In this briefing:
- Hyundai Autoever IPO Valuation Analysis
- Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”
- S&P 500 and S&P 600 Testing Resistance…Still
- Delta Electronics (DELTA TB): Little Option but to Accept the Tender Offer
- Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment
1. Hyundai Autoever IPO Valuation Analysis
Hyundai Autoever Corp (0978519D KS) IPO institutional investors bookbuilding starts in about seven days. In conclusion, we believe a 11-13x EV/EBIT valuation multiples are appropriate for Hyundai Autoever. These multiples are between the average comps multiples and slightly lower multiples than Samsung SDS’ level. Our base case implied market cap is 1.25 trillion won, representing 59,454 won, or 35% higher than the high end of the IPO price range of 44,000 won. As such, we would take this deal.
To value Hyundai Autoever, we prefer to use EV/EBIT multiples. However, we have also referenced P/Sales and P/E multiples based valuations for comparison purposes. The comps have better sales growth, operating profit growth, and balance sheet strength. However, Hyundai Autoever has better net margin and ROE.
We believe that Hyundai Autoever should trade at lower EV/EBIT multiples than Samsung SDS but similar to higher multiples than POSCO ICT and Lotte Data Communications. Hyundai Autoever is expected to play a key role in the Hyundai Motor Group’s push to become a leading global player of autonomous driving in the coming decade.
2. Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”
* The recovery in 4Q2018 shows that CTRP has already survived the new law and the new competitor in 2018.
* We believe EPS will grow 12% in 2019.
* However, we believe the market has already over-reacted to the news last November that CTRP became the largest online travel agency.
* We set a target price of USD23.80, which is 32% below the market price.
3. S&P 500 and S&P 600 Testing Resistance…Still
The S&P 500 is beginning to come off of short-term overbought extremes, consolidating near the confluence of key overhead resistance and the 200-day moving average. This level is roughly 2,817 on the S&P 500 and roughly 1,000 on the S&P 600 Small Cap index. Some consolidation or a mild pullback is possible in the near-term, which we believe would help alleviate current overbought readings and allow for a more orderly and meaningful move higher. In today’s report we highlight attractive Groups and stocks within the Consumer Discretionary, Health Care, and Services Sectors.
4. Delta Electronics (DELTA TB): Little Option but to Accept the Tender Offer
Delta Electronics (2308 TT) (DEI) launched the conditional voluntary tender offer for Delta Electronics Thai (DELTA TB) (Delta), an electronics contract manufacturer, on 26 February 2019. The tender offer of THB71.00 cash per share values Delta at an EV of THB72 billion ($2.2 billion).
Delta and DEI have close links as they were both founded by billionaire Bruce Cheng. Consequently, the tender offer could be viewed as a mechanism for the Chen family to sell their stake to a “friendly” DEI. For minority shareholders, we believe that DEI’s tender offer is reasonable and it makes little sense for minority shareholders to hold on to their shares.
5. Rakuten: Lyft IPO Provides Timely Support for Mobile Deployment
The publication of Lyft’s IPO prospectus is a clear positive for Rakuten Inc (4755 JP) . As a pure investment, Rakuten’s return on its Lyft investments could be 273-366% or ¥101-136 per share based on the $20-25bn valuation range reported by the press. There has been a lot of focus on the investment gains Rakuten should accrue but the real upside is a timely boost to liquidity plus accounting cover as mobile investment accelerates. Whether one believes Rakuten can succeed in mobile or not, it has the capital and paper profits to support a splashy introduction and spending is already accelerating.
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