Category

TMT/Internet

Jun 13
0

TMT: LG Energy Solution, Link Administration, V.S. Industry and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis
  • Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net
  • V.S. Industry (VSID.KL) – Foreign Labour Arriving In Stages

LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis

By Douglas Kim

  • Our base case valuation LG Energy Solution is implied market cap of 75 trillion won or target price of 319,089 won, representing 25% below current share price.
  • Currently, LGES is trading at a premium valuation multiple on a EV/EBITDA (2023E) versus CATL. We believe LGES should trade at a discount to CATL in the next 6-12 months. 
  • LGES’s 6 months lock-up ends on 27 July and there are 4.3% of outstanding shares that can be sold which is likely to put negative pressure on share price.

Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net

By Arun George

V.S. Industry (VSID.KL) – Foreign Labour Arriving In Stages

By Maybank Research

  • Maintain HOLD; Labour and raw mat issues remain
  • Addt’l 3k workers to arrive in the coming months
  • One-off levy and recruitment costs could drag 4Q NP
  • Costs impact within expectations

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Jun 12
0

TMT: Alibaba (ADR) and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • ECM Weekly (12th June 2022) – Alibaba, Kakao Pay, Thai Life, Tuhu, GoGoX, Net Protection, WM Motor

ECM Weekly (12th June 2022) – Alibaba, Kakao Pay, Thai Life, Tuhu, GoGoX, Net Protection, WM Motor

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.
  • IPO volumes remain subdued across the region, although a number of deals are said to be looking to launch soon.
  • Placements stole the limelight this week too with Kakao Pay’s selldown by Ant and Joy Spreader’s crash pulling the scales even on last week’s better performing deals.

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Jun 11
0

TMT: Bilibili Inc, LONGi Green Energy Technology and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Bilibili 1Q2022: Widening Losses and There Is Further Downside
  • Shanghai/​​​Shenzhen Northbound Connect: Weekly Moves (9 June 2022)

Bilibili 1Q2022: Widening Losses and There Is Further Downside

By Shifara Samsudeen, ACMA, CGMA

  • Bilibili reported 1Q2022 results yesterday. Revenue grew 29.6% YoY to RMB5.1bn (vs consensus RMB5.04bn) while operating losses as a % of revenue increased to 39.4% from 26.4% in 1Q2021.
  • Monthly Paying Users (MPUs) reached 27.2m vs 20.5m in 1Q2021, however, blended ARPU declined to RMB41.8 from RMB43.4 a year ago suggesting that user growth comes at lower pricing.
  • Bilibili’s ADS’ closed 15% lower at the end of yesterday’s trading as widening losses and softer guidance for 2Q2022 disappointed the market.

Shanghai/​​​Shenzhen Northbound Connect: Weekly Moves (9 June 2022)

By David Blennerhassett

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Jun 09
0

TMT: Tencent, Twitter Inc, ACM Research Shanghai Inc, GoGoX Holdings, GoTo, Net Protections, Bitcoin, Abbvie Inc, Credicorp Ltd and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Tencent/Netease: Smell of Common Prosperity in June Game Approval
  • Tencent – Cold Shoulder On New Game Approvals Is A Concern
  • Elon’s Trying To Get Out Of Buying Twitter—As We Knew He Would
  • STAR50 Index Rebalance Preview (Sep): Change Is the Only Constant
  • GOGOX IPO: Growth at All Costs
  • GoTo: Growth in Top Line Doesn’t Mean Improvement in Profitability
  • Net Protections Holding IPO Lock-Up – Small Expiry Now, Before 20% Is Released Later in the Year
  • Crypto Biweekly – Breakdown In Correlation Between Crypto and Equity as Market Wait for ETH 2.0
  • Diamond Hill All Cap Select Fund Q1 2022 Market Commentary
  • Diamond Hill International Fund 2022 Market Commentary

Tencent/Netease: Smell of Common Prosperity in June Game Approval

By Ke Yan, CFA, FRM

  • China announced game approval last night for June batch, after a break in May.
  • We discussed in our previous note that China had resume game approval but at a slower pace.
  • Tencent and Netease continue to score zero in June domestic game approval.

Tencent – Cold Shoulder On New Game Approvals Is A Concern

By Mio Kato

  • As reported by Reuters, yesterday China’s gaming regulator granted licences for 60 new games, none of which were published by Tencent or NetEase. 
  • The two dominant companies in the industry did not feature in the list of 45 approvals in April either and this pattern should not be ignored by investors. 
  • The lack of approval of foreign titles in the two batches is also striking and a further negative in our view.

