In today’s briefing:
- Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- W-Scope IPO Lock-Up – US$300m Worth of Shares to Come Free
- Tencent Meituan Dividend – All Shares in CCASS – More Pressure Now but Will Have a Shorter Overhang
- [Meituan (3690 HK) Target Price Change]: Bracing for Douyin Impact with Limited War Chest
- Indosat (ISAT IJ) – The Telco Changeling
- Tencent Holdings Ltd (700 HK) – Bullish Multi-Month Outlook – Target 450+ (+20-25%)
- Taiwan Tech Weekly: Micron Earnings to Provide Memory Outlook; Taiwan Vs. SOX Divergence
- MSCI EM $EEM 2-Month Downtrend Reversal at Support — Add Exposure. Upgrading Taiwan to Overweight
- [Xiaomi Inc. (1810 HK) Target Price Change]: Picking Both Earnings and Scale, but Obtaining Neither
- Athlete-Direct-to-Fan: The Future or FAD?
Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
- Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
- Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.
W-Scope IPO Lock-Up – US$300m Worth of Shares to Come Free
- WCP (393890 KS) raised around US$314m via in its Korean IPO. The stock was listed on 30th Sep 2022, its six-month lockup will expire soon.
- WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Tencent Meituan Dividend – All Shares in CCASS – More Pressure Now but Will Have a Shorter Overhang
- On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
- At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares.
- We have spoken about the background of the deal in our earlier notes. In this note, we talk about the overnight updates.
[Meituan (3690 HK) Target Price Change]: Bracing for Douyin Impact with Limited War Chest
- Meituan reported C4Q22 total revenue 4% higher than cons. Non-IFRS net margin beat cons. by 0.4ppt due to strong cost control during lockdowns.
- Meituan has limited options against Douyin’s fast expansion of new service categories and customized offerings. The competition against Douyin will continue to pressure the in-store business in the long run.
- Maintain SELL and cut TP to HK$125. Our TP implies 3x PS, 10x PE and 1x PS for on-demand delivery, in-store, and new initiatives, respectively.
Indosat (ISAT IJ) – The Telco Changeling
- Indosat (ISAT IJ) has come back from being the loss-making underdog amongst the Indonesian telcos and is now well and truly on the rebound, with significant potential upside.
- The acquisition of Hutchison’s “3” has propelled the company into the number two spot in terms of market share and enabled better quality coverage after a well-orchestrated merger.
- Indosat now has a 4G footprint in Java greater than Telkomsel and with significant potential to gain share ex-Java, which provides higher returns. Valuations remain attractive.
Tencent Holdings Ltd (700 HK) – Bullish Multi-Month Outlook – Target 450+ (+20-25%)
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- Last week complemented November 2022’s bullish LT confirmation with a bullish MT confirmation, re-instating the MT uptrend after a period of correction in Feb/Mar.
- Tencent Holdings Ltd (700 HK) has likely entered the 2nd leg of a material MT uptrend. Q2 2023 target towards 451.95 (+25%).
Taiwan Tech Weekly: Micron Earnings to Provide Memory Outlook; Taiwan Vs. SOX Divergence
- Micron earnings this week, will provide insight on the outlook for the memory chip space.
- The Taiwanese market has substantially lagged the surge in the Philadelphia Semiconductor Index.
- Chinese firms are trying to poach engineers from TSMC and UMC by offering 2-3x their salaries.
MSCI EM $EEM 2-Month Downtrend Reversal at Support — Add Exposure. Upgrading Taiwan to Overweight
- In our February 6, 2023 EM Strategy, we discussed that we were buyers of the MSCI EM (EEM-US) on a pullback to the 50-day MA.
- The pullback went a bit deeper but managed to hold at our $37.50 line-in-the-sand which we discussed in our recent ETF Pathfinder reports (Mar. 6 and Mar. 20, 2023).
- The EEM-US displays a bullish 2-month downtrend reversal- add exposure. Signs continue to point to a topping DXY, and a declining DXY has historically resulted in EM outperformance (vs. EAFE).
[Xiaomi Inc. (1810 HK) Target Price Change]: Picking Both Earnings and Scale, but Obtaining Neither
- Xiaomi reported C4Q22 top-line, non-IFRS EBIT and non-IFRS net income in-line, 14%, and 25% vs. our est., and in-line, 78%, and 26% vs. consensus;
- Beginning in 2023, we expect it will be forced to sacrifice for or the other given its lack of moat in any category;
- Xiaomi will likely improve phone gross margins due to declining IC prices, RMB appreciation, underlying our TP raise to HK$8.2, but we maintain SELL.
Athlete-Direct-to-Fan: The Future or FAD?
- The way fans interact with sports has changed an incredible amount over the past 20 years.
- We’ve seen broadcasting, social media, streaming and such all impact the way fans consume the sports they love.
- The future of fan engagement is always a hot topic because things are always changing, of course.
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