Daily BriefsTMT/Internet

TMT: Chindata, Nintendo Co Ltd, Masmovil Ibercom, Unity Software Inc and more

By September 14, 2020 No Comments

In today’s briefing:

  • Chindata Group IPO Initiation: Where the Cloud Meets the Ground
  • Nintendo – Catalysts to Support the Stock for the Next Year
  • MásMóvil: End of Acceptance Period
  • Unity Software IPO Valuation Analysis

Chindata Group IPO Initiation: Where the Cloud Meets the Ground

By Arun George

Chindata (CD US) is a data centre operator. It is the largest carrier-neutral hyperscale data centre operator in Asia-Pacific emerging markets as measured by capacity in service, with 21.5% market share out of a total market size of 829 MW, according to Frost & Sullivan. Chindata is backed by Bain Capital (57.17% shareholder), APG Strategic Real Estate Pool/Dutch pension funds (10.43%) and SK Holdings (034730 KS) (8.94%). It is seeking to raise up to $800 million (primary and secondary sale) through a Nasdaq IPO, according to press reports. 

The Asia-Pacific hyperscale data centre market is a structural growth market in part due to the increasing prevalence of outsourcing data centre services, rising client demand for higher power density and scalability, and increasing compliance and regulatory requirements on data security. Overall, we think that Chindata is an attractive play on these favourable market dynamics. 

Nintendo – Catalysts to Support the Stock for the Next Year

By Mio Kato

Positive news flow on Nintendo is increasing. Leaks regarding the new upgraded version of the Switch due next year are increasing and interesting, while the company has also asked suppliers to boost production of the Switch… again. There are also increasing signs of building third party support for the platform. What is pertinent is that this time it appears that third parties are finding some real success on the platform. We think this is underappreciated by the market and enables further upside.

MásMóvil: End of Acceptance Period

By Jesus Rodriguez Aguilar

  • On 10 September, Lorca Telecom Bidco SAU communicated to the CNMV that the offer had been accepted by more than 50% of the shares of Masmovil Ibercom (MAS SM) (therefore meeting the minimum accepance condition).
  • On 11 September ended the acceptance period of the takeover bid by Lorca Telecom Bidco SAU for Masmovil Ibercom (MAS SM) .
  • MásMóvil last closed at EUR 22.42
    • a gross spread of 0.35% to the takeover offer.
  • Using ten estimates, the mean target price on Capital IQ consensus is 25.5 per share.
  • Polygon sent a second letter to the CNMV with valuation details backing its assertions and refuting PwC’s valuation, on which the CNMV based its judgment that Lorca’s bid was fair.
    • In a nutshell, regarding the price offered, Polygon has expressed its “complete disagreement” with the content and conclusions of the valuation report published as an annex to the brochure and issued by PwC on July 24.
    • Polygon believes that the PwC valuation is at least “seven or eight euros below a fair offer” (i.e. in the neighbourhood of EUR 30).
  • I believe that Polygon is going to fight this one. A EUR 3 per share improvement would mean additional spending by Lorca of EUR 394 mn.
  • According to the takeover law, investors have three months from the end of the acceptance period to request that the company buy its shares at the same price at which the offer was made.
  • While it makes complete sense to cash in the chips, and I guess most institutionals would have done so, staying long and holding for an improved offer (with a 15% upside) does not look a foolish option either.

(Please, see timetable in the note)

Unity Software IPO Valuation Analysis

By Douglas Kim

Unity Software Inc (U US) plans to complete its IPO in the coming days. The company is seeking to raise $1.05 billion in this IPO selling 25 million shares at $34 to $42 per share. At the high end of the IPO price range, Unity Software would be valued at about $11 billion. Unity Software was valued at about $6 billion in July 2019 in its last round of private funding round so, at the high end of the IPO price range, it would be nearly double its last private market valuation about a year ago.  

Unity Software’s IPO process is using a new bidding process. According to FT, “Prospective institutional investors will be asked how many shares they wish to buy, and at what price, by an online system managed by Goldman Sachs, according to a notice sent out to explain the new process. Investors can place multiple bids at difference prices. Unity will select a price for the offering after the bids are entered, allocating a portion of the shares to all investors who indicated interest above that price level.”

Our valuation analysis suggests an implied market cap of $15.6 billion and a target price of $58.60 per share for Unity Software. The IPO price range is from $34 to $42 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 39% upside to this level. In fact, given the strong global demand for excellent software and game-related companies, there is a higher probability that Unity Software IPO trades in the mid-high end of our valuation range ($58.60 to $70.90 per share).

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