TMT/Internet

• Zai Lab HK Secondary Listing – Large Deal to Digest but past Deals Have Done Well
• ZTO Express Secondary Listing – Fast Growth but It Hasn’t Been Flowing Down to Earnings
• Huazhu HK Secondary Listing – Early Look – Needs the Cash More than Most Secondary Candidates

Apple has come out with an announcement yesterday that they will launch a new iPad and no iPhone.  The good news is that BYD Electronics (285 HK)is included in Apple’s supplier list to manufacture around 20-30% of iPad, and investors have been expecting this – causing the ultra optimism reflected in the share price YTD performance, beating the peers and even Apple Inc (AAPL US) . 

Unless the new iPad is selling like hotcakes and the domestic wearables and 5G migration really helps to increase demand, it is hard to see why BYD Electronics’ share price run-up is justifiable. 

• Money Forward (3994 JP) provides online accounting software for Japan’s SMEs, providing all of the time-saving tools that small business owners need to grow. It is the Japanese version of Xero Ltd (XRO AU) or Quickbooks by Intuit Inc (INTU US) 
• Money Forward (MF) and its domestic peer freee (4478 JP) dominate the Japanese online market, which is growing in the region of 60-70% YoY.
• There is a huge addressable market with low online penetration. MF has the potential to build a strong competitive moat, in the absence of the global majors.
• Today, MF looks similar to Xero in 2013. If MF follows the same growth trajectory, investors could be looking at a 9-bagger.  

Sumo Logic provides best-in-class cloud monitoring, log management, cloud SIEM tools and real-time insights for web and SaaS based apps. Company is looking for innovative ways to reduce costs, exposure to security vulnerabilities and helps organizations at every stage of digital transformation. Sumo Logic has 2,100+ customers, including Airbnb, Anheuser-Busch, Samsung, Fastly, Okta, Sharp, One Medical, Teladoc, Fidelity, Medallia. We have positive view on Sumo Logic despite COVID-19 pandemic and intense competition from Elastic, Splunk and Datadog. Sumo Logic stock currently trades at 10x our FY 2021 revenue estimate of ~$200 million and our Sep 2021 price target of $39 a share implies ~56% upside potential keeping in mind $400 million of cash and cash equivalents after successful IPO.

Sumo Logic offered ~15 million shares at $22 a share (above the range) and we estimate net proceeds from the offering to reach $300 million. Tiger Global Management has indicated an interest in purchasing up to 10% of the shares in this offering at IPO price. Lead underwriters are Morgan Stanley, J.P. Morgan, RBC Capital Markets and Jefferies.

Palantir is ready to complete its Direct Public Listing on September 23rd. 

Our valuation analysis suggests an implied market cap of $29.7 billion and a target price of $13.7 per share for Palantir (49% higher than the base price of $9.2 per share). The IPO price range is from $11.1 (low) to $16.6 per share (high). Assuming Direct Public Listing (DPL) market cap of $20 billion and diluted shares of 2.17 billion, this suggests $9.2 per share. Given the solid upside, we have a positive view of this DPL.

There are three key positives with Palantir which we believe are likely to outweigh its negatives, leading many investors to value this company at nearly $30 billion.

• First, we believe the company’s accelerating sales growth since the launch of its Foundry product in 2017 is likely to be valued highly. The company’s sales growth is clearly much higher than its peers in 2020. 
• Second, Palantir has picked a great time to complete its public offering with great investors demand high-quality software-related stocks this year.

• Third, Palantir has been enjoying a noticeable improvement in its operating margins and the company possesses a strong balance sheet. 

On 20 May 2020, the US Senate passed the  S. 945 the Holding Foreign Companies Accountable Act, an act which could force the delisting of US-listed Chinese companies should they be in noncompliance with US accounting standards. Shortly after, the U.S. House of Representatives introduced its version of the Bill which has yet to pass.

This bill requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the Public Company Accounting Oversight Board (PCAOB) is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board. Furthermore, if the board is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trade on a national exchange or through other methods. 

This creates a conundrum, if not an impossibility, as Chinese regulators forbid foreign regulatory bodies, such as the PCAOB, from inspecting accounting firms based in China. 

The Act, which is still to be ratified by the House, reconciled with the Senate bill, and approved by President Trump, provides even greater impetus for “take private” transactions (often expecting to re-list elsewhere at higher valuations) and secondary listings in markets outside of the United States, such as Hong Kong and Shanghai.