Elon’s Trying To Get Out Of Buying Twitter—As We Knew He Would

By Vicki Bryan

  • Elon can’t get out of his stupidly overpriced, but solidly binding agreement to buy Twitter. But he can tie it up in court indefinitely. 
  • Meanwhile, Twitter’s prospects for operational improvement are mixed at best.
  • Twitter is left in limbo, as are its investors. What should bondholders do?

STAR50 Index Rebalance Preview (Sep): Change Is the Only Constant

By Brian Freitas

  • With only one change expected in September using a 12 month minimum listing history, we expect the index committee to continue using a 6 month minimum listing history.
  • That will see the maximum of 5 changes that are permitted at a single rebalance resulting in a one-way turnover just shy of 5%.
  • Over the last few rebalances, the adds have outperformed the deletes post the end of the review period. That’s expected given passive trackers need to buy/sell a lot of stock.

GOGOX IPO: Growth at All Costs

By Arun George

  • GoGoX Holdings (GOGO HK) is a major online intra-city logistics platform in Asia. It has passed the listing hearing for an HKEx IPO to raise US$100-150 million.   
  • In GOGOX IPO Initiation: A Less than Perfect Delivery, we noted that as the losses are expected to persist over the next three years, we would avoid the IPO.
  • In this note, we examine the PHIP for the 2021 results and recent developments. The fundamentals remain unattractive and we would give the IPO a pass. 

GoTo: Growth in Top Line Doesn’t Mean Improvement in Profitability

By Shifara Samsudeen, ACMA, CGMA

  • GoTo (GOTO IJ)  announced 1Q2022 and FY2021 results on 30th May. Gross income grew by 43.5% YoY in 2021 with a growth of 53.5% YoY in 1Q2022.
  • However, gross margins show no improvement and operating losses have also worsened with the merger of Tokopedia in May 2021.
  • GoTo plans to turnaround its profitability through synergies, improved monetisation and cost efficiencies. However, we don’t expect profits in the near future.

Net Protections Holding IPO Lock-Up – Small Expiry Now, Before 20% Is Released Later in the Year

By Sumeet Singh

  • Net Protections Holdings, a buy now pay later service provider, raised around US$570m via selling a mix of primary and secondary shares in its Japan IPO in Dec 2021.
  • As per Yano Research, it had 40% market share in the domestic BNPL market for B2C transactions.
  • In this note, we will talk about the upcoming lock-up expiry on 12th Jun 2022.

Crypto Biweekly – Breakdown In Correlation Between Crypto and Equity as Market Wait for ETH 2.0

By Josh Du

  • Crypto and equity correlations are at all-time highs this year as both are negatively impacted by global headwinds like rate hikes. However, correlations decoupled over the past two weeks
  • Equities were in the positives while crypto prices continued to decline due to idiosyncratic factors such as the continued impact from Luna and the execution risks of ETH 2.0 merger
  • However, public crypto valuation is now overly depressed and the worst may be over with the Luna impact while the ETH 2.0 execution risk will be derisked imminently 

Diamond Hill All Cap Select Fund Q1 2022 Market Commentary

By Fund Newsletters

  • Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
  • During a volatile quarter, the Diamond Hill All Cap Select Fund held up meaningfully better than the Russell 3000 Index.
  • After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
  • While the year-to-date pullback in equity markets has created some investment opportunities, broad market valuations remain above historical averages.

Diamond Hill International Fund 2022 Market Commentary

By Fund Newsletters

  • Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
  • During a volatile quarter, the portfolio held up better than the Morningstar Global Markets ex-US Index by a decent margin.
  • After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
  • We expect to see varying states of economic growth aroundthe world in 2022 and believe persistent inflation will be one of the mostcritical risk factors economies face this year.

