This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
2. Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
- JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).
4. Swiggy IPO Trading – Decent Anchor but Tepid Overall Demand
- Swiggy Limited raised around US$1.35bn in its India IPO, although the demand wasn’t great.
- Swiggy Limited is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.
5. SF Holdings A/H Listing – Thoughts on A/H Premium and past A/H Listings
- S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, is now said to be looking to raise around US$1-1.5bn in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premium.
6. ECM Weekly (11th Nov 2024)-SF Holdings, Swiggy, ACME, NivaBupa, Sagility, Eternal Beauty, Shuangdeng
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, Indian deals flow seemed to be the only one continuing unbated despite the US elections overhang from the past week.
- On the placements front, there weren’t many large deals but we did look at upcoming lockup expiries.
7. Sagility India IPO Trading – Lackluster Demand
- Sagility India (2058883D IN) raised US$250m in its India IPO.
- Sagility India (Sagility) is a pure-play healthcare focused solutions and services provider to Healthcare Payers and Providers.
- We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the trading dynamics.
8. ISU Petasys Rights Issue: Today’s Wild Price Action Has Opened up a Fresh Trading Angle
- I initially skipped this rights issue due to the tight 15% discount and lack of hedge options, but today’s 20% drop opens up a potential angle worth exploring.
- Today’s selloff stems from pushback on ISU Petasys entering the battery business, not just dilution concerns. This means there’s a high chance we’ll see a lot of leftover, unsold shares.
- The strategy is to grab stock rights cheaply or go for the public offering. The main risk is whether the 15% spread holds until listing, but the case is strong.
9. Initial Thoughts on the Klarna IPO
- On 12 November, Klarna announced that it confidentially filed public offering paperwork. The company is getting ready for an IPO in 1H 2025.
- Klarna’s valuation reached as high as $45 billion in 2021 which declined to as low as $6.5 billion. Its valuation has recently risen to about $14.6 billion.
- Klarna generated 13.27 billion SEK in revenue (US$1.2 billion) in 1H 2024 (up 27% YoY). Operating margin improved significantly from -18% in 1H 2023 to -2% in 1H 2024.
10. SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- SF Holding’s domestic parcel volumes have grown slower than overall market volumes recently; is this strategic, or simply a loss of share?
- SF Holding is not closely aligned with any of the large online retail platforms in China; ultimately, is this independence an advantage or a disadvantage?
- When will SF Holdings’ varied international operations — and there are a few of them — begin to pull their own weight, in terms of profitability and growth?
