TMT/Internet

ATRenew (RERE US) is one of the stocks in China that is starting to look very attractive after a sharp decline in its share price since its IPO.
ATRenew has achieved noticeable improvements in operations and profitability in the recent quarter.
Our base case valuation analysis suggests an implied market cap of US$720 million, representing an implied price of US$3.15 per share, representing an upside of 43% from current price.

NTGR: Routing Thru Investor Day

By Hamed Khorsand

NTGR held its annual investor day reflecting on the challenges it has incurred within retail and highlighting how consumer demand has remained strong for high-end devices and its 5G hotspot
NTGR’s stock has been trading at levels valuing the Company near its working capital on fears the business would continue to generate losses
NTGR’s transition in becoming a super-premium brand started over a year ago, but only in recent quarters has it began to take a bigger role on the consumer

Taiwan Tech Weekly: Hon Hai IPhone Plant Recovery, Nanya Slumps, Intel Foundry Potential in 2023

Hon Hai’s Zhengzhou iPhone plant to return to full production? Shares pop
Nanya Tech shares worst performers last week – We remain near-term negative
Intel & TSMC trade flattish last week — Intel currently at UBS’s TMT conference

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Dec 05

Daily Brief TMT/Internet: Nomura Research Institute, HPSP and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

NRI (4307) Likely Prices Today – Expect Weakness Then Strength
Recap of Our IPO Research in 2022

NRI (4307) Likely Prices Today – Expect Weakness Then Strength

On 25 November Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would conduct a Secondary Offering of NRI Shares.
The sale is 36.97mm shares plus a greenshoe. It’s a big deal ($1bn) including greenshoe after JPY has just strengthened, but underperformance both before and after announcement sets up well.
Expect weakness today, but the stock is now at a two-year low, and the PER multiple premium is now at the lowest 3mo average premium in 5yrs. Expect retail buying.

Recap of Our IPO Research in 2022

In this report, we review our IPO investment research in 2022, including the performance of our calls.
The accuracy rate of our calls on IPOs this year was 79% (15 calls right, 4 calls wrong), higher than our average accurate rate of 77% from 2017 to 2022.
In 2022, the 12 stocks (positive ratings) were up 50.1% on average from their IPO prices. The 7 stocks (negative ratings) were down 11.2% on average from their IPO prices.

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Dec 04

Daily Brief TMT/Internet: Alibaba (ADR), KT Corp, Hong Kong Hang Seng Index, Tencent, Bigtincan Holdings Ltd, Palo Alto Networks, Fleetcor Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

ECM Weekly (4th Dec 2022) – Skymark, Daiei, Sunshine, Lygend, Weilong, NRI, Zomato, Goto, Bobcat
KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End
Bigtincan (BTH AU)’s Lightweight A$0.80 Offer from SQN
Palo Alto Networks: Acquisition of Cider Security & Other Drivers
FLEETCOR Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

ECM Weekly (4th Dec 2022) – Skymark, Daiei, Sunshine, Lygend, Weilong, NRI, Zomato, Goto, Bobcat

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, the two Japanese IPO set the ball rolling for the year end rush, with a few more lined up in Hong Kong along with Sunshine.
There were a few largish selldowns in Japan and India and given Hong Kong’s recent performace, it will see some deals soon as well.

KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

By Sanghyun Park

Names with a significant impact: KT (030200), Shinhan Financial (055550), Korean Air (003490), LG Energy (373220), Dongwon Industries (006040), Lotte Fine Chemical (004000), Meritz Fire (000060), & Mirae Asset (006800)
Limiting the target size of our flow trading to only the fund size that directly mirrors it (₩17.8T) on T-1 Effective will increase our winning rate.
Lately, local pensions have been seen as rather taking advantage of flow trading in index rebalancing events, so I also recommend keeping the trading window fairly tight.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End

By Simon Harris

Stock has recovered from an October low but may be running out of steam
Realised vol has been high and implied vols have not fallen as much as other equity assets
We suggest three trade ideas into year-end to take advantage of the vol surface and spot level

Bigtincan (BTH AU)’s Lightweight A$0.80 Offer from SQN

By Arun George

Bigtincan Holdings Ltd (BTH AU) disclosed a non-binding indicative offer of A$0.80 per share offer from SQN, a skinny 17.6% premium to the undisturbed price.
The offer is unattractive on several fronts and is the latest beaten-down ASX tech stock to be subject to a PE bid. Expect the Board to reject the offer.
Bigtincan also revealed other non-binding expressions of interest. This offer could flush out other potential bidders. At the last close, the gross spread is 6.0%.