Hong Kong is laying out the welcome mat. First the HKEx amended its listing rules in April 2018 to allow companies with multiple classes of shares with individual-controlled voting rights to sell shares in Hong Kong. This new listing regime enabled secondary listings for the likes of JD.com Inc (ADR) (JD US) / JD.com (HK) (9618 HK) and Alibaba Group (BABA US) / Alibaba Group (9988 HK). Further changes to the Listing Rules are anticipated to accommodate companies with corporate shareholders with weighted voting rights – such as Tencent Music (TME US).

But on occasion, the consideration paid under these take-private “homecoming” transactions are not always considered fair by the investment community.

The recently completed 58.Com Inc Adr (WUBA US) (58.com: Foregone Conclusion Amidst Proxy Advisor Pushback) faced considerable proxy advisor backlash. Similarly, Sina Corp (Class A) (SINA US)‘s preliminary non-binding “going private” proposal from its chairman/CEO,  is widely viewed as a low-balled, opportunistic Offer (Sina Corp: Management Buyout Offer). 

For Cayman Islands incorporated companies, such as SINA and 58.com, Section 238 of the Companies Law (2020 Revision) may provide scope for dissenting shareholders to a merger/take-private transaction to have the Grand Court determine the fair value of their shares.

That right to dissent also hinges off how these take-private transactions are undertaken,

As of today, four cases have resulted in final judgments handed down by the Grand Court of Cayman – Integra Group, Shanda Games Ltd Spons Adr (GAME US), Qunar Cayman Islands (QUNR US), and most recently, Nord Anglia Education (NORD US).

The life of LINE Corp (3938 JP) as a listed entity with a listed future is now entering its Zombie Twilight. The Tender Offer by Softbank Corp (9434 JP) and Naver Corp (035420 KS) to buy out minorities has ended and we now move on to the next stage. 

Today the results of the Tender Offer for LINE were announced and the Offerors managed to acquire a sum total of 31,234,670 shares leaving about 25,000,000 shares left over un-tendered (plus options and converts un-converted). That is 25,000,000 million shares worth of zombie shareholders who will roam the markets until the shares’ final retirement after the EGM. 

That is $1.25bn+ worth of zombies at the Tender Offer Price. 

The now-zombies defended their boundary, keeping the shares above the ¥5380 Tender Offer Price line from late June until the day before the Tender Offer went ex-.

The period between now and the delisting of LINE could be 4-5 months. It could take 5-6 months to get one’s money, unless one is going after appraisal rights. Then it will take a little longer, unless it takes a lot longer. 

This situation is different from the post-Tender trading situation of FamilyMart Co Ltd (8028 JP) and one should not expect the squeeze which happened there. 

The much-anticipated acquisition by NVIDIA of Arm from Softbank was formally announced on Monday. The transaction is valued at $40 billion, an approximately equal combination of cash and NVIDIA stock.

On the surface the deal looks strategically solid from NVIDIA’s perspective. It places the company at the center of Arm’s one hundred and eighty billion connected device ecosystem. Perhaps even more importantly, it opens up the possibility of an outright assault on Intel’s data center dominance by adding Arm-based server processors to complement NVIDIA’s existing lineup of GPUs and interconnect.

Underneath the surface however, this deal is fraught with issues and risks. While Arm has been a very successful company, their growth is flatlining as smartphone sales stagnate. Furthermore, we see the rise of RISC-V as a very real threat to Arm’s business model in the coming years. Arm has never competed with its customers. Under NVIDIA ownership, this will be virtually impossible to avoid.

From a regulatory perspective, Arm IP moving under american ownership will raise the very real prospect that this technology will become a future weapon in the US-China trade and technology wars. In today’s environment, it’s difficult to see why China would agree to facilitate that possibility.

All in all we think this deal is not as good as it seems on the surface and that it will be practically impossible to get through the regulatory approval process. 

Examining Ming Yuan Cloud by including its results from when it traded on the Shenzhen stock exchange as Shenzhen MingYuan Software paints a picture of a company that has enjoyed transformative growth after focusing on cloud and SaaS. We have some governance concerns and our in-depth look at the numbers suggests the company’s exposures may not be quite as attractive as they look on the surface, but nevertheless prospects look relatively good and with Snowflake leading the way with extremely slick marketing of its IPO we feel Ming Yuan Cloud could also reap some of the benefit of the excitement that is being generated.

