with the implied valuations at different share price levels.
2. Alpha Smart – Pre-IPO – PE Investors Recovered 56% of Their Cost in Two Years but Left It in Debt
Alpha Smart (ALS HK), the parent of Chinese menswear fashion retailer GXG, plans to raise US$300m in its Hong Kong IPO. L Catterton, LVMH’s investment arm, along with another PE investor, owns a 73% stake in the company.
Earnings have been consistently growing with the highest contribution still coming from its flagship brand “GXG”. The recent expansion of the online channel has further aided sales growth, with ASL claiming to be the largest menswear retailer in terms of online sales.
Apart from a large dividend payout which covered half of the acquisition costs for L Capital, nothing much seems to have changed recently. In addition, operating cash flow has not kept pace with earnings due to a consistent increase in inventory. To add to that there are a few related party issues as well including some stores being run by former employees.
3. Wuxi Apptec (药明康德) IPO: What You Need to Know Before the Trading Debut
Wuxi Apptec’s USD 1 billion IPO was priced at HKD 68/share and will start trading today. We summarize the latest information with updates on our valuation in this short note, prior to the trading debut.
Our previous coverage on Wuxi Apptec listing
- WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different
- WuXi Apptec (药明康德) IPO:Upside at Middle and Low End
- Wuxi Apptec (药明康德) IPO: Pricing Update Before Book Close
4. Tencent Music IPO: Price Target Hit; Risk/Reward Now More Balanced and Key Next Steps
Tencent Music Entertainment (TME US) rallied up 14% on day one of trade to hit our PT and closed up c8% on its first day of trade. Given the skepticism/ambivalence on the story, poor macro backdrop, weak recent listings from China in the US alongside a full-sized deal and a mid-December launch, this day one performance is a solid result in our view. We outline some further thoughts and next steps for the TME story below.
A recap of the trade: We recommended buying Tencent Music at the low end of the range ($13) and we estimated a base-case fair value of 14% upside. Tencent music rallied up 14% intraday on its first day of trade and closed up c8%. We think this is a fairly good result given the skepticism/ambivalence on the name alongside a weak macro backdrop and a mid-December deal-launch.
Historical week one trade provides mixed support for further gains:
Long-term – we prefer TME to Spotify but recent events give us pause on the cautious near-term view for Spotify:
Updated DCF Valuation:
GER view:
More details below…
5. Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
Xinyi Energy Holdings Ltd (1671746D HK) is a solar farm operator seeking a listing on Hongkong stock exchange raising up to US$680M (including Greenshoe). The company announced a price range of HK$1.89/share to HK$2.42/share valuing the company between HK$12.5B to HK$16B. The company is issuing 1.9B shares and 282M shares of Greenshoe as part of the IPO. The offer price will be announced on 13th December. The shares are expected to trade on Hongkong Stock Exchange on the 21st December.
Based on GER’s analysis valuations appear rich and the investors should avoid the IPO which are priced at a significant premium at the lower end of offer price compared to its peers.