Palo Alto Networks: Acquisition of Cider Security & Other Drivers

Palo Alto had a strong first quarter and managed to surpass Wall Street expectations in terms of top-line growth as well as profitability.
As the macroeconomic situation shifts, the company is ramping up its efforts to create incremental operating leverage in its business.
Another interesting fact is that Palo Alto has consistently outperformed other tech and cybersecurity stocks even in market lows.

FLEETCOR Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

FLEETCOR Technologies is a well-known digital payment solutions provider to businesses across the world.
The company’s financial results have been reasonably good in recent times and have exceeded management expectations in terms of revenues as well as earnings.
Corporate payments have been increasing in double-digits as per the company’s recent results due to strong new sales, domestically and abroad.

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Dec 03

Daily Brief TMT/Internet: Pinduoduo, Bigtincan Holdings Ltd, Singtel, Darktrace, Samsung Electronics and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Pinduoduo (PDD US): Spectacular 3Q, Tough Outlook
Expect Bigtincan To Reject SQN’s Proposal
ASEAN Utilities: From Tap To Socket
STOXX Europe 600 Dec 22 Rebal: Final Changes and Historical Performance Analysis
When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

Pinduoduo (PDD US): Spectacular 3Q, Tough Outlook

By Eric Chen

PDD’s spectacular 3Q results will prove unsustainable based on our assessments of its core markets and deep-dive benchmark analysis of growth trajectory of PDD and Alibaba, using GMV as scale.
We see earnings risk going into 2023 due to well-penetrated wallet share of core user base, deflating growth drivers and ramp-up of investments.
In the long term, inevitable multiple compression also renders the risk-return payoff of this US$100bn company mediocre, even under blue-sky growth forecasts. Prefer Alibaba over PDD.

Expect Bigtincan To Reject SQN’s Proposal

Software provider Bigtincan Holdings Ltd (BTH AU) has announced an indicative proposal, by way of Scheme, from PE outfit SQN Investors at A$0.80/share, a 17.6% premium to last close.
Due diligence has not yet been afforded. SQN currently holds a 13.6% stake.
BTH also highlighted it has had preliminary discussions with other interested parties. Expect BTH’s board not to engage with SQN at this price.

ASEAN Utilities: From Tap To Socket

This insight covers 68 ASEAN utilities, each boasting a market cap greater than US$500mn.
Countries covered include Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Intouch Holdings (INTUCH TB) remains highly elevated, and is a short against Advanced Info Service (ADVANC TB), and perhaps with some Singtel (ST SP).

STOXX Europe 600 Dec 22 Rebal: Final Changes and Historical Performance Analysis

By Janaghan Jeyakumar, CFA

The December 2022 index changes for the STOXX Benchmark Indices were announced yesterday.
There will be 6 ADDs and 6 DELs for the STOXX Europe 600 Index and 3 ADDs and 1 DEL for the EURO STOXX Index in December 2022.
In this insight, we take a closer look at the index flow expectations and the historical performance of STOXX Europe 600 and EURO STOXX Rebalance events.

When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

The debate about whether or not Samsung Life Insurance should sell its stake in Samsung Electronics is being reviewed by the National Assembly once again.
The greater probability event is status quo. The Korean government is not likely to force Samsung Life Insurance to sell its stake in Samsung Electronics in the near term.
Korean government is likely to require Samsung Life Insurance to sell its stake in Samsung Electronics after the Lee family has paid off all their inheritance taxes in 3-4 years.

