Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On Friday 30 October in the morning, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a><a href="https://www.prosus.com/news/media-release-prosus-to-acquire-us%245-billion-of-na" target="_blank" rel="noopener">announced</a> that it would conduct a US$5bn buyback of Prosus shares and <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). 
There were some pleasant, shareholder-friendly comments. 
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In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.
It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.

On Friday 30 October in the morning, Prosus (PRX NA)announced that it would conduct a US$5bn buyback of Prosus shares and Naspers (NPN SJ) shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). 
There were some pleasant, shareholder-friendly comments. 



In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.
It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.

Naspers & Prosus - A $5bn Catalyst Arrives

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Hong Kong Exchanges and Clearing / Event-Driven

Hong Kong Exchanges and Clearing (388 HK)

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

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 Bottom-Up

<ul class="">
<li>Alibaba (BABA)’s subsidiary, Ant Group, is profitable.</li>
<li>Xiaomi had weak revenue and weaker profit in 2Q20.</li>
<li>Tencent Music plans to issue notes.</li>
<li>Bilibili (BILI) grew strongly, but it also had a big loss. Overvalued.</li>
</ul>


Alibaba (BABA)’s subsidiary, Ant Group, is profitable.
Xiaomi had weak revenue and weaker profit in 2Q20.
Tencent Music plans to issue notes.
Bilibili (BILI) grew strongly, but it also had a big loss. Overvalued.


China Internet Weekly (31Aug2020): Q2 Result of Weak Xiaomi, Overheated BILI, DADA, and BITA

<ul>
<li>The growth rates of total revenue and game revenue continued to accelerate in 2Q20. Minor businesses as a whole grew by 44% YoY, even more rapidly than 21% YoY for game.</li>
<li>We expect total revenue will grow by 22% in 2020 versus 3% in 2019 (Exhibit 3). </li>
<li>We believe the operating margin decline were due to the losses from minor businesses, while the game operating margin was healthy.</li>
<li>Based on US game operators’ P/E ratios, we set an upside of 19% and a price target of US$566.</li>
</ul>


The growth rates of total revenue and game revenue continued to accelerate in 2Q20. Minor businesses as a whole grew by 44% YoY, even more rapidly than 21% YoY for game.
We expect total revenue will grow by 22% in 2020 versus 3% in 2019 (Exhibit 3). 
We believe the operating margin decline were due to the losses from minor businesses, while the game operating margin was healthy.
Based on US game operators’ P/E ratios, we set an upside of 19% and a price target of US$566.


NetEase (NTES): Better Growth in 2Q20, Margin Down, But Not in Game

<ul class="">
<li>Social entertainment accounted for 68% of total revenue, but its recovery was limited in 2Q20.</li>
<li>Social entertainment is the only profit source in TME. Therefore we believe the operating margin will decline in 2020.</li>
<li>We expect a downside of 28% and downgrade TME to Sell.</li>
</ul>


Social entertainment accounted for 68% of total revenue, but its recovery was limited in 2Q20.
Social entertainment is the only profit source in TME. Therefore we believe the operating margin will decline in 2020.
We expect a downside of 28% and downgrade TME to Sell.


Tencent Music (TME): The Profit Source Still Weak in 2Q20, Downgrade to Sell

China

Tencent Music Entertainment operates an online music entertainment platform in China. The Company offers platform that comprises of online music, recording, music-centric live streaming enabling users to discover, listen, sing, watch, perform, and socialize music.

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Tencent Music (TME US)

Naspers & Prosus - A $5bn Catalyst Arrives

Naspers/Prosus finally has a catalyst. It's not a HUGE catalyst but US$5bn is US$5bn. The trick is to think about where this places you at the end...

Travis Lundy

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

China Internet Weekly (31Aug2020): Q2 Result of Weak Xiaomi, Overheated BILI, DADA, and BITA

Alibaba (BABA)’s subsidiary, Ant Group, is profitable. Xiaomi had weak revenue and weaker profit in 2Q20. Tencent Music plans to issue...

Ming Lu

NetEase (NTES): Better Growth in 2Q20, Margin Down, But Not in Game

The growth rates of total revenue and game revenue continued to accelerate in 2Q20. Minor businesses as a whole grew by 44% YoY, even more rapidly...

Ming Lu

Tencent Music (TME): The Profit Source Still Weak in 2Q20, Downgrade to Sell

Social entertainment accounted for 68% of total revenue, but its recovery was limited in 2Q20. Social entertainment is the only profit source in...

Ming Lu

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