In this briefing:
- Forecasting the Semiconductor Market
- Chengdu Expressway (成都高速) IPO Review – Well-Managed but Unexciting
- Weimob IPO Valuation: Optically Cheap
- Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
- Jardine C&C (JCNC SP): Close the Stub Trade
1. Forecasting the Semiconductor Market
This is the time of year that Objective Analysis releases its semiconductor forecast. This post is based upon a video posted on the WeSRCH website that explains the Objective Analysis 2019 semiconductor forecast.
Although accurate semiconductor forecasts are straightforward to produce, the consistently-accurate methodology spelled out in this Insight is rarely used.
The forecast predicts that the downturn that the industry is currently entering will be longer than most, with profits eluding chip companies until 2022.
2. Chengdu Expressway (成都高速) IPO Review – Well-Managed but Unexciting
Chengdu Expressway Company Limited (1785 HK) is looking to raise US$112m in its upcoming IPO.
The expressways that CEC operate are integral in Chengdu’s transport network. The expressways have been upgraded and expanded consistently over the past three years which has led to an increase in traffic and toll revenue. However, in terms of valuation, CEC will likely trade at a valuation closer to small expressway peers which implies a 10% downside.
In this insight, we will look at the company’s financial and operational performance, toll payment model, and compare its valuation to Hong Kong-listed expressway peers. We will also run the deal through our IPO framework.
3. Weimob IPO Valuation: Optically Cheap
Weimob.com (1260480D CH) is a combination of a SaaS software and an adtech (targeted marketing) business which has started book building to raise gross proceeds of $108-135 million. According to press reports, Weimob is being viewed favourably by investors as it is being offered at a “cheap” valuation of 18-23x 2019 P/E.
However, the valuation of 18-23x 2019 P/E is optically cheap. Our analysis suggests that including capitalised R&D, Weimob is being offered at a material premium to a peer group of major Chinese internet companies. Notably, our forecasts do not adjust for the capitalised contract acquisition costs which would further increase Weimob’s P/E multiple. Consequently, we believe that the proposed IPO price range is unattractive and would sit out this IPO.
4. Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
Weimob.com (1260480D CH), a Tencent Holdings (700 HK) and GIC investee company, plans to raise up to US$135m in its Hong Kong IPO.
I’ve covered most aspects of the deal in my earlier insight, Weimob Pre-IPO – Can Be Steamrolled by Tencent, Anytime, where I spoke about the over-reliance on Tencent, high attrition rates and acquisition costs for SMBs, and the increasing contribution of its ads business.
In this insight, I’ll provide an update from the latest filings, comment on valuations and run the deal through our IPO framework.
5. Jardine C&C (JCNC SP): Close the Stub Trade
In my original insight on October 17, 2018 TRADE IDEA – Jardine Cycle & Carriage (JCNC SP) Stub , I proposed setting up a stub trade to profit from volatility in the markets that caused the Jardine Cycle & Carriage (JCNC SP) stub to trade at a historically low discount to NAV. During the 78 calendar days that followed, Jardine Cycle & Carriage (JCNC SP) has gained 23% and the trade has made 5.03% on the gross notional. I now recommend closing the trade.
In this insight I will discuss:
- Performance of ALL my recommended stub trades
- a post-mortem trade analysis on the JCNC stub
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