Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a>  announced on Sunday (28<sup>th</sup> March 2021) that its board of directors has authorised a share repurchase program to buyback US$1bn of its Class A ordinary shares in the form of American Depository Shares (ADS).</p><p>In our previous insights on TME, we discussed the company’s business model, segments, financials and valuation. Read our previous insights:</p><p><a href="https://www.smartkarma.com/insights/tme-secondary-listing-monetisation-efforts-in-social-entertainment-should-boost-top-line-growth" target="_blank" data-smartkarma-citation="insights:48830" rel="noopener">TME Secondary Listing: Monetisation Efforts in Social Entertainment Should Boost Top Line Growth</a> </p><p><a href="https://www.smartkarma.com/insights/tencent-music-secondary-unlikely-for-margins-to-expand-but-should-remain-stable-at-current-level" target="_blank" data-smartkarma-citation="insights:49034" rel="noopener">Tencent Music Secondary: Unlikely for Margins to Expand but Should Remain Stable at Current Level</a> </p><p><a href="https://www.smartkarma.com/insights/tme-4q-results-strong-finish-to-2020-further-strengthens-partnerships-and-focus-on-new-initiatives" target="_blank" data-smartkarma-citation="insights:49558" rel="noopener">TME 4Q Results: Strong Finish to 2020, Further Strengthens Partnerships and Focus on New Initiatives</a> </p>

Tencent Music (TME US)  announced on Sunday (28th March 2021) that its board of directors has authorised a share repurchase program to buyback US$1bn of its Class A ordinary shares in the form of American Depository Shares (ADS).In our previous insights on TME, we discussed the company’s business model, segments, financials and valuation. Read our previous insights:TME Secondary Listing: Monetisation Efforts in Social Entertainment Should Boost Top Line Growth Tencent Music Secondary: Unlikely for Margins to Expand but Should Remain Stable at Current Level TME 4Q Results: Strong Finish to 2020, Further Strengthens Partnerships and Focus on New Initiatives 

Tencent Music Announces US$1bn Buyback After Shares Dip Double-Digit

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>TME’s stock price has plummeted by 37% in the past three trading days.</li>
<li>The plunge was because a shareholding fund had to meet a margin call.</li>
<li>TME’s music copyrights are still valuable even if revenue is zero.</li>
<li>We set an upside of 15%~22% and a price target of US$24.</li>
</ul>


TME’s stock price has plummeted by 37% in the past three trading days.
The plunge was because a shareholding fund had to meet a margin call.
TME’s music copyrights are still valuable even if revenue is zero.
We set an upside of 15%~22% and a price target of US$24.


Tencent Music (TME): Upgrade to Buy for First Time After Plunge

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Event-Driven

<div>
<p>On 25th Mar 2021, we wrote about the knee jerk correction in some of the China ADRs that were yet to undertake a secondary listing as being unwarranted. Since then the ADRs have corrected further but now we know that the correction was more than just a reaction to SEC notice. In this note, we take a look at the recent updates and share price action and talk about its implications.</p>
</div>
<div>
<p>We have looked at the ADRs in the past, in our previous notes:</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang,</a> published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. </li>
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a> published in May 2020, we looked at the recent developments and provided an revised short-list</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a>, published in May 2020, we spoke about the implication of the act which had made its way through the senate.</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-pipeline-looks-rich-have-three-years-to-move" target="_blank" rel="noopener">China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move</a>, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. </li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-sec-notice-instead-of-three-probably-have-four-years-till-2025-correction-overdone" target="_blank" rel="noopener">China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone, </a> we spoke about the new SEC notice and its implications. </li>
</ul>
</div>


On 25th Mar 2021, we wrote about the knee jerk correction in some of the China ADRs that were yet to undertake a secondary listing as being unwarranted. Since then the ADRs have corrected further but now we know that the correction was more than just a reaction to SEC notice. In this note, we take a look at the recent updates and share price action and talk about its implications.


We have looked at the ADRs in the past, in our previous notes:




China ADRs Secondary Listing Deep-Dive: Yin and Yang, published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. 

In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List published in May 2020, we looked at the recent developments and provided an revised short-list
In China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home, published in May 2020, we spoke about the implication of the act which had made its way through the senate.
In China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move, published in Feb 2021 we looked at the ADR pipeline and spoke about the updates from the Holding Foreign Companies Accountable Act becoming law and the updates at Hong Kong end as well. 
In China ADRs - SEC Notice - Instead of Three, Probably Have Four Years till 2025 - Correction Overdone,  we spoke about the new SEC notice and its implications. 



