China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>Regulatory risk is the major headwind for <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a>, a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. </li>
<li>We believe <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)'s  </a>WeChat/QQ, and <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1439927D CH)</a>'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. </li>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strategic partnership with <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US).</a> The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. </li>
</ul>


Regulatory risk is the major headwind for Weibo Corp (WB US), a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. 
We believe Weibo Corp (WB US) has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as Tencent (700 HK)'s  WeChat/QQ, and ByteDance (1439927D CH)'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. 

Weibo Corp (WB US) has strategic partnership with Sina Corp (Class A) (SINA US) and Alibaba Group (BABA US). The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. Weibo Corp (WB US) is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. 


Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

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.

Several news media outlets reported in September that ByteDance (1439927D CH) has made plans to launch a music streaming app in China later this year. The online music streaming market in China is long dominated by Tencent Music who previously held exclusive music licensing agreements with global music streaming giants Warner Music Group (WMG), Universal Music (UMG) and Sony Music in China. However, TME was ordered to give-up these exclusive music licensing agreements by the country’s market regulator SAMR (state Administration of Market Regulation) and the company announced in August that it has relinquished all of its exclusive music licensing agreements as per the order of the Chinese regulators.TME’s shares are currently trading at US$6.87 per ADR at its all-time low and the shares are down 77.4% compared to its peak of US$30.42 per ADR in mid-March.

TME: ByteDance’s Entry into Music Streaming to Further Threaten TME’s Dominance

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

<p><a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> has had a disastrous year, ever since the IPO of their FinTech arm, <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>, was pulled last minute in November 2020. Since then, they have faced continued regulatory hurdles, including an RMB18.2bn anti-monopoly fine, which has culminated in a 51% share price drop, since its November 2020 peak, which means that Alibaba is currently trading on only a 14.3x forward PE ratio. Given that this is nearly 4 standard deviations below its 5-year historical average trading range, and that this multiple would imply only a 0.72x PEG ratio, for a company with an extremely strong net cash balance sheet, delivering returns on capital well above its cost of capital, with positive free cash flow generation, and a $15bn share buyback program, indicates that there is a massive disconnect between long-term Buy-side expectations and near-term Sell-side estimates. </p><p>Looking at the reported group financials over this period it does not seem as though the regulatory impact has been that significant on core operations. The key concern, however, is that Alibaba is losing market share in its core businesses. </p><p>In this insight, I take a closer look at the broader Chinese retail market, as well as the Chinese digital advertising market (I estimate that Alibaba still generates more than 40% of its Chinese commerce revenue, and roughly 1/3<sup>rd</sup> of group revenue, from marketing activities), to analyse Alibaba’s relative revenue share loss. Finally, I also revisit current valuation levels and analyse what this implies for its Core Commerce operations.</p>

Alibaba Group (9988 HK) has had a disastrous year, ever since the IPO of their FinTech arm, Ant Financial Services Group (6688 HK), was pulled last minute in November 2020. Since then, they have faced continued regulatory hurdles, including an RMB18.2bn anti-monopoly fine, which has culminated in a 51% share price drop, since its November 2020 peak, which means that Alibaba is currently trading on only a 14.3x forward PE ratio. Given that this is nearly 4 standard deviations below its 5-year historical average trading range, and that this multiple would imply only a 0.72x PEG ratio, for a company with an extremely strong net cash balance sheet, delivering returns on capital well above its cost of capital, with positive free cash flow generation, and a $15bn share buyback program, indicates that there is a massive disconnect between long-term Buy-side expectations and near-term Sell-side estimates. Looking at the reported group financials over this period it does not seem as though the regulatory impact has been that significant on core operations. The key concern, however, is that Alibaba is losing market share in its core businesses. In this insight, I take a closer look at the broader Chinese retail market, as well as the Chinese digital advertising market (I estimate that Alibaba still generates more than 40% of its Chinese commerce revenue, and roughly 1/3rd of group revenue, from marketing activities), to analyse Alibaba’s relative revenue share loss. Finally, I also revisit current valuation levels and analyse what this implies for its Core Commerce operations.

Alibaba: How Much Core Market Share Loss Has Been Priced In?