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Dec 02

Daily Brief TMT/Internet: Kanzhun, Tencent, Asana, Snowflake Inc, Zoom Video Communications Inc, FrankieOne, Dell Technologies Inc, Bigtincan Holdings Ltd, Applied Materials, Analog Devices and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Job Hunting App Operator’s Earnings Fall Despite End to National Security Probe
Volume, Call Options, Tencent, and China Overseas
Liquidity Risk Short Candidates: Luminar Tech, Asana, Appian, Oak Street Health
Snowflake FY3Q23 Earnings: Stabilizing Growth in FY2024
Zoom Video Communications: Product Updates & Other Developments
HuffPost Investor, Binance Join US$15.5M Series A+ Round of Fraud Detection Startup FrankieOne
Dell Technologies: Major Drivers
Expect Bigtincan To Reject SQN’s Proposal
Applied Materials: Key Drivers
Analog Devices Inc: New SPoE PESE & PD Solutions & Other Drivers

Job Hunting App Operator’s Earnings Fall Despite End to National Security Probe

By Caixin Global

The operator of Chinese recruitment app Boss Zhipin reported drops in third-quarter revenue and profit after restarting new user registrations following a nearly one-year suspension as part of a national security probe.
During the three months through September, Nasdaq-listed Kanzhun Ltd.logged a net profit of 211.7 million yuan ($29.8 million), representing a year-on-year drop of 26%
The firm generated about 99% of its revenue, or 1.16 billion yuan, from sales of recruitment services to corporate clients — a 2.7% year-on-year decrease.

Volume, Call Options, Tencent, and China Overseas

By Untying The Gordian Knot

Volume picked up on Tuesday, 29th November, just slightly below the 15th November volume, the previous buying climax.
Wednesday’s Volume fell 10% with new price highs.
The erratic rather than trending Volume without capitulation volume on the 31st October price lows are hallmarks of a bear market rally.

Liquidity Risk Short Candidates: Luminar Tech, Asana, Appian, Oak Street Health

By Eric Fernandez, CFA

Liquidity shorts can be great short candidates. The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements.
Liquidity shorts have built-in catalysts, have moderate to higher betas, and can have strong down moves if a crisis develops. They can go bankrupt, pushing the stock price near zero.
Today we are flagging Luminar Tech, Asana, Appian, Oak Street Health

Snowflake FY3Q23 Earnings: Stabilizing Growth in FY2024

By Aaron Gabin

Snowflake guided below consensus for 4Q2023 revenue growth on a mix of macro conservatism and a quirky point that more vacation travel will reduce the amount of workloads run.
Margins continue to beat to the upside and management is guiding FY2024 FCF marginst to 23%, just 2pts below the LT guidance.
Very conservative management team also guided for a stabilization in revenue growth for FY2024 at 47%, a bit below consensus, but better than feared given the earnings reports recently.

Zoom Video Communications: Product Updates & Other Developments

Zoom Video Communications delivered a decent quarter and managed an all-around beat.
From a product perspective, the company had robust growth in Zoom Phone, along with contributions from Zoom Rooms and other products.
Zoom Video Communications has recently announced a wide range of updates in different business units like Zoom IQ for sales, Zoom Events, Zoom Spaces, Zoom Contact Centre, and Zoom One.

HuffPost Investor, Binance Join US$15.5M Series A+ Round of Fraud Detection Startup FrankieOne

By e27

FrankieOne, a global platform connecting customers to multiple identity verification and fraud detection vendors via one API, has added US$15.5 million to its Series A+ round.
The new tranche will allow FrankieOne to expand its business across Asia Pacific and North America.
Founded in 2019 by Simon Costello and Aaron Chipper, FrankieOne is an identity and fraud detection engine helping companies onboard and protect their customers.

Dell Technologies: Major Drivers

After announcing a weak outlook in the last quarter and causing its stock price to plummet, Dell has shown a decent recovery.
Its stock price has continued to recover after the company delivered an all-around beat in a challenging demand environment.
Overall, we remain neutral on Dell and give it a ‘Hold’ rating with a revised target price.

