Brief Hong Kong: Moore’s Law May Not Be Dead, After All and more

In this briefing:

1. Moore’s Law May Not Be Dead, After All
2. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?
3. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
4. TRADE IDEA – Hang Lung (10 HK) Stub: A Timeless Arb
5. StubWorld: Wharf Under Pressure As Cooling Measures Bite

1. Moore’s Law May Not Be Dead, After All

For years semiconductor makers and investors have worried that Moore’s Law will end.  Although it is not difficult to find proponents of this argument today, this Insight provides evidence that the venerable phenomenon not only is still moving forward, but that it has, in some cases, been moving faster than it has in the past.

2. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?

Facebook Inc A (FB US) : Mark Zuckerberg sees the light or is facing the WeChat burn? It seems like the whole tilt towards ensuring a more safe, secure environment lies in its play to emulate WeChat…eventually. But first, it needs to address specific issues of data protection, security and privacy that plague the company and possibly think around altering its current revenues via the advertisement model.

The company certainly seems to be moving towards making a token/coin and is even hiring blockchain specialists. Could it look to make a Stablecoin? Work on a M-Pesa model ? Target remittances in countries like India? It seems a long road and arduous road ahead- but it has been dropping directional hints along the way.

Lyft Inc (0812823D US) : Why does Lyft Inc (0812823D US) want to list exactly aside locking in money before the number one player swamps the market ? Could it be regulatory changes on the anvil ? And would those be food for thought for Asia plays – Grabtaxi Holdings Pte (0967655D SP)DiDi Chuxing (1284375D CH)  and Olacabs ?

3. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019

The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.

Exhibit 1: M&A volume compared to the E&P index and the oil price since 2016

4. TRADE IDEA – Hang Lung (10 HK) Stub: A Timeless Arb

An old favorite in the Asian arbitrageur’s investment universe is the Hang Lung stub. The Hang Lung Group acquired Hang Lung Properties (formerly named Amoy Properties) and designated the subsidiary as its property investment arm.  After both companies were listed in 1992, the same year that the company entered the mainland with its purchase of the Grand Gateway 66 and Plaza 66 in Shanghai, the pair was open to arbs. The Hang Lung Group now controls over RMB 130 (USD 19.4b) billion of property in Hong Kong and China. 

In the wonderful world of Asian holding companies, Hang Lung needs little introduction. However, in this insight I would like to highlight a trade idea. I will detail why I think now is the right time to setup a stub trade and some background information on the company and what assets constitute the stub. 

In this insight I will cover:

I. The Trade

II. The Stub Assets

III. My Track Record with Stub Trades

5. StubWorld: Wharf Under Pressure As Cooling Measures Bite

This week in StubWorld …

• Wheelock & (20 HK) is coming up “expensive”, but it’s Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing’s cooling measures.

Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.