Brief Growth Ideas: Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up and more

In this briefing:

1. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up
2. MTG Co Ltd; Problems Stretch Far Beyond the New Chinese E-Commerce Legislation
3. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings
4. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
5. WICE: Expansion Phase Still Go On

1. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up

Huya, a leading live streaming player in China, announced share placement of USD 550 million after market close on April 3rd. In this insight, we will look at recent developments of Huya and score the deal in our ECM Framework.

2. MTG Co Ltd; Problems Stretch Far Beyond the New Chinese E-Commerce Legislation

• MTG revised their original targets for FY2019 and issued revised targets which were significantly below the original targets
• The share price has already been on the decline even prior to the notice of revised targets
• Declining inbound sales of its flagship brand ReFa is the main culprit for guidance reversion
• The impact of Chinese e-commerce legislation was significant due to limited exposure to pure inbound sales
• Parallel buyers, those who buy products to resell them in China: dominates MTG’s inbound sales
• MTG’s price difference in Japan duty-free purchases vs official sales channels in China
• The Troubles of MTG, Causing Panic Among Consensus
• Insider ownership and lack of free float keeping the share price above its fair value
• Price to book approaching 1.0x; limits the immediate downside risk

3. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings

Ruhnn Holding Ltd (RUHN US) raised US$125m at US$12.50 per share, the mid-point of the price range. We have previously analyzed the IPO in:

• Ruhnn (如涵) IPO Review – Expensive Influence
• Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

4. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact

Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!

So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.

Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing. 

5. WICE: Expansion Phase Still Go On

We maintain BUY rating for WICE with a new target price of Bt5.20 (previous target price: 7.50), based on 29xPE’19E, its one year average trading range or 20% discount to Thai transportation sector.

The story:

• Cross broader business plays the key growth driver in 2019
• We revised down earnings in 2019-21E due to lower-than-expected margins

Risks:

• Stronger Baht vs major foreign currencies such as US dollar causes lower income in Baht terms as the main reporting currency is Baht
• Higher than expected in fluctuation in freight rates
• Intensity of freight forwarding businesses in both domestic and overseas