ECM Weekly (18 May 2019) - MabPharm, Frontage, Mulsanne, Xinyi Energy, Helenbergh

There are a handful of IPOs coming up in Hong Kong. We are hearing that China East Education (EASTEDU HK) will be starting its premarketing next week while Haitong UniTrust International Leasing Co Ltd (HUIL HK) will be launching its IPO next Tuesday. CSSC (HK) Shipping has also filed its PHIP on HKEX, hence, its IPO will likely launch soon as well. We have already covered the companies in our earlier notes:

• China East Education (中国东方教育) Pre-IPO - The Company Known for Its Culinary School
• Haitong UniTrust Intl Leasing Pre-IPO - Shape Shifting
• CSSC (HK) Shipping IPO: A Cyclical Business Masked as an Income Stock

For upcoming IPOs in Hong Kong, media has reported Ping An's OneConnect has hired banks for its IPO and may come as soon as June with a potential deal size of US$1bn.

In the U.S, Luckin Coffee (LK US) made a fantastic debut, trading up to as high as US$25.96 (+52%). Valuation is expensive based on our base-case assumptions and even blue-sky assumptions put the fair value of Luckin at about US$26 per ADS. As mentioned in our previous note, the founding team has a track record of aggressively burning cash for market share and yet still build out a sustainable business thereafter. Hence, market was willing to ignore valuation in favor of its strong growth story.

As per our trading strategies note, we think that the first week pop is as good as it gets and price should retrace from here as the market will likely adopt a wait-and-see approach until the next earnings release to see whether management can deliver the growth that they have promised; mainly in cutting discount and raising the average ASP of drinks.

In Thailand, we are hearing that Singha Hotel and Resorts (SPRHOTEL TB) will be looking to IPO in the next quarter. On the other hand, Eagle Hospitality Trust (EHT SP) still managed to price its IPO at the bottom end of its adjusted price range and will be listing on the 24th of May.

Last, but not least, in Malaysia, Leong Hup International (LHIB MK) managed to deliver a first day intraday pop of about +8% before trading back down to its IPO price on debut and continue to break deal price thereafter. Sumeet Singh has mentioned that valuation wasn't attractive. Furthermore, cornerstone investors are not locked up.