In this briefing:
- Nexen Holdco Trade: Quick Reversion on Yesterday’s 2σ Price Divergence
- U.S. Equity Strategy: Has “the Pullback” Begun?
- New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside
- Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets
- Maoyan Entertainment IPO Valuation: Press the Skip Button
1. Nexen Holdco Trade: Quick Reversion on Yesterday’s 2σ Price Divergence
- Nexen Sub made a run yesterday. It climbed 6% yesterday. Holdco stayed flat with a 0.34% gain. This created a huge price divergence. The duo made nearly 2σ gap in one single day. They are now slightly below -1σ on a 20D MA. Holdco discount is 46% to NAV.
- This much divergence in a single day is very rare for the Nexen duo. Sub’s stronger 4Q numbers should have been already priced in. Yesterday was more of a sentimental boost, thanks to HMG. Short-term wise, further price pushing up on Sub is unlikely.
- The duo is well below 120D mean and 2Y mean on a 20D MA price ratio. Price divergence should be held back at the current level. I’d go for a quick reversion in favor of Holdco. Just, Holdco liquidity can be a major issue to many of us here.
2. U.S. Equity Strategy: Has “the Pullback” Begun?
The weight of the evidence suggests that the pullback has begun. This belief is supported by overbought conditions combined with the S&P 500, MSCI ACWI, and nearly all Sectors hitting logical resistance. Assuming the pullback continues, the next question is how deep or damaging will it be? In this report we highlight various market/technical indicators we are monitoring, as well as pointing out attractive set ups within Consumer Discretionary and Health Care Sectors.
3. New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside
- The record net losses were mainly due to a seasonally weak quarter and recognition of the impairment in a subsidiary.
- Q2 revenues did not slow down and management does not believe Q3 revenues will slow down.
- EDU will not be negatively impacted by the new law from the Ministry of Education.
- The P/E band suggests an upside of 27% and a price target of USD90.
4. Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets
- LVS shot at Japan license enhanced by his role in lobbying US Justice Department’s reverse opinion on online gambling published last week. Read why in this insight.
- Owning Sands China makes a strong case based on an ROCE analysis vs. the hospitality sector.
- Owning both at current trade is one of the screaming bargains in the entire sector
5. Maoyan Entertainment IPO Valuation: Press the Skip Button
Maoyan Entertainment (EPLUS HK) is the largest online movie ticketing service provider in China. The mid-point of Maoyan’s IPO price range of HK$14.8-20.4 per share implies a market value of $2.5 billion (HK$19.8 billion). Five cornerstone investors have agreed to buy $30 million or 10% of the offering at the IPO mid-point. The cornerstone investors are Imax China Holding (1970 HK), Hylink Digital Solutions, Prestige of The Sun, Welight Capital and Xiaomi Corp (1810 HK).
Our analysis suggests Maoyan is being offered at a material premium to a peer group of major Chinese internet companies. Due to challenging prospects faced by Maoyan as outlined in our previous research, we believe a premium rating is unwarranted. Consequently, we are inclined to sit out this IPO.
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