In today’s briefing:
- Tencent Holdings – Bad News On The Doorstep
- China Evergrande Group – Be A Hero, Take It To Zero
- Modern Dental Group (3600.HK) – More Suitable for Short Term Trading than Long Term Holding
- Amplitude – Our Stock Pick With Huge Upside Potential
- SK Hynix: Improving Global Market Positioning Whilst Still Trading at Discount Valuation Multiples
- Freshworks: Six Months Post-IPO. Valuation Update
- COSCO Shipping Energy (1138 HK): US Crude Export and China Import the Wild Cards?
- Hapvida (HAPV3 BZ) And Grupo Notredame (GNDI3 BZ) Business Combination- Potential Value Generation
Tencent Holdings – Bad News On The Doorstep
- The US Trade Representative (“USTR”) office added Tencent and Alibaba Group to the US government’s latest “notorious markets” list;
- Similar to being implicated in running afoul of regulators in mainland China, Tencent “strongly disagrees” with the USTR label; and
- *We look forward to Tencent’s 4Q21 results announcement on March 23, 2021 where management will continue to refuse to discuss anything meaningful.
China Evergrande Group – Be A Hero, Take It To Zero
- The shares of Evergrande aren’t worth the paper their printed on;
- Shanghai Construction receives a positive court outcome at expense of Evergrande; and
- The likelihood that Evergrande has enough liquidity and will not have a fire sale of assets is nil – we can add Evergrande to the list of the walking dead.
Modern Dental Group (3600.HK) – More Suitable for Short Term Trading than Long Term Holding
- The impact of dental implants centralized procurement on Modern Dental Group (3600 HK) (MDG) could be limited, and the strategic partnership with Meitu Inc (1357 HK) on “QJ Smile” also brings more possibilities.
- The concerns include doubts on R&D/innovation capability, complex international relations, foreign policy disturbances, unsettling macro environment and immature invisible orthodontic business, bringing uncertainties in terms of future development outlook.
- Although the 2021 full-year performance is worth looking forward to, which could be the short-term catalyst, MDG is more suitable for short term trading than long term holding.
Amplitude – Our Stock Pick With Huge Upside Potential
- This year the market presents investors with opportunities, especially in the technology sector, and we believe VC-backed Amplitude is one of them.
- The market cap of the leading product and data analytics unicorn fell to ~$2.3B, keeping in mind last private round valuation was ~$4B in June of 2021.
- $21 valuation, based on ~10x 2022E EV/Revenue and ~8x 2023E EV/Revenue, applies to our bear case revenue estimates of $226M in CY22 and $287M in CY23.
SK Hynix: Improving Global Market Positioning Whilst Still Trading at Discount Valuation Multiples
- SK Hynix has lost slight market share in DRAM, but gained significantly in NAND to become a strong #2 contender
- Revenue growth expectations seem conservative given Intel consolidation, market growth expectations, and the current pricing environment
- The company is still trading at discount valuation multiples despite improved market positioning and medium-term dividend clarity
Freshworks: Six Months Post-IPO. Valuation Update
- We are moving our PT to $26 by applying a 14x multiple to CY22 revenue estimate of $491M, which we believe is fair given lower implied CY22 growth.
- Freshworks has resolved the litigation filed by Zoho Corporation regarding trade secret misappropriation against Freshworks, eliminating key risk factor for investors.
- Freshworks crossed the $400M ARR mark in the quarter ended Dec-21, and quarterly revenue exceeded $100M for the first time.
COSCO Shipping Energy (1138 HK): US Crude Export and China Import the Wild Cards?
- US crude export growth is the positive driver while China import contraction is the negative for tanker ton-mile demand in last year which contraction 5.3% YoY.
- Significant room exists for a rebound in US oil export as oil majors announced plans to increase output. China’s import growth will recover in the next 12-18 months as well.
- US oil export to China needs 2x more VLCC than from Arabian Gulf. This bodes well for tanker rate, benefiting Cosco Shipping Energy (1138 HK) in the medium term.
Hapvida (HAPV3 BZ) And Grupo Notredame (GNDI3 BZ) Business Combination- Potential Value Generation
- The business combination of Hapvida Participacoes E Inve (HAPV3 BZ) and Notre Dame Intermed Par SA (GNDI3 BZ) concluded on Feb 11. GNDI3 shares are no longer trading.
- Since Feb 14, 2022, GNDI has become a wholly-owned subsidiary of Hapvida. The combined business has become Brazil’s largest vertical healthcare operator, with a market share of approximately 18%.
- The combined company estimates operational synergies of BRL1.38 billion during 2022–2024. With a share of 58%, revenue is expected to be the biggest contributor of the synergies.
Related tickers: Tencent (0700.HK), Evergrande (3333.HK), Modern Dental Group (3600.HK), SK Hynix (000660.KS), Cosco Shipping Energy Transportation Co. Ltd. (H) (1138.HK)
Before it’s here, it’s on Smartkarma
