China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> reported stronger than expected quarter earnings driven by resilient ad revenue growth. Its 3Q21 revenue grew +30% year-over-year and monthly active users reached 573 million. </li>
<li>We applaud that <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> quarter results under tougher regulatory environment (particularly from fandom-related products) and increasing ad impacts from Apple's new iOS IDFA policy. </li>
<li>Weibo estimates 4Q21 revenue to grow 15-20%, consistent with market expectation.  Weibo is traded at forward 15x consensus P/E, which is attractive for Weibo's scale and monetization potential. </li>
</ul>



Weibo Corp (WB US) reported stronger than expected quarter earnings driven by resilient ad revenue growth. Its 3Q21 revenue grew +30% year-over-year and monthly active users reached 573 million. 
We applaud that Weibo Corp (WB US) quarter results under tougher regulatory environment (particularly from fandom-related products) and increasing ad impacts from Apple's new iOS IDFA policy. 
Weibo estimates 4Q21 revenue to grow 15-20%, consistent with market expectation.  Weibo is traded at forward 15x consensus P/E, which is attractive for Weibo's scale and monetization potential. 


Weibo (WB US): Strong Quarter Amid Regulatory Crackdown

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>Shares of Didi Global appear to have stabilized after regulatory turmoil but whilst the stream of bad news has slowed, the lack of good news (an end to the app ban, <em>any</em> management comments) is also troubling. Even with a hopeful view on the end of regulatory pressure, the company appears less valuable as competition and higher pay for drivers shifts the economics and our new forecasts value the company at $9.74 versus our pre-IPO value of $15.8. We track Didi as part of our Softbank Group coverage.</p>

Shares of Didi Global appear to have stabilized after regulatory turmoil but whilst the stream of bad news has slowed, the lack of good news (an end to the app ban, any management comments) is also troubling. Even with a hopeful view on the end of regulatory pressure, the company appears less valuable as competition and higher pay for drivers shifts the economics and our new forecasts value the company at $9.74 versus our pre-IPO value of $15.8. We track Didi as part of our Softbank Group coverage.

Didi Global - Regulatory Overhang Remains and Long-Term Value Is Falling

<ul>
<li>Regulatory risk is the major headwind for <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a>, a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. </li>
<li>We believe <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)'s  </a>WeChat/QQ, and <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1439927D CH)</a>'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. </li>
<li>
<a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> has strategic partnership with <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a> and <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> The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. </li>
</ul>


Regulatory risk is the major headwind for Weibo Corp (WB US), a twitter-like social media platform for sharing news and user opinions.  As Beijing tightening its grip on social media platform, we have observed Weibo's value declining 65% from its high in 3-year period. In the latest move, China reiterates the ban on private enterprise in news organizations. In the past 10 months, the magnitude of policy change on tech giant is unprecedent. The latest rounds of measurements on social media include: 1) crackdown of internet influencer/celebrity culture; 2) adjustment on algorithm-powered feeds; 3) macro impact on SME ad campaign spending. 
We believe Weibo Corp (WB US) has strong presence in celebrity and key opinion leaders on social media, which differentiates it from other major platform such as Tencent (700 HK)'s  WeChat/QQ, and ByteDance (1439927D CH)'s Toutiao.  With its 521 million monthly active users and 225 million daily active users, Weibo is one of the largest social platform.  As more key opinion leaders join Weibo, more users use Weibo to read view the key opinion leaders’ content and engage with them through replying, sharing, and clicking the “Like” button. These key opinion leaders can also get tipping from or sell merchandise to their fans. We believe Weibo's business model and scale is hard to replicate. 

Weibo Corp (WB US) has strategic partnership with Sina Corp (Class A) (SINA US) and Alibaba Group (BABA US). The parent company Sina owns 45% Weibo outstanding shares and has 71% voting right. Alibaba owns 30% Weibo outstanding shares and has 16% voting right. Given the recent scrutiny of Alibaba and forcing exit from media industry, we think the upcoming recapitalization of Weibo could be a positive catalyst. Weibo has already explored the potential Hong Kong secondary listing.  And it could use the IPO proceed to partially buyout Alibaba stake. Another option is that new strategic investors could be introduced to take Alibaba's stake as well. Weibo Corp (WB US) is traded at forward 15x consensus P/E, and could deliver 15% revenue CAGR in the next 3 year. We think valuation is attractive for Weibo's scale and monetization potential. 


Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p>It all started with the injury that Chen, the top female badminton player, suffered during China National Games two weeks ago that went viral and fans took it to <a href="https://www.smartkarma.com/entities/weibo-corp-adr" target="_blank" data-smartkarma-citation="entities:3826:1" rel="noopener">Weibo Corp (WB US)</a> . It is unlikely that the injured toe will cause a massive product recall as it is not a life-threatening injury but it definitely warrants some further investigation by the R&amp;D team that may lead to either an increase of R&amp;D cost, an increase in the COGS that will decrease GPM or extra marketing costs as part of giving players more shoes to prevent injuries. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/932/original/image?1632657827" class="editor-image img-responsive" data-smartkarma-image-id="231932"></figure>

It all started with the injury that Chen, the top female badminton player, suffered during China National Games two weeks ago that went viral and fans took it to Weibo Corp (WB US) . It is unlikely that the injured toe will cause a massive product recall as it is not a life-threatening injury but it definitely warrants some further investigation by the R&amp;D team that may lead to either an increase of R&amp;D cost, an increase in the COGS that will decrease GPM or extra marketing costs as part of giving players more shoes to prevent injuries. 


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

<div>
<p><a href="https://www.smartkarma.com/entities/cloud-village-inc" target="_blank" data-smartkarma-citation="entities:33412:1" rel="noopener">Cloud Village (CLV HK)</a> is the second-largest online music platform after <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> as measured by users and revenue in China. The cornerstone product is <em>NetEase Cloud Music</em> that delivers diverse music and music-inspired content and provides interactive community features. Cloud Village is braving the moribund Chinese IPO market by pre-marketing an HKEx IPO to raise around $1 billion, according to press reports. </p>
<p>In <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-ipo-initiation-musical-shares" target="_blank" data-smartkarma-citation="insights:52266" rel="noopener">Cloud Village (NetEase Music) IPO Initiation: Musical Shares</a>, we stated that at first sight, Cloud Village performance seems poor as its high growth has come at the cost of negative gross margin and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure. We concluded that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  </p>
<p>In <a href="https://www.smartkarma.com/insights/cloud-village-netease-music-ipo-play-list" target="_blank" data-smartkarma-citation="insights:55506" rel="noopener">Cloud Village (NetEase Music) IPO: Play List</a>, we examined the 1Q21 results and the recent developments disclosed in the PHIP. We noted that while Cloud Village expects to remain unprofitable over the next three years, the 1Q21 results and the recent SAMR ruling on Tencent Music support our view that Cloud Village is on track to combine its high growth with an improving cost structure. </p>
</div><div><div><div class="content-highlight"><p>In this note, we present our forecasts and take the first look at Cloud Village's potential valuation range. </p></div></div></div>


Cloud Village (CLV HK) is the second-largest online music platform after Tencent Music (TME US) as measured by users and revenue in China. The cornerstone product is NetEase Cloud Music that delivers diverse music and music-inspired content and provides interactive community features. Cloud Village is braving the moribund Chinese IPO market by pre-marketing an HKEx IPO to raise around $1 billion, according to press reports. 
In Cloud Village (NetEase Music) IPO Initiation: Musical Shares, we stated that at first sight, Cloud Village performance seems poor as its high growth has come at the cost of negative gross margin and cash burn. However, Cloud Village is on the cusp of turning around its performance due to a fundamental change in its cost structure. We concluded that Cloud Village has the potential to shed its underdog status vs the much larger Tencent Music.  
In Cloud Village (NetEase Music) IPO: Play List, we examined the 1Q21 results and the recent developments disclosed in the PHIP. We noted that while Cloud Village expects to remain unprofitable over the next three years, the 1Q21 results and the recent SAMR ruling on Tencent Music support our view that Cloud Village is on track to combine its high growth with an improving cost structure. 
In this note, we present our forecasts and take the first look at Cloud Village's potential valuation range. 

Cloud Village (NetEase Music) IPO: Valuation First-Look

China

Weibo Corp is a social media platform for people to create, distribute and discover Chinese-language content.  The Company offers users public self-expression in real time with a powerful platform for social interaction, as well as content aggregation and distribution.

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Weibo Corp (WB US)

Weibo (WB US): Strong Quarter Amid Regulatory Crackdown

Weibo Corp (WB US) reported stronger than expected quarter earnings driven by resilient ad revenue growth. Its 3Q21 revenue grew +30% year-over...

Roger Xie

Didi Global - Regulatory Overhang Remains and Long-Term Value Is Falling

Volatility in Didi shares appear has stabilized after regulatory turmoil but whilst the stream of bad news has slowed, a lack of good news is also...

Kirk Boodry

Weibo (WB US): Regulatory Risks Overshadow Cheap Valuation And Recapitalization Optionality

Although Weibo (WB.US) is facing regulatory risk and growth is slow, we think valuation is attractive for its scale and monetization potential....

Roger Xie

Li Ning (2331): Toe Injury

The injured toe will lead to either an increase in R&D cost, an increase in the COGS that will decrease GPM or extra marketing costs as part of...

Henry Soediarko

Cloud Village (NetEase Music) IPO: Valuation First-Look

Cloud Village is braving the moribund Chinese IPO market by pre-marketing an HKEx IPO to raise around $1 bn. In this note, we present our forecasts...

Arun George

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