Kakao Games is undergoing the second day of a well-anticipated correction.

It is now down -7.7% this morning. The current TV is already one fourth that of yesterday, which soared to ₩1.5tril, 25% of the market cap.

Again, as well expected, the foreign short-term IPO money has all left Kakao G. As of the previous close, the FO % was 0.59%, down by 2.04 percent point from 2.63%. Presumably, it is even lower now.

At the current price, the PERs range from 63.4x to 85.2x on FY20E earnings (an EPS band of ₩800~1,074).

Even at today’s harshly corrected price, Kakao G still stands at Korea’s most expensive game stock as even the lower end of the PER range is higher than Netmarble, which is the second over-inflated game company.

Hexaware Technologies (HEXW IN) took it down to the wire. The Reverse Book Build got to the 90.0% threshold at a little past 2:30pm local time, and small shareholders continued putting in offers until 5pm local time. 

It looks, from a combination of the BSE data and NSE data that we have a Discovered Price. 

Now we wait. 

More comment below the fold. 

Ming Yuan Cloud offers software dedicated to the real estate industry and is the market leader in China. The company has already secured a bevy of high-class investors as cornerstones with Sequoia, GIC, Fidelity and Blackrock on board. We examine the company’s business model and market exposure below.

Ming Yuan Cloud Group (MYCG HK) is the leading software solution provider for property developers in China with a market share of 18.5% as measured by revenue in 2019, according to Frost & Sullivan. Ming Yuan has launched its IPO at a price range of $15.00-16.50 per share. At the mid-point of the IPO price range, Ming Yuan will raise net proceeds of HK$5,635.9 million ($727 million). Six cornerstone investors will subscribe for 36.3% of the shares under the global offering, at the mid-point of the IPO price range. The cornerstone investors are Hillhouse Capital, GIC, China Structural Reform Fund, Sequoia Capital, BlackRock and Fidelity International. 

iHuman Inc. (IH US) is looking to raise US$100m in its upcoming IPO in the U.S.

iHuman is a childhood edutainment company in China. The company develops products and services that caters to the education demands of children aged between three and eight. The company has developed and now operates the widely popular app, iHuman Chinese. It also operates other apps such as iHuman English World, iHuman Pinyin, and etc. On top of its app business, the company sells offline products that include learning materials, smart reading pens, building blocks, and learning consoles.

In this note, we will look at the company’s background, analyze its financials and operating metrics, and share our thoughts.

• Patrick Drahi, through Next Private has launched an agreed takeover offer for the 22.42% shares of Altice Nv A (ATC NA) he does not already own, with the aim of taking it private and delisting the company. The minimum acceptance level to achieve this is 95%.
• The bid price represents 2.8x EV/NTM Revenue, 7.2x EV/NTM EBITDA and 23.8x EV/NTM EBIT (Capital IQ consensus). 
• Altice is one of Europe’s biggest HY issuers, rated B by S&P.
• The offer price takes advantage of the dismal performance of European telcos on the stock market following the onset of the Covid crisis. It is difficult to believe that shareholders will accept an offer below recent highs in February, and there are chances of an improved offer. Performance is improving at SFR (France), the company’s biggest subsidiary.
• The shares are trading between EUR 4.15 and 4.12, with a close on Tuesday 15 of EUR 4.14, with a volume traded of c. EUR 24 mn.
• I recommend using this price levels of EUR 4.12-4.15 as an entry point and holding out for an improved offer.

In this insight, we provide a valuation analysis of JFrog which raised the IPO price range to $39 to $41 per share from $33 to $37 due to higher investors’ demand. The company and existing shareholders are selling 8 million shares and 3.57 million shares, respectively. At $41 per share, the JFrog IPO could raise $474 million. 

Our valuation analysis suggests an implied market cap of $5.0 billion and a target price of $55.2 per share for JFrog. The IPO price range is from $39 to $41 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 35% upside to this price level. Given the solid upside, we have a positive view of this stock.

Chindata (CD US) is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost & Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. 

Positive news flow on Nintendo is increasing. Leaks regarding the new upgraded version of the Switch due next year are increasing and interesting, while the company has also asked suppliers to boost production of the Switch… again. There are also increasing signs of building third party support for the platform. What is pertinent is that this time it appears that third parties are finding some real success on the platform. We think this is underappreciated by the market and enables further upside.

