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.

Equity Capital Markets

The Chinese search giant <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  has set the terms for its IPO where it plans to issue 95m shares at a maximum indicative price of HK$295 per share. At the above price, Baidu will raise net proceeds of HK$27.6bn (approx. US$3.6bn). Each ADS represents eight ordinary shares of the company, and the maximum HK offer price implies approx. US$304.3 per ADS, about 12% premium to Baidu’s last close price of US$272.38 per ADS. The Hong Kong offering of 95m shares will constitute approx. 3.4% of the extended share capital of the company.In our previous insight on Baidu’s secondary listing, we discussed Baidu’s business segments and highlighted that the next phase of growth for the company will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years. Baidu plans to use 50% of its net IPO proceeds on investing in enhancing its AI and autonomous driving capabilities.

The Chinese search giant Baidu (BIDU US)  has set the terms for its IPO where it plans to issue 95m shares at a maximum indicative price of HK$295 per share. At the above price, Baidu will raise net proceeds of HK$27.6bn (approx. US$3.6bn). Each ADS represents eight ordinary shares of the company, and the maximum HK offer price implies approx. US$304.3 per ADS, about 12% premium to Baidu’s last close price of US$272.38 per ADS. The Hong Kong offering of 95m shares will constitute approx. 3.4% of the extended share capital of the company.In our previous insight on Baidu’s secondary listing, we discussed Baidu’s business segments and highlighted that the next phase of growth for the company will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years. Baidu plans to use 50% of its net IPO proceeds on investing in enhancing its AI and autonomous driving capabilities.

Baidu Secondary: SOTP Offers Decent Upside with Conservative Assumptions

The Chinese internet search giant <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  has passed its listing hearing for a secondary listing on the Hong Kong Stock Exchange. Baidu’s secondary listing document didn’t provide the terms of the IPO, however, according to news media outlets, Baidu could raise as much as US$4-5bn through its HKEX offering.Though Baidu has been known as a search engine for the past two decades, the company has finally been able to monetise its efforts in AI and related technologies. Baidu’s core online advertising business growth has slowed down (negative over the last two years), and at the same time, we remain concerned about the prospects of <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a> as well as recently acquired YY Live business from <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a> . However, we believe Baidu’s next phase of growth will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years.We believe the motive behind Baidu’s secondary listing close to its home is far from raising funds to fuel its business growth as the company is rich in cash. Baidu reported cash and cash equivalents of US$5.5bn and short-term investments of US$19.3bn as at the end of December 2020. Cash and short-term investments together accounted for nearly 50% of the company’s total assets as of that date. On the other hand, Baidu’s total debt of around US$11.6bn accounted for about 60% of the cash and short-term investment balance.

The Chinese internet search giant Baidu (BIDU US)  has passed its listing hearing for a secondary listing on the Hong Kong Stock Exchange. Baidu’s secondary listing document didn’t provide the terms of the IPO, however, according to news media outlets, Baidu could raise as much as US$4-5bn through its HKEX offering.Though Baidu has been known as a search engine for the past two decades, the company has finally been able to monetise its efforts in AI and related technologies. Baidu’s core online advertising business growth has slowed down (negative over the last two years), and at the same time, we remain concerned about the prospects of iQIYI Inc (IQ US) as well as recently acquired YY Live business from JOYY (YY US) . However, we believe Baidu’s next phase of growth will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years.We believe the motive behind Baidu’s secondary listing close to its home is far from raising funds to fuel its business growth as the company is rich in cash. Baidu reported cash and cash equivalents of US$5.5bn and short-term investments of US$19.3bn as at the end of December 2020. Cash and short-term investments together accounted for nearly 50% of the company’s total assets as of that date. On the other hand, Baidu’s total debt of around US$11.6bn accounted for about 60% of the cash and short-term investment balance.

Baidu Secondary Listing: At the Crossroads

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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.

Founded as a search engine business in 2000, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> is today a leading internet platform with a focus on AI. Baidu passed its Hong Kong listing committee hearing and could raise up to $5 billion through a secondary listing, according to press reports. Baidu is following hot in the heels of <a href="https://www.smartkarma.com/entities/autohome-inc-adr" target="_blank" data-smartkarma-citation="entities:20234:1" rel="noopener">Autohome Inc (Adr) (ATHM US)</a>, by joining a new wave of Hong Kong secondary listings set to hit the screens in the coming months. Baidu like several companies which pursued secondary listings does not require the funds as its cash-rich and highly cash generative. <div class="content-highlight">We think that Baidu is making great strides in expanding its total addressable market (TAM) through ongoing investments. Baidu’s TAM for knowledge and information-centric Internet platforms and non-advertising business (excluding Robotaxi) in China is estimated at RMB342 billion and RMB4,134 billion in 2025, respectively, according to CIC. In combination with the potential valuation upside to the last close price (based on SoTP), we think that the equity story is attractive. </div>

