In today’s briefing:
- Tencent Investee Selldown – The US$120bn Global Overhang
- SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- Indiamart Intermesh Ltd- Forensic Analysis
- Tencent Increases Its Investment in Medical and Healthcare
- Nintendo (7974) | Beware of Cycles
- Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday
- Top Material IPO Valuation Analysis
- Minority Shareholders Convince DB Hitek to Stop a Company Split
- Lets Talk About LILAK
- Lyft Inc: Marketing & Advertising Unit & Other Drivers
Tencent Investee Selldown – The US$120bn Global Overhang
- Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year.
- The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
- In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.
SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
- The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
- Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.
Indiamart Intermesh Ltd- Forensic Analysis
- IndiaMart (INMART IN)‘s annual report analysis highlights some of the issues that should not be overlooked.
- In addition to changes in important disclosures, the company still continues to see less flow-through of deferred income into revenues.
- On the assets side, it should be noted that the strategic investments are yet to show any promise, while fixed assets show some concerns including non-verification, disposals, etc.
Tencent Increases Its Investment in Medical and Healthcare
- Tencent known to outspend its peers on strategic investments, has made only around 80 investments and acquisitions so far this year compared to more than 200 deals done in 2021.
- Tencent’s vast investment portfolio has attracted regulatory scrutiny and it’s the market’s belief that Tencent was asked to divest some of its stake in other leading tech players in China.
- However, over the last few months, Tencent has been increasingly investing on companies operating in the medical field.
Nintendo (7974) | Beware of Cycles
- Nintendo’s stocked recently popped on two positive developments – Splatoon 3 sales set a record for a Switch game & Nintendo Direct announced the release date of Legend of Zelda
- Switch life cycle is coming to an end. The cycle had been extended by Covid and supply issues for Sony PS5
- Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower
Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday
- We estimate that Nanya Technology has the highest level of net cash as a percent of its market cap in its history and it is trading well below 1x PBV.
- The median 6-month total shareholder return has been 40.5% for instances since 2012 when Nanya Tech has traded below 1.0x PBV.
- Micron’s results this Thursday will provide color on Nanya’s outlook and could be a catalyst.
Top Material IPO Valuation Analysis
- Our base case valuation of Top Material (360070 KS) is a target price of 37,965 won per share, which is 33% higher than the mid-point of the IPO price range.
- Given the solid upside, we have a Positive view of the IPO. Our base case valuation is based on 25.6x P/E using our estimated net profit in 2022.
- We estimate the company to generate sales of 73.7 billion won (up 131.1% YoY) and operating profit of 14.1 billion won (up 190.3% YoY) in 2022.
Minority Shareholders Convince DB Hitek to Stop a Company Split
- On 26 September, DB Hitek Co., Ltd. (000990 KS) announced that it will stop the proposed split-off of its semiconductor design business.
- This move to stop the company split comes after numerous minority shareholders banded together to stop this move which could have a negative impact on DB Hitek.
- Overall, we believe DB Hitek’s decision to stop the company split driven by the campaigns from the minority shareholders is likely to have a positive impact on the company.
Lyft Inc: Marketing & Advertising Unit & Other Drivers
- After a sharp correction, Lyft saw a recovery in the stock price and its results justified the same.
- Rideshare rides were up 27% year over year, and both active riders and rides have reached post-COVID highs.
- A mixture of new and seasoned drivers contributed to the largest number of active drivers in the past two years.
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