Daily BriefsTMT/Internet

TMT: Krafton Inc, Money Forward, Softbank Group, Infosys Ltd, L&T Technology Services Limited and more

In today’s briefing:

  • Krafton IPO – This Should Be Pulled
  • Krafton IPO – Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion
  • Krafton’s Index Play: KOSPI 200, MSCI Std, FTSE AW, FnGuide Top 10, & KRX BBIG
  • Money Forward (3994) | Evolving Rapidly
  • Softbank Group – Vision Fund 2’s Late-Private Investments Blur the Lines with Northstar
  • Expect a further upward revision in its guidance
  • Infosys: Revenue Beat, Margins Below Expectations; Upgrade in Revenue Guidance
  • HSIE Results Daily: Infosys, L&T; Technology Services
  • Remain positive on improving demand outlook
  • HSIE Results Daily: Infosys, L&T; Technology Services

Krafton IPO – This Should Be Pulled

By Mio Kato

We previously discussed our thoughts on Krafton’s valuation in Krafton IPO – Valuation | Smartkarma. Since then, Krafton has lowered its asking range from KRW458,00-557,000 to KRW400,000-498,000 while reducing the number of new share offered from 7,030,000 to 5,624,000. They didn’t reduce the number of existing shares offered though, no. Somewhat fitting perhaps for a company that is over-reliant on a game whose battlefield you enter by parachute. They should colour the parachutes golden if they manage to pull this off.


Krafton IPO – Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion

By Zhen Zhou, Toh

Krafton Inc (259960 KS) is looking to raise up to US3.8bn in its South Korea IPO. 

Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown’s Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.

In this note, we will take a look at lock-up on shareholders and index inclusion.

We covered the IPO earlier in:


Krafton’s Index Play: KOSPI 200, MSCI Std, FTSE AW, FnGuide Top 10, & KRX BBIG

By Sanghyun Park

Krafton is likely to strategically allocate to institutions with a low lock-up ratio. By securing a maximum of 13%p from the 14.16% IPO stocks as floats and limiting ESOP subscriptions as much as possible, they will likely secure more than a 15% float rate.

In this case, even if the pre-IPO non-lockup minority shareholder’s stake is not included in the float at all, it may not be a big deal.

In the case of ESOP subscriptions, there are media reports that the subscription rate of Krafton’s internal employees will be quite low due to the high IPO price.

Here is the link to the news report about this.

Post-IPO shareholding%Lock-up
Major shareholder23.73%6 months to 1 year
Pre-IPO minority shareholders, with lockups26.81%1 month to 1 year
Treasury shares4.43%6 months
ESOP (post-IPO)3.54%1 year
Non-float: sub-total58.53%
Pre-IPO non-lockup minority shareholders27.31%
IPO shareholders (institutional & retail)14.16%
Source: DART

MSCI and FTSE are expected to be able to stably secure at least a 15% float. Assuming that a 15% float is secured from the offering, the float can rise to 70% for KOSPI 200 and FnGuide/Wise.

It may vary depending on the proportion of special stakeholders among pre-IPO minority shareholders. However, as specified in the IPO prospectus, there is no pre-IPO minority shareholder in a separate joint ownership agreement with the major shareholder. So, it seems appropriate to assume that KOSPI 200 and FnGuide/Wise are 70% float.

Post-IPO immediate index floatKOSPI 200MSCI StandardFTSE All-WorldFnGuide/Wise
At the listing69.12%15.00%15.00%69.12%
Source: DART

Money Forward (3994) | Evolving Rapidly

By Mark Chadwick

Money Forward (3994 JP)  has not experienced any slowdown in customer acquisition or revenue growth due to the COVID pandemic, unlike many Japanese SaaS providers. It is a testament to the company’s strong business model and go-to-market strategy. As a result, consolidated sales in Q2 rose 42% year over year to ¥3.99 billion. Although the stock has done well, rising 40% year to date, it remains cheap when compared with its Japanese peer, freee (4478 JP) .


Softbank Group – Vision Fund 2’s Late-Private Investments Blur the Lines with Northstar

By Kirk Boodry

Softbank has boosted its Vision Fund 2 commitments to $40bn even as a series of recent investments have been concurrent with IPOs or just before. These are effectively investments in public equities, nominally what Northstar covers, but with some optionality on a valuation pop if demand is high although that has not happened so far. Confirmation today of a $1.7bn investment in Korean online travel firm Yanolja appears to be an extension of this trend. The series of late-stage investments also highlights a lack of activity at VF2’s collection of SPACs which were created with these kinds of targets in mind. China weakness appears to be settling but Softbank shares remain range-bound at a mid-40% discount to underlying public values.


Expect a further upward revision in its guidance

By Motilal Oswal

Expect a further upward revision in its guidance Motilal Oswal values your support in the Asiamoney Brokers Poll 2021 for India Research, Sales, Corporate Access and…

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.

Infosys: Revenue Beat, Margins Below Expectations; Upgrade in Revenue Guidance

By Axis Direct

We recommend a BUY rating on the stock and assign a 28x P/E multiple to its FY23E earnings of Rs 62.3/share to arrive at a TP of Rs 1,740/share, implying an upside of 10% from CMP.

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: Infosys, L&T; Technology Services

By HDFC Securities

L&T Technology Services: We maintain REDUCE on L&T Technology Services (LTTS), despite a slightly better Q1 revenue performance. Revenue guidance has been increased to 15-17% growth for FY22 (13-15% earlier), which implies a decelerated trajectory of 2-3% CQGR (as compared to 4.2% QoQ delivered in Q1FY22), despite a base benefit (FY21 at -6%). Two wins with TCV >USD 25mn (similar to Q4) will support growth in the transportation vertical. LTTS’ historical volatility in the large accounts bucket (>USD 20mn accounts) and volatility due to variability in segmental operating profile are reflected in the growth guidance of ~800bps below its strongest year.

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.

Remain positive on improving demand outlook

By Motilal Oswal

LTTS reported a 4.3% QoQ CC growth in 1QFY22, above our estimate of 2.8%. Industrial Products/Transportation (+7.8%/+4.3% QoQ) spearheaded this growth. EBIT margin improved by 70bp QoQ, despite a wage hike during…

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: Infosys, L&T; Technology Services

By HDFC Securities

L&T Technology Services: We maintain REDUCE on L&T Technology Services (LTTS), despite a slightly better Q1 revenue performance. Revenue guidance has been increased to 15-17% growth for FY22 (13-15% earlier), which implies a decelerated trajectory of 2-3% CQGR (as compared to 4.2% QoQ delivered in Q1FY22), despite a base benefit (FY21 at -6%). Two wins with TCV >USD 25mn (similar to Q4) will support growth in the transportation vertical. LTTS’ historical volatility in the large accounts bucket (>USD 20mn accounts) and volatility due to variability in segmental operating profile are reflected in the growth guidance of ~800bps below its strongest year.

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.

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