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Jun 08
0

TMT: Softbank Group, NTT Data Corp, Amazon.com Inc, Archer Daniels Midland Co, Marathon Digital Holdings and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Softbank Group – Didi Relief and ZME Pain Highlight Multiple Potential Outcomes
  • Parent-Subsidiary Listing Investment Strategy Update (5)
  • Rhizome Partners Q1 2022 Investor Letter
  • Diamond Hill Mid Cap Fund Q1 2022 Market Commentary
  • Diamond Hill Large Cap Fund Q1 2022 Market Commentary
  • Horizon Kinetics 1st/2nd Quarter Interim Commentary

Softbank Group – Didi Relief and ZME Pain Highlight Multiple Potential Outcomes

By Kirk Boodry

  • Didi shares jumped 24% on reports regulatory relief was at hand. That is good news for Softbank although the halo effect boosting Alibaba had more of a valuation impact
  • Less noticed but also relevant as a potential outcome is the de-listing of Zhangmen Education which fell 50% Monday and is down 97% for VF in total
  • Softbank shares trade at a 43% discount to fair value and remain range-bound.  Tech market sentiment remains the primary driver and we continue to be cautious

Parent-Subsidiary Listing Investment Strategy Update (5)

By Aki Matsumoto

  • This article updates NTT DATA by referring my earlier article although Hopes of NTT Data becoming a wholly owned subsidiary are far from fulfilled after the May 9th news conference.
  • My previous article stated reorganization with NTT’s overseas operations is priority to strengthen NTT Data’s overseas business. NTT Data’s stock price is highly valued while NTT Data’s profitability is lacking.
  • The timing of NTT Data becoming a wholly owned subsidiary will depend solely on how quickly the company can raise its profitability while it focuses more on domestic business.

Rhizome Partners Q1 2022 Investor Letter

By Fund Newsletters

  • Rhizome Partners LP is a Delaware limited partnership, aims to achieve long-term capital appreciation while limiting the risk of loss.
  • For the first quarter of 2022, Rhizome Partners generated a net loss of 9.9% versus a 4.6% loss.
  • We may be experiencing a regime change in the market in 2022.
  • Investors seem to have started to favor profitable companies trading at low multiples of existing cash flow over companies with uncertain payoffs in ten years.
  • We still favor good businesses with healthy margins, good balance sheets, structural moats, high returns on invested capital, rational competitors, pricing power, and reasonable growth.

Diamond Hill Mid Cap Fund Q1 2022 Market Commentary

By Fund Newsletters

  • Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
  • Amid a rocky market quarter overall, Diamond Hill Mid Cap Fund’s negative returns still outpaced the Russell Midcap Index by a healthy margin in Q1.
  • After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
  • From current levels, equity market returns over thenext five years are likely to be below historical averages.

Diamond Hill Large Cap Fund Q1 2022 Market Commentary

By Fund Newsletters

  • Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
  • During a volatile quarter, Diamond Hill Large Cap Fund held up better than the Russell 1000 Index by a decent margin in Q1.
  • After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
  • From current levels, equity market returns over the next five years are likely to be below historical averages.

Horizon Kinetics 1st/2nd Quarter Interim Commentary

By Fund Newsletters

  • Horizon Kinetics LLC, founded in 1994, is an independently owned and operated investment adviser. With a long-term absolute return mindset, and based on first-hand research, our portfolios tend to be concentrated and avoid tracking or mimicking any benchmark or index.
  • Texas Pacific Land Corp is entering into a strategic alliance with two cryptocurrency mining companies to develop a mining operation on some of TPL’s land.
  • The public discussion has now turned to how “aggressive” the central bank will be in raising interest rates in order to try to stem inflation.
  • Debt-to-GDP ratio can increase for a very prolonged period of time, like the 39 years from1980 to 2019, without the economy experiencing serious inflationary pressures.
  • If the supply of oil were to grow even as high as 2% a year, while the supply of currency to pay for it is growing at 12% a year, then the price of oil measured in currency is going to go up.

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Jun 07
0

TMT: Renesas Electronics, HPSP, Amplitude and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change
  • HPSP IPO Valuation Analysis
  • Amplitude: Valuations Look Attractive and Growth Catalysts May Materialize in CY22

A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change

By Travis Lundy

  • The Nikkei Index team proposed several changes to the Nikkei 225 Average methodology last week. They include capping, a semi-annual (vs annual) review, and a change in “liquidity” measure.
  • It helps move membership away from the low price low weight names which populate the bottom of the index. Slowly. 6 names a year. That’s not enough.
  • And it doesn’t fix the historical anomalies rendering the index unsuitable as benchmark (and BOJ tool). I propose more changes below. You can submit this or yours in the consultation.

HPSP IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of HPSP is implied market cap of 810 billion won or target price of 38,228 won per share.
  • This is 53% higher than the high end of the IPO price range of 25,000 won.  Given the solid upside, we have a POSITIVE view of the HPSP IPO.
  • Our base case valuation uses our estimated net profit of 79.8 billion won in 2022 and P/E of 10.2x which is the median valuation multiple of its peers. 