Expect Bigtincan To Reject SQN’s Proposal

Software provider Bigtincan Holdings Ltd (BTH AU) has announced an indicative proposal, by way of Scheme, from PE outfit SQN Investors at A$0.80/share, a 17.6% premium to last close.
Due diligence has not yet been afforded. SQN currently holds a 13.6% stake.
BTH also highlighted it has had preliminary discussions with other interested parties. Expect BTH’s board not to engage with SQN at this price.

Applied Materials: Key Drivers

Applied Materials delivered a strong quarterly performance and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
Demand remains very high in cutting-edge foundry/logic, with customers vying for leadership and driving significant technological inflections that decide their respective competitive positions.
AMAT should have a strong resilience because of their substantial backlog, expanding service business, and strong customer demand for their leading technologies that support significant technological inflection points.

Analog Devices Inc: New SPoE PESE & PD Solutions & Other Drivers

Analog Devices delivered another all-around beat in the recent quarterly result.
In Communications, Analog Devices expanded its 5G radio systems leadership with its transceiver portfolio, winning some additional share at key suppliers.
We provide the stock of Analog Devices with a ‘Hold’ rating with a revision in the target price.

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Dec 01

Daily Brief TMT/Internet: Shanghai Fudan Microelectronics Group, Softbank Group, Appier Group, HYBE, Crowdstrike Holdings Inc, BLS International Services, Alibaba Health Information Technology, Marketingforce Management, Oracle Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

CES China Semiconductor Chips Index Rebalance: Four Changes in December
Softbank Group (9984 JP) –The Masa Hurdles
Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022
FY3Q23: If It’s All Macro, Do You Buy the Dip?
BLS International Services Ltd: Forensic Analysis
Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen
Marketingforce Management Pre-IPO Tearsheet
Oracle: What To Expect As It Reports Q2 2023 Results

CES China Semiconductor Chips Index Rebalance: Four Changes in December

By Brian Freitas

There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.

Softbank Group (9984 JP) –The Masa Hurdles

By Victor Galliano

Masayoshi’s debt with Softbank group is big, and due to the poor performance of SoftBank Vision Fund 2, Masa’s equity interest as a co-investor is now zero
Internal hedge fund Northstar, in which Masa has a 33.3% stake, is in liquidation leaving Masa’s share of his Northstar debt to SoftBank at USD1.2bn
SoftBank’s collateral on Masa debt includes the Vision Fund 2 equity, as well as SoftBank shares and other personal assets; we expect SoftBank’s NAV discount of c 25% to widen

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

By Shifara Samsudeen, ACMA, CGMA

We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux.

FY3Q23: If It’s All Macro, Do You Buy the Dip?

By Aaron Gabin

First ever ARR miss, and big initial guide down on FY2024 ARR growth: low 30s vs. 37% into the Q. Pretty shocking given Crowdstrike’s track record.
Macro Macro Macro – deal close times pushed out for SMBs and Enterprise customers reworking timing of deal starts to match opex budgets.
Stock is overly punished down 20% and trading at 9x forward sales for a platform consolidator with 30% FCF margins.

BLS International Services Ltd: Forensic Analysis

By Nitin Mangal

BLS International Services (BLSIN IN) is engaged in business of providing outsourcing and administrative task of Visa, Passport and Consular services to various Diplomatic Missions across the world.
BLS is troubled with several forensic discomforts. One should take into account the discomforts on the subsidiaries end and other linked entities like DSS Gulf Realtors.
Other forensic setbacks include alarming bad debts, misstatement of operating cash flows and several grey areas pertaining to disclosure norms followed by the company.

Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen

Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.

Marketingforce Management Pre-IPO Tearsheet

By Ethan Aw

Marketingforce Management (MFM HK) is looking to raise about US$100m in its upcoming HK IPO. The deal will be run by CICC and CCB International.
Marketingforce Management (MFM) is a domestic marketing and sales SaaS solution provider in China and considered the largest in terms of revenue in 2021, according to Frost & Sullivan.
Through its Marketingforce platform, MFM delivers integrated cloud-based solutions that cover the entire marketing and sales management process of enterprises, from content and experience to strategy and management, amongst others.

