In this briefing:
- Sonic Healthcare Placement – Accretive Acquisition, Placement Discount Should Help
- Tencent Music IPO – Firework – Trading Strategies
- Softbank IPO: Signs Point to Risk of Early IPO Price Break
- CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
1. Sonic Healthcare Placement – Accretive Acquisition, Placement Discount Should Help
Sonic Healthcare (SHL AU) plans to raise US$434m (A$600m) via an institutional placement to part fund its US$540m acquisition of Aurora Diagnostic.
As per the company, the acquisition is likely to be earnings accretive and will increase the revenue contribution of US operations to around 26%. While the deal appears attractive, SHL hasn’t provided many details about the past financial performance for Aurora. Some of the earlier filings by Aurora seem to indicate that revenue has been growing much faster than EBITDA.
2. Tencent Music IPO – Firework – Trading Strategies
Tencent Music Entertainment (TME US)‘s IPO was priced at the low-end US$13/share. The shares will begin trading tonight. As per earlier media reports, books were well covered.
I have covered most aspects of the deal in my previous series of insight, links to which are below. In this insight, I’ll re-look at what peers have been doing since book building began and how its main listed peer Spotify Technology Sa (SPOT US) has been performing. I’ll also provide a sensitivity table of the implied valuations at different price points and my thoughts on the price range for near-term trading.
My previous insights on TME’s IPO:
- The company’s performance: Tencent Music Pre-IPO Review – The Final Countdown – Growth Doesn’t Seem to Be Slowing Down,
- The working of the apps: Tencent Music Pre-IPO – This Is How We Do It – A Quick Look at How the Apps Work,
- Industry dynamic: Tencent Music Pre-IPO – Industry – Don’t Cry – In 2010 a Little Red Dot Almost Overtook the Dragon, and
- Peer analysis: Tencent Music Pre-IPO – Quick Peer Analysis – If I Was You, I’d Wanna Be Me Too – Bigger and Faster,
- Valuations overview: Tencent Music Pre-IPO – Valuations Estimates – Leaving on a Jet Plane – $30bn Was Quite Stretched.
- First take on the IPO pricing: Tencent Music Pre-IPO Updates – Welcome to the Jungle – Rumoured Asking Valuations More Reasonable
- IPO valuation update: Tencent Music IPO – Don’t Stop Me Now – 9M18 Updates, Outlook and Price Limits
- Some more information on Ultimate Music acquisition: Tencent Music IPO – A Little Less Conversation – A Little More Information on Ultimate Music
3. Softbank IPO: Signs Point to Risk of Early IPO Price Break
Coverage of Softbank Corp (9434 JP)‘s IPO on Smartkarma has offered a mix of viewpoints with some bullish and some bearish opinions. Our own take has been relatively subdued, leaning to the bearish side but only significantly so in the event that Docomo follows through with its announced price cuts and Rakuten’s entry as a full-fledged MNO is particularly aggressive.
By and large we consider the issue to be overvalued but felt that significant downside risk only existed if the dividend were to be cut, which we consider a distinct possibility but by no means a sure thing. This long -term view has not changed, however, we now consider some modest downside to be likely in the short term.
4. CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
China Mobile Games Adr (CMGE US) plans to raise US$300m in its upcoming Hong Kong IPO.
CMGE is an intellectual-property (IP) oriented mobile game operator. The company delisted from Nasdaq in 2015 and tried to do a backdoor listing on Shenzhen Exchange in late 2015 but it was canceled due to unfavorable market condition. It is now trying to list on the Hong Kong Exchange when the sentiment is poor due to the game approval suspension.
In this insight, we will take a look at the financial performance, key operating metrics, and analyze its games pipeline.