• On 10 September, Lorca Telecom Bidco SAU communicated to the CNMV that the offer had been accepted by more than 50% of the shares of Masmovil Ibercom (MAS SM) (therefore meeting the minimum accepance condition).
• On 11 September ended the acceptance period of the takeover bid by Lorca Telecom Bidco SAU for Masmovil Ibercom (MAS SM) .
• MásMóvil last closed at EUR 22.42
  • a gross spread of 0.35% to the takeover offer.
• Using ten estimates, the mean target price on Capital IQ consensus is 25.5 per share.
• Polygon sent a second letter to the CNMV with valuation details backing its assertions and refuting PwC’s valuation, on which the CNMV based its judgment that Lorca’s bid was fair.
  • In a nutshell, regarding the price offered, Polygon has expressed its “complete disagreement” with the content and conclusions of the valuation report published as an annex to the brochure and issued by PwC on July 24.
  • Polygon believes that the PwC valuation is at least “seven or eight euros below a fair offer” (i.e. in the neighbourhood of EUR 30).
• I believe that Polygon is going to fight this one. A EUR 3 per share improvement would mean additional spending by Lorca of EUR 394 mn.
• According to the takeover law, investors have three months from the end of the acceptance period to request that the company buy its shares at the same price at which the offer was made.
• While it makes complete sense to cash in the chips, and I guess most institutionals would have done so, staying long and holding for an improved offer (with a 15% upside) does not look a foolish option either.

(Please, see timetable in the note)

Unity Software Inc (U US) plans to complete its IPO in the coming days. The company is seeking to raise $1.05 billion in this IPO selling 25 million shares at $34 to $42 per share. At the high end of the IPO price range, Unity Software would be valued at about $11 billion. Unity Software was valued at about $6 billion in July 2019 in its last round of private funding round so, at the high end of the IPO price range, it would be nearly double its last private market valuation about a year ago.  

Unity Software’s IPO process is using a new bidding process. According to FT, “Prospective institutional investors will be asked how many shares they wish to buy, and at what price, by an online system managed by Goldman Sachs, according to a notice sent out to explain the new process. Investors can place multiple bids at difference prices. Unity will select a price for the offering after the bids are entered, allocating a portion of the shares to all investors who indicated interest above that price level.”

JFrog is one of the leaders in the software update industry. Tech unicorn helps developers and organizations to be more agile, faster, secure in the software release lifecycle and offers a universal set of DevOps tools that work with all major software technologies to accelerate the delivery of software packages or binaries through delivery pipeline. DevOps affects healthcare, politics, social interaction, food & water, transportation and energy. Just imagine, Facebook, LinkedIn and Netflix update software 7 times a day. That is why releasing and updating software is especially important in the era of digital transformation and the transition to cloud. Number of devices and applications is growing at unimagined rate as well as data – 175 ZB globally by 2025, mostly cloud.

JFrog is offering ~12 million shares at valuation range of $33-37 and we estimate net proceeds from the offering to reach $255 million at midpoint. Lead underwriters are Morgan Stanley, BofA Securities and J.P. Morgan

When we initially heard about Unity’s plans to IPO, we were quite excited and felt some anticipation. Given the positioning serving mobile game customers and emerging trends using game engines in movies and other 3D modelling software we felt that market prospects were good and on hearing that gross margins were about 80% we imagined that operating margins could be 40 or 50% and were starting to rub our hands in expectation. Thus, we were stunned to see that the company was loss-making and analysing its financials caused any optimism we had to evaporate. The company plays a nice role democratising game development but as an investment it totally underwhelms.

Palantir is expected to complete its Direct Public Listing (DPL) on 23 September. Although the valuation pricing levels of Palantir’s DPL are yet to be announced, it appears that they will be lower than the implied valuation of $20 billion that the company received in the private round funding in 2015. The company’s updated prospectus, which includes the latest shares outstanding and average shares price, sets the company’s valuation at about $10.5 billion.

With the company’s financials now publicly available, there is a strong probability that the DPL will NOT price the company at close to $20 billion. This is a distinctly different case than Snowflake where its IPO valuation is much higher than the private market valuation Snowflake received in early 2020. Overall, there could be more interested investors in Palantir if the DPL valuation is set close to about $15 billion, in our view.

