Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

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<p>In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> were made in the past decade. </p>
<p>We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. </p>
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In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, Netmarble Corporation (251270 KS), and Kakao Corp (035720 KS) were made in the past decade. 
We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. 


Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>Back on the 27 July, Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>, majority-owned by <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a>  and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="http://ir.sogou.com/2020-07-27-Sogou-Announces-Receipt-of-a-Preliminary-Non-Binding-Proposal-to-Acquire-the-Company" target="_blank" rel="noopener">announced</a> it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS. The Offer price is a 57% premium to the undisturbed price and a two-year high.</p>
<p>Today Sogou <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a Going-Private Transaction at the same Offer price of US$9/share.</p>
<p>Separately, <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> has entered into a share purchase agreement with Tencent concerning its stake in Sogou, the completion of which will result in Tencent holding not less than 90% of the voting power in Sogou.</p>
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<p>Therefore the Merger will be in the form of a short-form merger as per section 233(7) of the <em><a href="https://www.cima.ky/upimages/commonfiles/CompaniesLaw2020Revision_1579811065.pdf" target="_blank" rel="noopener">Companies Law of the Cayman Islands</a></em> - there is no vote. There are no dissenting rights.</p>
<p>Done deal - the Merger is expected to close in the fourth quarter of 2020.</p>
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<p>More below the fold.</p>
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Back on the 27 July, Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US)  and Tencent Holdings (700 HK), announced it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS. The Offer price is a 57% premium to the undisturbed price and a two-year high.
Today Sogou entered into a definitive agreement for a Going-Private Transaction at the same Offer price of US$9/share.
Separately, Sohu.com Inc (SOHU US) has entered into a share purchase agreement with Tencent concerning its stake in Sogou, the completion of which will result in Tencent holding not less than 90% of the voting power in Sogou.


Therefore the Merger will be in the form of a short-form merger as per section 233(7) of the Companies Law of the Cayman Islands - there is no vote. There are no dissenting rights.
Done deal - the Merger is expected to close in the fourth quarter of 2020.


More below the fold.


Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

<p><strong><em>*Export Restrictions On SMIC: </em></strong>The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor firm), with American US firms being required to apply for a license in order to export certain products to SMIC. These restrictions were reportedly implemented due to "an unacceptable risk of diversion to a military end use" and confirmed the recent market speculation of US action against SMIC;</p><p><strong><em>*Unreliable Entity List: </em></strong>Mainland China’s Ministry of Commerce finally issued regulations for its “unreliable entity” list aimed at foreign companies that it deems endanger national sovereignty, security, or development interests. Companies which end up on the list could be banned from importing/exporting from/to mainland China, and may be barred from investing in the country; and</p><p><strong><em>*Taiwan Flashpoint Coming:</em></strong> Rhetoric between is also being ramped up militarily between both sides over Taiwan, as the US government is contemplating providing Taiwan with an advanced defensive system and provocations of more "high-level official visits to Taiwan" by U.S. officials.</p>

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor firm), with American US firms being required to apply for a license in order to export certain products to SMIC. These restrictions were reportedly implemented due to "an unacceptable risk of diversion to a military end use" and confirmed the recent market speculation of US action against SMIC;*Unreliable Entity List: Mainland China’s Ministry of Commerce finally issued regulations for its “unreliable entity” list aimed at foreign companies that it deems endanger national sovereignty, security, or development interests. Companies which end up on the list could be banned from importing/exporting from/to mainland China, and may be barred from investing in the country; and*Taiwan Flashpoint Coming: Rhetoric between is also being ramped up militarily between both sides over Taiwan, as the US government is contemplating providing Taiwan with an advanced defensive system and provocations of more "high-level official visits to Taiwan" by U.S. officials.

