In this briefing:
- Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets
- Maoyan Entertainment IPO Valuation: Press the Skip Button
- Inventory Clearance and the Semiconductor Cycle
- Wanted: A 21st Century Monetary Theory
- HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
1. Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets
- LVS shot at Japan license enhanced by his role in lobbying US Justice Department’s reverse opinion on online gambling published last week. Read why in this insight.
- Owning Sands China makes a strong case based on an ROCE analysis vs. the hospitality sector.
- Owning both at current trade is one of the screaming bargains in the entire sector
2. Maoyan Entertainment IPO Valuation: Press the Skip Button
Maoyan Entertainment (EPLUS HK) is the largest online movie ticketing service provider in China. The mid-point of Maoyan’s IPO price range of HK$14.8-20.4 per share implies a market value of $2.5 billion (HK$19.8 billion). Five cornerstone investors have agreed to buy $30 million or 10% of the offering at the IPO mid-point. The cornerstone investors are Imax China Holding (1970 HK), Hylink Digital Solutions, Prestige of The Sun, Welight Capital and Xiaomi Corp (1810 HK).
Our analysis suggests Maoyan is being offered at a material premium to a peer group of major Chinese internet companies. Due to challenging prospects faced by Maoyan as outlined in our previous research, we believe a premium rating is unwarranted. Consequently, we are inclined to sit out this IPO.
3. Inventory Clearance and the Semiconductor Cycle
A very normal part of the semiconductor cycle is inventory clearance. DRAM makers are starting to discuss this in their earnings calls. What they are NOT telling their investors is how significant this is to the onset of a price collapse, perhaps because they don’t understand it themselves. This Insight will help readers to learn how and why an inventory clearance helps ratchet a budding oversupply into a full-blown glut.
4. Wanted: A 21st Century Monetary Theory
The globe is facing more than an ordinary business cycle.
Joseph C. Sternberg, editorial-page editor and European political-economy columnist for the Wall Street Journal’s European edition, recently interviewed Claudio Borio, head of the Monetaryand Economic Department of the BIS. Mr. Borio said that politicians have relied far too much on central banks, which are constrained by economic theories that offer little meaningful guidance on how to sustain growth and financial stability. The only tool they have is an interest rate that can affect output in the short run but ends up affecting only inflation in the end.
5. HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this week’s HK Connect Discovery, we highlight that Tencent topped the weekly inflow by quantum and its shares held by mainland investors via Stock Connect is at one year low. Stocks exposed to mobile game sector experienced inflow too. In addition, we continue to observe that the mainland investors holding on Yichang HEC continue to rise.
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