In this briefing:
1. Softbank IPO: Signs Point to Risk of Early IPO Price Break
Coverage of Softbank Corp (9434 JP)‘s IPO on Smartkarma has offered a mix of viewpoints with some bullish and some bearish opinions. Our own take has been relatively subdued, leaning to the bearish side but only significantly so in the event that Docomo follows through with its announced price cuts and Rakuten’s entry as a full-fledged MNO is particularly aggressive.
By and large we consider the issue to be overvalued but felt that significant downside risk only existed if the dividend were to be cut, which we consider a distinct possibility but by no means a sure thing. This long -term view has not changed, however, we now consider some modest downside to be likely in the short term.
2. DeNA (2432): Undervalued Internet Stock
Dena Co Ltd (2432 JP) used to be the GO-GO internet stock for both retail and institutional investors in Japan during the previous bull run before 2008 and trading at 40-50x PER. The multiples have since then collapsed to 10-20x PER although the business prospect remains solid if not better. Benefiting from the increasing regulation in China, DeNA signed an agreement with Tencent Holdings (700 HK) to distribute Arena of Valor in Japan which will boost revenue and improve margin. At 14x PER and 1.2x PBR, DeNA looks attractive.
