In today’s briefing:
- Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
- UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth
- Delhivery IPO Initiation: Can It Deliver?
- Microsoft’s Activision Acquisition Is a Stupendous Deal
- Microsoft – Thinking Through the ATVI Acquisition Further
- Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
- Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
- GTPL Hathway: Broadband to Be Key Growth Driver Ahead
Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
- Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers.
- YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline.
- However, we expect significant upside surprises on profitability and that is our focus.
UMC (UMC.US, 2303.TT): 1Q22 Earnings Preview- Continuous Growth
- It is continuing to raise wafer price, and revenue/GM to reach ~NT$58billion/~39% and NT$60billion/~41.5% in 4Q21/1Q22 respectively.
- It will plan to add 5-8k 28nm production capacity in 12A Tainan during 2H22, and we consider it is to secure customers’ demands.
- We do not see any sign to deteriorate for the 2nd half at this moment.
Delhivery IPO Initiation: Can It Deliver?
- Delhivery (1058656D IN) is the largest and fastest-growing 3PL express parcel delivery player in India by revenue in FY21. It has won SEBI approval to raise up to $1 billion.
- The fundamentals are mixed as it has been unable to leverage its leading position and strong growth to deliver profits or cash generation.
- Based on the draft red herring prospectus, we are cautious about this potential IPO as the negatives outweigh the positives.
Microsoft’s Activision Acquisition Is a Stupendous Deal
- A blizzard of cost synergies we conservatively estimate at $500MM from lower distribution commissions, hosting costs, and cutting ATVI’s highly paid C-Suite.
- Multiple strategic benefits: Catalyzes Microsoft’s XCloud streaming game service and Game Pass subscription offering….potentially offers greater leverage for app store negotiations with Apple and Google.
- Accretive on valuation alone…MSFT is paying a 10% discount to ATVI’s 23x average forward PE from last few years. MSFT’s 11x forward P/S vs. ATVI’s 5.5x revalues ATVI’s revenues 2x.
Microsoft – Thinking Through the ATVI Acquisition Further
- Our initial thoughts on Microsoft’s bid for Activision Blizzard were on the sceptical side given various signs of trouble at the company.
- In contrast the majority of commentary on the deal has been somewhere between positive and euphoric though there are monopoly concerns from customers.
- Yet the more we examine the implications the less we like this deal for Microsoft.
Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
- Shift reported its 1QFY08/2022 results last week. Revenue for the quarter increased 51.5% YoY to JPY14.3bn while OP more than tripled to JPY1.95bn vs JPY548m a year ago.
- Both Enterprise and Entertainment segments saw strong growth in revenue as well as improvement in GPM during the period.
- Shift’s share price gained 7.4% following its earnings announcement and we expect the company’s strong earnings momentum to continue over the next few years.
Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
- Qoo10 has become one of the most popular Japanese malls among young women for all things Korean, particularly cosmetics and fashion.
- The online mall now wants to exploit this by creating a new dedicated fashion mall with better promotional opportunities for merchants of all nationalities.
- This should bring more competition to ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP).
GTPL Hathway: Broadband to Be Key Growth Driver Ahead
- GTPL Hathway (GTPL) is a leading MSO (No. 1 in terms of subscribers) offering cable television (CATV) and broadband services
- Expansion into new states and digitisation has led to strong topline and earnings growth of ~27% and ~86% CAGR, respectively, over FY16-21
- We roll over to FY24 and value GTPL at Rs 290 i.e. 14x FY24E P/E
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