China ADRs- Blocks, Liquidation, Buyback - Implications

<ul class="">
<li>Chinese equities plunged, because a Chinese equity holder had to meet a margin call.</li>
<li>Alibaba's Taobao Deals is planning a store on Tencent's WeChat.</li>
<li>Xiaomi's Internet of Things is facing an industry stagnance.</li>
<li>Huay improved both growth and margin, but still cannot acquire Douyu.</li>
</ul>
<p>Our main coverage on overseas listed Chinese equities: Alibaba (9988 HK), Bilibili (BILI US), JD.com (9618 HK), KE (BEKE US), Kuaishou (1024), Meituan (3690 HK), NetEase (9999 HK), Tencent (700 HK), Xiaomi (1810 HK).</p>


Chinese equities plunged, because a Chinese equity holder had to meet a margin call.
Alibaba's Taobao Deals is planning a store on Tencent's WeChat.
Xiaomi's Internet of Things is facing an industry stagnance.
Huay improved both growth and margin, but still cannot acquire Douyu.

Our main coverage on overseas listed Chinese equities: Alibaba (9988 HK), Bilibili (BILI US), JD.com (9618 HK), KE (BEKE US), Kuaishou (1024), Meituan (3690 HK), NetEase (9999 HK), Tencent (700 HK), Xiaomi (1810 HK).

China Internet Weekly (Mar 29): Margin Call Punched Chinese Equities, Alibaba Plans Store on Tencent

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Zhihu Technology / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/zhihu-technology-ltd" target="_blank" data-smartkarma-citation="entities:32185:1" rel="noopener">Zhihu Technology (ZH US)</a> is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC.</p></div><div><p>Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range of $9.50-11.50 per ADS, according to press reports. At the final IPO price of $9.50 per share, Zhihu will have a market cap of $5.7 billion. Zhihu will also raise an additional $250 million in a concurrent private placement to <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> and Lilith Games.</p></div><div><p>In <a href="https://www.smartkarma.com/insights/zhihu-ipo-initiation-question-time" target="_blank" data-smartkarma-citation="insights:48928" rel="noopener">Zhihu IPO Initiation: Question Time</a>, we opined that as the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from favourable industry trends. We concluded that Zhihu’s fundamentals are attractive. In <a href="https://www.smartkarma.com/insights/zhihu-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:49410" rel="noopener">Zhihu IPO: Valuation Insights,</a> we noted that the IPO price range is attractive. </p></div><div><div><div class="content-highlight"><p>However, since the launch of the IPO, a brutal sell-off on Chinese ADRs was triggered by SEC adopting measures that would kick foreign companies off US stock exchanges if they do not comply with US auditing standards. Despite the subsequent de-rating of peers, Zhihu remains attractive at the IPO price. Updating for the final IPO net raise, our base-case DCF derived price target of $12.35 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on securing a modest share of the addressable market. </p></div></div></div>

Zhihu Technology (ZH US) is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC.Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range of $9.50-11.50 per ADS, according to press reports. At the final IPO price of $9.50 per share, Zhihu will have a market cap of $5.7 billion. Zhihu will also raise an additional $250 million in a concurrent private placement to Alibaba Group (BABA US), JD.com Inc (ADR) (JD US), Tencent Holdings (700 HK) and Lilith Games.In Zhihu IPO Initiation: Question Time, we opined that as the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from favourable industry trends. We concluded that Zhihu’s fundamentals are attractive. In Zhihu IPO: Valuation Insights, we noted that the IPO price range is attractive. However, since the launch of the IPO, a brutal sell-off on Chinese ADRs was triggered by SEC adopting measures that would kick foreign companies off US stock exchanges if they do not comply with US auditing standards. Despite the subsequent de-rating of peers, Zhihu remains attractive at the IPO price. Updating for the final IPO net raise, our base-case DCF derived price target of $12.35 per ADS. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis points to a meaningful upside based on securing a modest share of the addressable market. 

China

Tencent Music Entertainment operates an online music entertainment platform in China. The Company offers platform that comprises of online music, recording, music-centric live streaming enabling users to discover, listen, sing, watch, perform, and socialize music.

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Tencent Music (TME US)

Tencent Music Announces US$1bn Buyback After Shares Dip Double-Digit

We would recommend making an entry at the current multiple as we believe the announced buyback will likely help share price to move up in the short...

Shifara Samsudeen, ACMA, CGMA

Tencent Music (TME): Upgrade to Buy for First Time After Plunge

TME’s stock price has plummeted by 37% in the past three trading days.The plunge was because a shareholding fund had to meet a margin call. TME’s...

Ming Lu

China ADRs- Blocks, Liquidation, Buyback - Implications

On 25th Mar 2021, we wrote about the knee jerk correction in some of the China ADRs. Since then the ADRs have corrected further. In this note, we...

Sumeet Singh

China Internet Weekly (Mar 29): Margin Call Punched Chinese Equities, Alibaba Plans Store on Tencent

Chinese equities plunged, because a Chinese equity holder had to meet a margin call.Alibaba's Taotao Deals is planning a store on Tencent's WeChat.

Ming Lu

Zhihu IPO: Trading Debut

Zhihu has priced its IPO at $9.50 per ADS which at the low-end of the IPO price range, according to press reports. Despite the recent de-rating of...

Arun George

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