In today’s briefing:
- Offensively Cheap Homecoming For Glory Star New Media
- HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- Softbank Group – Fortress Sale Looks Better when Returns and Exchange Rate Considered
- Money Forward (3994) | SaaS Crash Survivor
- Money Forward – Q2 22 Results Reaction: Mixed Results Short of Consensus
- Money Forward: Growth at the Cost of Profits
Offensively Cheap Homecoming For Glory Star New Media
- Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
- Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG’s undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG’s CEO Bing Zhang.
- The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it’s a low-balled Offer.
HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
- FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
- Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.
Softbank Group – Fortress Sale Looks Better when Returns and Exchange Rate Considered
- Softbank sale of Fortress removes an asset that is surplus to requirements at a price that is not as bad as headlines suggest
- A sale to Mubadala at ~$1bn seems low versus the $3.3bn it paid in 2017 but dividend payments and a strong yen mean a c. 70% loss is actually ~10%
- The discount has modestly narrowed recently but VF valuations likely to remain volatile whilst worries on China tech regulation persist
Money Forward (3994) | SaaS Crash Survivor
- Money Forward has one of the largest SaaS/Fintech platforms in Japan and is a key beneficiary of corporate digital transformation
- The stock has fallen 48% year to date as valuations crashed with global SaaS multiples
- We think MF will emerge from downturn in good shape. At 10x EV/Rev, we see 22% upside (maybe even 55%….)
Money Forward – Q2 22 Results Reaction: Mixed Results Short of Consensus
- Q2 financial results were in-line or better than management targets but lagged consensus expectations
- Guidance for Q3 is slightly disappointing with the target range for revenue mostly below expectations whilst promotional and marketing spend continues to expand
- The secular growth story is attractive and operating KPI growth remains robust but investors probably needed more from a stock that trades at 7.5x EV/FY22 rev in a risk-off environment
Money Forward: Growth at the Cost of Profits
- Money Forward (3994 JP) reported 2QFY11/2022 results yesterday. Revenue grew 27.2% YoY to JPY5.08bn (vs consensus JPY5.13bn). Operating losses for the quarter was JPY2.2bn (vs consensus JPY1.9bn).
- MF’s top line growth has been slowing down, and the company continues to spend heavily on advertising to acquire users for its SaaS business.
- Though MF continues to grow its user base, it comes at the cost of profits.
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