In this briefing:
- 58.com (WUBA): Weak Membership Growth Suggests More Volatile Performance, 17% Downside
- JKN: 4Q18 Earnings Grew Both YoY and QoQ
- Sea Ltd: Follow-On Public Offering an Opportunistic Fundraising?
1. 58.com (WUBA): Weak Membership Growth Suggests More Volatile Performance, 17% Downside
* We believe that the stagnancy in membership was due to the new competitor Ke.com and will make total revenues more volatile in the future.
* We assume total revenues will slow down, but the operating margin will be stable in 2019.
* We compare WUBA’s expected P/E for 2019 with other vertical platforms in China and conclude 17% downside.
2. JKN: 4Q18 Earnings Grew Both YoY and QoQ
The company’s 4Q18 net profit was at Bt46m (+298%YoY and +8%QoQ). The result was in line with our 2018 forecast and accounted for 97% of our full-year forecast.
- A YoY surge in earnings was due to a 30% increase in revenue to Bt360m, mainly from export revenue (50% revenue contribution in 3Q18 from 0% in 4Q17). A QoQ gain was caused a reduction in extra expenses for holding an annual event ‘JKN mega showcase’ in early August.
- 2019 earnings outlook is still decent on the back of 1.) higher revenue contribution from export market especially South East Asia (26% of revenue in 2018), 2.) CNBC studio commencement in 2Q19, and, 3.) revenue recognition from new channel subscribers (No.5, Thairath, Spring news, True4U, Nation and MONO)
We maintain our forecast and BUY rating for JKN with a target price of Bt8.80 based on 14.8xPE’19E mean of the Asia ex-Japan Consumer Discretionary Sector.
3. Sea Ltd: Follow-On Public Offering an Opportunistic Fundraising?
- We evaluate the attractiveness of Sea Ltd’s (SE US) US$1 bn follow-on public offering announced last Fri.
- This offering is a typical opportunistic fundraising as its ADR price has recently surged.
- At assumed deal price of US$21, SE post deal would trade at 4.6x 2019E P/adjusted sales (excl. 1P e-commerce sales), vs. peers average of 5.2x.
- We would recommend investors to go for the deal if it is priced at US$20 or lower.
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