In today’s briefing:
- Alibaba (BABA): Overly Impacted, Accumulate Before 3Q22 Result
- Sea Ltd (SE US) – A Himalayan Saga
- Sea Ltd in Free Fall Following the Removal of Free Fire from The App Store & Google Play
- There Are Offer Premiums. And Then There’s Resonant’s
- Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback
- Korea Local Metaverse ETFs: Passive Flow Preview
- Novatek (3034.TT): A Good Year Ahead, and Likely to Expand to SMIC for Wafer Foundry
Alibaba (BABA): Overly Impacted, Accumulate Before 3Q22 Result
- The stock price declined to a very low level before the market fell.
- The Chinese e-commerce market is still promising despite of the high comparison base last year.
- We believe the stock has an upside of 68% for March 2023.
Sea Ltd (SE US) – A Himalayan Saga
- The spotlight is back on Sea Ltd (SE US) after its game FreeFire was named as one of 54 apps of Chinese origin to be banned in India.
- The ban on FreeFire comes despite Sea Ltd‘s recent move to reduce the influence from Tencent by scaling back its ownership of voting shares
- We see the recent price weakness as an opportunity to accumulate Sea Ltd given the growth story remains intact although investors may not pay the same multiple premium over peers.
Sea Ltd in Free Fall Following the Removal of Free Fire from The App Store & Google Play
- Sea Ltd dropped 18% yesterday following India’s decision to ban its battle royale game, Free Fire and 53 other Chinese apps from the Google Play and App Store in India.
- India’s Free Fire ban could deliver a double whammy to Sea Ltd (SE US) with lower Digital Entertainment profitability limiting Sea’s ability to bankroll Shopee’s expansion.
- With the macro-outlook for growth stocks not looking great, we wouldn’t be surprised to see “Sea” breaking the bottom end of the EV/Sales range towards the end of the year.
There Are Offer Premiums. And Then There’s Resonant’s
- A 266% premium to last close. That is what Murata Manufacturing (6981 JP) is Offering for 4.2%-held Resonant (RESN US).
- The $4.50/share Offer price was last exceeded a little under a year ago. Shares have rolled over 84% since last February following an exuberant, meteoric spike over Resonant’s RF capabilities.
- The Offer is conditional on attaining ownership of 50% of shares out, including Murata’s stake.
Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback
- Indian IT giant Tata Consultancy Svcs (TCS IN) released their public announcement document for their latest buyback after market close on 14th February 2022.
- The company is planning to spend up to INR180bn (~US$2.4bn) which is one of the largest amounts spent in Tender Offer-style Buybacks in India.
- Below is a closer look at the details of this Buyback.
Korea Local Metaverse ETFs: Passive Flow Preview
- Among Korea’s local metaverse ETFs, the Big Three have significant AUMs. At yesterday’s closing prices, their AUMs are ₩0.41T, ₩0.40T, and ₩0.20T, respectively. Their total is now 1 trillion won.
- Those on which we can perform stable momentum trading are the 14 stocks included in all three ETFs. Passive funds account for +3% of MC in half of these names.
- Weighting adjustment uses keyword relevance. So, estimation is not easy. Nevertheless, since the absolute value does not change significantly, we can reduce the error by using the previous rebalancing weighting.
Novatek (3034.TT): A Good Year Ahead, and Likely to Expand to SMIC for Wafer Foundry
- Novatek had reported a flattish sales outlook in 1Q22, and all of revenue, GM and OPM were expected to NT$35.8~36.8bn, 48~51% and 34~37% respectively, while revenue was at -1.92~+0.82% QoQ.
- We think the high inventory days of supply chain is giving a good chance to expand into China foundry for production, especially SMIC.
- We think Novatek would maintain its solid dividend policy for EPS NT$63.87 in 2021, and it’s pay-out ratio is 80% in the past.
Before it’s here, it’s on Smartkarma
