In this briefing:
- Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT
- Tencent Music: A Case of Failing to Live up to Hyped Expectations
- Fed Sees No Hikes in 2019 and Announces Balance Sheet Wind Down Will End in 2019
- Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
- Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk
1. Up Fintech (Tiger Brokers) IPO Trading Update – First Day Volume Was Higher than Futu, Close to QTT
Up Fintech (TIGR US)‘s IPO was priced at US$8/share, above its range of US$5-7/ADS raising at total of US$111m, including the proceeds from the private placement with Interactive Brokers Group, Inc (IBKR US).
In my earlier insights, I looked at the company’s background, past financial performance, scored the deal on our IPO framework and compared it to Futu Holdings Ltd (FHL US):
- Futu Holdings IPO Quick Note – Comparison with Tiger Brokers – Same Market, Different Economics
- Up Fintech (Tiger Brokers) Pre-IPO Quick Note – Much Too Reliant on IBKR
- Up Fintech (Tiger Brokers) IPO Quick Take – It’s Not like Futu, Won’t Perform like It Either
In this insight, I will re-visit some of the deal dynamics, comment on share price drivers and provide a table with implied valuations.
2. Tencent Music: A Case of Failing to Live up to Hyped Expectations
- One word to describe Tencent Music Entertainment’s (TME US) first conference call post IPO is uninspiring.
- Management does not provide concrete 2019/1Q19 guidance, but hints margin pressures persist largely due to investments in music contents.
- We expect that consensus still has to revise down TME’s 2019-20E net profits forecast by 17-26%.
- On our earnings forecast, TME unattractively trades at 46.3x/37x 2019-20E PE, a whopping 48-52% premium to peers average.
3. Fed Sees No Hikes in 2019 and Announces Balance Sheet Wind Down Will End in 2019
The Federal Open Market Committee (FOMC) left the fed funds rate target range unchanged today, as expected. However, many other aspects of today’s policy statement, economic projections, and Fed Chairman Powell’s press conference were more dovish than expected.
4. Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
The slowing world economy has raised concerns in some quarters about an inflexion point in the global credit cycle that could provoke a repeat of the 2008 crisis due to higher levels of debt.
Governments have mainly contributed to the rise in global debt since 2008, particularly in advanced economies, while China has presided over debt expansion across all non-financial sectors of its economy.
Concerns about the US corporate bond market have centred around the significant growth of the BBB-rated segment since 2008, along with its ability to sustain liquidity given the looming satiation of investor mandates.
China’s corporate debt has risen aggressively and become increasingly risky since 2008, but a sovereign backstop and predominantly domestic funding sources limit any prospective cross-border fallout.
A full-blown repetition of the 2008 debt crisis is unlikely due to: 1) lower cross-border banking linkages, 2) a smaller role for banks in overall credit intermediation, and 3) far lower leverage in the US financial system.
5. Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk
Ruhnn Holding Ltd (RUHN US) is looking to raise about US$200m in its upcoming IPO.
The company is an internet key opinion leader (KOL) incubator in China. Revenue and GMV grew at impressive rates of 63% and 57% YoY in FY2018, respectively.
The idea of being able to leverage on KOLs influence over consumers to understand demand and retain consumers is interesting but Ruhnn has yet to demonstrate that it has a sustainable business model.
Gross margin has deteriorated and losses widened as a percentage of revenue. Service fee paid to KOLs as a percentage of revenue has increased and showed little improvement in 9M FY2019. The company depends heavily on the top KOL, Zhang Dayi, to generate revenue, almost half of the company’s GMV and revenue is generated from her.
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