Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

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.

Event-Driven

<ul>
<li>On 16th November, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  announced that it has entered into a definitive agreement with <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a>  to acquire its domestic video-based entertainment live streaming business in China (known as YY Live). JOYY will retain its overseas business.</li>
<li>The deal includes YY mobile app, YY.com website and PC YY, among others, for an aggregate purchase price of approximately US$3.6bn in cash and the transaction is expected to occur in 1H2021 subject to certain conditions.</li>
<li>According to Baidu, YY Live stands to benefit from the company’s large traffic and thriving mobile ecosystem while Baidu will receive immediate operational experience and knowhow for large-scale video-based social media development, as well as a creator network that will further strengthen Baidu's massive content provider network.</li>
<li>Baidu has been a late entrant to the thriving short video app market in China which is currently dominated by Douyin and Kuaishou. Baidu has been attempting to reduce its dependence on core advertising revenues, however, these efforts are yet to make any meaningful impact on the company’s top line and margins.</li>
</ul>


On 16th November, Baidu (BIDU US)  announced that it has entered into a definitive agreement with JOYY (YY US)  to acquire its domestic video-based entertainment live streaming business in China (known as YY Live). JOYY will retain its overseas business.
The deal includes YY mobile app, YY.com website and PC YY, among others, for an aggregate purchase price of approximately US$3.6bn in cash and the transaction is expected to occur in 1H2021 subject to certain conditions.
According to Baidu, YY Live stands to benefit from the company’s large traffic and thriving mobile ecosystem while Baidu will receive immediate operational experience and knowhow for large-scale video-based social media development, as well as a creator network that will further strengthen Baidu's massive content provider network.
Baidu has been a late entrant to the thriving short video app market in China which is currently dominated by Douyin and Kuaishou. Baidu has been attempting to reduce its dependence on core advertising revenues, however, these efforts are yet to make any meaningful impact on the company’s top line and margins.


Baidu: Acquisition of YY Live Is More Beneficial to JOYY than Baidu

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a> shares dropped 15% yesterday post the release of its 3Q20 results which showed sales growth turning negative in the quarter despite an easy comp. On top of this, Iqiyi's balance sheet remains stretched amidst a tough competitive environment. Our thoughts are below

iQIYI Inc (IQ US) shares dropped 15% yesterday post the release of its 3Q20 results which showed sales growth turning negative in the quarter despite an easy comp. On top of this, Iqiyi's balance sheet remains stretched amidst a tough competitive environment. Our thoughts are below

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Revenue increased by 28% YoY in 3Q20.</li>
<li>The worst business lines stopped declining.</li>
<li>The growth rate of financial revenue accelerated.</li>
<li>Video competitor, iQiyi, ceased the price war.</li>
<li>The draft of online antitrust law does not target Tencent.</li>
<li>The 5-year P/E band suggests an upside of 15%. Upgrade to Buy.</li>
</ul>


Revenue increased by 28% YoY in 3Q20.
The worst business lines stopped declining.
The growth rate of financial revenue accelerated.
Video competitor, iQiyi, ceased the price war.
The draft of online antitrust law does not target Tencent.
The 5-year P/E band suggests an upside of 15%. Upgrade to Buy.


Tencent (700 HK): Every Business Line Looks Great in 3Q20, Upgrade to Buy

<ul>
<li>We believe the new law will slow down the expansion of the lending business related to e-commerce companies.</li>
<li>iQiyi (IQ) announced it would raise the membership fees.</li>
<li>Tencent Music (TME) signed a contract for exclusively using Peer Music’s copyrights in China.</li>
</ul>


We believe the new law will slow down the expansion of the lending business related to e-commerce companies.
iQiyi (IQ) announced it would raise the membership fees.
Tencent Music (TME) signed a contract for exclusively using Peer Music’s copyrights in China.


China Internet Weekly (9Nov2020): New Law on Online Small Amount Lending

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.hkex.com.hk/News/Regulatory-Announcements/2020/201030news?sc_lang=en" target="_blank" rel="noopener">published</a> the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:<ul>
<li>a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.</li>
<li>be an 'innovative company' as part of the suitability for listing</li>
<li>demonstrate that the laws, rules and regulations provide certain shareholder protection standards</li>
</ul>The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for <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> and <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a>, among others, to pursue a secondary listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>.

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEX (388 HK), published the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:
a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.
be an 'innovative company' as part of the suitability for listing
demonstrate that the laws, rules and regulations provide certain shareholder protection standards
The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for Tencent Music (TME US) and iQIYI Inc (IQ US), among others, to pursue a secondary listing on the HKEX (388 HK). 

Conclusions of the Corporate WVR Consultation: Small Changes for Now

China

iQIYI, Inc. offers video entertainment services. The Company provides movies, television dramas, variety shows, and other video contents. iQIYI offers services worldwide.

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iQIYI Inc (IQ US)

Baidu: Acquisition of YY Live Is More Beneficial to JOYY than Baidu

Baidu announced that it has entered into a definitive agreement with JOYY to acquire its domestic video-based entertainment live streaming business...

Shifara Samsudeen, FCMA, CGMA

Iqiyi: Another Tough Quarter

iQIYI Inc (IQ US) shares dropped 15% yesterday post the release of its 3Q20 results which showed sales growth turning negative in the quarter...

Rickin Thakrar

Tencent (700 HK): Every Business Line Looks Great in 3Q20, Upgrade to Buy

The worst business lines stopped declining. The growth rate of financial revenue accelerated. Video competitor, iQiyi, ceased the price war. The...

Ming Lu

China Internet Weekly (9Nov2020): New Law on Online Small Amount Lending

We believe the new law will slow down the expansion of online lending. iQiyi raised the membership fees. Tencent Music signed an exclusive contract...

Ming Lu

Conclusions of the Corporate WVR Consultation: Small Changes for Now

The HKEX has published the conclusions of the consultation on corporate WVR beneficiaries. There are no major changes, but the proposed changes...

Brian Freitas

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