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

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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