In today’s briefing:
- Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
- Tata Technologies IPO- Forensic Analysis
- Kuaishou: Strong Earnings With Further Improvement in Profitability
- Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge
- Blackstone&Permira/Adevinta: Firm Offer
- 2024 High Conviction: BILL Holdings – Hyper Growth Through M&A Deals Is Over While SMBs Struggle
- Wrkr Limited – FY24 Revenue Guidance a Continuation of Q1 FY24
Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
- Xiaomi Corp (1810 HK) is a member of the Hang Seng Index, Hang Seng China Enterprises Index and Hang Seng TECH Index, among others.
- Capping of stocks at 8% of the index weight will lead to selling in Xiaomi (1810 HK) at the close on 1 December, mainly from Hang Seng TECH Index trackers.
- Relative underperformance vs the HSTECH Index from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.
Tata Technologies IPO- Forensic Analysis
- Tata Technologies (TATATECH IN) awaited IPO is set to launch for subscription this week.
- The company is one of the largest ER&D player that is based in India with revenues crossing INR 44 bn in F23.
- Balance sheet remains strong and cash rich. There are however, doubts on revenue recognition policy, forex risk and reliance on Tata Group.
Kuaishou: Strong Earnings With Further Improvement in Profitability
- Kuaishou’s 3Q2023 earnings beat consensus estimates with significant improvement to the company’s profitability driven by growth across all business segments.
- Operating losses of the overseas segment has further reduced, and new offerings such as paid mini dramas have been driving strong growth for the company.
- Though Kuaishou’s share price has moved up during the last few months, valuation multiples are at a steep discount to historical multiples, suggesting there is further upside.
Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge
- Nvidia’s street-beating results indicate strong growth to continue; Generative AI demand will next expand from startups, consumer internet, and cloud service providers increasingly to enterprise AI-linked demand.
- Nvidia is not expensive despite recent market concerns. We believe Nvidia can meet or even beat its current calendar year 2024 earnings expectations and forward PE is cheap.
- Short a basket of Taiwan AI concept stocks vs. a core Nvidia long position rather than take profits in Nvidia. We have swapped one Taiwan stock in our short basket.
Blackstone&Permira/Adevinta: Firm Offer
- Permira and Blackstone announced a NOK 115.0/share offer, two months after their approach was unveiled. 3-month VWAP premium is 52.6%. The offer represents 18.3x EV/NTM Fwd EBITDA (vs. 14.6x comparables)
- The three largest shareholders (c.72.3%) communicated at the outset their support, so it’s a done deal. 90% condition can be waived. Board says price “financially fair”, but cannot recommend it.
- I set my TP at NOK 115. The consortium could achieve an IRR of 17.8% by year 8. Spread is 3.3%/6.65% (gross/annualised, assuming settlement by 31 May). Long.
2024 High Conviction: BILL Holdings – Hyper Growth Through M&A Deals Is Over While SMBs Struggle
- BILL Holdings is a cloud-based provider of SaaS, payments, spend and expense management products, which automate accounts payable (AP) and accounts receivable (AR) transactions
- The company has successfully completed its IPO in 2019 and raised $200M+ in net proceeds. Today, BILL Holdings includes subsidiaries such as Bill.com, DivvyPay, Invoice2go, Cimrid and Finmark Financial.
- My bear case assumes a ~5% ten-year revenue CAGR from FY24 through FY34, maximum competitive pressure, high customer churn, headwind to float revenue and volatile transactional revenue.
Wrkr Limited – FY24 Revenue Guidance a Continuation of Q1 FY24
- Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
- New AGM commentary is guiding FY24 revenue to $9m-$10m (RaaS $10.2m), which includes forecast SMSF Hub revenue in-line with RaaS at ~$800k and higher interest income, boosted by the recent RBA rate increase.
- While the onboarding of a ‘significant fund’ client of Link is expected ‘within weeks’ we have little in the way of transactional revenue in FY24, just implementation revenue.
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