In today’s briefing:
- AKM Industrial (1639 HK): SASAC and Xiamen Government-Backed Pre-Conditional Offer
- Stablecoin Part 1 – The Game Changing Tech in Crypto and a Real World Arb Trade
- Qingdao AInnovation Technology Group IPO – Fairly Valued with Mediocre Cornerstones
- AInnovation Technology IPO: Valuation Insights
- Mindtree: Robust Revenue Growth; Efficient Execution to Aid Margin Expansion
- Elastic: High-Profile Search Company With Attractive Fundamentals
- Fiserv – Investing In Transforming Leaders Rather Than Disruptors
- Infosys Ltd: Strong Revenue, Margin Resilience Is Key
- HSIE Results Daily: Mindtree, CESC
- IBM: A Rising Tide Lifts All Boats
AKM Industrial (1639 HK): SASAC and Xiamen Government-Backed Pre-Conditional Offer
- Flexible printed board player Akm Industrial (1639 HK) has announced a pre-conditional Scheme from Alpha Luck and AKM Meadville at HK$1.82/share. The Offer price will NOT be increased.
- Alpha Luck is ultimately held by SASAC and AKM Meadville by the government of Haicang District, Xiamen. The two intend to hold 40:60 respectively in the unlisted vehicle.
- Various PRC regulatory approvals are required. This appears a transaction geared to complete. Timing is the key risk to the deal.
Stablecoin Part 1 – The Game Changing Tech in Crypto and a Real World Arb Trade
- Stablecoins are the critical $170 billion dollar sector that is the key building block for the entire $2 trillion dollar crypto asset class with increasing attention from regulators
- In part 1, we explore some real world case studies on problems that stablecoins solved for crypto such as stability of payments to vendors, and the enabling of lending
- We also present a (almost) risk-free arb where traders pay 1.5% to borrow USD and receive 9% on stablecoin dollars
Qingdao AInnovation Technology Group IPO – Fairly Valued with Mediocre Cornerstones
- Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) is looking to raise up to US$157m in its Hong Kong IPO.
- Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions.
- While we don’t have a fundamental issue with the listing, at asking valuations, the firm appears to be fairly valued with limited upside on its FY23 numbers.
AInnovation Technology IPO: Valuation Insights
- AInnovation Technology (AIT HK) is a fast-growing enterprise AI solutions provider in China. It has launched an HKEx IPO to raise up to US$157 million.
- In AInnovation Technology IPO Initiation: Code Amber, we stated that the negatives outweigh the positives and we would give the IPO a pass.
- Our valuation analysis suggests that the IPO price is fair. Due to our concerns about the fundamentals, we remain on the sidelines. Pricing is 20 January, listing on 27 January.
Mindtree: Robust Revenue Growth; Efficient Execution to Aid Margin Expansion
- Mindtree beat our estimates with revenue of Rs 2,750 Cr for Q3FY22, reporting revenue growth of 35.9% YoY and 6.3% QoQ
- The company posted operating profits of Rs 592 Cr, registering a growth of 9.7% QoQ
- We recommend a BUY on the stock and assign 40x P/E multiple to its FY24E earnings of Rs 131.5/share to arrive at a, implying an upside potential of 12% from CMP.
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Elastic: High-Profile Search Company With Attractive Fundamentals
- Elastic NV (ESTC US) has grown its ARR from ~$207 million as of Jul-18 to ~$760 million today and may become a multi-billion dollar unicorn in the future.
- We like the subscription-based freemium business model, strong net expansion rate, and acceleration in revenue growth of Elastic Cloud business, which currently represents ~33% of total revenue.
- Elastic Search is one of the most popular search engines globally, and the company’s products have been downloaded more than 350 million times since 2013.
Fiserv – Investing In Transforming Leaders Rather Than Disruptors
- Fiserv is valued as a slow-growth and low return on capital legacy business, although this does not appear to be the case.
- At present, the expected topline growth rate is far from spectacular, but parts of the business are growing fast and could result in a multiple repricing.
- Due to the acquisition of First Data, the company’s improving profitability is a better measure of business performance than return on capital is.
Infosys Ltd: Strong Revenue, Margin Resilience Is Key
- Infosys Ltd (Infy) is one of the leading IT players catering to BFSI, retail, communication, manufacturing & hi tech verticals.
- The company generates >58% of revenues from digital technologies
- We continue to remain positive and retain our BUY rating on the stock. We value Infosys at Rs 2,300 i.e. 32x P/E on FY24E EPS
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
HSIE Results Daily: Mindtree, CESC
- Mindtree (MTCL) delivered healthy QoQ growth (following a very strong quarter) and margin beat (~100bps expansion) was the highlight of the quarter
- Recovery in T1 business was encouraging and growth was broad-based across verticals, geographies, and service lines
- Our target price of INR 5,060 is based on 37x Mar-24E EPS (25% CAGR over FY21-24E on a high base in FY21 of >70%)
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
IBM: A Rising Tide Lifts All Boats
- Even though IBM shares ended 2021 in the green, total return was very disappointing on a risk-adjusted basis.
- Kyndryl shareholders were severely punished, and prospects for the company remain rather bleak.
- 2022 will be a critical year for IBM’s management to prove that it could turn the business around.
Before it’s here, it’s on Smartkarma
