China Archives | Page 18 of 153 | Smartkarma

• We expect Tencent to report C4Q23 revenue, IFRS op. profit and IFRS net income in line, (3.3%) and (4.9%) vs. consensus.
• The robust topline growth was mainly contributed by fast growing WeChat VA (Video Account) and strong performances of <Dream Star> in December.
• We cut our TP to HK$362 to reflect operating margin decline caused by increased sales and marketing. 

• A listing in London would not remove de minimis reform risk in US market
• A new report quantifies the potential cost of changes to US de minimis rules
• Europe’s rigorous new ‘digital services’ laws are an emerging threat to SHEIN

• The recent earnings of Baidu indicated solid performance for the fiscal year 2023.
• An extremely neutral analysis reveals several positives.
• The total revenue for Baidu Core’s total revenue for the year increased by 8% year-over-year, indicating strong financial resilience.

• Shanghai Zhida Technology Development Co Ltd (SZTD HK) is looking to raise about US$130m in its upcoming Hong Kong IPO. Shenwan Hongyuan is the sole bookrunner.
• Shanghai Zhida Technology Development (SZTD) is a provider of electric vehicle (EV) home charging solutions.
• As per F&S, the firm was the world’s largest provider of EV home charging solutions in terms of sales volume of home EV chargers over its track record period.

• The NetEase Q4 earnings revealed several strengths and weaknesses in the company.
• On the positives, NetEase reported a 7% increase in total net revenue for 2023 to RMB 103.5 billion (USD 14.6 billion), driven by momentum across its businesses.
• The revenue growth was attributed mainly to increased revenue contribution from the launch of new games such as Justice Mobile, and sustainably developed titles like Egg Party.

• JD.com Inc (ADR) (JD US) reported a set of better-than-expected 4Q23 results yesterday, as the ADR rose 16% last night in US trading session. 
• The improvement in net profit margin showed that being more price competitive did not lead to lower margins. 
• I believe the key takeaway, aside from the resilient 4Q23 results and solid 2024 outlook, is the much improved shareholder return measures.

• China Vanke has caused jitters as it was reported to be closely watched by some insurers as it seeks to rollover some of its debt with insurers.
• It is reported that it has sufficient funding to repay its bond due on March 11th and is lining up a HK$1.5 billion syndication loan.
• Vanke warrants close monitoring as there is no sign of turning in its reducing contract sales, deteriorating cash position, shrinking financing ability. 

• The Smartkarma Corporate Webinar | Sasseur REIT: A Glimpse into China’s Outlet Industry on Feb 29 explored the Oulet sector with Sasseur REIT, a Singapore REIT focused on China Outlets.
• Sasseur REIT is 57.85% owned by the Sasseur Group operating China outlets since 2008, with 4 outlets in 3 major Tier-2 cities currently in the REIT, with room for expansion.
• Sasseur REIT is a play on China consumption and outlet operations. 2023 EMA rental income +10.7% Y/Y.  The 9.1% dividend yield stands out, at a relatively low aggregate leverage.

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• In this insight, we take a look at the rankings of potential ADDs and potential DELs for the June 2024 index rebal event.
• While there are no expected ADDs/DELs for HSTECH in June 2024, some index members like Li Auto (2015 HK), Meituan (3690 HK), and XPeng (9868 HK) could experience capping flows.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in June 2024.
• Based on the current data, I see two low-conviction ADDs and two low-conviction DELs.

• Fu Shou Yuan (1448 HK) is likely to declare a special dividend in its FY23 result announcement as indicated in its board meeting notification.
• Net cash at end-1H23 amounted to 14.5% of its current share price, providing room for imagination of the amount of special dividends. 
• Besides raising its yield, returning excess cash should raise its ROE. This will also demonstrate the management’s confidence on the outlook and its financial position.

• Shanghai REFIRE Group (SRG) is looking to raise around US$100m in its upcoming Hong Kong IPO. The bookrunner for the deal is CICC.
• SRG designs, develops, manufactures, and sells hydrogen fuel cell systems, hydrogen production systems, and related components, as well as provides fuel cell engineering and technical services.
• According to Frost & Sullivan (F&S), it ranked first in the hydrogen fuel cell system market in China, with a market share of 25.9%.