Amplitude: Valuations Look Attractive and Growth Catalysts May Materialize in CY22

By Andrei Zakharov

  • During the #1 product and growth conference Amplify 2022 in Las Vegas, Amplitude (AMPL US)  introduced the Customer Data Platform (CDP) with integrated product analytics.  
  • The company expanded partner integration with Snowflake Inc (SNOW US)  to improve data connectivity while Amplitude Experiment sees strong traction with customers. 
  • With shares down ~65% YTD, Amplitude has underperformed the Nasdaq Composite (-23%). Our PT is $28.00, implying ~14x EV/2022E revenue and ~10x EV/2023E revenue. 

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Jun 06
0

TMT: Mercari Inc, Link Administration Holdings, HPSP and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Mercari (4385 JP) | Time to Flee
  • Weekly Deals Digest (5 Jun): Link Admin, Cocoaland, Xiamen Port, Link Net, WM Motor, GOGOX, Yancoal
  • HPSP Preview: A Korean IPO With Best Fundamentals So Far in 2022

Mercari (4385 JP) | Time to Flee

By Mark Chadwick

  • Topix inclusion could generate some solid domestic passive buying interest, but we think the fundamentals remain Bearish
  • Mercari’s GMV growth in Japan is slowing sharply. We see higher promotional costs impacting margins as competition with PayPay Flea market heats up
  • We think that street estimates are too high and we don’t see a reason why the stock should be trading at substantial premium to Z Holdings

Weekly Deals Digest (5 Jun): Link Admin, Cocoaland, Xiamen Port, Link Net, WM Motor, GOGOX, Yancoal

By Arun George

HPSP Preview: A Korean IPO With Best Fundamentals So Far in 2022

By Douglas Kim

  • HPSP is getting ready for an IPO in Korea in July. This semiconductor equipment Korean company is an IPO with the best fundamentals for a so far in 2022.
  • The IPO base deal size is from $55 million to $60 million. Crescendo Equity Partners (backed by Peter Thiel) is the controlling shareholder of HPSP.
  • HPSP had revenue of 91.8 billion won (up 50% YoY) and operating profit of 45.2 billion won (up 82.3% YoY) in 2021. Its sales and profits surged higher in 1Q22.

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Jun 05
0

TMT: Block, Elastic NV, Alibaba Group, Broadridge Financial Solutions, Inc, CK Hutchison Holdings Ltd and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • S&P/​​ASX Index Rebalance (June 2022): Mostly Expected, Some Surprises & Short Interest Spikes
  • Elastic: Beat and Raise. $2B in Total Revenue in FY25
  • Longleaf Partners Asia Pacific UCITS Fund Q1 2022 Commentary
  • Diamond Hill Small Cap Fund Q1 2022 Market Commentary
  • Longleaf Partners Global UCITS Fund Q1 2022 Commentary

S&P/​​ASX Index Rebalance (June 2022): Mostly Expected, Some Surprises & Short Interest Spikes

By Brian Freitas

  • There is one set of changes to the S&P/ASX 50, one deletion for the S&P/ASX 100, and four adds/ five deletes for the S&P/ASX 200 (AS51 INDEX). 
  • Passive trackers will need to trade between 2-6 days of ADV on nearly all stocks. Short interest spikes in a few names indicate pre-positioning for the passive flow.
  • Core Lithium Ltd (CXO AU) is a potential inclusion to the MVIS Global Rare Earth/Strategic Metals Index in June and that could add to the passive inflows on the stock.

Elastic: Beat and Raise. $2B in Total Revenue in FY25

By Andrei Zakharov

  • Elastic NV (ESTC US)  reported stronger than expected 4QFY22 results, and management provided guidance for FY25 total revenue of $2 billion. 
  • The net expansion rate was 140%+ for Elastic Cloud in 4QFY22, and the company expects cloud revenue to exceed 50% of total revenue by 4QFY24.  
  • Elastic NV (ESTC US) appears well-positioned to outperform across observability and security market segments. Management was confident in achieving growth objectives in FY23 and beyond.

Longleaf Partners Asia Pacific UCITS Fund Q1 2022 Commentary

By Fund Newsletters

  • Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
  • Longleaf Partners Asia Pacific UCITS Fund returned -7.48% in the first quarter, trailing the MSCI AC Asia Pacific Index.
  • There is an immense opportunity to be in the right companies as they close that massive discount to a more reasonable discount versus global peers.