In this insight, we provide the key highlights of the Palantir Investor Day presentation which was held on 9 September. (Source: https://vimeo.com/palantir) It is always good to hear directly from the key members of the senior management team. We provide 13 key highlights from the presentation. 

In this insight, we provide a valuation analysis of Snowflake which has set its IPO price range of $75 to $85 per share. At these prices, Snowflake’s market cap would range between $20.9 billion and $23.7 billion. Snowflake could raise more than $2.7 billion in this IPO and this would be one of the biggest IPOs in the U.S. stock market this year. The valuation range is a big jump from the valuation the company received earlier this year when it was valued at about $12.5 billion (raising $479 million in its Series G funding round).

It was also announced that Berkshire Hathaway will invest $573 million in the Snowflake IPO, which is likely to have a big positive impact on this IPO, especially among the value-oriented investors globally. Salesforce.Com Inc (CRM US)also plans to invest $250 million in the Snowflake IPO. The private placement investments by Berkshire Hathaway and Salesforce.com will be equal to the IPO price. For Berkshire Hathaway, it plans to purchase 3.125 million new shares of the company’s Class A common stock (assuming $80 per share, this would represent $250 million) and an additional 4.042 million shares of the company’s Class A common stock from one of the existing shareholders (assuming $80 per share, this would represent $323 million).

The Japanese language Nikkei had an article out yesterday after the close discussing the possibility of a Softbank MBO. Of course, with Softbank you really never know, but to us this smells like an attempt to drive a short squeeze. We discuss why below.

Two days ago Nintendo released an announcement about Hyrule Warriors: Age of Calamity (Aka Zelda Musou). This is a tie-up with Koei Tecmo and will be essentially a Zelda skin on KT’s Dynasty Warriors series… except it isn’t. More below.

According to Palantir CEO Alex Karp talking about security and data integration

“If you think that we are going to reduce the complexity of these issues to some weird soundbite that makes sense to somebody in marketing hired by a consultancy you should not invest in Palantir.”

Alex, don’t you believe in the POWER OF WE???!!!

Also

“If you think that we will doggedly build the best software in the world years before anyone else and that we will supply the software at the world’s perfect macro timing we want your support because that’s what we’ve done in the past and that’s what we’re going to do in the future.”

It’s almost as if Alex Karp believes that long-term thinking and actual innovation are more important than enormous losses, slick marketing and Masayoshi Son sensing the force in you… lunatic.

Joy Spreader Interactive Technology (6988 HK) (JST) is looking to raise up to US$225m in its upcoming Hong Kong IPO.

JST is a performance-based we-media marketing service provider in China. JST connects marketers and we-media publishers via its technology and platforms. The services provided to marketers include analyzing and distributing their products on the we-media network which will help marketers acquire users.

In this note, we will look at assumptions and share our thoughts on valuation.

Our previous coverage of the IPO:

• Joy Spreader (乐享互动) Pre-IPO – Found a Niche in Games but Still Just a Middleman 

• RPA Holdings Inc (6572 JP) is the Japanese leader in the hottest area of enterprise tech, Robotic Process Automation. 
• Adoption of RPA in Japan is still low and there is a huge potential addressable market.
• RPA’s BizRobo platform has hit a growth wobble, but the larger, higher margin Robot Transformation segment is on fire. 
• The stock trades at an 80% discount to global peers.

Joy Spreader Interactive Technology (6988 HK) is an ad tech company which connect marketers (namely, product providers and merchants) with we-media publishers. Joy Spreader has launched a Hong Kong IPO to raise around net proceeds of $140-210 million. 

• Chatwork Co Ltd (4448 JP)  is Japan’s leading business chat app provider with a ¥50bn market capitalization.  

• With 35% topline growth, the company’s future lies in conquering the SME market and then using that as a platform to launch additional value-added services.  

• Chatwork dominates within the SME chat market and competes head to head with Slack Technologies Inc (WORK US)  in Japan.  

• We view Warren Buffett’s move to invest in Japan’s largest trading companies as being indicative of the lack of reasonably-valued opportunities in the US as well as the size disadvantage of Berkshire Hathaway;
• While being in no place to judge the superinvestor’s investment decision, we find better investment targets to “participate in the future of Japan,” especially for those who manage a smaller AUM than Berkshire;
• In this article, we list one superior-quality business that serves the backbone of Japan’s economy (i.e., the SMEs);
• Our investment strategy concentrates on quality from a business perspective and seeks long-term opportunities with a 10%-15% hurdle rate.

