Daily IPOs & Placements: Weimob IPO Trading Update – Existing Shareholders to the Rescue and more

In this briefing:

1. Weimob IPO Trading Update – Existing Shareholders to the Rescue
2. Last Week in GER IPO Research: Leong Hup, China Tobacco, Futu and Weimob
3. China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks
4. Japan Hotel REIT Placement – Biggish Acquisition, Smallish Accretion
5. 2019 M&A/IPO Preview: Chinese Express Sector Quickly Building Out ‘Last-Mile’ & Int’l Capabilities

1. Weimob IPO Trading Update – Existing Shareholders to the Rescue

Weimob.com (2013 HK) IPO was priced at the low-end at HKD2.80/share. The retail tranche was 0.79x covered while the institutional tranche was slightly over-subscribed.

I’ve covered most aspects of the deal in my earlier insights: 

• Weimob Pre-IPO – Can Be Steamrolled by Tencent, Anytime
• Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation

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. Last Week in GER IPO Research: Leong Hup, China Tobacco, Futu and Weimob

We slide into 2019 with GER’s recap of our latest IPO research. This week, we talk chicken as Arun initiates on the IPO Malaysian poultry producer Leong Hup International (LEHUP MK). Secondly, Venkat initiates on China Tobacco International (GHALPZ CH) with a cautious view. In addition, Arun initiates on online broker Futu Holdings Ltd (FHL US)  and we remind of Arun’s valuation piece on Weimob.com (2013 HK) . 

Quote of the week 

Are you insane?

-Sky news presenter to UK MP Boris Johnson ahead of the Brexit parliament vote planned for today

Best of luck for the week and new year- Rickin, Venkat and Arun

3. China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks

China Kepei Education (1890 HK) is looking to raise up to US$122m in its upcoming IPO. 

Overall, the company has continued to show that its undergraduate program is the driver behind its growth. It grew its 8M 2018 revenue and gross profit both by about 24% YoY. However, there are significant near-term risks if the MOJ Draft for Comments gets implemented. It may result in Kepei registering its schools as for-profit private schools which would shrink its net profit margin.

In this insight, we will provide updates on the company’s 8M 2018 financials and operating performance, the potential impact of policy change and compare its valuation to other listed education peers. We will also run the deal through our framework.

4. Japan Hotel REIT Placement – Biggish Acquisition, Smallish Accretion

Japan Hotel Reit Investment (8985 JP) (JHR) plans to raise around US$300m/JPY33bn to part fund the acquisition of Hilton properties located in Tokyo and Osaka.

We have previously covered four other capital raising by JHR:

• US$170m in Jun 2017, Japan Hotel REIT Placement – An Accretive Acquisition, JGB 10Y Yield Seems Stable
• US$340m in July 2016, Japan Hotel REIT – YEN a Bigger Driver than the Acquisitions,
• US$120m in Jan 2016, Japan Hotel REIT – Acquisition to Aid DPU Growth, but RMB Needs to Hold Up for the Stock to Perform, and
• US$230m in Jan 2015, Japan Hotel REIT (8985 JP) – Acquisition to aid DPU growth; take the deal

The prior-deals have given mixed bag results over the short-term. In this insight, we will run the deal through our framework and analyse past performance.

5. 2019 M&A/IPO Preview: Chinese Express Sector Quickly Building Out ‘Last-Mile’ & Int’l Capabilities

A year ago we published a note that described how we expected corporate activity in China’s domestic express  sector to play out in 2018 (see 2018 M&A/IPO Activity Preview: Chinese Express, Logistics Sectors Hit by Slower Growth & BABA Vs JD). In this new piece, we look back at how things actually played out in the sector last year and look forward to 2019 and beyond. 

We’ve divided this year’s piece into four sections:

1. A quick review of our expectations from 2018, and how things actually played out
2. New (and ongoing) trends we expect to see in express sector M&A this year
3. The continued battle for leadership between Alibaba Group Holding (BABA US) and JD.com Inc (ADR) (JD US)
4. Potential IPO candidates for 2019 and beyond

We expect Chinese domestic express demand to continue to moderate in 2019, and in response we expect the express companies to increase their investments in ‘last-mile’ and international delivery, which will probably create a drag on profitability in the medium-term. Although we believe e-commerce giants Alibaba and JD.com would like their growing portfolios of logistics investments to become self-funding sooner rather than later, we foresee somewhat limited investor appetite for more large Chinese logistics IPOs in 2019, since many high-profile offerings have faltered since going public.