Diamond Hill Small Cap Fund Q1 2022 Market Commentary

By Fund Newsletters

  • Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
  • Amid a rocky market environment, our portfolio’s negative returns still outpaced the Russell 2000 Index by a healthy margin in Q1.
  • After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
  • From current levels, equity market returns over thenext five years are likely to be below historical averages.

Longleaf Partners Global UCITS Fund Q1 2022 Commentary

By Fund Newsletters

  • Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
  • Longleaf Partners Global UCITS Fund declined 5.02% in the first quarter, roughly in line with the MSCI World’s 5.15% decline.
  • The Fund saw a continuation of China/Hong Kong exposure weighing on absolute and relative returns.
  • We are close to fully invested with approximately 8% cash, and our on-decklist is growing longer amid market volatility.
  • We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

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Jun 04
0

TMT: Crowdstrike Holdings Inc, Winia Aid, Amazon.com Inc, Alibaba Group, Weibo Corp, CNX Resources and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Crowdstrike FY1Q23: Share Gains Will Lead to Share Gains
  • Winia Aid IPO Valuation Analysis
  • RiverPark Short Term High Yield Fund & RiverPark Strategic Income Fund Q1 2022 Letter
  • Longleaf Partners International Fund Q1 2022 Commentary
  • RiverPark Floating Rate CMBS Fund Q1 2022 Commentary
  • Weibo (WB US): Ad Growth Clouded by Pandemic and Macro Slowdown
  • Longleaf Partners Global Fund Q1 2022 Commentary
  • Longleaf Partners Small-Cap Fund Q1 2022 Commentary

Crowdstrike FY1Q23: Share Gains Will Lead to Share Gains

By Aaron Gabin

  • 61% revenue growth, 17% operating margins (up 720bps YoY) and 32% FCF margins. Best in class growth + profitability.
  • ECommerce engine opening up from 4 modules to 12 means higher velocity sales on the come.
  • VMWare’s Carbon Black will become a major share donator due to Broadcom acquisition.

Winia Aid IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Winia Aid is target price of 21,724 won per share, which is 34% higher than the high end of the IPO price range.
  • Winia Aid had ROE of 29% in 2021 which was much higher than the comps’ average of 9.6% in 2021. 
  • The company’s core businesses include after sales service and logistics for Winia Group electronics related products and Apple after sales service and support.

RiverPark Short Term High Yield Fund & RiverPark Strategic Income Fund Q1 2022 Letter

By Fund Newsletters

  • Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
  • Called and Tendered securities continue to be a significant component of our purchases. The supply of these bonds remained ample during most of the period.
  • In an unpredictable market, RiverPark Strategic Income continues to stay conservative, with an effective maturity a fraction of the indices while maintaining comparative yields.

Longleaf Partners International Fund Q1 2022 Commentary

By Fund Newsletters

  • Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
  • Longleaf Partners International Fund declined 12.04% in the first quarter, while the MSCI EAFE Index declined 5.91%.
  • New investments have a high hurdle to qualify given our conviction in our current holdings and the steep discount of the portfolio.
  • We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

RiverPark Floating Rate CMBS Fund Q1 2022 Commentary

By Fund Newsletters

  • Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
  • For our portfolio, that technical downward price pressure is abating, as the new issuance has been absorbed and as higher coupons have attracted new buyers.
  • While we face challenges at home and abroad, we believe this is an excellent time to invest in the Fund.
  • Inflation is our number one concern for the year ahead and ourportfolio is ideally positioned for it to maximize returns and to minimize rate driven losses.

Weibo (WB US): Ad Growth Clouded by Pandemic and Macro Slowdown

By Roger Xie

  • Weibo Corp (WB US) delivered robust 1Q22 results with ad revenue growing 10% year-over-year and outperforming other Chinese social networks, which underscores Weibo’s prominent position for advertisers.
  • However, widespread lockdowns in China and economic slowdown could pressure Weibo in 2Q, and we expect a gradual recovery in 3Q-4Q with limited visibility. 
  • We like Weibo attractive valuation at 10x forward P/E; it has amassed MAU 582 million till March 2022 and user engagement has been improving.

Longleaf Partners Global Fund Q1 2022 Commentary

By Fund Newsletters

  • Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
  • Longleaf Partners Global Fund declined 5.84% in the first quarter, roughly in line with the MSCI World’s 5.15% decline.
  • In a volatile quarter for markets across the globe, we saw one of the largest disconnects between price and value per share performance that we have seen for our portfolio in a long time.
  • We remain fully invested with less than 2% cash, and our on-deck list isgrowing longer amid market volatility.
  • We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

Longleaf Partners Small-Cap Fund Q1 2022 Commentary

By Fund Newsletters

  • Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
  • Longleaf Partners Small-Cap Fund added 0.76% in the first quarter, meaningfully outperforming the Russell 2000 Index, which declined 7.53%.
  • We own companies that have pricing power that can price through cost increases and grow their profitability.