• Markets continue to be extremely bearish on HK/China, we look at the latest property market fundamentals and macro indicators, as well as company updates of our top picks
• In the latest budget, the HK government just announced to scrap all spicy measures on property market and eased mortgage policy
• With government support, we view the bottom of physical market is near.  For further re-rating, we need interest rate to go down, as well as resumed fund flows.

• PRC regulatory approvals were satisfied on the 4th March for the Tanoto family’s HK$23.50 pre-conditional Offer for Vinda International (3331 HK). 
• The Circular has been dispatched, and the Offer is now open for acceptances.
• With a 50% minimum acceptance condition and irrevocables of 72.624% (plus Tanoto’s 7.69% direct stake), this should turn unconditional on or before the 19th March

• The 72.5% decline in SITC International (1308 HK)‘s FY23 earnings is disappointing but should already reflected in the share price given the profit warning. Instead, this may be the trough.  
• Spot freight rates for key intra-Asia routes have already recovered since 3Q23, with the YTD level higher than the 2H23 average. The 1H24 result may show a sequential rebound.
• Even assuming flat YoY earnings in FY24, it still sits on a 9% dividend yield. The projected ROE of over 24% and net cash position mean 1.6-1.7x P/B undemanding.

• Despite the lifting of the “spicy” property cooling measures last week, New World Development (17 HK) has plumbed fresh P/B lows after a (very) brief respite. 
• Preceding my comments on NWD are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

For our next Corporate Webinar, we are glad to welcome Hua Hong Seminconductor’s Chief Financial Officer, Daniel Yu-Cheng Wang. 

In the upcoming webinar, Daniel will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Eric Wen. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 12 March 2024, 16:00 SGT.

About Hua Hong Semiconductor

Hua Hong Semiconductor Limited, an investment holding company, manufactures and sells semiconductor products. The company provides embedded non-volatile memory, standard logic and mixed-signal, radio frequency, power management integrated circuits, power discrete, and automotive solutions. It also offers foundry services; and design services comprising standard and customized IP development, full-custom layout design, and customer-specific integrated solutions, as well as design support and tape out services. In addition, the company provides multi-project wafer services; mask making services; and backend services, such as in-house testing, backside processing and dicing, and backend turnkey services, as well as assembly and testing services. 

Further, it engages in real estate development. Its products are used in consumer electronics, communications, computing, industrial, and automotive markets in the People’s Republic of China, North America, Europe, Japan, and other Asian countries. The company was founded in 1997 and is headquartered in Shanghai, the People’s Republic of China. Hua Hong Semiconductor Limited is a subsidiary of Shanghai Alliance Investment Ltd.

• With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
• We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
• The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

• China Power International (2380 HK)‘s Jan power sales showed a sharp 41.2% YoY growth. More importantly, this marks sustaining a solid MoM trend in the last few months. 
• Recovery of the hydropower generation is encouraging as this was a drag last year. Meanwhile, higher coal-fired generation will capture the better profitability of this segment.
• CPI’s strongest earnings CAGR in the sector has made its earnings multiples increasingly cheap over the next two years. After +15.7% YTD in its share price, there is further upside.

• Auntea Jenny is positioned in the same league as Guming. Both have similar business model/strategy. However, in terms of the number of stores/revenue scale/profitability, Auntea Jenny lags behind its peers.
• China’s freshly-made beverage industry has developed to the stage of capitalization. Auntea Jenny has to obtain more funds to strengthen barriers, improve supply chain, accelerate expansion.The real competition just begins.
• Pre-IPO valuation of Auntea Jenny was already RMB5.1 billion, but the market seems not optimistic about the franchising model. Valuation of Auntea Jenny should be lower than that of Guming/MIXUE.  

• UMP Healthcare (722 HK) delivered a slow start to FY24, with revenues up 2.3% YoY and profits down 63% YoY, due to sluggish demand in Hong Kong. 
• The company cut dividend for H1 FY24 by 25% to 1.3 HKD cents/share. Net cash on the balance sheet remained healthy at 265 mn HKD representing 64% of market capitalization.
• The company is implementing stringent cost control and we believe that a slow turnaround and a 9-10% dividend yield is very probable at these levels. 

• First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China.
• They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$.
• This somewhat obscures their true earnings power.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Green Energy
• Greentown China

• Tuhu Car (9690 HK) was listed in Hong Kong on 26th Sept 2023 after raising US$151m. The IPO had been a 100% primary offering.
• Tuhu is an integrated online and offline platform for automotive services in China.
• Trading with a very small float of 1.8%, in its upcoming six-month lockup expiry, >90% of Tuhu’s pre-IPO investors, cornerstones and management combined stakes will come off six-month lockup expiry.

