Daily BriefsTMT/Internet

TMT: Softbank Corp, Softbank Group, Xiaomi Corp, PC Partner, Ming Yuan Cloud Group, Snowflake Inc, Amazon.com Inc, Chindata and more

By September 15, 2020 No Comments

In today’s briefing:

  • Softbank Corp (9434) – Time To Cover
  • Softbank – Interpreting the Arm Sale
  • Xiaomi Placement – Run-Up in Share Price, Co-Founder Selling
  • PC Partner: Poor-Man’s Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield
  • Ming Yuan Cloud (明源云) IPO – Better Disclosure and a Leader in the Industry
  • Snowflake – Extremely Pretty, but Liable to Melt in Amazon’s Sun
  • Snowflake: Making It Rain
  • India Internet & Consumer Weekly | Amazon, Xiaomi, Zomato, PUBG, India’s Dual Listing Norms
  • Ming Yuan Cloud IPO Initiation: New Wiring
  • Chindata IPO: Making Good Progress but Challenges Ahead

Softbank Corp (9434) – Time To Cover

By Travis Lundy

When the Softbank Corp (9434 JP) block was announced on 28 August after the close, it was one of the larger secondary blocks ever placed in Japan, and it was underwritten.

It was always going to get sold rather than bought, and it appears that it has been sold. For some reason I could not figure out, the shares only fell 3-4% or so on the first day and then stayed stable for a few days. I thought it needed more of a wallop to see pricing come out right. 

It has, in the interim, been walloped. 

Now is the time to cover that sale in the market if you shorted, and to buy back if you sold long. 

The implied dividend yield on the offering is now (as I write) above 7%. Suganomics may not favor telcos but I expect the telcos probably have enough leverage to push back from time to time. 

More below the fold.


Softbank – Interpreting the Arm Sale

By Mio Kato

So the Arm sale is finally here, as is the $40bn that Softbank was looking for… sort of. We had commented previously that we felt Softbank’s mark for Arm was optimistic (this could be debated now but we actually feel this acquisition lends credence to this view), the acquisition would probably be heavy on the share component, and that exclusion of Arm’s IoT business from the deal would be a no-confidence vote from Nvidia and a repudiation of Son’s “Vision”. On the latter point we believe we were correct.


Xiaomi Placement – Run-Up in Share Price, Co-Founder Selling

By Sumeet Singh

Xiaomi Corp (1810 HK)‘s co-founder Lin Bin aims to raise around US$1bn via selling some of his stake in the firm.

While he has provided a long lock-up to allay any concerns of an overhang, the shares have run-up a lot going into the index inclusion. 


PC Partner: Poor-Man’s Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield

By Nicolas Van Broekhoven

Several years ago we wrote about PC Partners (1263 HK): A Poor Man’s Way into Nvidia New GPU Cycle; Trades at 3x PE and 11% Div Yield.

We see a similar trade coming up in 4Q20 and into 1Q21.

As demonstrated over the years covering PC Partners the stock is rarely a buy & hold. With Nvidia’s new RTX30 GPU launch (GTX3060/GTX3070/GTX3080 and GTX 3090) being spread out from October to December there is likely to be excitement around its performance and uptake.

Much different than in FY18 there is no large oversupply from a deflating crypto bubble. This means there is no old inventory to clear which should result in much better GPM and NPM for Pc Partners. Please also note that gearing for Pc Partner in 2018 was over 100% while the company will have a net cash position by the end of FY20.

Pc Partner remains a poor man’s way to play Nvidia and key themes such as e-sports, AI, data centers, and overall gaming. We expect dividends to be reinstated for FY20. On our estimates, the company will achieve 8 billion HKD in FY20 sales and generate 272 million HKD in net profit (3.4% NPM). If we assume a 30% payout on that we get a 0.22 HKD/share full-year dividend or a 14% dividend yield. We expect the stock to reach 3 HKD in the coming 6 months. Upside could come from a bullish breakout in cryptocurrencies as crypto mining (which consumes massive GPU) comes back in vogue. The downside is capped by a very cheap valuation.


Ming Yuan Cloud (明源云) IPO – Better Disclosure and a Leader in the Industry

By Zhen Zhou, Toh

Ming Yuan Cloud Group (MYCG HK) (MYCG) is looking to raise up to US$796m in its upcoming Hong Kong IPO.

MYCG is a software solution provider in China with a focus on real estate. The company provides enterprise resource planning (ERP) solutions and SaaS products to property developers and other industry participants in the real estate value chain in China. As per Frost & Sullivan (F&S), the company is ranked first among software providers for property developers in China and has a dominant 24.6% market share in terms of contract value in 2019.

In this note, we will look at updates in the new PHIP filing, do a brief peer comparison, and share our assumptions, and thoughts on valuation.

Our previous coverage of the IPO:


Snowflake – Extremely Pretty, but Liable to Melt in Amazon’s Sun

By Mio Kato

The Snowflake IPO has attracted significant investor interest including some pretty impressive names such as Warren Buffett and Salesforce. Indeed, the company’s business is impressive, and its sales growth should help drive a successful IPO in our opinion. However, that does not mean the company is without issues and while we suspect this could be a good trade, we are sceptical about its merits as an investment, and not just because of demanding valuations but also because it is unclear how the company will defend its currently attractive position against Amazon and other large players.


Snowflake: Making It Rain

By Aaron Gabin

We’ve looked into many IPOs over the last 20 years, and think Snowflake is one of the better ones we’ve come across. Its architectural competitive advantages vs. legacy data warehouse providers are simply insurmountable, and while the cloud platforms loom as eventual rivals, we think this management team knows how to carve out a defensible place amongst the cloud titans.

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.


India Internet & Consumer Weekly | Amazon, Xiaomi, Zomato, PUBG, India’s Dual Listing Norms

By Pranav Bhavsar

Our objective with this weekly is to highlight notable developments in the India internet and consumer sector focusing on public and private companies. The sub-sectors covered include payment providers, e-commerce retailers,  social media platforms and consumer companies.


Ming Yuan Cloud IPO Initiation: New Wiring

By Arun George

Ming Yuan Cloud Group (MYCG HK) provides enterprise-grade ERP solutions and SaaS products to property developers and other industry participants along the real estate value chain in China. It 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 a Hong Kong IPO to raise as much as HK$6.17 billion ($798 million), according to press reports.

The software solutions market for the real estate industry is growing due to expanding business operations of property developers which increases complexity and the intensifying competition which drives the need for property developers to use technology to lower costs. The key barrier to entry for software developers is deep industry know-how, which Ming Yuan has in spades. Overall, we believe that Ming Yuan is an attractive play on these market dynamics.


Chindata IPO: Making Good Progress but Challenges Ahead

By Shifara Samsudeen, ACMA, CGMA

  • Chindata (CD) is the leading carrier-neutral hyperscale data center solution provider in Asia Pacific emerging markets and the company focuses on China, India and Southeast Asian markets.
  • According to Frost & Sullivan, Chindata was ranked first in the carrier-neutral hyperscale data center market in Asia-Pacific emerging markets in terms of capacity in service, with a 21.5% market share (as of December 2019).
  • The company operates six hyperscale data centers in China and one data center in Malaysia and is in the process of constructing five data centers in China and one data center in India as of the date of the IPO prospectus.
  • The company has filed for an IPO in the US and has a placeholder indication to raise up to US$400m and plans to use approximately 70% of the IPO proceeds on the development and construction of new data center projects.

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