On 30 August, the Shanghai Stock Exchange (SSE) posed 21 questions to Ant Financial (1051260D CH) in relation to its IPO filing. Ant responded to the questions in a Chinese regulatory filing on 3 September. As a reminder, Ant has submitted its IPO applications for simultaneous dual-listing in Hong Kong and on the Shanghai stock exchange’s STAR board. Ant is floating no less than 10% of its total share capital to raise around $30 billion, at a valuation of $200-300 billion, according to various press reports.

Today is the first trading day of Kakao Games.

The latest OTC price is ₩78,000, which gives a market cap of ₩5.9tril.

More importantly, Kakao Games’ trading volume in the OTC market is astonishingly high, suggesting an insanely high level of interest by local retail.

But the street consensus is substantially lower.

Three local brokerages gave an earnings estimate for FY2020. They range from ₩68.7bil (Hanwha) to ₩81.4bil (Daishin).

It is pretty much in line with my projected range (₩60.6~73.2bil).

The PER range is 22.34~26.47x at the offering price of ₩24,000.

If we see the opening price hit the upper end (200%), it will be 44.68~52.94x on FY2020 projected earnings.

Then, it reaches the daily ceiling (+30%), we will have a 58.08~69.82x. 

If all other work from home beneficiaries used by SMBs continue to see explosive growth Zoom Video Communications Inc (ZM US) , DocuSign Inc (DOCU US) , Crowdstrike Holdings Inc (CRWD US) , but you see sharp deceleration, you may have a competition issue.

We have been pitching Coupa as a long since the March bottom, and have been blown away by the surge in its stock and multiple…it went from 15x forward sales to 25x last quarter and stands at 35x forward sales today. A lack of disclosure around Coupa Pay progress and a potentially “conservative” 3Q21 billings guidance says to us its time to move to the sidelines on Coupa and await a better re-entry point. 

Nikkei reported on Tuesday (08^th September 2020) that Apple will begin initial production of its 5G-enabled iPhones in mid-September amid travel restrictions and Covid-19 disruptions. Apple has managed to reduce the delay in the production of its much anticipated 5G iPhones to just weeks instead of months.

Apple usually begins mass production of its new iPhone model in August every year that are scheduled for release during the company’s September event.

Games are now one of the best entertainment channels for many consumers. The global games market is estimated to grow faster than GDP growth for next few years (8.3% CAGR for 2014-2019), backed by its accessibility, affordability and interesting features from new technologies. Furthermore, the growth rate has been increased due to COVID this year.

Global per capita game spend and China per capita game spend were still only $24.2 per year and $23 per year respectively, as of 2018. Korea had the highest per capita spend of $227 and game spend in other countries, especially China, is expected to catch up given development of devices and IT networks, and increase in disposable income. 

Nexon is one of the largest game developers in Asia. In 2020, it has begun tapping into the huge opportunities of the mobile games market. When other games companies introduced mobile versions utilizing their PC IPs, the mobile versions were able to achieve 2~10x revenues compared to their PC versions.

Nexon’s share price has declined by 13% from the peak, since it had delayed the launch of a key mobile game (“DNF mobile”) on 11^th August. The street is expecting it to resume its launch sometime in September. There is a risk that its launch could be further delayed. However, Nexon can still grow its operating profit by 24% CAGR over 2019-2021E without “DNF mobile” and its valuation is not expensive. If “DNF mobile” is successfully launched in September, its operating profit is estimated to grow by 47% CAGR over 2019-2021E. 

On Thursday 3 September at mid-day, Hexaware Technologies (HEXW IN) announced that the Exchange had granted In-Principle Approval the day before. Hexaware’s Public Announcement went out on the 3rd. 

The completion of the Despatch of the Offer Letter was announced on 6 September.

The Reverse Book Build Auction will open on the 9th of September and close on the 15th.  The last possible day to announce a counter-offer would be the 17th of September. Settlement would be expected to be the 29 September. 

It’s on. 

I see Mooar Gainz here.