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Jun 03
0

TMT: GoTo, Powerchip Semiconductor Manufacturing Corp, Meituan, TSMC, Preferred Networks, Apple, SmartNews, Elastic NV, Spotify Technology SA and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week
  • FTSE TWSE Taiwan 50 Index Rebalance: PSMC (6770) Replaces Momo (8454)
  • Meituan (3690 HK): 1Q22 Looks Normal, But Layoff Will Slow Down Revenue
  • TSMC: Precariously Balanced; Robust Medium-Term Earnings Outlook and Discount Valuation Levels
  • Preferred Networks – The AI Revolutionary
  • RiverPark Large Growth Fund Q1 2022 Letter
  • SmartNews – Potentially A Global Champion?
  • Meituan – Omicron Impact Was Not as Big in 1Q but 2Q Will Have the Full Impact
  • Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs
  • Arch Capital Q1 2022 Investor Letter

GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week

By Brian Freitas

FTSE TWSE Taiwan 50 Index Rebalance: PSMC (6770) Replaces Momo (8454)

By Brian Freitas

Meituan (3690 HK): 1Q22 Looks Normal, But Layoff Will Slow Down Revenue

By Ming Lu

  • Revenue growth mainly came from initiatives, which is the focus of April layoff.
  • We believe revenue will slow down and the operating loss will shrink.
  • We set a downside of 11.5% and a price target of HK$160.

TSMC: Precariously Balanced; Robust Medium-Term Earnings Outlook and Discount Valuation Levels

By Wium Malan, CFA

  • Medium-Term revenue growth expectations could be exceeded given capacity expansion plans, announced pricing increases and a continued tight semiconductor supply market.
  • Based on TSMC’s robust medium-term outlook, for revenue growth and profitability, current sell-side estimates of only 10% EPS growth for FY2023f seem conservative.
  • TSMC is currently trading at a 16.2x forward PE ratio, one standard deviation below its 5-year average, a level which has historically proven to be a good entry point.

Preferred Networks – The AI Revolutionary

By Mio Kato

  • Preferred Networks is generally considered Japan’s leading AI and deep learning company with collaborations with numerous conglomerates across many industries. 
  • The company offers significant gearing into labour saving technologies and could potentially become a global leader in AI over time. 
  • In addition, it has demonstrated exceptional power efficiency with its deep learning technology which could prove a critical competitive advantage.

RiverPark Large Growth Fund Q1 2022 Letter

By Fund Newsletters

  • Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
  • Over this year’s first three months, the RiverPark Large Growth Fund (the “Fund”) lost 19.6%.
  • Rather than follow the market’s so-called “de-risking” strategy, we “leaned in” to our higher growth positions (in some cases materially) at what we believe to be generationally attractive prices.
  • While we are deeply disappointed by our recent losses, we believe thatwe are currently invested in an exceptional risk-reward portfolio and look forward to strongabsolute and relative returns in the quarters to come.

SmartNews – Potentially A Global Champion?

By Mio Kato

  • SmartNews is a news aggregation app using an advertising-based business model originally established in Japan in 2012 with an expansion into the US market in 2014. 
  • The company is interesting in that it funds initiatives to improve the quality of investigative journalism and address problems arising from social media such as increasing polarisation. 
  • However, what truly piques our interest is its demonstrated success in the US which remains unusual for Japanese software companies.

Meituan – Omicron Impact Was Not as Big in 1Q but 2Q Will Have the Full Impact

By Shifara Samsudeen, ACMA, CGMA

  • Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
  • As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
  • Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel & Travel which seems strange, suggesting 2Q numbers could be worse.

Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs

By Aaron Gabin

  • Elastic just dramatically raised its revenue guidance for FY2025…implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.
  • Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.
  • The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.

Arch Capital Q1 2022 Investor Letter

By Fund Newsletters

  • Arch Capital is a concentrated, long-only equity fund aiming to compound capital at an above-market rate.
  • The fund holds a concentrated collection of high-quality businesses purchased at prices where we believe forward returns can exceed a rate of 15% a year.
  • With the fund down 15.3% since inception, the market does not agree with our assessments.

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