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

<ul>
<li>Several news media outlets reported last week that Tencent has changed its M&amp;A strategy to obtain majority stakes in overseas gaming companies as opposed to buying minority stakes previously.</li>
<li>Tencent’s online game revenue declined YoY for two-consecutive quarters primarily due to decline in domestic game revenue that was impacted by absence of new game titles and minority protection rules.</li>
<li>Our analysis on Tencent’s game downloads and ranks reveal that both domestic and international game revenues would decline further in 3Q2022E.</li>
</ul>


Several news media outlets reported last week that Tencent has changed its M&amp;A strategy to obtain majority stakes in overseas gaming companies as opposed to buying minority stakes previously.
Tencent’s online game revenue declined YoY for two-consecutive quarters primarily due to decline in domestic game revenue that was impacted by absence of new game titles and minority protection rules.
Our analysis on Tencent’s game downloads and ranks reveal that both domestic and international game revenues would decline further in 3Q2022E.


Tencent Seeks Majority Stake in Overseas Game Companies as Game Revenue Slows Down Further

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

Lionheart Studio  / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lionheart-studio-corporation" target="_blank" data-smartkarma-citation="entities:36417:1" rel="noopener">Lionheart Studio (426630 KS)</a>, a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.</li>
<li>The company is majority owned by <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, which after having recently hiked its stake, owned 54.94% of the company prior to listing.  </li>
<li>In this note, we will talk about the positive aspects of the deal.</li>
</ul>



Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
In this note, we will talk about the positive aspects of the deal.


Lion Heart Studio Pre-IPO - The Positives - Got One Hit

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.</li>
<li>Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.</li>
<li>All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. </li>
</ul>


Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.
Our IPO valuation assumes a 7.2x EV/EBITDA (comps' average) using 2023 estimated EBITDA of 145 billion won for the company.
All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors. 


Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

<ul>
<li>SOCAR's institutional subscription rate was 56.97 to 1. It is highly unusual for an institutional competition rate to be this low among IPOs worth more than ₩1T.</li>
<li>SOCAR eventually set the price at ₩28,000 and reduced the offering volume from 4.55M to 3.64M, resulting in deal size of ₩100B at an implied market cap of ₩970B.</li>
<li>Since Lotte Rental's buying flow may be triggered earlier than expected, we may need to consider a swing trade if the price enters an oversold territory after listing.</li>
</ul>


SOCAR's institutional subscription rate was 56.97 to 1. It is highly unusual for an institutional competition rate to be this low among IPOs worth more than ₩1T.
SOCAR eventually set the price at ₩28,000 and reduced the offering volume from 4.55M to 3.64M, resulting in deal size of ₩100B at an implied market cap of ₩970B.
Since Lotte Rental's buying flow may be triggered earlier than expected, we may need to consider a swing trade if the price enters an oversold territory after listing.


SOCAR IPO: Order Table, Revised Terms, & Thinking Points

<ul>
<li>In the past several days, there have been numerous news accounts about the Indian government cracking down on Krafton's Battlegrounds Mobile India (BGMI) game.</li>
<li>We believe there are several reasons why Indian government is cracking down on BGMI including concerns about this game potentially leading to greater violence among children and ties to Tencent.</li>
<li>At current valuation levels, we like a pair trade between Krafton (go short) and NCSOFT Corp (036570 KS) (go long).</li>
</ul>


In the past several days, there have been numerous news accounts about the Indian government cracking down on Krafton's Battlegrounds Mobile India (BGMI) game.
We believe there are several reasons why Indian government is cracking down on BGMI including concerns about this game potentially leading to greater violence among children and ties to Tencent.
At current valuation levels, we like a pair trade between Krafton (go short) and NCSOFT Corp (036570 KS) (go long).


A Pair Trade Between Krafton & NCsoft (India's Crackdown on Krafton's BGMI)

South Korea

HYBE Co., Ltd. operates as an entertainment company. The Company provides music production, album distribution, entertainers management, publicity, planning, training, and other services. HYBE also makes television shows.

Netmarble Corporation develops and publishes mobile games. The Company develops and publishes casual games, action, sports games, strategy, simulation games, and social casino games. Netmarble offers services worldwide.