Softbank Group (9984 JP) was revealed on Friday as the massive NASDAQ whale helping to drive unprecedented option volume in recent weeks with its multi-billion dollar call-buying spree in the biggest tech names, as reported by Financial Times and The Wall Street Journal which confirmed speculation Thursday by Zero Hedge.

Softbank’s option trades added to $40 billion in call-buying over the past month traced to retail investors. The resulting frenzy netted Softbank $4 billion in option trading gains—on paper—on its own $50 billion notional exposure.

By comparison, Softbank’s newly acquired long positions in Amazon.com Inc (AMZN US), Alphabet Inc Cl C (GOOG US), Microsoft Corp (MSFT US),  and Tesla Motors (TSLA US) are worth just $2 billion, almost all that’s left of the $10 billion Softbank spent late in the June quarter buying and selling mostly tech stocks at heady prices. Those holdings now are also subject to sharp declines triggered when Softbank’s option scheme was revealed. Sure enough, Softbank lost $9 billion in market value on Monday.

There’s plenty of intense scrutiny underway to understand these trades and what their impact ultimately proves to be. I’m more interested in Softbank’s drastic change in strategy and its alternative deployment of cash from $40 billion raised in stock fire sales forced by its wary banks and legacy mega-investors who cut him and Softbank off after decades of seemingly endless billions in available funding when his recklessness netted Softbank and Vision Fund tens of billions of dollars in record losses. 

This certainly is not what Softbank told investors to expect mere weeks ago.

Instead, Softbank’s actions signal arrogance, or desperation, or worse—that CEO Masayoshi Son feels unrestrained and back in his Star Wars Zone with $40 billion in fresh cash.

Double Standard provides web marketing support services and content data by utilising big data for enterprises. The company operates under two main business segments, Big Data related business and Service Planning Development business. The company was founded in 2012 and listed its shares in 2015 through an initial public offering.

The company’s revenues have grown at double-digit rates over the past 4-5 years; however, we have observed that the company’s margins have declined over the past 4-5 quarters.

The company has entered into a business alliance with SBI Financial Services in December 2019 and at the same time, it also has increased its stake in one of its equity-affiliates, Aster’s. We expect these strategic moves to help boost the company’s top line and revive its deteriorating margins.

In this insight, we take a look at the company’s business, financials and valuation.

Much has been made in the press of Palantir’s history of losses. Unfortunately, in its S-1 Palantir only disclosed six quarters of operating history making a deep analysis difficult, but nevertheless, based on our analysis of those financials we believe that the company’s underlying profitability potential is high, very high. Leaving valuations aside, from an operational standpoint this is one of the most attractive looking tech stocks we have seen among the new wave and we do not consider it impossible for the company to become one of the biggest companies in the world as the data revolution gathers steam.

“A huge leap forward for South Korea” is how President Moon described the New Deal initiative that the Government launched to digitalise social infrastructure and jumpstart the transition to green energy.

The expected spend of KRW 160 trillion (US$134.45bn) over 5 years will be financed by the Government (KRW 114.1 trillion) and from local Governments and the private sector (KRW 46 trillion) and is expected to create 1.9m jobs over the period based on the Digital New Deal and the Green New Deal that look to strengthen employment and the social safety net.

The KRX has created 4 new indices tracking the secondary Battery, Bio, Internet and Gaming sectors that are expected to benefit from the New Deal initiative plus an additional index (BBIG) that includes the top 3 stocks from each sector. While the BBIG is an equal weighted index, the sector indices allocate 75% of the index weight equally among the top 3 stocks while the remaining 25% weight is allocated to the rest of the stocks based on free float market cap. This will create some very interesting trades if ETFs that are launched on these indices gather a lot of assets.

Some stocks that have been included in these indices have already started to run up in anticipation of index flows and investors will need to monitor ETF asset gathering in determining entry/exit trades on these stocks. There are existing ETFs that track these sectors so it is hard to fathom why ETFs on the new indices would gather a lot of assets especially with a skewed weighting scheme.

Joy Spreader Interactive Technology (JST HK) is looking to raise US$200m in its upcoming Hong Kong IPO.

JST is a performance-based we-media marketing service provider in China. JST connects marketers and we-media publishers via its technology and platforms. The services provided to marketers include analyzing and distributing their products on the we-media network which will help marketers acquire users.

In this note, we will share our thoughts on the company’s business model, financials and operating data.