In this briefing:
- China’s New Semiconductor Thrust – Part 1: Why and How?
- Qutoutiao Offering: Funding a Costly Battle
- Notes from the Silk Road: Xtep Int’l Holdings (1368 HK): Time to Run (Away) For Now
- Angang Steel: PMI Recovery to Support Shares: Close Short
- QTT Placement: Liquidity Warrants a Quick Trade
1. China’s New Semiconductor Thrust – Part 1: Why and How?
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
2. Qutoutiao Offering: Funding a Costly Battle
On Friday, Qutoutiao Inc (QTT US) unveiled plans to raise around $11 million (based on the closing price of $11.45 per ADS) through a public offering of 1.1 million ADS. Also, certain selling shareholders will offer 7.5 ADS in the offering. The public offering comes hot on the heels of the announcement of a $171.1 million convertible loan from Alibaba Group Holding (BABA US) on 28 March.
We remain cautious on Qutoutiao as it faces an inescapable catch-22 as it cannot attract users without increasing its user acquisition spend and it cannot reach breakeven without lowering its user acquisition costs. Overall, we would not participate in the public offering.
3. Notes from the Silk Road: Xtep Int’l Holdings (1368 HK): Time to Run (Away) For Now
Xtep International (1368 HK) has announced a placing and top-up subscription of new shares event, creating a capital base which is 9% larger.
XTEP states that they have considered various ways of raising funds and consider that it would be in their best interests to raise equity funding through the placing and the subscription.
With the share price down 16% since the placement, we examine what this means for the company’s fundamentals and shareholders. We believe the results will prove to be mixed for management and shareholders alike. We highlight how we expect the stock ranking to react, given we the placement was only a few days back and this is yet to reflect. This special situation analysis may surprise you with the conclusions.
4. Angang Steel: PMI Recovery to Support Shares: Close Short
INVESTMENT VIEW:
The recovery in China’s March PMI index to 50.8 shows an unexpected expansion in economic activity. Historically, there is a strong correlation between the PMI and Chinese steel prices as well as Angang’s share price.
We close our short on Angang Steel Co Ltd (H) (347 HK) shares.
5. QTT Placement: Liquidity Warrants a Quick Trade
Qutoutiao Inc (QTT US) announced a USD 100 million share sales by the company and its shareholders, slightly more than two weeks after the lock-up expiration on March 13th. In this insight, we will provide our quick thought on the deal.
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