Pearl Abyss Corp. operates as a computer games making company. The Company offers games development, games exporting, and other services. Pearl Abyss serves customers worldwide.

Kakao Games Corp. operates as a multiply platform gaming company. The Company provides mobile games, computer games, virtual reality games, and other related products. Kakao Games markets its products worldwide.

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

LG Uplus Corp., an affiliate of LG Group, provides a wide range of personal communications services (PCS) using code division multiple access (CDMA) technology.  The Company offers call forwarding, call and data transfer, call waiting, voice mail, Internet-phone, prepaid call, and authentication text-to-speech (TTS) services.

LS Cable & System Asia Ltd. provides and offers cable products.  The Company manufactures and markets electric and telecommunication cables, head transmission lines, voltage cables and industrial specialty cables for the energy, infrastructure, construction, automotive, railway, telecommunication and electronics industries.

KINX INC is the Internet linkage and line adapter service providing firm.  The Company provides IX and Internet Data Center service to the network service providers to reduce the traffic and to contruct Internet infrastructure.  KINX also provides VoIP service.

Sejong Telecom, Inc. develops and provides various telecom service.  The Company's main service include international phone call, Internet phone call, and long distance call.

Endeavor Group Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, offers entertainment content, as well as specializes in marketing and licensing, representation, and event management. Endeavor Group Holdings serves customers worldwide.

Roku, Inc. designs and manufactures consumer electronic products. The Company offers wireless enabled devices that stream audio and video content from the internet to home entertainment systems. Roku serves customers globally.

Kunlun Tech Co., Ltd. offers comprehensive Internet value-added services. The Company focuses on social network interactive and online game fields. Kunlun Tech also provides localized translation outsourcing and agency advertising services.

Bilibili Inc. provides online entertainment services. The Company offers a platform that covers a wide array of genres and media formats, including videos, live broadcasting, mobile games, animation, and comics. Bilibili serves customers in China.

China Ruyi Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on online streaming video and internet community businesses. China Ruyi Holdings also manufactures and sells photographic, electronic, and multimedia accessories.

37 Interactive Entertainment Network Technology Group Co.,Ltd designs, develops, and operates mobile games and web games. The Company also provides game promotion, customer service, top-up payment, and other services. 37 Interactive Entertainment Network Technology Group conducts its businesses in China.

37 Interactive Entertainment N (002555 CH)

Lions Gate Entertainment Corporation develops and distributes film entertainment contents. The Company produces motion pictures, television programming, animation, and digital media. Lions Gate Entertainment serves customers worldwide.

World Wrestling Entertainment, Inc. operates as a media and entertainment company. The Company offers live wrestling events, television programming, music publishing, advertising, licensing, and home video streaming services. World Wrestling distributes its programs worldwide in various languages.

AMC Entertainment Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides theatrical exhibition, movie screening, food distribution, online ticket booking, and other related services. AMC Entertainment offers movie theaters worldwide.

Saregama India Limited manufactures, sells and deals in Audio Cassettes, CD's and DVDs, which they market in India, Europe, the USA, Canada, the Caribbean Islands and South Africa. The Group's range of music encompasses both new and old Hindi films, regional films, ghazals, classical, Indipop and International. Saregama also has a film business, which produces films and TV serials.

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

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Krafton (259960 KS)

Tencent Seeks Majority Stake in Overseas Game Companies as Game Revenue Slows Down Further

Tencent has been aggressively seeking to acquire majority stakes in overseas game developers. Our analysis on game downloads and ranks reveal that...

Shifara Samsudeen, ACMA, CGMA

Lion Heart Studio Pre-IPO - The Positives - Got One Hit

Lionheart Studio, a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO. The company is majority...

Sumeet Singh

Lionheart Studio IPO Valuation Analysis

Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.

Douglas Kim

SOCAR IPO: Order Table, Revised Terms, & Thinking Points

This post investigates SOCAR's order table in the bookbuilding and discusses the thinking points for post-listing trade.

Sanghyun Park

A Pair Trade Between Krafton & NCsoft (India's Crackdown on Krafton's BGMI)

We believe there are several reasons why Indian government is cracking down on Krafton's BGMI including concerns about this game leading to greater...

Douglas Kim

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