Founded as a search engine business in 2000, Baidu (BIDU US) is today a leading internet platform with a focus on AI. Baidu passed its Hong Kong listing committee hearing and could raise up to $5 billion through a secondary listing, according to press reports. Baidu is following hot in the heels of Autohome Inc (Adr) (ATHM US), by joining a new wave of Hong Kong secondary listings set to hit the screens in the coming months. Baidu like several companies which pursued secondary listings does not require the funds as its cash-rich and highly cash generative. We think that Baidu is making great strides in expanding its total addressable market (TAM) through ongoing investments. Baidu’s TAM for knowledge and information-centric Internet platforms and non-advertising business (excluding Robotaxi) in China is estimated at RMB342 billion and RMB4,134 billion in 2025, respectively, according to CIC. In combination with the potential valuation upside to the last close price (based on SoTP), we think that the equity story is attractive. 

Baidu Secondary Listing: Searching for the Next Big Thing

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

Since my last detailed look at <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>’s valuation back in September last year (<a href="https://www.smartkarma.com/insights/baidu-strategies-for-operating-in-an-industry-in-decline" target="_blank" data-smartkarma-citation="insights:43393" rel="noopener">Baidu: Strategies for Operating in an Industry in Decline</a>) Baidu’s share price has witnessed a meteoric rise of 170%, re-rating from 6.2x to 16.9x NTM EV/EBITDA.This has been driven by several catalysts, such as M&amp;A into live streaming, increased share buybacks, the continued prospect of a Hong Kong listing, and improved reported earnings, but most-of-all, by their announcement that they plan to start an intelligent electric vehicle company in strategic partnership with <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a>. Following their recent 4Q20 results, management also went to great lengths to highlight the revenue growth acceleration in their “Non-marketing Baidu Core” sub-segment, emphasising the shift away from their traditional Core Search Advertising, or mobile ecosystem, to diversify revenue streams. In this insight, I take a closer look at this sub-segment and analyse what the current market value implies for those operations, as well as their future “intelligent electric vehicle” venture.

Since my last detailed look at Baidu (BIDU US)’s valuation back in September last year (Baidu: Strategies for Operating in an Industry in Decline) Baidu’s share price has witnessed a meteoric rise of 170%, re-rating from 6.2x to 16.9x NTM EV/EBITDA.This has been driven by several catalysts, such as M&amp;A into live streaming, increased share buybacks, the continued prospect of a Hong Kong listing, and improved reported earnings, but most-of-all, by their announcement that they plan to start an intelligent electric vehicle company in strategic partnership with Geely Auto (175 HK). Following their recent 4Q20 results, management also went to great lengths to highlight the revenue growth acceleration in their “Non-marketing Baidu Core” sub-segment, emphasising the shift away from their traditional Core Search Advertising, or mobile ecosystem, to diversify revenue streams. In this insight, I take a closer look at this sub-segment and analyse what the current market value implies for those operations, as well as their future “intelligent electric vehicle” venture.

Baidu: A Closer Look at Non-Marketing Baidu Core. What Are We Paying for EV?

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight. We continue to attribute much of EM’s outperformance to the intact downtrend in the US dollar (DXY). As long as weakness in the DXY persists we believe EM’s outperformance is likely to continue.

Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight. We continue to attribute much of EM’s outperformance to the intact downtrend in the US dollar (DXY). As long as weakness in the DXY persists we believe EM’s outperformance is likely to continue.

EM Remains Global Leadership -- Remain Overweight

China

JOYY Inc. operates a global social media platform. The Company offers platform which enables users to interact with each other in real time through online live media by creating, sharing, and enjoying a vast range of entertainment content and activities. JOYY serves customers in China.

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JOYY (YY US)

Baidu Secondary: SOTP Offers Decent Upside with Conservative Assumptions

Our SOTP Valuation implies HK$303.7 per ordinary share outstanding, a 3% premium to the company’s maximum HK offer price of HK$295 per share and we...

Shifara Samsudeen, FCMA, CGMA

Baidu Secondary Listing: At the Crossroads

Baidu’s core online advertising business growth has been slowing down, however, Baidu's efforts in AI and advanced technologies have begun to bear...

Shifara Samsudeen, FCMA, CGMA

Baidu Secondary Listing: Searching for the Next Big Thing

Baidu could raise up to $5 bn through a secondary listing, according to press reports. In combination with the upside to our SoTP valuation, we...

Arun George

Baidu: A Closer Look at Non-Marketing Baidu Core. What Are We Paying for EV?

In this insight, I take a closer look at “Non-marketing Baidu Core” and analyse what the current market value implies for those operations, as well...

Wium Malan, CFA

EM Remains Global Leadership -- Remain Overweight

Price and RS uptrends for the MSCI EM index continues to underpin our bullish outlook for emerging market equities -- remain overweight.

Vermilion Research

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