IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Cloud Village (NetEase Music) IPO: Valuation First-Look

Cloud Village (NetEase Music) IPO: Not yet a Sound Investment

Cloud Village (NetEase Music) IPO: Valuation Insights

Cloud Village (NetEase Music) IPO Initiation: Musical Shares

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Equity Capital Markets

<a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a> is the second-largest online music platform after <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> as measured by users and revenue in China. The cornerstone product is NetEase Cloud Music that delivers diverse music and music-inspired content and provides interactive community features. Founded by <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">NetEase Inc (NTES US)</a>, NetEase Cloud Music, has been operating as a stand-alone business since October 2016. Cloud Village is braving the moribund Chinese IPO market by pre-marketing an HKEx IPO to raise around $1 billion, according to press reports. In <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-ipo-initiation-musical-shares" target="_blank" data-smartkarma-citation="insights:52266" rel="noopener">Cloud Village (NetEase Music) IPO Initiation: Musical Shares</a>, we stated that at first sight, Cloud Village performance seems poor as its high growth has come at the cost of negative gross margin and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure. We concluded that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  <div class="content-highlight">In this note, we examine the 1Q21 results and the recent developments disclosed in the PHIP. While Cloud Village expects to remain unprofitable over the next three years, the 1Q21 results and the recent SAMR ruling on Tencent Music support our view that Cloud Village is on track to combine its high growth with an improving cost structure. With investors understandably wary of Chinese IPOs due to China’s regulatory onslaught, Cloud Village has the potential to entice investors to give Chinese IPOs a renewed look.   </div>

Cloud Village (CLV HK) is the second-largest online music platform after Tencent Music (TME US) as measured by users and revenue in China. The cornerstone product is NetEase Cloud Music that delivers diverse music and music-inspired content and provides interactive community features. Founded by NetEase Inc (NTES US), NetEase Cloud Music, has been operating as a stand-alone business since October 2016. Cloud Village is braving the moribund Chinese IPO market by pre-marketing an HKEx IPO to raise around $1 billion, according to press reports. In Cloud Village (NetEase Music) IPO Initiation: Musical Shares, we stated that at first sight, Cloud Village performance seems poor as its high growth has come at the cost of negative gross margin and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure. We concluded that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  In this note, we examine the 1Q21 results and the recent developments disclosed in the PHIP. While Cloud Village expects to remain unprofitable over the next three years, the 1Q21 results and the recent SAMR ruling on Tencent Music support our view that Cloud Village is on track to combine its high growth with an improving cost structure. With investors understandably wary of Chinese IPOs due to China’s regulatory onslaught, Cloud Village has the potential to entice investors to give Chinese IPOs a renewed look.   

Cloud Village (NetEase Music) IPO: Play List