Trump Administration Continues to Ratchet Up The Pressure

Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Tata Consumer Products / Equity Bottom-Up

<p>Our objective with this weekly is to highlight notable developments in the India internet and consumer sector focusing on public and private companies. The sub-sectors covered include payment providers, e-commerce retailers,  social media platforms and consumer companies.</p>
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<li>
<a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TGBL IN)</a> to explore <a href="https://www.smartkarma.com/entities/coffee-day-enterprises-ltd" target="_blank" data-smartkarma-citation="entities:26188:1" rel="noopener">Coffee Day Enterprises (CCD IN)</a> 's hot beverage vending machine business in India at a valuation of INR 20 billion.</li>
<li>After breaking ties with Chinese counterpart <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd-69366efb-cf6b-404d-a0e4-c6b9b2e128dc" target="_blank" data-smartkarma-citation="entities:17:1" rel="noopener">Tencent Holdings (ADR) (TCEHY US)</a> , PUBG Corp now looks to <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a> 's Reliance Jio platforms to bring PUBG back to India.</li>
<li>
<a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> launches the 'Mi Store on Wheels' - a concept to increase product sales in the rural Indian market. Already at 72% of pre-pandemic levels of sales, this may just be the push they need for their return to normalcy.</li>
<li>
<a href="https://www.smartkarma.com/entities/walmart-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Walmart (WMT US)</a> owned Flipkart ties up with 1MG.COM to enter the e-pharmacy space in India and also expands its B2B offering, Flipkart wholesale to 11 new cities in India.</li>
</ul>

Our objective with this weekly is to highlight notable developments in the India internet and consumer sector focusing on public and private companies. The sub-sectors covered include payment providers, e-commerce retailers,  social media platforms and consumer companies.


Tata Consumer Products (TGBL IN) to explore Coffee Day Enterprises (CCD IN) 's hot beverage vending machine business in India at a valuation of INR 20 billion.
After breaking ties with Chinese counterpart Tencent Holdings (ADR) (TCEHY US) , PUBG Corp now looks to Reliance Industries (RIL IN) 's Reliance Jio platforms to bring PUBG back to India.

Xiaomi Corp (1810 HK) launches the 'Mi Store on Wheels' - a concept to increase product sales in the rural Indian market. Already at 72% of pre-pandemic levels of sales, this may just be the push they need for their return to normalcy.

Walmart (WMT US) owned Flipkart ties up with 1MG.COM to enter the e-pharmacy space in India and also expands its B2B offering, Flipkart wholesale to 11 new cities in India.


India Internet & Consumer Weekly | Tata Consumer Products, PUBG, Xiaomi, Flipkart

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.

Equity Capital Markets

<ul>
<li>The largest business, consumer loan, is slowing down.</li>
<li>The second largest business, cash loan, grew fast, but pulled down the margin.</li>
<li>JD Digits is trying to acquire users outside JD.com.</li>
<li>JD is also trying to get banking licenses.</li>
</ul>


The largest business, consumer loan, is slowing down.
The second largest business, cash loan, grew fast, but pulled down the margin.
JD Digits is trying to acquire users outside JD.com.
JD is also trying to get banking licenses.


JD Digits: Dependence on JD.com - A Bottleneck

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)

Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

We go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to...

Douglas Kim

Sogou/Tencent: And That's A Wrap

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received...

David Blennerhassett

Trump Administration Continues to Ratchet Up The Pressure

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor...

Thomas J. Monaco

India Internet & Consumer Weekly | Tata Consumer Products, PUBG, Xiaomi, Flipkart

Our objective with this weekly is to highlight notable developments in the India internet and consumer sector focusing on public and private...

Pranav Bhavsar

JD Digits: Dependence on JD.com - A Bottleneck

The largest business, consumer loan, is slowing down. The second largest business, cash loan, grew fast, but pulled down the margin. JD Digits is...

Ming Lu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

We go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to...

Douglas Kim

Sogou/​Tencent: And That's A Wrap

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received...

David Blennerhassett

Trump Administration Continues to Ratchet Up The Pressure

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor...

Thomas J. Monaco

India Internet & Consumer Weekly | Tata Consumer Products, PUBG, Xiaomi, Flipkart

Our objective with this weekly is to highlight notable developments in the India internet and consumer sector focusing on public and private...

Pranav Bhavsar

JD Digits: Dependence on JD.com - A Bottleneck

The largest business, consumer loan, is slowing down. The second largest business, cash loan, grew fast, but pulled down the margin. JD Digits is...

Ming Lu

Sogou/Tencent: And That's A Wrap