In this briefing:
- Maoyan Entertainment IPO: The Trouble with Blockbusters
- JD.com (JD): Lawsuit Over, Price Falling Back to First Trading Day, Defensive in Bear Market
- Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.
- Discover HK Connect: Mainlanders Were Buying Pharma and Property Managers in December
- Weimob IPO: Prospectus Point to Mixed Fundamentals
1. Maoyan Entertainment IPO: The Trouble with Blockbusters
Maoyan Entertainment, formerly Entertainment Plus (EPLUS HK), is the largest online movie ticketing service provider in China. According to press reports, Maoyan has started pre-marketing to raise $0.3 billion (down from earlier indication of $0.5-1.0 billion) through a Hong Kong IPO. Maoyan is backed by Beijing Enlight Media (300251 CH) (20.0% shareholder), Tencent Holdings (700 HK) (16.3% shareholder) and Meituan Dianping (3690 HK) (8.6% shareholder).
Maoyan is yet another proxy in the battle between Tencent and Alibaba Group Holding (BABA US). However, we believe that challenges abound for Maoyan and would be cautious about participating in the IPO.
2. JD.com (JD): Lawsuit Over, Price Falling Back to First Trading Day, Defensive in Bear Market
- Minnesotan Authorities declined to charge the founder of JD.
- JD’s stock price has already plunged 52% in 2018. We believe JD is a defensive equity for portfolios, as the NASDAQ Composite just plunged 50% at most in the financial crisis of 2008.
- Compared to 2014, today’s JD has a higher market share in the larger e-commerce market. However, JD’s stock price is at the same level as the first trading day in 2014.
- JD continued to generate operating cash inflows in 2018 as previous years despite of its zero net margins.
- We are not concerned about the programmer layoff in December, as we believe JD overly invested in “hi-tech” that will not bring revenues in the near future.
- Based on historical Price / GMV, we believe there is an upside of 270% for JD’s stock price.
3. Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.
The Semiconductor Industry Association (SIA) just announced that worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8% YoY, but down 1.1% MoM, the first such decline since February 2018. While the decline is modest and total 2018 total semiconductor sales are on track to reach ~$470 billion for a YoY increase of 15.7%, any decline in what should be peak holiday season is not a good sign.
Semiconductor sales historically track Wafer Fab Equipment (WFE) sales with a roughly six month time lag. North American WFE sales have been declining each month for the past six months meaning that this latest semiconductor MoM sales decline is right on schedule.
Leveraging a decade’s worth of historical data, we analyse two key questions that are likely on every investors mind. Firstly,for how long should we expect semiconductor sales to continue their decline. Secondly, how steep should we expect that decline to be?
4. Discover HK Connect: Mainlanders Were Buying Pharma and Property Managers in December
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainlanders in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: those with a market capitalization of above USD 5 billion, those with a market capitalization between USD 1 billion and USD 5 billion, and those with a market capitalization between USD 500 million and USD 1 billion.
5. Weimob IPO: Prospectus Point to Mixed Fundamentals
Weimob.com (1260480D CH) is a combination of a SaaS software and an adtech (targeted marketing) business. It is backed by Tencent Holdings (700 HK), which is 3% shareholder and its largest customer. Weimob has started book building to raise gross proceeds of $108-135 million. Cornerstone investors which include a close associate of Tencent and Huifu Payment Limited (1806 HK) have agreed to purchase $42 million worth of shares in the offering.
The prospectus provides 1H18 results and selective disclosure on the first nine months of 2018. Overall, we believe that Weimob’s fundamentals are mixed and any prospective IPO multiple needs to be adjusted for the material capitalisation of expenses.
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