In today’s briefing:
- Sea Ltd: Share Price Approaching Its Rightful Destination
- [Sea Limited (SE US, SELL, TP US$35) Target Price Change]: Long-Term Headwinds Amid Upsides in 3Q
- Splitit Pursues Split From The ASX
- Alibaba’s DingTalk to Split From Cloud Division and Seek Own IPO, Source Says
- Tencent (700 HK): 2Q23, Ad and FinTech Recovering, Margin Higher, Buy
- Tesserent (TNT AU): Scheme Meeting on 18 September
- Intel Terminates Tower Semi Deal
- Tencent: Earnings Miss, Cost Controls Help Margins; Slowdown in Domestic Gaming Is Concerning
- Quiddity Leaderboard SSE50/180 Dec 22: 5 Changes for SSE50 and 18 Changes for SSE180
- Omron (6645) | Long-Term View Unchanged but Bumpy Ride
Sea Ltd: Share Price Approaching Its Rightful Destination
- While our outlook for Sea (SE US)‘s 2Q23 was bearish, we didn’t anticipate such a substantial price reaction post-earnings, considering the existing low consensus.
- However, the market appears to have given more importance to the revenue miss and the deterioration of fundamentals in e-commerce, as indicated by the post-earnings price reaction of -28.7%.
- Shopee’s modest profitability, restrained growth fail to warrant an EV surpassing $7.0bn. The Gaming business is best valued around $3.0bn, while the Fintech arm should be valued at around $5.0bn.
[Sea Limited (SE US, SELL, TP US$35) Target Price Change]: Long-Term Headwinds Amid Upsides in 3Q
- Sea reported CY2Q23 top-line that missed consensus by 3.4%, while non-GAAP net income beat by 16%. Sea guided for the net margin to turn negative again in future quarters.
- We see deterioration of Sea’s competitive landscape as a long-term trend, hence we cut TP to US$35. The next swing factor is Temu’s ASEAN launch.
- Yet, we need to remind investors that Sea’s 3Q earning might have some upside, including user growth of Shopee, as well as stabilization of gaming metrics.
Splitit Pursues Split From The ASX
- Splitit Ltd (SPT AU) will seek approval from shareholders to delist the Buy Now, Pay Later micro-play from the ASX and redomicile to the Cayman Islands.
- Concurrent with the voluntary delisting proposal, PE outfit Motive Partners will pump in US$50mn in exchange for preference shares – assuming the delisting occurs and certain earnings targets are met.
- This is not an Offer for shares. If delisted, Splitit shareholders will hold scrip in an unlisted private vehicle.
Alibaba’s DingTalk to Split From Cloud Division and Seek Own IPO, Source Says
- Alibaba Group Holding Ltd.’s workplace collaboration platform DingTalk will split from the company’s cloud division and pursue its own IPO, a source familiar with the matter told Caixin, as the tech giant ramps up efforts to unlock growth following its major restructuring.
- DingTalk’s separation is expected to be completed before the Alibaba cloud unit’s own IPO, the source close to the e-commerce firm said.
- Alibaba announced in May that it would spin off its Cloud Intelligence Group via a stock dividend distribution to its shareholders over the next year with an eventual listing.
Tencent (700 HK): 2Q23, Ad and FinTech Recovering, Margin Higher, Buy
- In 2Q23, online advertising and FinTech revenues continued to grow rapidly.
- Game revenue was slow, but two existing games were still at the top of the game market.
- The operating margin improve significantly, benefiting from the layoff last year.
Tesserent (TNT AU): Scheme Meeting on 18 September
- Tesserent Ltd (TNT AU)‘s IE considers Thales SA (HO FP)’s A$0.13 offer fair and reasonable as it is above its valuation range of A$0.098 to A$0.109 per share.
- The offer is subject to FIRB and shareholder approval. New Zealand’s OIO approval suggests that Australia’s FIRB approval should be forthcoming. Pearson’s recent selldown lowers the vote risk.
- At the last close price and for the 4 October payment, the gross and annualised spread is 4.0% and 32.0%, respectively.
Intel Terminates Tower Semi Deal
- Tower to collect a cool $353 million termination fee from Intel
- Intel claims its foundry ambition to become the global #2 by end of the decade remains unchanged
- The key thing Intel needed from Tower was access to its broad, diverse portfolio of specialty process technologies. These will take Intel years to develop on their own.
Tencent: Earnings Miss, Cost Controls Help Margins; Slowdown in Domestic Gaming Is Concerning
- Tencent (700 HK) reported 2Q2023 results today. Revenue grew 11.3% YoY to RMB149.2bn (vs consensus RMB151.1bn) while reported OP increased 34% YoY to RMB40.3bn (vs consensus RMB44.6bn).
- Rapid growth in ad business, video account monetisation and cost controls have contributed to Tencent’s 2Q2023 earnings despite domestic gaming business has slowed down.
- Though Tencent’s 2Q2023 results show a recovery in earnings, we would interpret the company’s earnings with caution given the slowdown in domestic gaming and social networks businesses.
Quiddity Leaderboard SSE50/180 Dec 22: 5 Changes for SSE50 and 18 Changes for SSE180
- SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange.
- Earlier this month, I discussed the historical price and volume performance of SSE 50 and SSE 180 Rebalance events in Quiddity Primer for SSE 50/180/380 Index Rebalance Events.
- In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the December 2023 Rebalance event.
Omron (6645) | Long-Term View Unchanged but Bumpy Ride
- Omron’s stock price has collapsed 20% after missing Q1 earnings estimates.
- The recovery in demand has been pushed back – the company may cut its full year guidance at the interim stage
- On near-term earnings, the stock is around fair value. There is +20% upside for longer-term investors based on our DCF
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