• Yesterday, Haidilao International Holding (6862 HK), the largest hotpot chain in China, announced that the company will introduce franchise model as a new way to support growth. 
• Haidilao’s move into franchising should directly benefit Yihai Int’L Holding (1579 HK), the affiliate company that supplies hotpot condiments to Haidilao. 
• Yihai is trading at an inexpensive 12x 2024 PE compared to a historical average of 32x since listing.

• Xunfei Healthcare Technology (XHT HK) is looking to raise around US$200m in its upcoming Hong Kong IPO. The bookrunners on the deal are Huatai International, GF Capital, and CCB International.
• Xunfei Healthcare Technology (Xunfei), a iFlytek (Shenzhen-listed) spin-off, primarily provides solutions covering the full healthcare service cycle, with products and services mainly catered towards major stakeholders in the healthcare industry.
• Backed by its healthcare AI solutions matrix, the firm ranked first in the healthcare AI industry in terms of revenue in China in 2022, according to Frost & Sullivan (F&S).

• Innovent’s 2023 product revenue was RMB5.7 billion. In 2024, product revenue growth would remain strong (e.g. 35% YoY).The main flashpoint for performance is after the approval of mazdutide in 2025.
• Innovent has started paving the way for mazdutide more than a year in advance and building various channels.Normally speaking, mazdutide could get the approval in 25Q2. Its CDMO is Asymchem
• Share price of Innovent was once dragged down by the CXO plunge due to the US Draft Bill, but unlike CXOs, innovative drugs do not involve supply chain security issues.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Japfa Comfeed Indonesia

• Alibaba closed four more supermarkets at the end of February.
• Alibaba is moving retailers from the discount app back to Taobao.
• Li Auto’s deliveries increased by 62% YoY in the first two months of 2024.

• NetEase reported C4Q23 top line, GAAP operating profit and GAAP net income (4.8%), (16%) and (9.0%) vs. our estimates, and (3.6%), (12%) and (6.8%) vs. consensus， mainly due to..
• The positive, however, is the acceleration of launch of <Naraka Mobile> by 1-2 quarters. Our estimate of the gross billing remains the same;
• We remain optimistic about the upcoming pipeline, and we raise our TP to US$122. Our new TP implies 15.4X PE, which is 12% above current price.

• Vinda International (3331 HK) has announced the pre-condition for Sukanto Tanoto’s HK$23.50 voluntary offer is satisfied. The composite document will be despatched on or before 11 March. 
• The offeror has received irrevocables from Essity (ESSITYB SS) and Mr Li, representing 72.62% of outstanding shares, which satisfies the 50% minimum acceptance condition.
• Including irrevocables, the offeror currently represents 80.31% of outstanding shares. The offeror intends to exercise compulsory acquisition rights. The tight 0.4% gross spread reflects a done deal. 

• Although people acknowledged BeiGene’s performance, it still makes us uneasy about a long-standing question: When will BeiGene be profitable?With current cost structure, there’s at least two years left until breakeven. 
• BeiGene’s internationalization only proves decent increase in revenue, but it doesn’t yet verify its profitability.SG&A expense ratio completely deviates from the normal state of Biotech with over US$2 billion sales.
• If BeiGene indeed has a plan to turn loss into profits, besides maintaining a high growth rate in sales, reasonable optimization in cost and expenses is the most basic “sincerity”.

• The Hang Seng Index closed the month of February up, printing a +6.63% return, after months of uninterrupted downtrend.
• The big question at this point is: has the index reached the turning point that many have been waiting for?
• In this insight we will try to analyze what the possible short-term trend could be for the index after the recent trend reversal.

• Adjusting for impact of LNY timing, January numbers still seem firm
• Headline February / LNY 2024 traffic growth also appears solid
• Our thesis remains that tourism recovery takes longer, strongest in H124

• Vipshop reported C4Q23 top-line, non-GAAP EBIT, and GAAP net profit in-line, 6.3% and 7.0% vs. our estimate, and 4.5%, 20.5%, and 23.9%, vs. consensus, respectively;
• We expect the two themes of “live for the moment” consumption and consumption downgrade to persist in 2024. The former drives apparel spending, while the latter drives consumers to Vipshop
• We maintain BUY and raise the TP to US$ 20.4, implying 7.7x CY24 non-GAAP P/E, and 4.9x CY24 EV/Earnings.