Oracle: What To Expect As It Reports Q2 2023 Results

By Vladimir Dimitrov, CFA

Oracle’s share price drop presented a good opportunity for long-term shareholders to average down.
Lagging analysts’ sentiment still presents an opportunity for future multiple repricing.
Headwinds for profitability will likely be an issue for investors with short-term investment horizons.

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Nov 30

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Singtel, Bilibili, Nanya Technology, Twitter Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Taiwan Dual-Listings: TSMC & UMC Nice Setup Opportunities, Chunghwa Rare Deep Discount
Singtel: Demand Surge
Intel Vs. TSMC Monitor: TSMC Outperformed Too Much Too Soon?
Bilibili (9626 HK): 3Q22, Growth Accelerated, Loss Shrank, 38% Upside
Nanya Technology: Inventory Risk, A 10% Downside Trade Is Still Available
Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt
Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

Taiwan Dual-Listings: TSMC & UMC Nice Setup Opportunities, Chunghwa Rare Deep Discount

TSMC — Trading near parity, decent setup opportunity at the current level.
UMC — Trading at a discount, another decent setup opportunity.
Chunghwa Telecom — Rare opportunity here, trading at a steep discount compared to the tight historical range.

Singtel: Demand Surge

By Steven Holden

Sentiment switch for Singtel after surge in buying among Asia Ex-Japan funds
New positions from Fullerton Asia Focus, Jupiter Asian Fund and Fullerton Asia Growth & Income head a total of 14 funds opening exposure between 01/31/2022 and 10/31/2022.
Follows broader rotation in to key Singapore names despite heavy selling in Sea Ltd.

Intel Vs. TSMC Monitor: TSMC Outperformed Too Much Too Soon?

Intel has eked out a small outperformance vs. TSMC most recently, and we believe there is more to come.
Events appear to be in Intel’s favor in the near-term.
TSMC has outperformed by a historically extreme amount in just three weeks.

Bilibili (9626 HK): 3Q22, Growth Accelerated, Loss Shrank, 38% Upside

By Ming Lu

The revenue growth rate rose for the first time in one year and a half.
Also, operating loss shrank for the first time in one year and a half.
We believe the stock has an upside of 38% for year end 2023.

Nanya Technology: Inventory Risk, A 10% Downside Trade Is Still Available

Nanya Tech shares have dropped, but there’s still a 10% trading sell from these levels.
The company had dramatically outperformed the Taiwan market and Memory chip peers, yet is heading into weakening end-demand with inventory levels at multi-year highs.
We see the potential for inventory write-downs and a negative operating margin in the coming quarters. Meanwhile, opportunities for near-term good news appear limited.

Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt

By Vicki Bryan

Twitter’s banks are stuck with 30% of total US LBO debt unsold debt.
The banks already had lost more than $500 million on Twitter’s LBO debt even before the deal closed. They could sell it even at 50-60 cents on the dollar.
The trouble with Elon aggressively blowing up Twitter is that it’s banks probably won’t take his calls when Twitter needs more cash—which it probably will in the near future.

Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

By Aki Matsumoto

There are 236 companies with a trading unit of more than 500,000 yen, while there are 967 companies with a trading unit of less than 50,000 yen on the TSE.
It’s fair to amend the law to abolish the share unit system, but changing the law takes time. It’s also unclear why “between 50,000 yen and 500,000 yen” is appropriate.
While TSE still allows 300 companies that don’t meet the listing criteria to be listed on prime market, TSE requires companies with higher stock prices to increase their administrative burden.

