Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

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Kuaishou Technology Pre-IPO - PHIP Updates - User Growth Has Been Slowing Down Post COVID

Kuaishou IPO: Valuation and Forecast Update

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Private Capital Markets

Kuaishou Technology / Private Capital Markets

Kuaishou Technology filed the PHIP papers last week as it is getting ready for an IPO in the next few weeks. The company plans to raise at least $5 billion that could value the company at about $60 billion. According to <a href="https://www.reuters.com/article/us-kuaishou-ipo/chinas-kuaishou-hong-kong-ipo-could-value-firm-at-about-60bln-sources-idUSKBN29N09M" target="_blank" rel="noopener">Reuters,</a> the exact valuation of the company will be determined after the meetings with the investors this week but the valuation could change before the deal is launched.Our base case revenue estimate for the company is 58,249 million RMB in 2020 (up 48.9% YoY) and 79,463 million RMB in 2021 (up 36.4% YoY). If the IPO is priced at $60 billion in valuation, this would suggest P/S of 6.7x (2020E) and 4.9x (2021E), using our sales estimates.<div class="content-highlight">
There are some important highlights in 3Q 2020 results of Kuaishou Technology:
<ul>
<li>
Although the company's revenue increased by 50.7% YoY in 3Q 2020,the revenue decline of 1.6% by the Live Streaming business in 3Q 2020 is very concerning. 
</li>
<li>Despite the fact that the company's Live Streaming sales declined in 3Q 2020, its other business units including Online Marketing and Other Services experienced explosive growth. </li>
<li>Despite the negative operating profits in 3Q 2020, the company was able to make significant improvements in operating margins (from -29.9% in 1H 2020 to -9.0% in 3Q 2020) without sacrificing revenue growth. </li>
</ul>
</div>

Kuaishou Technology filed the PHIP papers last week as it is getting ready for an IPO in the next few weeks. The company plans to raise at least $5 billion that could value the company at about $60 billion. According to Reuters, the exact valuation of the company will be determined after the meetings with the investors this week but the valuation could change before the deal is launched.Our base case revenue estimate for the company is 58,249 million RMB in 2020 (up 48.9% YoY) and 79,463 million RMB in 2021 (up 36.4% YoY). If the IPO is priced at $60 billion in valuation, this would suggest P/S of 6.7x (2020E) and 4.9x (2021E), using our sales estimates.
There are some important highlights in 3Q 2020 results of Kuaishou Technology:


Although the company's revenue increased by 50.7% YoY in 3Q 2020,the revenue decline of 1.6% by the Live Streaming business in 3Q 2020 is very concerning. 

Despite the fact that the company's Live Streaming sales declined in 3Q 2020, its other business units including Online Marketing and Other Services experienced explosive growth. 
Despite the negative operating profits in 3Q 2020, the company was able to make significant improvements in operating margins (from -29.9% in 1H 2020 to -9.0% in 3Q 2020) without sacrificing revenue growth. 



Kuaishou IPO PHIP Update & Income Statement Forecast