In today’s briefing:
- TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
- HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer
- Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9
- End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023
- IQiyi: Upbeat 4Q Is Only Temporary
- Meta Platforms: Even More Bullish
- Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know
- ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle
- SHEN: Slower Adds from a Larger Network
- [Pinduoduo (PDD US) Target Price Change]: Cut TP for Higher Losses from Temu
TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
- Some low liquidity stocks in the TOPIX Index carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
- These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will enjoy buying flows from passive trackers of TOPIX.
- In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2023.
HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer
- Bloomberg reportedHKBN Ltd (1310 HK) has received a takeover offer from HGC Global Communications at a valuation of more than US$1 billion (implies around HK$6 per share).
- The shares rose 11.6% to HK$5.59 before entering a trading halt. The rumoured price is underwhelming compared to historical multiples and share prices.
- HKBN has a relatively concentrated shareholder register which suggests that the rumoured takeover premium of around 20% is not going to cut it.
Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9
- Another valuable long-short opportunity has arisen this time with K-New Deal rebalancing. The pair consists of Douzone Bizon and KMW, which have switched places in the Internet Index’s top three.
- Due to their relatively low trading volume, the passive flow size (x ADTV) that this pair will face at the closing price on March 9th is expected to be significant.
- This creates sufficient opportunities for a Long-Short setup in terms of day or swing trading. As KMW is a constituent of the KOSDAQ 150, it is possible to short KMW.
End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023
- We discuss end of the mandatory lock-up periods for 35 stocks in Korea in March 2023, among which 8 are in KOSPI and 27 are in KOSDAQ.
- These 35 stocks on average could be subject to further selling pressures in March and could underperform relative to the market.
- Among these 35 stocks, the top 5 market cap stocks include Nh Investment & Securities, WCP, Bionote, Jeio, and Dreamtech.
IQiyi: Upbeat 4Q Is Only Temporary
- IQIYI Inc (IQ US) ‘s share price is up 30.8% YTD primarily driven by upbeat 4Q2022 results. The main highlight was strong increase in members alongside improvement in OPM.
- The company’s aggressive cost cutting measures have helped reach operating profits, however, we don’t think this is sustainable given user growth depends on content.
- We expect iQiyi’s 1Q2023E results to be strong driven by the launch of The Knockout series, however, further cutting down costs will impact the company’s long-term prospects.
Meta Platforms: Even More Bullish
- The recently announced Meta Verified could generate an incremental $2.2B in revenues.
- Incremental layoffs being reported could amount to $5B in incremental savings this year.
- Between the two reports, we could easily see 10% upside to EPS.
Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know
- Share buybacks and stock-based compensation also will be an important part of the upcoming earnings release.
- GAAP operating profitability will be in the spotlight as the company lays off a significant amount of its workforce.
- The level of share buybacks will be a key part of Salesforce’s growth strategy.
ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle
- ChipMOS results missed expectations with capacity utilization falling, dragging down profitability.
- The company sees 1Q23E as the bottom for its performance, followed by a 2Q23E rebound. However, it says it believes the Memory industry may take longer to recover.
- We believe ChipMOS is cheap if one looks through the cycle, and it is relatively unloved by the Street hence the expectations bar is set low.
SHEN: Slower Adds from a Larger Network
- SHEN reported better than expected fourth quarter revenue as more customers subscribe to faster broadband speeds
- Our focus is on the seasonally low number of customer additions in the quarter even though SHEN was building out its optical fiber network.
- Our negative bias has been built on SHEN’s capital expenditure plans requiring the Company to build debt and the timing of when SHEN would reach free cash flow positive
[Pinduoduo (PDD US) Target Price Change]: Cut TP for Higher Losses from Temu
- We conducted interviews with Temu and Shein merchants. We expect Temu to be more aggressive in expansion. Most metrics of Temu are improving, and it creates increasing pressure on Shein.
- Yet, investors should be aware about Temu’s widening losses and the possible margin drag in the domestic eCommerce business due to the subsidy campaign launched by JD.
- We revised our forecasts on Temu’s GMV/non-GAAP net loss in 2023 from USD 2bn/(1)bn to USD 5bn/(3)bn. We cut PDD’s TP to US$100.
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