Daily Hong Kong: Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation and more

In this briefing:

1. Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
2. Jardine C&C (JCNC SP): Close the Stub Trade
3. StubWorld: A 2018 Review In Charts
4. Maoyan Entertainment IPO: The Trouble with Blockbusters
5. Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.

1. 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.

2. 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

3. StubWorld: A 2018 Review In Charts

This week in StubWorld …

• The average NAV discount of a basket of 40 Holdcos steadily, and not altogether unsurprisingly, widened throughout the year.
• Passive, tech-related and illiquid Holdcos widened most; while cross-border and property Holdcos were the best of the worst.  
• Illiquid, property, and passive Holdcos’ underperformance (or widening) was more pronounced in the first half. Tech Holdcos primarily widened in the second half.
• Worst performers (discount widening): In absolute % terms, United Co Rusal Plc (486 HK) and Asm International Nv (ASM NA) roughly shared the largest moves; while Dah Sing Financial (440 HK), First Pacific Co (142 HK), Genting Bhd (GENT MK) and Pasona Group (2168 JP) are trading at or near their 52-week wides and 52-week low prices.
• Best performers (discount narrowing): China Conch Venture Holdings Ltd (586 HK) is the only Holdco in positive territory; while Japan Post Holdings (6178 JP) is trading closest to its narrowest level in the last 12 months.

Below the various NAV discount chart summaries of various baskets are my weekly setup/unwind tables.

This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% ‘market capitalisation’ threshold, whereby the value of the holding/Opco held must be at least 20% of the parent’s market cap.

Comments on Jardine Matheson Hldgs (JM SP) / Jardine Strategic Hldgs (JS SP) also follow the setup/unwind tables.

4. Maoyan Entertainment IPO: The Trouble with Blockbusters

Maoyan Entertainment, formerly Entertainment Plus (EPLUS HK), is the largest online movie ticketing service provider in China. According to press reports, Maoyan has started pre-marketing to raise $0.3 billion (down from earlier indication of $0.5-1.0 billion) through a Hong Kong IPO. Maoyan is backed by Beijing Enlight Media (300251 CH) (20.0% shareholder), Tencent Holdings (700 HK) (16.3% shareholder) and Meituan Dianping (3690 HK) (8.6% shareholder).

5. Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.

The Semiconductor Industry Association (SIA) just announced that worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8% YoY, but down 1.1% MoM, the first such decline since February 2018. While the decline is modest and total 2018 total semiconductor sales are on track to reach ~$470 billion for a YoY increase of 15.7%, any decline in what should be peak holiday season is not a good sign. 

Semiconductor sales historically track Wafer Fab Equipment (WFE) sales with a roughly six month time lag. North American WFE sales have been declining each month for the past six months meaning that this latest semiconductor MoM sales decline is right on schedule.  

Leveraging a decade’s worth of historical data, we analyse two key questions that are likely on every investors mind. Firstly,for how long should we expect semiconductor sales to continue their decline. Secondly, how steep should we expect that decline to be?