Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

While AML (Anti- Monopoly Law) posed as a share overhang first on <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> starting late 2020, the regulator's recent focus shifted towards the smaller e-commerce platforms, Pin Duo Duo and Meituan. On Monday, 10 May 2021, Shanghai Consumer Council, a quasi-government consumer protection agency, called a meeting with <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> representatives to address counterfeit goods and consumers' and laborers' complaints, according to Wall Street Journal.  PDD and Meituan shares fell 9% and 7%, respectively, on the day, although PDD shares recovered some grounds on Tuesday.    Unlike the share overhang lifting for Alibaba with the announcement of the historic fine on 10 April, I believe share overhang will continue to plague the PDD shares as the uncertainty persists.  This is one of the reasons I maintain my cautious stance on the stock.  I flagged in my Webinar on PDD, <a href="https://www.smartkarma.com/insights/smartkarma-webinar-pinduoduo-pdd-us-know-when-to-fold" target="_blank" data-smartkarma-citation="insights:49910" rel="noopener">Smartkarma Webinar | Pinduoduo (PDD US): Know When to Fold</a> on 7 April, that AML risk could be even more impactful for the leading group buying platform because of its greater reliance on promotions and marketing subsidies which is one of the target violation investigations.  Moreover, I continue to be cautious about the stock because of its expensive valuation (P/Sales) and the risk of deteriorating investors' sentiment as revenue growth decelerates. My previous reports on Pin Duo Duo: <a href="https://www.smartkarma.com/insights/china-e-commerce-robust-consumption-data-hints-at-online-spending-spree" target="_blank" data-smartkarma-citation="insights:50798" rel="noopener">China E-Commerce: Robust Consumption Data Hints at Online Spending Spree</a> <a href="https://www.smartkarma.com/insights/pin-duo-duo-pdd-us-four-charts-to-make-you-want-to-run" target="_blank" data-smartkarma-citation="insights:49333" rel="noopener">Pin Duo Duo (PDD US): Four Charts To Make You Want to Run</a><a href="https://www.smartkarma.com/insights/pinduoduo-pdd-us-know-when-to-fold-know-when-to-run" target="_blank" data-smartkarma-citation="insights:48659" rel="noopener">Pinduoduo (PDD US): Know When to Fold, Know When to Run</a>

While AML (Anti- Monopoly Law) posed as a share overhang first on Alibaba Group (BABA US) starting late 2020, the regulator's recent focus shifted towards the smaller e-commerce platforms, Pin Duo Duo and Meituan. On Monday, 10 May 2021, Shanghai Consumer Council, a quasi-government consumer protection agency, called a meeting with Meituan (3690 HK) and Pinduoduo (PDD US) representatives to address counterfeit goods and consumers' and laborers' complaints, according to Wall Street Journal.  PDD and Meituan shares fell 9% and 7%, respectively, on the day, although PDD shares recovered some grounds on Tuesday.    Unlike the share overhang lifting for Alibaba with the announcement of the historic fine on 10 April, I believe share overhang will continue to plague the PDD shares as the uncertainty persists.  This is one of the reasons I maintain my cautious stance on the stock.  I flagged in my Webinar on PDD, Smartkarma Webinar | Pinduoduo (PDD US): Know When to Fold on 7 April, that AML risk could be even more impactful for the leading group buying platform because of its greater reliance on promotions and marketing subsidies which is one of the target violation investigations.  Moreover, I continue to be cautious about the stock because of its expensive valuation (P/Sales) and the risk of deteriorating investors' sentiment as revenue growth decelerates. My previous reports on Pin Duo Duo: China E-Commerce: Robust Consumption Data Hints at Online Spending Spree Pin Duo Duo (PDD US): Four Charts To Make You Want to RunPinduoduo (PDD US): Know When to Fold, Know When to Run        

Pin Duo Duo (PDD US): Whipping in the Wind

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

<div><a href="https://www.smartkarma.com/entities/ximalaya-inc" target="_blank" data-smartkarma-citation="entities:33232:1" rel="noopener">Ximalaya (XIMA US)</a>, the largest online audio platform in China, is looking to raise around US$1bn in its US listing. </div><div>As of 1Q21, it had 250m average MAUs, which included 104m mobile MAUs through its apps and 146m MAUs through internet-of-things (IoT) and other third-party platforms. As per CIC, it accounted for 75% of total mobile listening time among all online audio platforms in China. It had 5.2m active content creators in 2020.</div><div>In our previous notes,<a href="https://www.smartkarma.com/insights/ximalaya-pre-ipo-the-positives-a-whole-lot-of-listening" target="_blank" rel="noopener"> Ximalaya Pre-IPO - The Positives - A Whole Lot of Listening</a>, and  <a href="https://www.smartkarma.com/insights/ximalaya-pre-ipo-the-negatives" target="_blank" rel="noopener">Ximalaya Pre-IPO - The Negatives</a> we have covered the positive and negative aspects of the deal.</div><div>In this note, we will compare Ximalaya with some of its listed peers.</div>

Ximalaya (XIMA US), the largest online audio platform in China, is looking to raise around US$1bn in its US listing. As of 1Q21, it had 250m average MAUs, which included 104m mobile MAUs through its apps and 146m MAUs through internet-of-things (IoT) and other third-party platforms. As per CIC, it accounted for 75% of total mobile listening time among all online audio platforms in China. It had 5.2m active content creators in 2020.In our previous notes, Ximalaya Pre-IPO - The Positives - A Whole Lot of Listening, and  Ximalaya Pre-IPO - The Negatives we have covered the positive and negative aspects of the deal.In this note, we will compare Ximalaya with some of its listed peers.

