Focus on Smaller Cap Value Names, Altay Capital

Altay Capital

Focus on Smaller Cap Value Names

Long time value investor. Long/Short portfolio that’s always net long (between 30-80%). I have extensive experience in the video game industry as I founded a leading media company in the space, which I have since exited after an acquisition. Gaming companies only make up ~15% of my portfolio, but its a sector where I believe I have an edge. A newsletter about value investing! Mostly focus on smaller cap value names that aren't widely covered.

Equity Bottom-Up

<ul><li>This writeup was inspired by David Orr’s tweet about the U.S. listed Chinese company DouYu (Nasdaq: DOYU) paying out a $9.76 special dividend.</li><li>The stock closed at $12.59 the day before and was $6.59 earlier in the year.</li><li>Among Chinese ADRs with significant cash balances, SOHU is my favorite. </li></ul>

This writeup was inspired by David Orr’s tweet about the U.S. listed Chinese company DouYu (Nasdaq: DOYU) paying out a $9.76 special dividend.The stock closed at $12.59 the day before and was $6.59 earlier in the year.Among Chinese ADRs with significant cash balances, SOHU is my favorite. 

Sohu.com Inc (Nasdaq: SOHU): A Net-Net with $1.3B in Cash and Valuable Real Estate

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.

Event-Driven

<ul>
<li>PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.</li>
<li>The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.</li>
<li>In this note, we'll talk about the latest developments, possible outcomes and implications.</li>
</ul>


PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we'll talk about the latest developments, possible outcomes and implications.


China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<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 <strong><a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a></strong> and <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener"><strong>Sohu.com (SOHU US</strong>)</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

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>Meituan has been hiring delivery workers in Hong Kong since February 20.</li>
<li>JD will provide a subsidy of RMB1.5 billion to customers to compete with Pinduoduo (PDD) in early March.</li>
<li>Four companies released financial performance for 4Q22, including Baidu, iQiyi, NetEase, and Sohu.</li>
</ul>


Meituan has been hiring delivery workers in Hong Kong since February 20.
JD will provide a subsidy of RMB1.5 billion to customers to compete with Pinduoduo (PDD) in early March.
Four companies released financial performance for 4Q22, including Baidu, iQiyi, NetEase, and Sohu.


China Internet Weekly (2023Feb27): Meituan, JD, Baidu, IQiyi, NetEase, and Sohu

<div>
<p>Around 9.5 months after <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a> <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a Going-Private Transaction, the Offer was granted unconditional approval by the State Administration for Market Regulation (SAMR) on the 12 July. </p>
<p>Apparently, that wasn't the final approval as the regulators continued to overhaul and tweak China's tech sector. In its<a href="http://ir.sogou.com/2021-08-09-Sogou-Announces-Second-Quarter-2021-Results" target="_blank" rel="noopener"> 2Q21 results</a> (announced on the 9 August) Sogou said it expected the merger with Tencent to complete in the 2H21.</p>
<p>Yesterday, Sogou <a href="http://ir.sogou.com/2021-09-23-Sogou-Announces-Completion-of-Going-Private-Transaction" target="_blank" rel="noopener">announced</a> the completion of the merger and shares have been suspended. Payment will be made "as soon as practical". </p>
<p>Hong Kong's Standard <a href="https://www.thestandard.com.hk/section-news/section/17/234417/Tencent-Sogou-merger-first-after-overhauls" target="_blank" rel="noopener">reported</a> yesterday that Tencent's news and content unit Tencent Kandian will absorb most of Sogou's business and employees.  After merging with Sogou, the search engine segment will be the core business of Tencent Kandian. Tencent was permitted to take up the 60.9% in Sogou it did not already own provided it established a "special mechanism" to ensure data security.</p>
<p>So that's done. This is a short-form merger - there was no vote. Dissension rights are now afforded for short-form mergers and I would expect some investors to take up those rights.  </p>
</div>
<div>
<p>Separately, <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> pockets ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$857mn. </p>
</div>
<div>
<p>More below the fold.</p>
</div>


Around 9.5 months after Tencent (700 HK) and Chinese search-engine Sogou Inc (SOGO US) entered into a definitive agreement for a Going-Private Transaction, the Offer was granted unconditional approval by the State Administration for Market Regulation (SAMR) on the 12 July. 
Apparently, that wasn't the final approval as the regulators continued to overhaul and tweak China's tech sector. In its 2Q21 results (announced on the 9 August) Sogou said it expected the merger with Tencent to complete in the 2H21.
Yesterday, Sogou announced the completion of the merger and shares have been suspended. Payment will be made "as soon as practical". 
Hong Kong's Standard reported yesterday that Tencent's news and content unit Tencent Kandian will absorb most of Sogou's business and employees.  After merging with Sogou, the search engine segment will be the core business of Tencent Kandian. Tencent was permitted to take up the 60.9% in Sogou it did not already own provided it established a "special mechanism" to ensure data security.
So that's done. This is a short-form merger - there was no vote. Dissension rights are now afforded for short-form mergers and I would expect some investors to take up those rights.  


