In this briefing:
- Nexen Corp Holdco Trade: Status Update & Recommended Action
- BGF Holdo Trade: Status Update & Recommended Action
- Hikari Tsushin (9435) Continues to Generate Profits Growth as New Business Streams Contribute. BUY
- DeNA (2432): Undervalued Internet Stock
- CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
1. Nexen Corp Holdco Trade: Status Update & Recommended Action
- Nexen Corp (005720 KS) / Nexen Tire Corp (002350 KS) stub trade yield is 6.07%. Price ratio is now at 20D MA. Holdco discount now stands at 41.57% to NAV.
- Shorting on Tire has softened in the last two trading days. No yearend dividend boosting effect is expected on Holdco. Holdco discount isn’t particularly high. Price ratio is well above yearly avg. I’d close this position now at a 6.07% yield.
2. BGF Holdo Trade: Status Update & Recommended Action
- BGF Co Ltd (027410 KS) / Bgf Retail (282330 KS) stub trade is at a 4.38% loss. Price ratio is still well below -1 σ. It is actually at a new yearly low. Holdco discount now stands at 48.55% to NAV.
- Holdco price discount is too harsh. It’d be too tempting to pass up. An estimated 1.5~2%p difference in dividend yield must be pushing up price ratio soon.
- I still believe below -1 σ wouldn’t last for as long as it used to. I’d hold onto this position a bit longer with a 10% loss cut.
3. Hikari Tsushin (9435) Continues to Generate Profits Growth as New Business Streams Contribute. BUY
The company forecasts an operating profit of Y55bn this year, the consensus is for Y57bn which is not unreasonable as management want to hold profits back. Next year assuming they make about Y64bn, the shares are on about 19x. With long term profits growth expected, and a good shareholder return policy this is a great domestic long term BUY. BUY into recent weakness. Foreigners own 24% of this name.
4. DeNA (2432): Undervalued Internet Stock
Dena Co Ltd (2432 JP) used to be the GO-GO internet stock for both retail and institutional investors in Japan during the previous bull run before 2008 and trading at 40-50x PER. The multiples have since then collapsed to 10-20x PER although the business prospect remains solid if not better. Benefiting from the increasing regulation in China, DeNA signed an agreement with Tencent Holdings (700 HK) to distribute Arena of Valor in Japan which will boost revenue and improve margin. At 14x PER and 1.2x PBR, DeNA looks attractive.
5. CMGE Tech (中手游) Pre-IPO Review – Unfortunate Timing
China Mobile Games Adr (CMGE US) plans to raise US$300m in its upcoming Hong Kong IPO.
CMGE is an intellectual-property (IP) oriented mobile game operator. The company delisted from Nasdaq in 2015 and tried to do a backdoor listing on Shenzhen Exchange in late 2015 but it was canceled due to unfavorable market condition. It is now trying to list on the Hong Kong Exchange when the sentiment is poor due to the game approval suspension.
In this insight, we will take a look at the financial performance, key operating metrics, and analyze its games pipeline.
