Report
EUR 85.94 For Business Accounts Only

Smoore Intl (思摩尔国际) IPO - Upside in the Absence of Global Investors, Stock Connect in 2021

Smoore Tech is a leading e-cigarette and component manufacturer in China. The company was delisted from the venture board in China, the NEEQ. The company has started book building to raise up to USD 918m to list in Hong Kong.

In our previous notes, we have looked at the company's background, its brief financials, and its shareholders. We were impressed by the company's stellar growth in the past and its technology-driven business. The company is the number one e-cigarette OEM player in the world with the US being its largest source of revenue. We also looked at the latest regulatory landscape on e-cigarettes in the company’s main market, the US and China. We think the FDA’s deadline for pre-marketing approval in 2020, even if pushed forward, will not present a major problem to the company’s blue-chip clients. Looking at the development in China, we also believe that the e-cigarette will be regulated in a similar manner as it is in the US. There might be short term hiccups but a regulatory framework that benefits the general public is long term positive for the e-cigarette industry.

In this note, we will provide our thoughts on the price range. We think there is a substantial upside at the high end. In the absence of international investors due to the ESG concern, the deal attracted a decent line up of domestic investors. We believe the stock will be included in the stock connect scheme in 2021 and attract demand from mainland investors. We would participate in the deal.
Underlyings
British American Tobacco PLC

British American Tobacco is engaged in tobacco and nicotine products. This includes Co.'s Next Generation Products, comprising its vapour and tobacco heating products, and its oral tobacco and nicotine products such as moist snuff and snus. Co.'s U.S business (Reynolds American) brand portfolio which includes Newport, Camel and Pall Mall. These, and other brands including Doral, Misty and Capri, are manufactured in a variety of styles and marketed throughout the U.S. Co. has other international and local cigarette brands including Vogue, Viceroy, Kool, Peter Stuyvesant, Craven A, Benson & Hedges, John Player Gold Leaf, State Express 555 and Shuang Xi.

British American Tobacco PLC ADS

Japan Tobacco Inc.

Japan Tobacco is mainly engaged in the manufacture and sale of tobacco products in the domestic and overseas markets. Along with its affiliates, Co. operates in four principal business segments: Japanese domestic tobacco, international tobacco, pharmaceutical, and processed food. Co. is engaged in the manufacture and sale of cigarettes in Japan and overseas; the research, development, manufacture and sale of ethical pharmaceuticals; and the manufacture and sale of frozen and ambient processed foods, bakery items and seasoning. In addition, Co. is involved in the leasing and management of real estate and the other businesses.

Smoore International Holdings Ltd

Provider
Aequitas Research
Aequitas Research

Aequitas Research is a leading ECM research firm with a focus on IPOs and placements/follow-on offerings across the Asia Pacific with deal size of over USD100m. 

Since 2015, we have covered 400+ IPOs and 450+ placements with a hit rate of 73% and 65%, respectively. We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic analysis.
 
Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis. We also provide a more quant driven analysis on placement/follow-on offerings.
 
Markets that we cover include:
Hong Kong,
China ADRs,
India,
Japan,
Australia, and
ASEAN.

Analysts
Ke Yan

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