In today’s briefing:
- GoTo Gojek Tokopedia: Turning Tide with Index Inclusion?
- Sea Ltd (SE US) – Reading the Positive Signals
- Tencent (700 HK): 1Q22, Zero Growth, But Will Recover for New Policies, Upgrade to Buy
- Tencent 1Q2022– Weaker than Expected
- Sea Ltd: In Rough Seas
- Square Enix – Bounce Suggests Market Was Far Too Pessimistic
- A Pair Trade Between LG Chem & LG Energy Solution
- Novatek (3034.TT): 2Q22 Revenue Declined 2~5.5% QoQ, but the Stock Price Could Be Reacted Earlier.
- Trunomi: Consent and Data Rights Platform Which Doesn’t Store Customer Data
- IdentityMind: AML and KYC for Fintech
GoTo Gojek Tokopedia: Turning Tide with Index Inclusion?
- GoTo (GOTO IJ) completes 20 trading days today. Based on the average price over the period and the last close, the stock meets the Fast Entry criteria for IDX30/LQ45/IDX80 inclusion.
- Using a free float of 66%, we estimate passive trackers buying 5.42bn shares (US$74m) of GoTo (GOTO IJ). Announcement could come in a few days with implementation at month-end.
- With the real float close to 4%, passive trackers will need to buy 11.6% of the real float and the stock could move higher in the short-term.
Sea Ltd (SE US) – Reading the Positive Signals
- Sea Ltd released a solid set of 1Q2022 results, with very strong YoY growth in e-commerce GAAP revenues, and a predictable softening of gaming revenues given greater mobility in 1Q2022.
- A key highlight was improving profitability with the adjusted EBITDA loss per order falling 70% in South-East Asia and Taiwan. Management also signalled that gaming revenues started stabilising end 1Q2022.
- Sea Ltd (SE US) saw a strong rally post these results given guidance was maintained albeit with a wider range. Sea Ltd is now trading at a discount to peers.
Tencent (700 HK): 1Q22, Zero Growth, But Will Recover for New Policies, Upgrade to Buy
- Authorities encourage platform economy and restarted approving the licenses for new games.
- Fintech just met a high comparison base in 1Q21 and we believe the growth rate will rise.
- We believe the stock has an upside of 39% for the year end 2022.
Tencent 1Q2022– Weaker than Expected
- Tencent (700 HK) reported 1Q2022 results today. Revenue grew 0.1% YoY to RMB135.5bn (vs consensus RMB140.7bn) while reported OP decreased 34% YoY to RMB37.2bn (vs consensus RMB37.3bn).
- Adjusted OP was down 36% YoY to RMB22.3bn while adjusted OPM declined to 39.2% from 56.1% in the same period a year ago.
- Tencent’s 1Q2022 revenues were below our estimates of RMB144.3bn which was mainly due to significant drop in Fintech and business services revenues.
Sea Ltd: In Rough Seas
- Sea’s share price rose 14% yesterday after beating consensus revenue by 1.4%, but this seems unwarranted as Sea lowered the lower-end of the e-commerce revenue guidance by $400m to $8.5bn.
- Nonetheless, most of this price reaction could be short covering as Sea Ltd (SE US)’s results were rather disappointing on multiple fronts.
- With Free Fire faltering fast, we think Sea could get washed back to rough seas before reaching calm waters.
Square Enix – Bounce Suggests Market Was Far Too Pessimistic
- Square Enix results were mildly above consensus (by 2.4% at the revenue line and 3.4% at the OP line).
- The company did not provide guidance on account of the pending transfer of its overseas development studios.
- However, we expect the sale to lift a significant burden from the bottom line enabling significant YoY OP growth.
A Pair Trade Between LG Chem & LG Energy Solution
- We believe there is an attractive pair trade of going long on LG Chem and going short on LG Energy Solution at current levels.
- Main reasons why we like this pair trade include large shares that could be sold after 6 months lockup for LGES, LG Chem’s attractive valuation, and shift to value stocks.
- In the past one month, LG Energy Solution is down 5.3% whereas LG Chem is up 2.4%. We believe this gap could widen in the next several months.
Novatek (3034.TT): 2Q22 Revenue Declined 2~5.5% QoQ, but the Stock Price Could Be Reacted Earlier.
- Novatek reached NT$36.5bn, 50.7% and NT$18.3 for revenue, GM and ESP respectively.
- Its revenue and GM would be NT$34.5~35.8bn and 46~49% range in 2Q22, which revenue was declined 2~5.5% QoQ and increase 1.2~4.7% YoY.
- There are hopes for China 618-shopping Festival, US back-to-school and China double 11 shopping Festival, etc.
Trunomi: Consent and Data Rights Platform Which Doesn’t Store Customer Data
- Trunomi (1314065D BH) is a customer consent and data rights management platform whose unique ability is proving compliance to various data protection regulations without seeing or storing customer data.
- The introduction of the EU GDPR was one of the company’s key drivers and many countries are now introducing similar data protection regulations.
- A number of growing technologies such as Smart technologies and ad-tech would act as further drivers.
IdentityMind: AML and KYC for Fintech
- IdentityMind (1254693D US) has a SaaS platform which builds regulatory technologies for fintech companies, crypto trading platforms and ICOs.
- Fraud is prevalent in the ICO market and the rise of regulations increasing demand for KYC/AML services will drive the company’s future growth.
- IdentityMind was acquired by Acuant (an identity verification company) in April 2020, for an undisclosed amount.
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