• China Travel International Investment Hong Kong (308 HK) has an impressive 2024 CNY with the volume and revenue of its tourist attractions increased by 46% to 123% YoY.
• Relative to 2019 CNY, most businesses have fully recovered. 1H23 earnings is the highest since 1H20 and the market may have underestimated 2H23, providing upside surprise potential. 
• The share price is still some 30% below the peak in late-2021 when earnings have yet to recover. Also, its net cash now equals 19% of the share price. 

• On the 15 December 2023, the Tanoto family emerged with a HK$23.50 pre-conditional Offer for Vinda (3331 HK). PRC regulatory approval to one side, this Offer was a done deal.
• Those regulatory approvals have now been satisfied. The Composite Doc will be dispatched on or before the 11th March, at which time the Offer will be open for acceptances. 
• With a 50% minimum acceptance condition and irrevocables of 72.624% (plus Tanoto’s 7.69% direct stake), this should turn unconditional on or before the 20th March

• The large SOE bank indicates that it will list its housing rental subsidiary, although the proceeds may be inconsequential given the size of CCB.
• CCB shows lower (and very low) credit costs despite what appears to be a major weakening in its NPL distribution.
• Loss NPLs are up 2.5x from FY19 to 1H23 much more than its 1.5x rise in total NPLs, so that its declining and benign credit costs may not last.

• A share indices were up on the week. HK stock indices were down except for HS Tech. H-shares with A-share pairs were up. 
• Net SOUTHBOUND buying was HK$9.1bn in the second post-holiday week after being +HK$20bn in the first week. LOTS of SOEs on the net buying side. Still.
• SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
• Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 23.5bn of A-shares on strong average activity after RMB +49bn the previous four trading weeks. More efforts by authorities to eliminate selling.
• No finance names of any kind in the top ten this week after 5/10 the week before. Slight tendencies to trade on reversion.

• In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.
• After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.
• Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.

• The iShares A50 China (2823 HK) and CSOP China A50 (HKD) (2822 HK) ETFs will rebalance their holdings at the close on 15 March.
• Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank will replace Aier Eye Hospital, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery in the ETFs.
• Hygon Information Technology (688041 CH) will also be added to a global index at the same time while CGN Power (1816 HK) will be added to the FXI ETF.

• Chongho Bridge (2314866D CH) is looking to raise up to US$500m in its upcoming HK IPO. The deal will be run by CICC.
• Chongho Bridge (CB) is an integrated services provider to China’s rural population. It offers rural inclusive credit services, agricultural production services, rural consumer goods and rural clean energy services.  
• According to F&S, CB is the largest non-traditional financial institution targeting China’s rural market in terms of total loan balance as of FY22 (31st Dec 22).

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, we took an early look at the possible summer 2024 listing of Tokyo Metro.
• For placements, there was another large selldown in Renesas Electronics (6723 JP), while ITC Ltd (ITC IN) could see one as well soon from British American Tobacco (BATS LN). 

• In the past few years, a big problem of Taiji is weak performance/low valuation. The main purpose of mixed-ownership reform with CNPGC is to improve operational efficiency and enhance profitability.
• CNPGC made a clear commitment to solve the horizontal competition issue. So, after the privatization of China TCM is completed, it’s worth noting whether it will be merged into Taiji.
• 2024 is expected to see Taiji launch new M&A deals, which would bring a qualitative leap for Taiji. Market value of Taiji is expected to at least double. 

• CIMC Vehicles Group (301039 CH) (CIMCV) is a leading global manufacturer of semi-trailers and various truck bodies that is the mainstay of heavy ground goods transport  
• 9M23 earnings surged by 216% and beat consensus, scope for further earnings upgrade as the business and management outlook statement is very positive   
• Our target price of CNY12.50 (+31% UPSIDE) is based on 2024 PE 15x – a 10% discount against the industry leader Caterpillar 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adaro Energy
• China Jinmao Holdings

• The last week was a very busy one. The coming week has some announcements and implementations but is a relatively quieter one.
• The SSE STAR50 (STAR50 INDEX) and STAR100 Index changes for March will be implemented at the close on Friday, the 8th.
• Another week of inflows for the iShares Emerging Markets ex-China (EMXC US) ETF as creations cross US$2bn for 2024. ETF AUM has gone from US$420m in 2021 to US$11bn now!

