In this briefing:
- Studio City – Thoughts on Lock-Up Expiry
- Changliao (畅聊) AKA Paipai (派派) Pre-IPO Review – Self-Sufficient
- Rakuten IPO Redux: Pinterest Surfaces More Liquidity but Not Paper Profits
- JD.com (JD): Cancels Delivery Man’s Basic Salary, Adapts to Growth of Commission Business
- HK Connect Discovery Weekly: Air China and Great Wall Motor (2019-04-04)
1. Studio City – Thoughts on Lock-Up Expiry
Studio City, a spin-off by MLCO US, was listed on October 18th, 2018 and its lock-up will expire next week on April 16th. The company raised USD 359 million in its IPO with the majority of the shares taken up by its shareholders.
In this insight, we will review the company’s operation, shares subject to lock-up expiry and its valuation vs peers.
Our previous insights on Studio City
- Studio City (新濠影汇) IPO: A Melco Spin-Off Turning Profitable
- Studio City (新濠影汇) IPO: Attractive Valuation with Options for Long-Term Upside (Part 2)
- Studio City (新濠影汇) IPO Trading Update: Performance Within Expectations, Near-Term Upside Capped
2. Changliao (畅聊) AKA Paipai (派派) Pre-IPO Review – Self-Sufficient
Changliao Inc (CL HK) is looking to raise about US$100m in its upcoming IPO. The company just filed its draft prospectus with the HKEX last week.
Changliao is a fast-growing social networking entertainment platform. The business model of engaging and monetizing users through interactive games is interesting.
However, the need for an IPO is questionable since the company has a healthy net cash balance sheet and it had paid out dividends in the past two years. It can easily finance its growth through debt or operating cash flow.
Tencent is an investor in the firm, however, it had only invested RMB9m in the company in FY2016. There are no other notable investors despite several rounds of financing.
In this insight, we will look at the company’s business model, analyze its financial performance and operating metrics.
3. Rakuten IPO Redux: Pinterest Surfaces More Liquidity but Not Paper Profits
Rakuten Inc (4755 JP) investee Pinterest Inc (PINS US) has filed its IPO prospectus implying a lower valuation than its last venture round but a robust increase in value since Rakuten led the Series C round in May 2012. We think an initial ¥4bn investment could be worth ¥25-30bn at the midpoint of the suggested IPO range.
- As with Lyft, the absolute value again and shift to greater liquidity are positive as it gives Rakuten more financial flexibility as it ramps up investments in the mobile business.
- Unlike Lyft, the Pinterest IPO value is down from the latest funding round which impacts paper profits that provide cover for spending on mobile albeit at a fraction of the upside from Lyft.
Pinterest doesn’t generate the same headlines as Lyft but a second IPO of a Rakuten investment as its cash needs expand can only be good news
4. JD.com (JD): Cancels Delivery Man’s Basic Salary, Adapts to Growth of Commission Business
* JD cut delivery men’s salary by 25% last week.
* JD ever generated cash flows by accounts payable in direct sales, but cost control is necessary when the commission business grew faster than the direct sales business.
* We believe that the overwhelming majority of delivery men will stay with JD after the salary cut, as many small delivery companies went bankrupt in 2018.
* we believe JD will be able to control costs well and keep close-to-zero net margin in 2019.
5. HK Connect Discovery Weekly: Air China and Great Wall Motor (2019-04-04)
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 mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we will highlight Air China and Great Wall Motor.
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