Separately, Sohu.com Inc (SOHU US) pockets ~US$1.2bn from the merger via its 33.8% equity stake in Sogou, versus its current market cap of US$857mn. 


More below the fold.


Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

China

Longmaster Information & Technology Company Limited provides community-based phonic value-added services. The Company's main product is a large-scale telephone phonic social and entertainment platform.

Longmaster Information&Technology (300288 CH)

Zhejiang NetSun Co., Ltd. provides Internet information service, website development and maintenance services, E-commerce service, and application software development. The company developed and is currently operating www.chemnet.com.cn, www.chemnet.com, www.texnet.com.cn, www.TexWeb.com, www.pharmnet.com.cn and other several vertical e-commerce websites.

Yirendai Ltd. engages in the online consumer finance business. The Company provides services for both online and offline marketplace connecting borrowers and investors, as well as wealth management services. Yirendai serves customers in China.

21Vianet Group, Inc. provides carrier-neutral Internet data center services. The Company hosts its customers' servers and networking equipment, as well as provides interconnectivity and managed network services to enable customers to deliver data across the Internet. 21Vianet conducts business in Beijing, China.

Qtone Education Group (Guangdong)., Ltd. provides family education information services. The Company's main products include systems development operation and maintenance, business promotion operations, read the information services, family education website services.

Xiamen 35.com Technology Co., Ltd. researches and develops application software, provides corporate email hosting services, electronic business homepage building services.  The Company also provides domain name, office automation system (OA), and customer relationship management system (CRM).

Hubei Century Network Technology Co. Ltd. provides internet content and service aggregation platforms. The Company delivers music, games, and other related products.

Everyday Network Company Limited operates and markets networks of new houses, second-hand houses, and homes. Also, the Company provides research and consulting businesses. The Company's main products include various types of system software.

Beijing Tianli Mobile Service Integration Inc provides mobile information services. The Company's main products include the MAS business, ICT service platform for business and mobile phone securities business.

Beijing Tianli Mobile Service (300399 CH)

Shanghai Ganglian E-Commerce Holdings Company Limited provides market information and B2B e-commerce services for steel and steel-related industries. The Company provides market information, research services and also offers business promotion to customers.

Infomart Corporation provides business to business (B2B) e-commerce services for food industry.  The Company offers ordering systems as well as database systems that contain detailed information about food ingredients.

Connectwave Co., Ltd. operates as an online shopping portal site. The Company provides price comparing and shopping information providing service. Connectwave also generates income from advertisement.

Quotient Technology Inc. operates a promotion platform. The Company offers online printable, social, and mobile coupons in apparel, automotive, beverages, books, entertainment, food, healthcare, household, office supplies, pet, photography, professional services, and restaurants.

Softbank Technology Corp. provides electronic commerce (EC) related services. The Company mainly provides Internet systems integration, web site management, marketing consulting, and technical support services.

TrueCar, Inc. develops and publishes an online automotive information and communication platform. The Company provides data and price reports for cars both online and over the phone for consumers and a communications platform for automobile dealers to communicate with consumers. TrueCar serves customers throughout the United States.

Trade-Van Information Services Co., Ltd. provides custom filing services for importers and exporters through EDI (Electronic Data Interchange).  The Company's services include EDI, interactive EDI, file transfer, electronic mail, database inquiry, and archiving.

ADDCN Technology Co., Ltd. operates an Internet trading platform and online apparel retail businesses. The Company's platforms trades in virtual treasures, housing for tenants and buyers, car sales and apparel retail.

Ahnlab, Inc. designs and develops anti-virus solutions for network server systems, personal computers, and e-business data systems.  The Company also offers consulting service and develops Internet security applications.

Bengo4.com Inc offers lawyer and tax accountant advisory website services.

Real Matters Inc. provides an application software platform. The Company offers property valuation, collateral risk management, and data analytic services over a cloud-based environment. Real Matters serves real estate appraisers, lenders, mortgage insurers, and originators in the North American financial services industry.

Sohu.com Limited operates as an online media search and game service group company. The Company provides online brand advertising services on personal computers and mobile devices. Sohu.com serves clients in the People's Republic of China.

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Sohu.com (SOHU US)

Sohu.com Inc (Nasdaq: SOHU): A Net-Net with $1.3B in Cash and Valuable Real Estate

This writeup was inspired by David Orr’s tweet about the U.S. listed Chinese company DouYu (Nasdaq: DOYU) paying out a $9.76 special dividend.

Altay Capital

China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US...

Sumeet Singh

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

I'd tilt slightly towards Sohu. It did successfully sell Sogou; whereas Joyy failed to sell YY live. That may provide some insight as to how the...

David Blennerhassett

China Internet Weekly (2023Feb27): Meituan, JD, Baidu, IQiyi, NetEase, and Sohu

Meituan is hiring delivery workers in Hong Kong. JD will provide a subsidy of RMB1.5 bn to customers to compete with Pinduoduo (PDD). Baidu, iQiyi,...

Ming Lu

Sohu.com (SOHU US): Cashed Up As Tencent/Sogou Merger Completes

Would Zhang look to take the company private? If possible, I would. An Offer would be self-funding, and he further benefits via listing Changyou on...

David Blennerhassett

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