• Hong Kong-based MediConCen, a startup automating insurance claims using AI and blockchain, has raised US$6.85 million in its latest Series A round.
• HSBC Asset Management led this round, with support from existing investors G&M Capital and ParticleX and new investor Wings Capital Ventures.
• Also Read: Wealthtech, insurtech, SaaS fintech are the new hot verticals in Indonesia: AC Ventures report This brings MediConCen’s total raise to US$12.7 million.

• Xinyi Glass Holdings (868 HK) reported FY23 results, with net profit up 5% yoy and sales up 4% yoy. 
• The company announced a final dividend of HKD0.37 per share, resulting in a full year dividend of HKD0.63 per share, which is a yield of 8%. 
• Overall the results look resilient, with auto glass segment a bit weaker than expected and float glass segment stronger than expected. 

• Baidu (BIDU) reported C4Q23 top line, non-GAAP operating profit and GAAP net income inline, 9.4% and (43%) vs. our estimates, and inline, 8.2% and (46%) vs. consensus. 
• We believe LLM is fundamentally an upgrade of search; further, BIDU is a 2B/general AI play in China, a country filled with 2C/specialized AI players;
• We cut our TP for BIDU from US$157 to US$116 and maintain BUY.

• We expect PDD to report CY4Q23 top-line and non-GAAP net income 14.3% and 21.2% vs. consensus. Main model changes are increased Temu revenue per order and PDD take-rate;
• Temu continued increasing prices despite the holiday shopping season, and merchants reported that Temu began charging service fees. PDD upgraded its ads tools, which we expect boosted China take rate.
• We maintain our BUY rating and raise our TP to US$ 178.

• Yankuang Energy, CGN Power and China Coal Energy are buys, China Resources Beer, China Vanke and Wuxi Biologics are sells for the iShares China Large-Cap (FXI) (FXI US) in March.
• Shorts have been spiking in China Vanke (2202 HK) while there has been covering in Yankuang Energy (1171 HK), China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK). 
• There has been an increase in cumulative excess volume on all the adds and deletes over the last few months. There could be more over the next week.

• Vietnam now accounts for more than 50% of production replacing China
• China production is less than 25% of overall capacity in 2023
• Reshoring and production of higher end “Athleisure” shoes is increasing margins for Stella International (1836 HK)
  

• Plover Bay Technologies (1523 HK) reported an 8.5%/ 24YoY increase in revenue/profits (%). Profits increased due to a net margin expansion of 370 bps to 29.8%. 
• The company had positive news in January when Peplink announced that it had agreed with SpaceX’s Starlink to become an authorized technology provider using Peplink SD-WAN routers.
• Trading at 11x/10x PE FY23/FY24e, with an 8.2% trailing dividend yield and ~60% ROE, this is another growth/dividend gem worth exploring.

• Pacific Basin Shipping (2343 HK) has a weaker-than-expected 2H23, but we are glad that its unit cost has come down. Also, FY24F and FY25F should be years of recovery.
• Current spot rates as indicated by BDI are significantly higher than 1H23 and YTD average, suggesting an upside for realised rates in the rest of this year. 
• Supply pressure will be alleviated by the issues at Panama and Suez Canals, while China may be a factor in YoY demand improvement. Net gearing of 2% is light. 

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Agile Group’s ESG as “Adequate”. The company’s Environmental and Social scores are “Adequate”, while Governance is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Industry ASP declined -15.5% Y/Y in January to just 8.36 CNY, a record low
• Despite strong volume (+85% Y/Y) some firms have likely turned unprofitable
• International parcel growth strong; SF still avoiding worst of domestic price wars

• Among core/key products, TY-302 and TY-2136b have to face fierce competition, with R&D progress lagging behind competing products.TY-9591 for brain metastases from NSCLC could be a breakthrough point for TYK.
• There would be a long time for the first product to generate revenue, but TYK is cash shortage.So, the survival risk is high. Such companies are less attractive to investors.
• Valuation of TYK after six rounds of financing was RMB3.08 billion. However, considering the weak sentiment and concerns on pipeline, valuation of TYK after IPO could fall below this level.