Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

Between early-2018 and late-2019, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> / <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> management took meaningful steps to attempt a narrowing of their discount to listed NAV, the most important of which was announcing the intended spin-off of all Naspers’ ex-South African internet assets into a new entity, Prosus, to be listed on Euronext Amsterdam, with a secondary listing on the JSE, which resulted in a narrowing of the discount from c.35% to c.25%. However, in the year since the listing of Prosus, we have seen a “double” discount manifest given Prosus’ c. 27% discount to its listed NAV as well as Naspers’ c. 29% discount to its listed NAV (which entirely comprises its 73% shareholding in Prosus). Intuitively, this seems excessive and, in this insight, I take a closer look at, what I believe to be, the top reasons for this discount, to find catalysts which might unlock value. I believe we will continue to see a c.25% holding company discount at Prosus, with another c.20% warranted at Naspers. I cannot, however, identify any catalysts that would cause the “double” discount to widen and have applied these values to my SOTP. I estimate fair value for Prosus at €101/share (31% upside) and Naspers at R4,404/share (47% upside).

Between early-2018 and late-2019, Naspers (NPN SJ) / Prosus (PRX NA) management took meaningful steps to attempt a narrowing of their discount to listed NAV, the most important of which was announcing the intended spin-off of all Naspers’ ex-South African internet assets into a new entity, Prosus, to be listed on Euronext Amsterdam, with a secondary listing on the JSE, which resulted in a narrowing of the discount from c.35% to c.25%. However, in the year since the listing of Prosus, we have seen a “double” discount manifest given Prosus’ c. 27% discount to its listed NAV as well as Naspers’ c. 29% discount to its listed NAV (which entirely comprises its 73% shareholding in Prosus). Intuitively, this seems excessive and, in this insight, I take a closer look at, what I believe to be, the top reasons for this discount, to find catalysts which might unlock value. I believe we will continue to see a c.25% holding company discount at Prosus, with another c.20% warranted at Naspers. I cannot, however, identify any catalysts that would cause the “double” discount to widen and have applied these values to my SOTP. I estimate fair value for Prosus at €101/share (31% upside) and Naspers at R4,404/share (47% upside).

Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Thematic (Sector/Industry)

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/827/original/BANNER-TOURISM.png?1601474994" class="editor-image img-responsive" data-smartkarma-image-id="162827"></figure>
Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now.


Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now. 

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Baidu (BIDU)’s manager was arrested for gambling advertisements.</li>
<li>iQiyi (IQ) was banned in Taiwan.</li>
<li>Trip.com (TCOM)’s revenue continued to decrease QoQ in 2Q20.</li>
<li>China Literature (772 HK) raised novel writers’ revenue share from 50% to 70%.</li>
</ul>


Baidu (BIDU)’s manager was arrested for gambling advertisements.
iQiyi (IQ) was banned in Taiwan.
Trip.com (TCOM)’s revenue continued to decrease QoQ in 2Q20.
China Literature (772 HK) raised novel writers’ revenue share from 50% to 70%.


China Internet Weekly (28Sep2020): BIDU Manager Arrested, TCOM Revenue Shrank QoQ

Leading Chinese online travel agency <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> will report Q220 (June) results after the US markets close this Thursday, September 24th (Friday morning Hong Kong time).
In this note we talk about what to expect in the Q2 numbers and ask whether Trip.com can match or beat its own downbeat guidance, which the company issued in late May. 
To answer that question, we look at what other companies and organizations in the Chinese travel sector have already reported about Q2 demand. For now we retain our Hold rating on Trip.com.

Leading Chinese online travel agency Trip.com (TCOM US) will report Q220 (June) results after the US markets close this Thursday, September 24th (Friday morning Hong Kong time).
In this note we talk about what to expect in the Q2 numbers and ask whether Trip.com can match or beat its own downbeat guidance, which the company issued in late May. 
To answer that question, we look at what other companies and organizations in the Chinese travel sector have already reported about Q2 demand. For now we retain our Hold rating on Trip.com.

Can Trip.com Meet (Or Beat) Its Own Downbeat Revenue Guidance? Q220 Earnings Preview

China

Trip.com Group Ltd. provides online travel agency services. The Company offers mobile applications, hotel reservations, flight ticketing, package tours, corporate travel management, and train ticketing services.

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Trip.com (TCOM US)

Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues

Since the listing of Prosus, we have seen a “double” discount to listed NAV manifest at Naspers. I take a closer look at the top reasons for this...

Wium Malan, CFA

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

what happened of note? air activity in china and elsewhere hotel room rates conclusions

Tracking Traffic

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

BANNER

Tracking Traffic

China Internet Weekly (28Sep2020): BIDU Manager Arrested, TCOM Revenue Shrank QoQ

Baidu (BIDU)’s manager was arrested for gambling advertisements. iQiyi (IQ) was banned in Taiwan. Trip.com (TCOM)’s revenue continued to decrease...

Ming Lu

Can Trip.com Meet (Or Beat) Its Own Downbeat Revenue Guidance? Q220 Earnings Preview

Leading Chinese online travel agency Trip.com (TCOM US) will report Q2

Tracking Traffic

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