Most Read: LINE Corp, HDFC Standard Life Insurance, Sohu.com Inc, Samsung Electronics Pref Shares, Ant Financial and more

In today’s briefing:

  • LINE (3938) – This Is Not the Kitchen Sink You Are Looking For
  • NIFTY50 Index Rebalance – HDFC Life at All Time High On Inclusion, Time to Switch
  • Sohu – The Better Play on Sogou
  • Samsung Electronics – Preferred Shares Underperforming on Liquidity
  • Ant Group IPO First Look: Swarming to Market

LINE (3938) – This Is Not the Kitchen Sink You Are Looking For

By Travis Lundy

Since writing my two insights describing how I thought betting on a LINE bump was not the best trade out there in Bump-Land, I have received no small amount of pushback by investors who are long the bump trade. 

My response?   That’s what makes a market. 

Today, LINE Corp (3938 JP) announced its Q2 earnings, showing both a normal operating loss and additional extraordinary losses from write-downs. That will not encourage some and I expect there may be some accusations of LINE kitchen-sinking their earnings before a Special Committee (and this has its own issues) decides to revisit the fair price valuation through a re-valuation and an updated Fairness Opinion. 

For those worried about that, I offer the following:

More discussion below.

Previous insights related to this situation and the names involved are listed below.

Relevant Insights

DateAuthorTitle

About Cashless Payments

13 Mar 2019 Michael Causton  Loyalty Points In Japan: More Loyalty, More Points and the Conduit to Cashless Payments 
2 Apr 2019 Mio Kato, CFA  Mercari: Why Mercari Is Likely to Be a Winner in the Cashless Wars 
28 Jun 2019 Supun Walpola  Paying with PayPay: A Deep Dive into Yahoo! Japan’s Mobile Payment Business 
6 Jan 2020 Michael Causton  Lawson and KDDI Join Forces in Cashless Payments War 
24 Jan 2020 Michael Causton  Mercari – Merpay Acquisition of Origami Pay Continues Cashless Consolidation 
15 Feb 2020 Michael Causton  Japan Payment Wars: NTT Docomo and Merpay/Origami to Attempt Catch up with PayPay and Rakuten 
20 Mar 2020 Michael Causton  Some Resistance to Cashless Payments in Japan 
28 Apr 2020 Michael Causton  Z Holdings and Yamato Create Fulfilment Service for All to Rival Rakuten and Amazon 
29 July 2020 Supun Walpola  Z Holdings [Alt Data]: PayPay Mall and PayPay Flea Market Continue to Disappoint 

About This Deal

14 Nov 2019Travis Lundy Z and LINE, Sitting in a Tree… M.E.R.G.I.N… G…? 
18 Nov 2019Travis Lundy LINE and Z, Sitting in a Tree… M.E.R.G.I.N.G! And a Tender Offer! 
26 Dec 2019Travis LundyNEW Deal for LINE (A Lot Like the Old Deal)
6 July 2020Travis Lundy Market Is Pricing a LINE Bump – Should It? 
22 July 2020travis Lundy A LINE Bump – The Other Argument Against 

NIFTY50 Index Rebalance – HDFC Life at All Time High On Inclusion, Time to Switch

By Brian Freitas

On 2 July, the Index Maintenance Sub-Committee (IMSC) of NSE Indices Limited made an ad-hoc change to the NIFTY Index (NIFTY INDEX) excluding Vedanta Ltd (VEDL IN) and including HDFC Standard Life Insurance (HDFCLIFE IN) with effect from the close of business on 30 July to coincide with the Futures & Options (F&O) expiry.

The change was made due to Vedanta Ltd (VEDL IN)‘s proposed voluntary delisting and HDFC Standard Life Insurance (HDFCLIFE IN) was the highest ranked non-constituent eligible for inclusion in the index.

HDFC Standard Life Insurance (HDFCLIFE IN) has rallied 34% from our first Insight on its potential inclusion in the NIFTY Index (NIFTY INDEX) at the September index review and has outperformed its peers over the period. With the stock now trading expensive relative to its peers, we recommend using the passive flow at the close tomorrow, which we estimate at around 20m shares to buy, to switch out of the stock and into its peers SBI Life Insurance (SBILIFE IN) and ICICI Prudential Life Insurance (IPRU IN).


Sohu – The Better Play on Sogou

By Mio Kato, CFA

With Tencent making a non-binding offer for Sogou, both Sogou and major shareholder Sohu have seen their stock prices surge from depressed levels. In this insight we piggyback of David Blennerhassett’s suggestion that Sohu is worth another look. We strongly agree and actually feel this could be the better play on the Sogou acquisition than Sogou itself.


Samsung Electronics – Preferred Shares Underperforming on Liquidity

By Brian Freitas

Samsung Electronics has two classes of stock: ordinary shares Samsung Electronics (005930 KS) and the preferred shares Samsung Electronics Pref Shares (005935 KS). Typically, these two classes trade in a tight band and arbitrageurs move in when the ratio of the two securities reaches either end of the band.

Currently, the preferred shares are trading at the cheaper end of the short term band due to investors demanding liquidity and finding it on the common shares. This has been exacerbated by the jump in the stock price following Intel Corp (INTC US)‘s announcement that its 7nm chip technology was six months behind schedule and the market expects the company to outsource more chip manufacturing. 

We expect the preferred shares to outperform the ordinary shares in the near term by around 5% absolute.


Ant Group IPO First Look: Swarming to Market

By Arun George

Ant Financial (1051260D CH)/Ant Group is a technology company that provides digital payment services and digital financial services to consumers and small and micro businesses (SMBs) in China and across the world. Ant said last week it would pursue a simultaneous dual-listing in Hong Kong and on the Shanghai stock exchange’s STAR board. The Hong Kong share sale alone could raise about $10 billion at a $200 billion valuation, according to press reports. 

In this note, we take a first look at Ant and run through its history, industry and operating segments. We then take a closer look at the rumoured $200 billion valuation in the context of Ant’s financial performance. Based on available disclosure, our estimates and peer group multiples, the $200 billion valuation is justifiable, in our view.  


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