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Nov 28

Daily Brief TMT/Internet: Nomura Research Institute Ltd, Kakaku.com Inc, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
Kakaku.com Inc.: A Deep-Dive View
Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses
Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

By Shifara Samsudeen, ACMA, CGMA

On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares.
At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

Kakaku.com Inc.: A Deep-Dive View

By Steven Chen

Kakaku.com Inc. can be a rare species among listed companies in Japan;
We had multiple email exchanges and meetings with the management team for a deep-dive view covering corporate cultural, management style, capital allocation, business model, and competitive strength.
We would wait for a 20%-30% pullback in the share price before looking to add to our position but would certainly remain reluctant to sell any share that we own.

Meituan: New Reporting Structure Conceals Loss-Making Businesses and Hard to Assess Core Businesses

Meituan reported 3Q2022 results. Revenue increased 28.2% YoY to RMB62.6bn (vs consensus RMB62.3bn) while reported an OP of RMB988m (consensus OP loss of RMB935m) for the first time since 3Q2019.
However, on adjusted basis, Meituan made an adjusted operating loss of RMB1.1bn (1.7% of revenue) of revenues compared to an adjusted operating loss of RMB7.7bn (15.1% of revenue) in 3Q2022.
Tencent announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends and Naspers is expected to sell the Meituan Shares it receives from Tencent.

Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

By Sumeet Singh

Nomura Holdings (8604 JP) and Jafco Co Ltd (8595 JP) are looking to raise around US$850m via selling 5.7% of Nomura Research Institute Ltd (4307 JP).
This is not the first sale by Nomura and marks a clean up for Jafco. Hence it might not come as a complete surprise.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

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Nov 27

Daily Brief TMT/Internet: Trina Solar Co Ltd, Alibaba (ADR), Socionext, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo
Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley
Meituan 105 Buy Support

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

By Brian Freitas

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.

ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, things are picking up again going into the year end.
There were no large placement or blocks this week, although prior lockup linked blocks kept flowing through.

Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.”
Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.

Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley

You could imagine people covering their short in Meituan (3690 HK) now. The Hang Seng sell flow on 4 January 2023 is insignificant. But there will be more overhang later.
If you buy Link Administration (LNK AU) outright, you are buying a package of three potential future takeout targets.
It’s not certain the scrip terms will continue as stated in the DTAC /True merger, but if they change at all, that would almost certainly require a new shareholder meeting.

Meituan 105 Buy Support

By Thomas Schroeder

Meituan (3690 HK) has some big resistance hurdles to overcome and will act as tactical sell levels to seek out the 105 buy zone.
A tactical bounce back to 165 is on the cards with 168/75 the high degree sell barrier. Secondary trendline resistance rests near 185 as the bigger sell zone.
The bearish rising wedge stands out as the dominant force. The support break warns of fallout after a bounce attempt back to 168. A weak bounce would turn near 160.

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Nov 26

Daily Brief TMT/Internet: GoTo, Sea Ltd, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers
Sea Ltd (SE US) – Wind Back in the Sails
2023 High Conviction Ideas: Meituan
Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers

By Clarence Chu

In Mar 2022, GoTo (GOTO IJ) raised around US$1bn from what was essentially a domestic Indonesian IPO.
GoTo has already burnt through the cash it raised from the listing and cash burn still remains high, while its cash balance is amongst the lowest in its peer set.
At its current cash burn pace, the company will have to come to the markets again soon.

Sea Ltd (SE US) – Wind Back in the Sails

By Angus Mackintosh

Sea Ltd 3Q2022 results should be seen as the poster child for the rest of the space given a crystal clear focus on profitability and pragmatic approach to future growth.
The fact that the company is now contribution margin positive in ASEAN and even Adjusted EBITDA positive in Malaysia and Taiwan is a testament to its success in controlling costs.
Sea Ltd (SE US) has seen a significant compression in valuations and now looks attractive on 2.1x FY2023V EV/Sales and 1.7x FY2024E EV/Sales.

2023 High Conviction Ideas: Meituan

By Xin Yu, CFA

Meituan is a leading “service e-commerce” platform in China, leveraging technology to connect consumers with merchants.
With the gradual re-opening in 2023, core local commerce will deliver better than expected result.
Tencent’s distribution of Meituan shares provides a good entry point.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (25 November 2022)