Brief Consumer: Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment and more

In this briefing:

1. Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment
2. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
3. Orion Holdco/Sub Trade: Holdco’s Price Catching up Was Overworked, Time for Sub to Catch Up
4. Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)

1. Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment

The publication of Lyft’s IPO prospectus is a clear positive for Rakuten Inc (4755 JP) . As a pure investment, Rakuten’s return on its Lyft investments could be 273-366% or ¥101-136 per share based on the $20-25bn valuation range reported by the press. There has been a lot of focus on the investment gains Rakuten should accrue but the real upside is a timely boost to liquidity plus accounting cover as mobile investment accelerates.  Whether one believes Rakuten can succeed in mobile or not, it has the capital and paper profits to support a splashy introduction and spending is already accelerating.

2. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports. 

Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.

In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.

3. Orion Holdco/Sub Trade: Holdco’s Price Catching up Was Overworked, Time for Sub to Catch Up

• Orion Holdco/Sub duo is now above +2σ on a 20D MA. They made nearly 2σ jump in just two trading days. Price ratio is currently at a 120D high. Holdco discount to NAV dropped 4%p from 50% to 46% since last time we checked on Jan 24.
• China easing wind began to blow into Korea since late last year. This China expectation had pushed up both Holdco and Sub. Sub had reacted more sensitively to it. Sub has undergone a price correction lately. Holdco has done a lot of catching up during this period. Now, Holdco surpassed Sub in terms of price return. Holdco climbed 32% from its 52W low. Sub went up 30% from its 52W low.
• Holdco is preparing its own business operation, water purifier, in China. This may act as a divergence factor. But at this point, Holdco’s own business in China has no meaningful substance that can shake its NAV radically. They must be reverted back to mean. Their price return got reversed in favor of Holdco. Holdco’s price catching up should be done now. It is time to go long Sub and short Holdco.

4. Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)

In our Discover SZ/SH Connect series, we aim to help our investors understand the flow of northbound trades via the Shanghai Connect and Shenzhen Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by offshore investors in the past seven days.

We split the stocks eligible for the northbound trade into three groups: those with a market capitalization of above USD 5 billion, and those with a market capitalization between USD 1 billion and USD 5 billion.

We note that offshore investors were buying all GICS sectors, and had a strong preference for Industrials, Consumer Staples, Consumer Discretionary, and Financials names. We estimate that total inflow into the A-share market via northbound trade amounted to USD 8.4 bn in February.