Daily BriefsTMT/Internet

TMT: Tencent, Samsung Electronics, Meituan, Sansan Inc, Tata Consultancy Svcs and more

In today’s briefing:

  • Tencent Holdings – Under Severe Pressure
  • Samsung Founding Family’s Stake Sale: Impact on SamE Share Buyback Vs. Special Dividend
  • Meituan: Major Overhang Cleared After $534m Fine
  • San San (4443) – Networking, Not Net Working
  • HSIE Results Daily: Tata Consultancy Services

Tencent Holdings – Under Severe Pressure

By Thomas J. Monaco

*Fintech Hits Are Coming: Regulators have forced the capitulation of internet anti-competitive behavior. Most recently, both Alibaba (BABA.US) [Alibaba} and Tencent (700.HK) [Tencent] have stopped blocking rivals’ links which prevented users to purchase goods using competitor payment apps. This is a big deal, given that FinTech represented a growing 30.3% of revenue for Tencent at 2Q21. The more Tencent relies on Fintech to support growth, the more alarming the moves by Alibaba and other competitors are; and

*Prior To The War On Gaming, Tencent’s Results Have Already Deteriorated: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged. We can’t wait to see what the impact of mainland China’s latest regulatory maneuvers will have on Tencent’s 3Q21 results out on November 10th.  


Samsung Founding Family’s Stake Sale: Impact on SamE Share Buyback Vs. Special Dividend

By Sanghyun Park

Below are the details of the disposal trust agreement that Samsung’s Lee family members newly signed with the trust institution.

Disposal trust contractLee Bu-jin (daughter)Lee Seo-hyun (daughter)Hong Ra-hee (spouse)
CompanySamsung SDSSamsung Life InsuranceSamsung SDSSamsung Electronics
Ticker018260032830018260005930
Disposition trust amount (shares)1,509,4303,459,4901,509,43019,941,860
% of the shares out1.95%1.73%1.95%0.33%
: Value (at the last close)₩0.24T₩0.25T₩0.24T₩1.43T
Trust institutionKB BankKB BankKB BankKB Bank
Contract date2021. 10. 052021. 10. 052021. 10. 052021. 10. 05
Contract ends2022. 04. 252022. 04. 252022. 04. 252022. 04. 25
Disposal deadlineN/A2021. 12. 24N/AN/A
PurposeFor inheritance tax paymentFor inheritance tax paymentFor inheritance tax paymentFor inheritance tax payment
Source: KRX KIND

Key takeaways

  • All the family members, except Lee Jae-yong, disclosed they had newly signed a disposal trust agreement on the same date (October 5) with the same trust institution, KB Bank.
  • However, all of these regulatory filings were published after the market closed last Friday. That is, the market only found it out late Friday, so whatever impact will likely be reflected in the price next trading day, which is next Tuesday.
  • All four trust contracts expire on April 25 next year. However, it does not necessarily mean that the deadline for the stake sale is April 25.
  • Only Samsung Life Insurance disclosed the deadline for sale to be December 24 of this year. But it strongly suggests that this December 24 will likely be the deadline for the other trust contrasts as well.
  • All four trust contracts clearly stated that the purpose was to pay inheritance tax.

Meituan: Major Overhang Cleared After $534m Fine

By Ke Yan, CFA, FRM

On Friday October 8th post-market close, the State Administration for Market Regulation issued a notice to fine Meituan $534m for its monopolistic behavior of “two-choose-one”. In this note, we will analyze the impact of this notice. We think the quantum of the fine is within the market expectation and most importantly, the major overhang of the stock is removed. Recent data also shows that Meituan continues to be a beneficiary of the movement restriction due to COVID-19 and the growing penetration rate of the O2O services in China. 


San San (4443) – Networking, Not Net Working

By Mark Chadwick

  • San San should benefit from an end to Covid restrictions as employees start to network again, with revenue driven to some extent by the volume of business cards that are digitised
  • San San remains in the early stages of its growth cycle as corporate Japan embraces digital transformation
  • Q1 Sales growth +25% YoY, accelerated from 19% YoY the previous quarter
  • Bill One, a new invoicing platform, is starting to contribute
  • The stock has run up 52% YTD, one of the top performers among large cap SaaS companies in Japan 
  • Trading at 18x TTM Revenue the stock is cheaper than peers

HSIE Results Daily: Tata Consultancy Services

By HDFC Securities

Our target price of INR 4,180 is based on 32x Dec-23E EPS with EPS CAGR of 14% over FY21-24E. Tata Consultancy Services: We maintain ADD on TCS despite a slight miss on revenue and margin, supported by healthy deal wins (book-to-bill of 1.2x was similar to Accenture outsourcing). TCS continues to witness strength in its core business segment and has bagged higher mid-sized deals spread across verticals. We expect the growth to continue, supported by (1) strong demand environment, led by a secular shift to cloud, (2) growth pick-up in Europe, led by BFSI, (3) continued strong deal wins in retail & CPG vertical and recovery in manufacturing, and (4) +25% YoY (excluding mega-deal) growth in TCV, led by TCS Cognix.

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