Daily BriefsTMT/Internet

TMT: Kakao Games, Hexaware Technologies, Ming Yuan Cloud Group, iHuman Inc., Altice Nv A, JFrog Ltd and more

By September 16, 2020 No Comments

In today’s briefing:

  • Kakao Games: Current Selloff & KOSDAQ 150 Inclusion
  • Hexaware Exit Offer Reverse Book Build Gets 90% & Discovered Price – Now We Wait
  • Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still
  • Ming Yuan Cloud IPO: Valuation Insights
  • IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue
  • Altice – Next Private Takeover Announcement
  • JFrog IPO Valuation Analysis

Kakao Games: Current Selloff & KOSDAQ 150 Inclusion

By Sanghyun Park

Kakao Games is undergoing the second day of a well-anticipated correction.

It is now down -7.7% this morning. The current TV is already one fourth that of yesterday, which soared to ₩1.5tril, 25% of the market cap.

Again, as well expected, the foreign short-term IPO money has all left Kakao G. As of the previous close, the FO % was 0.59%, down by 2.04 percent point from 2.63%. Presumably, it is even lower now.

Date Close (₩) % TV TV (₩B) Local inst. Foreign FO FO %
2020.09.15 68,100 -7.72% 5,400,000 367.7
2020.09.14 73,800 -9.00% 20,213,705 1,491.8 -578,393 -999,063 428,995 0.59%
2020.09.11 81,100 29.97% 5,013,124 406.6 -786,093 -397,435 1,428,058 1.95%
2020.09.10 62,400 30.00% 561,750 35.1 -100,870 -99,289 1,825,493 2.49%
– Opening price 48,000 100.00% 1,924,782 2.63%
– IPO price 24,000
Source: KRX

At the current price, the PERs range from 63.4x to 85.2x on FY20E earnings (an EPS band of ₩800~1,074).

PERs/FY20E earnings (₩B) Earnings EPS Price PER
1H20 annualized 65.0 ₩858 ₩68,100 79.36
Hanwha 68.7 ₩907 ₩68,100 75.11
Daishin 81.4 ₩1,074 ₩68,100 63.39
Shinyoung 75.0 ₩990 ₩68,100 68.80
– Case 1 60.6 ₩800 ₩68,100 85.15
– Case 2 66.9 ₩883 ₩68,100 77.13
– Case 3 73.2 ₩966 ₩68,100 70.49
Source: DART, KRX, & HK Consensus
Consolidated (₩B) 2020E 2021E
Sales 505.0 557.5 610.0 602.0 738.0 874.0
– Existing lineup 400.0 400.0 400.0 300.0 300.0 300.0
– Guardian Tales 75.0 112.5 150.0 180.0 270.0 360.0
: Release date July 29, 2020
: Daily est. sales 0.50 0.75 1.00 0.50 0.75 1.00
– Elyon 30.0 45.0 60.0 72.0 108.0 144.0
: Release date November 1, 2020
: Daily est. sales 0.50 0.75 1.00 0.20 0.30 0.40
– Other 0.0 0.0 0.0 50.0 60.0 70.0
OP 70.7 78.1 85.4 84.3 103.3 122.4
NP 60.6 66.9 73.2 72.2 88.6 104.9
Post-IPO SO 75,768,385 75,768,385 75,768,385 75,768,385 75,768,385 75,768,385
EPS (₩) (Case 1) 800 (Case 2) 883 (Case 3) 966 953 1,169 1,384
P/E multiple 34.90 34.90 34.90 34.90 34.90 34.90
Target price (₩) 27,915 30,817 33,719 33,277 40,795 48,313
– Lower-end discount 28.35% 35.10% 40.69% 39.90% 50.97% 58.60%
– Upper-end discount 14.03% 22.12% 28.82% 27.88% 41.17% 50.32%
– OTC price discount -179.42% -153.10% -131.32% -134.40% -91.20% -61.45%
Source: DART

Even at today’s harshly corrected price, Kakao G still stands at Korea’s most expensive game stock as even the lower end of the PER range is higher than Netmarble, which is the second over-inflated game company.