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

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<p><a href="https://www.smartkarma.com/entities/media-nusantara-citra-tbk-pt" target="_blank" data-smartkarma-citation="entities:6881:1" rel="noopener">Media Nusantara Citra (MNCN IJ)</a> released a strong set of 1H2021 results with overall revenues up by +23% YoY to IDR4,863,1bn, driven by advertising revenue growth of +27% YoY. Free-to-Air Television advertising revenues grew by +16% YoY to IDR4,595.1bn, whilst digital advertising revenues grew by +117% YoY to IDR889.2bn.</p>
</section>
<p>There was also a strong performance from e-commerce players such as <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group</a>, Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>, <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> &amp; <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia</a>, and BliBli.com, which block-booked primetime slots for entertainment variety shows and promotional events. <a href="https://www.smartkarma.com/entities/media-nusantara-citra-tbk-pt" target="_blank" data-smartkarma-citation="entities:6881:1" rel="noopener"></a>Content is King</p>
<section class="figure">
<p><a href="https://www.smartkarma.com/entities/media-nusantara-citra-tbk-pt" target="_blank" data-smartkarma-citation="entities:6881:1" rel="noopener">Media Nusantara Citra (MNCN IJ)</a> continues to see strong performance from its prime-time blocking programs, which are predominantly for e-commerce companies but also players such as Telkomsel. </p>
<p><a href="https://www.smartkarma.com/entities/media-nusantara-citra-tbk-pt" target="_blank" data-smartkarma-citation="entities:6881:1" rel="noopener">Media Nusantara Citra (MNCN IJ)</a> continues to see explosive growth from its digital adverting efforts, which saw revenues rise +117% in 1H2021.</p>
<p>Management is also very excited about the prospects for the company's RCTI+ super app, which had 39.8m MAUs at the end of 1H2021 versus 9.5m a year ago, and already hit 50m MAUs in August, with expectations of 60-70m by year-end.</p>
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<p>Management is optimistic that 2H2021 can see even stronger growth and the lack of European Cup costs should see better margins at the same time. <a href="https://www.smartkarma.com/entities/media-nusantara-citra-tbk-pt" target="_blank" data-smartkarma-citation="entities:6881:1" rel="noopener">Media Nusantara Citra (MNCN IJ)</a> looks very attractive from a valuation perspective trading on 5.3x FY21E PER and 4.4x FY22E PER versus a 5-year average of 9.3x forward PER.</p>
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Media Nusantara Citra (MNCN IJ) released a strong set of 1H2021 results with overall revenues up by +23% YoY to IDR4,863,1bn, driven by advertising revenue growth of +27% YoY. Free-to-Air Television advertising revenues grew by +16% YoY to IDR4,595.1bn, whilst digital advertising revenues grew by +117% YoY to IDR889.2bn.

There was also a strong performance from e-commerce players such as Lazada Group, Shopee (Sea Ltd (SE US), Gojek &amp; Tokopedia, and BliBli.com, which block-booked primetime slots for entertainment variety shows and promotional events. Content is King

Media Nusantara Citra (MNCN IJ) continues to see strong performance from its prime-time blocking programs, which are predominantly for e-commerce companies but also players such as Telkomsel. 
Media Nusantara Citra (MNCN IJ) continues to see explosive growth from its digital adverting efforts, which saw revenues rise +117% in 1H2021.
Management is also very excited about the prospects for the company's RCTI+ super app, which had 39.8m MAUs at the end of 1H2021 versus 9.5m a year ago, and already hit 50m MAUs in August, with expectations of 60-70m by year-end.




Management is optimistic that 2H2021 can see even stronger growth and the lack of European Cup costs should see better margins at the same time. Media Nusantara Citra (MNCN IJ) looks very attractive from a valuation perspective trading on 5.3x FY21E PER and 4.4x FY22E PER versus a 5-year average of 9.3x forward PER.










Media Nusantara Citra (MNCN IJ) - Increasingly Digital with Gaming to Boot

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

Hang Seng China Enterprises Index (HSCEI INDEX)

<p>Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.</p><p>With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.</p><p>The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.</p><p>We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.</p>

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

China

Beijing Douyin Information Service Co. Ltd. provides online information and contents. The Company develops and operates short video platform, original short video community, news platform, and other related products. Beijing Douyin Information Service offers services worldwide.

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ByteDance (1439927D CH)

Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

Although Weibo (WB.US) is facing regulatory risk and growth is slow, we think valuation is attractive for its scale and monetization potential....

Roger Xie

TME: ByteDance’s Entry into Music Streaming to Further Threaten TME’s Dominance

ByteDance has made plans to launch a music streaming app in China later this year which is likely to further threaten TME's market dominance as it...

Shifara Samsudeen, FCMA, CGMA

Media Nusantara Citra (MNCN IJ) - Increasingly Digital with Gaming to Boot

MNCN continues to dominate audience share in FTA TV in Indonesia, which is yielding positive advertising returns but it is also growing its digital...

Angus Mackintosh

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas

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52-week Range

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Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

Although Weibo (WB.US) is facing regulatory risk and growth is slow, we think valuation is attractive for its scale and monetization potential....

Roger Xie

TME: ByteDance’s Entry into Music Streaming to Further Threaten TME’s Dominance

ByteDance has made plans to launch a music streaming app in China later this year which is likely to further threaten TME's market dominance as it...

Shifara Samsudeen, FCMA, CGMA

Alibaba: How Much Core Market Share Loss Has Been Priced In?

In this insight, I analyse Chinese retail sales and digital advertising market share changes and what is implied by Alibaba’s current valuation...

Wium Malan, CFA

Media Nusantara Citra (MNCN IJ) - Increasingly Digital with Gaming to Boot

MNCN continues to dominate audience share in FTA TV in Indonesia, which is yielding positive advertising returns but it is also growing its digital...

Angus Mackintosh

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas