In today’s briefing:
- TOPIX July Rebalance: Flows at the Close Today
- Mercari (4385) | We Were Wrong…its Worse
- JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- VNET Draws the Interest of MBK Partners
- Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
- FirstCry Tearsheet – India’s Only “Surviving” Baby Products Retailer
- SK Telecom: MSCI Deletion Should Provide Entry Point Vs KT Corp
- Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying
- Digital Turbine Inc.: Initiation of Coverage – Partnerships With Google & AccuWeather
- Tencent (700 HK): Game Industry Decreasing for First Time and Turning to Overseas Market
TOPIX July Rebalance: Flows at the Close Today
- FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
- There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
- The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.
Mercari (4385) | We Were Wrong…its Worse
- Shopify Inc (SHOP US) ‘s share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends
- Mercari Inc (4385 JP) ‘s US business is highly correlated with its US peer, as is its stock price
- A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal
JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
- In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
- Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.
VNET Draws the Interest of MBK Partners
- Bloomberg reported that MBK Partners is in talks to team up with a partner on a joint offer for 21Vianet Group (VNET US). Considerations are at a preliminary stage.
- A potential bid would compete against The Hina Group and Industrial Bank’s $8.00 per ADS offer. The Board has not provided an update on its stance on this offer.
- Takeover interest is unsurprisingly due to VNET’s depressed share price, unchanged FY22 guidance and ongoing data centre M&A activity.
Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
- Softbank and Z Holdings have confirmed the conversion of PayPay preferred equity into common in-line with previous guidance for ownership levels and a revaluation gain
- Z Holdings will sell the credit card business to PayPay to align transactional fintech which makes distribution, product development and branding easier
- Our outlook has not changed but we are lowering our target price to reflect diminished expectations announced at Q4 results. We remain at Buy but prefer NTT/KDDI in telcos
FirstCry Tearsheet – India’s Only “Surviving” Baby Products Retailer
- FirstCry (0172540D IN) is one of the leading and only surviving Omni channel retailer that specialises in baby products.
- Channel feedback is positive, the strategy of opening company-owned and operated stores, and segregating online and offline operations is working well.
- Increasing revenues, profitable operations and limited competition make FirstCry a compelling narrative that should be on the watchlist.
SK Telecom: MSCI Deletion Should Provide Entry Point Vs KT Corp
- SK Telecom (017670 KS) has continued to underperform KT Corp (030200 KS) even as foreign investors continue buying. Local institutions have been selling the stock.
- With foreign room currently at 1.68% and consistently below 3.75% recently, SK Telecom (017670 KS) should be deleted from the MSCI Korea Index at the August QIR.
- There will be more selling from FTSE trackers in September. With the SK Tel/KT Corp price ratio trading at the lows, the passive selling could provide a good entry point.
Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying
- On 22nd June, China released a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.
- Alibaba Health’s share price is down more than 10% since the announcement of the draft rule, however, third-party e-commerce platforms accounts for about 10% of Ali Health’s revenues.
- Pharmaceutical direct sales business has been generating lower GPM compared to JD Health’s direct biz, and the company’s margins have continued to deteriorate during the last 2-years.
Digital Turbine Inc.: Initiation of Coverage – Partnerships With Google & AccuWeather
- This is our first report on the mobile growth platform provider, Digital Turbine.
- Digital Turbine is now in an expansion mode as evident from its recent results as well as its acquisition-oriented strategy.
- However, in recent quarters, the investors of Digital Turbine have turned against various technology-focused assets, and its stock price also lost much value.
Tencent (700 HK): Game Industry Decreasing for First Time and Turning to Overseas Market
- Online game sales decreased for the first time in 1H22.
- The main problem is the unstable policy of the new game license.
- Big companies like Tencent and NetEase are seeking overseas markets.
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