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>The government warned that Meituan should raise delivery workers’ benefits and reduce their workload.</li>
<li>The CEO quoted a poem on a social media and we believe all media reports misunderstand it.</li>
<li>We reduced the target price to HK$230.</li>
</ul>
Our previous coverage on Meituan:
<ul>
<li><a href="https://www.smartkarma.com/insights/meituan-3690-hk-forthcoming-punishment-will-benefit-alibaba" target="_blank" data-smartkarma-citation="insights:50794" rel="noopener">Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba</a></li>
<li>
<a href="https://www.smartkarma.com/insights/meituan-3690-hk-meituan-spending-money-but-agents-accumulating-customers-for-themselves" target="_blank" data-smartkarma-citation="insights:50118" rel="noopener">Meituan (3690 HK): Meituan Spending Money, But Agents Accumulating Customers for Themselves</a> </li>
</ul>


The government warned that Meituan should raise delivery workers’ benefits and reduce their workload.
The CEO quoted a poem on a social media and we believe all media reports misunderstand it.
We reduced the target price to HK$230.

Our previous coverage on Meituan:

Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba

Meituan (3690 HK): Meituan Spending Money, But Agents Accumulating Customers for Themselves 


Meituan (3690 HK): CEO's Poem, as Response to Authorities' Sweat Shop Warning, Could Be Disaster

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

International Games System / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/international-games-system-co-ltd" target="_blank" data-smartkarma-citation="entities:3486:1" rel="noopener">International Games System (3293 TT)</a> (IGS) is one of the leading social online gaming companies in Taiwan. IGS's core products include social casino games, casual games, and arcade games.Despite risks including declining sales of Arcade Games and potential regulatory risks associated with social casino online games, we believe many investors will focus on the positives and continue to add to their positions of this undervalued stock. Key catalysts of the company are as follows:<ul>
<li>Tremendous growth in online/mobile social casino &amp; casual games</li>
<li>Strong sales growth in Jan-Apr 2021 </li>
<li>Improving profit margins</li>
<li>High dividend payout</li>
</ul>

International Games System (3293 TT) (IGS) is one of the leading social online gaming companies in Taiwan. IGS's core products include social casino games, casual games, and arcade games.Despite risks including declining sales of Arcade Games and potential regulatory risks associated with social casino online games, we believe many investors will focus on the positives and continue to add to their positions of this undervalued stock. Key catalysts of the company are as follows:
Tremendous growth in online/mobile social casino &amp; casual games
Strong sales growth in Jan-Apr 2021 
Improving profit margins
High dividend payout


International Games System: An Undervalued Online Social Gaming Stock in Taiwan

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
On the 28 February, e-commerce and payment solutions provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In <a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a>, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.
</div>


On the 28 February, e-commerce and payment solutions provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders approved at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.


China Youzan (8083 HK): Reality Check As Shares Rollover

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Pin Duo Duo (PDD US): Whipping in the Wind

Pin Duo Duo shares were rocked on Monday by the news that regulators called PDD to warn about counterfeit goods. Find out why regulatory risk and...

Mitchell Kim

Ximalaya Pre-IPO - Peer Comparison

Ximalaya (XIMA US), the largest online audio platform in China, is looking to raise around US$1bn in its US listing. As of 1Q21, it had 250m MAUs...

Sumeet Singh

Meituan (3690 HK): CEO's Poem, as Response to Authorities' Sweat Shop Warning, Could Be Disaster

The government warned that Meituan should raise delivery workers’ benefits and reduce their workload. The CEO quoted a poem on a social media and...

Ming Lu

China Youzan (8083 HK): Reality Check As Shares Rollover

Buying China Youzan means you are buying the Youzan Tech IPO at an Implied EV/sales multiple. That's around a 10% premium to peers currently. The...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

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Dividend (Yield)

Pin Duo Duo (PDD US): Whipping in the Wind

Pin Duo Duo shares were rocked on Monday by the news that regulators called PDD to warn about counterfeit goods. Find out why regulatory risk and...

Mitchell Kim

Ximalaya Pre-IPO - Peer Comparison

Ximalaya (XIMA US), the largest online audio platform in China, is looking to raise around US$1bn in its US listing. As of 1Q21, it had 250m MAUs...

Sumeet Singh

Meituan (3690 HK): CEO's Poem, as Response to Authorities' Sweat Shop Warning, Could Be Disaster

The government warned that Meituan should raise delivery workers’ benefits and reduce their workload. The CEO quoted a poem on a social media and...

Ming Lu

International Games System: An Undervalued Online Social Gaming Stock in Taiwan

International Games System (3293 TT) is high growth, social games provider in Taiwan that we believe is undervalued versus leading global social...

Douglas Kim

China Youzan (8083 HK): Reality Check As Shares Rollover

Buying China Youzan means you are buying the Youzan Tech IPO at an Implied EV/sales multiple. That's around a 10% premium to peers currently. The...

David Blennerhassett