PERs/FY20E earnings (₩B) Sales OP Earnings PER OPM NPM
Netmarble Corp 2,597.3 272.7 270.3 58.25 10.50% 10.41%
NCSoft Corp 2,561.9 947.5 733.9 24.56 36.98% 28.65%
PearlAbyss Corp 524.6 185.3 150.4 17.48 35.32% 28.67%
Com2uS Corp 513.8 128.6 121.0 12.97 25.03% 23.55%
WE MADE Co Ltd 121.4 6.4 13.8 46.87 5.27% 11.37%
Webzen Inc 257.7 79.4 63.2 21.04 30.81% 24.52%
Neowiz 296.0 67.8 58.5 11.01 22.91% 19.76%
Doubleu Games Co Ltd 662.8 204.5 145.0 9.41 30.85% 21.88%
Kakao Games Corp 557.5 78.1 66.9 74.52 14.00% 12.00%
Source: KRX & DART

Hexaware Exit Offer Reverse Book Build Gets 90% & Discovered Price – Now We Wait

By Travis Lundy

Hexaware Technologies (HEXW IN) took it down to the wire. The Reverse Book Build got to the 90.0% threshold at a little past 2:30pm local time, and small shareholders continued putting in offers until 5pm local time. 

It looks, from a combination of the BSE data and NSE data that we have a Discovered Price. 

Now we wait. 

More comment below the fold. 


Ming Yuan Cloud IPO – SaaSy, but Regional Channel Partners Are SaaSier Still

By Mio Kato

Ming Yuan Cloud offers software dedicated to the real estate industry and is the market leader in China. The company has already secured a bevy of high-class investors as cornerstones with Sequoia, GIC, Fidelity and Blackrock on board. We examine the company’s business model and market exposure below.


Ming Yuan Cloud IPO: Valuation Insights

By Arun George

Ming Yuan Cloud Group (MYCG HK) is the leading software solution provider for property developers in China with a market share of 18.5% as measured by revenue in 2019, according to Frost & Sullivan. Ming Yuan has launched its IPO at a price range of $15.00-16.50 per share. At the mid-point of the IPO price range, Ming Yuan will raise net proceeds of HK$5,635.9 million ($727 million). Six cornerstone investors will subscribe for 36.3% of the shares under the global offering, at the mid-point of the IPO price range. The cornerstone investors are Hillhouse Capital, GIC, China Structural Reform Fund, Sequoia Capital, BlackRock and Fidelity International. 

In our initiation note, we stated that Ming Yuan’s fundamentals are attractive due to several factors. Overall, we think that a reasonable PEG valuation, a market-leading business and solid cornerstone support makes Ming Yuan tempting at the proposed pricing range. 


IHuman Inc (洪恩) Pre-IPO – Overly Reliant on One App to Generate the Majority of Revenue

By Zhen Zhou, Toh

iHuman Inc. (IH US) is looking to raise US$100m in its upcoming IPO in the U.S.

iHuman is a childhood edutainment company in China. The company develops products and services that caters to the education demands of children aged between three and eight. The company has developed and now operates the widely popular app, iHuman Chinese. It also operates other apps such as iHuman English World, iHuman Pinyin, and etc. On top of its app business, the company sells offline products that include learning materials, smart reading pens, building blocks, and learning consoles.

In this note, we will look at the company’s background, analyze its financials and operating metrics, and share our thoughts.


Altice – Next Private Takeover Announcement

By Jesus Rodriguez Aguilar

  • Patrick Drahi, through Next Private has launched an agreed takeover offer for the 22.42% shares of Altice Nv A (ATC NA) he does not already own, with the aim of taking it private and delisting the company. The minimum acceptance level to achieve this is 95%.
  • The bid price represents 2.8x EV/NTM Revenue, 7.2x EV/NTM EBITDA and 23.8x EV/NTM EBIT (Capital IQ consensus). 
  • Altice is one of Europe’s biggest HY issuers, rated B by S&P.
  • The offer price takes advantage of the dismal performance of European telcos on the stock market following the onset of the Covid crisis. It is difficult to believe that shareholders will accept an offer below recent highs in February, and there are chances of an improved offer. Performance is improving at SFR (France), the company’s biggest subsidiary.
  • The shares are trading between EUR 4.15 and 4.12, with a close on Tuesday 15 of EUR 4.14, with a volume traded of c. EUR 24 mn.
  • I recommend using this price levels of EUR 4.12-4.15 as an entry point and holding out for an improved offer.

JFrog IPO Valuation Analysis

By Douglas Kim

In this insight, we provide a valuation analysis of JFrog which raised the IPO price range to $39 to $41 per share from $33 to $37 due to higher investors’ demand. The company and existing shareholders are selling 8 million shares and 3.57 million shares, respectively. At $41 per share, the JFrog IPO could raise $474 million. 

Our valuation analysis suggests an implied market cap of $5.0 billion and a target price of $55.2 per share for JFrog. The IPO price range is from $39 to $41 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 35% upside to this price level. Given the solid upside, we have a positive view of this stock.

The key investment thesis of JFrog is that it is a company has been able to capitalize on its first mover’s advantage in this new product category of Continuous Software Release to scale up its business significantly without spending large sums of money on sales & marketing and this is one of the key reasons why the company has quickly become profitable.


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