Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names. </li>
<li>Of these companies, only two are expected to be EBITDA positive in FY22. </li>
<li>They are <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a> and <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com (SOHU US)</a>. This insight looks at both names. </li>
</ul>


Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names. 
Of these companies, only two are expected to be EBITDA positive in FY22. 
They are JOYY (YY US) and Sohu.com (SOHU US). This insight looks at both names. 


Negative EVs: JOYY & Sohu's Steep Discount To Net Cash

Event-Driven

Glory Star New Media Group Holdings / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/glory-star-new-media-group-h" target="_blank" data-smartkarma-citation="entities:33080:1" rel="noopener">Glory Star New Media Group H (GSMG US)</a> (GSMG), a leading digital media platform and content-driven e-commerce company in China, has <a href="https://www.sec.gov/Archives/edgar/data/0001738758/000121390022038380/ea162668ex99-1_glorystar.htm" target="_blank" rel="noopener">entered</a> a definitive privatisation transaction with Cheers Inc.</li>
<li>Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG's undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG's CEO Bing Zhang. </li>
<li>The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it's a low-balled Offer.</li>
</ul>



Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG's undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG's CEO Bing Zhang. 
The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it's a low-balled Offer.


Offensively Cheap Homecoming For Glory Star New Media

<ul>
<li>The SEC has finalised the Holding Foreign Companies Accountable Act rules. Under the current timeframe, the SEC may force the delisting of foreign companies in three years if in contravention.</li>
<li>Amid <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>'s intention to delist from the US, the CSRC refutes it is pushing for VIEs to drop their listings in the United States.</li>
<li>Expect continued volatility as the ~248 US-listed China plays seek to avoid delisting if they don’t comply with auditing rules.</li>
</ul>


The SEC has finalised the Holding Foreign Companies Accountable Act rules. Under the current timeframe, the SEC may force the delisting of foreign companies in three years if in contravention.
Amid DiDi Global (DIDI US)'s intention to delist from the US, the CSRC refutes it is pushing for VIEs to drop their listings in the United States.
Expect continued volatility as the ~248 US-listed China plays seek to avoid delisting if they don’t comply with auditing rules.


Delisting Chinese ADRs: High Foreign-Holding, With No Fixed Abode, Most At Risk

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

<ul>
<li>Since late 2020, Search’s share of digital advertising revenue has stabilised at around 8-10%, seemingly retaining its core advertising customers and industries.</li>
<li>Baidu management expects AI Cloud to maintain strong revenue growth momentum in the upcoming quarters.</li>
<li>Baidu trades on a 3.6x NTM EV/EBITDA multiple, well below one standard deviation lower than its 5-year historical average trading range and the lowest it has ever been.</li>
</ul>


Since late 2020, Search’s share of digital advertising revenue has stabilised at around 8-10%, seemingly retaining its core advertising customers and industries.
Baidu management expects AI Cloud to maintain strong revenue growth momentum in the upcoming quarters.
Baidu trades on a 3.6x NTM EV/EBITDA multiple, well below one standard deviation lower than its 5-year historical average trading range and the lowest it has ever been.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/111-inc" target="_blank" data-smartkarma-citation="entities:27412:1" rel="noopener">111 Inc (YI US)</a>, an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu - both co-founders and co-chairmans.</li>
<li>Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price. </li>
<li>Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.</li>
</ul>



111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu - both co-founders and co-chairmans.
Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price. 
Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.


111 Inc's Low-Balled Homecoming Is A Done Deal

United States

Sogou Inc. operates as a Chinese online search engine. The Company develops Internet applications such as map, voice search, and smart phone assistant, as well as web directory and browser. Sogou serves clients in China.

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Sogou Inc (SOGO US)

Negative EVs: JOYY & Sohu's Steep Discount To Net Cash

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David Blennerhassett

Offensively Cheap Homecoming For Glory Star New Media

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David Blennerhassett

Delisting Chinese ADRs: High Foreign-Holding, With No Fixed Abode, Most At Risk

This does not strike me as the time to be bargain hunting. Not when there remains confusion as to how and when delistings will unfold. The focus...

David Blennerhassett

Baidu: Priced to Fail

In this insight, we analyse Baidu’s search query and digital advertising revenue market share trends, revenue growth outlook, margin expansion...

Wium Malan, CFA

111 Inc's Low-Balled Homecoming Is A Done Deal

Trading at a 9.3% gross spread to terms. That's okay for an illiquid arb. One that is neither firm, nor optically reasonable. The downside is...

David Blennerhassett

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