In today’s briefing:
- Softbank Group – Q1 22 Results Reaction: So Many Surprises…a Few Were Positive
- EVOC’s Privatisation Offer of HK$1.75 a Case of Third Time’s the Charm?
- China Internet Weekly (8Aug2022): Tencent, NTES, Kuaishou, Autohome
- NTT (Buy) – Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability
- EVOC (2308 HK)’s Merger By Absorption
- Mercari (4385) | No Path to Profitability
- Visa Inc.: New Partnerships & Other Drivers
- Twitter Inc.: The Data Breach & Other Major Risks
- Alphabet Inc.: IaaS & Google Cloud Upside
- Cirrus Logic Inc.: Initiation of Coverage – Heavy Dependence on Apple
Softbank Group – Q1 22 Results Reaction: So Many Surprises…a Few Were Positive
- Softbank posted record quarterly losses again ($23bn this time) after an aggressive writedown of private investments in the portfolio
- Vision Fund’s cumulative returns since FY17 are now less than $1bn and valuation losses for WeWork at the parent mean VF and related have lost money
- The good news is Softbank valuations are more closely aligned with reality whilst a ¥400bn buyback takes some of the sting away but tech values (and ARM) remain a risk
EVOC’s Privatisation Offer of HK$1.75 a Case of Third Time’s the Charm?
- EVOC Intelligent Technology Company Limited H (2308 HK) announced a privatisation offer from Mr Chen Zhi Lie, the ultimate controlling shareholder, at HK$1.75 per H share.
- The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.
- The offer price is final. The offer is attractive in comparison to long-term historical share prices and multiples. We think that Mr Chen’s third privatisation attempt will likely succeed.
China Internet Weekly (8Aug2022): Tencent, NTES, Kuaishou, Autohome
- Tencent aims to raise shareholdings in an overseas game company and reduce shareholdings in a domestic movie producer.
- Tencent and NetEase have not got new game licenses and a license black market has emerged in China.
- Autohome revenue decreased in 4Q22 due to the lockdown in Shanghai.
NTT (Buy) – Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability
- Q1 revenue growth was the highest since Q3 17, helped by forex tailwinds and stability in the mobile segment
- Core telecom results were also positive as mobile erosion was less intensive than peers on better subscriber growth whilst DX demand has kept enterprise sales healthy
- Management did not change full-year guidance but this almost never happens with a Q1 report and we expect this report is enough to nudge consensus higher
EVOC (2308 HK)’s Merger By Absorption
- After shares were suspended on the 1 August, electronics play and property developer EVOC Intelligent Technology Company Limited H (2308 HK) has announced a privatisation at HK$1.75 per H-share.
- This Offer is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
- The premium to last close is just 15.13%; however, it is a 42.28% premium to the five-day closing average. This is EVOC’s third privatisation attempt in the past five years.
Mercari (4385) | No Path to Profitability
- Mercari reported full year operating loss of ¥3.7b on sales of ¥147b, while providing no guidance for the coming year
- We remain most concerned about the US business, where GMV is declining and losses look entrenched
- Mercari JP is also clearly slowing, partly due to post-Covid, but also due to rising competition
Visa Inc.: New Partnerships & Other Drivers
- Visa continued to show resilience in the challenging business environment and actually managed to see a marginal increase in payment volume in the recent result.
- The company managed to surpass Wall Street expectations in terms of both, revenues as well as earnings as its total Q3 payment volume increased by 1 point from Q2 and as much as 136% compared to three years ago.
- They also expanded their partnership with Remitly, one of the top digital remittance service providers in the world, to provide Visa Direct cross-border payments from Canada to bank accounts around the world.
Twitter Inc.: The Data Breach & Other Major Risks
- Twitter has been in the news for a number of wrong reasons off late.
- The total revenue for the quarter increased by 22% and the total revenue for the year by 37%, respectively, to reach $1.57 billion and $5.08 billion. mDAU increased by 1 million sequentially and by 13% year over year to 217 million, which were in line with its predictions.
Alphabet Inc.: IaaS & Google Cloud Upside
- Alphabet has been a beneficiary of the growth in both travel and retail in the past few months which enabled its Search business to show formidable growth.
- The company also introduced brand-new ad formats for enhanced visual browsing during searches.
- Overall, we remain optimistic about their future growth and give an ‘Outperform’ rating with a revised target price.
Cirrus Logic Inc.: Initiation of Coverage – Heavy Dependence on Apple
- Cirrus Logic has had an eventful year so far with solid bolt-on M&A and operating momentum.
- This has been possible through a noteworthy expansion in the product mix and technology of Cirrus Logic.
- Lastly, it is worth highlighting that Cirrus Logic operates with quite a strong balance sheet with more firepower to pursue diversification attempts further.
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