Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Huitongda IPO: Huge Churn Rate Indicates That Things Could Go Bad Very Quickly

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

<ul>
<li>With churn rates as high as 50% and wholesale customers declining by 27.7% in 9M21, we are not particularly interested in <a href="https://www.smartkarma.com/entities/huitongda" target="_blank" data-smartkarma-citation="entities:33789:1" rel="noopener">Huitongda (9878 HK)</a> over long term.</li>
<li>The valuation looks cheap compared to peers on the surface, but when compared after considering Huitongda’s 1P exposure its at a significant premium to peers.</li>
<li>Given that the market takes time to pick up similar mispricing situations, we think its advisable to wait and see where Huitongda opens, before arranging a short position.</li>
</ul>


With churn rates as high as 50% and wholesale customers declining by 27.7% in 9M21, we are not particularly interested in Huitongda (9878 HK) over long term.
The valuation looks cheap compared to peers on the surface, but when compared after considering Huitongda’s 1P exposure its at a significant premium to peers.
Given that the market takes time to pick up similar mispricing situations, we think its advisable to wait and see where Huitongda opens, before arranging a short position.


Huitongda

Huitongda IPO - Valuation