In this briefing:
- Meituan Dianping (美团点评): Thoughts Before Lock-Up Expiry
- Weibo (WB): Revenues Slowed Down Significantly in 4Q2018, Failed in Transition
- 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
1. Meituan Dianping (美团点评): Thoughts Before Lock-Up Expiry
Meituan Dianping, the largest O2O platform in China, was listed on September 20th last year and lock-up expiry will be on March 20th. The stock has returned -13% since listing.
- As it heads into lock-up expiry on March 20th, we will examine Meituan Dianping shareholder structure and potential shares up for sale.
- Meituan was included by MSCI recently and will be eligible for the Hong Kong Connect soon thanks to rule amendment.
- The company delivered a decent topline growth in 3Q2018 but its profit fell short of expectation. We highlight potentials from the food supply chain solution. We also discuss implication from MoBike acquisition.
- We review our SOTP valuation of Meituan and believe there is an upside.
Our previous coverage on Meituan Dianping
- Meituan Dianping IPO Preview: The China O2O Powerhouse
- Meituan Dianping IPO: Understand the Moat From 3 Company Milestones
- Meituan Dianping (美团点评) IPO: Thoughts on Valuation – The Market Structure and the Variables (Part 3)
- Meituan Dianping (美团点评) IPO: New Data, Mobike, Liquidity and Refined Valuation (Part 4)
- Meituan Dianping (美团点评) Post-IPO Lunch-Bite: Near Term Upside and The Liquidity Angle
2. Weibo (WB): Revenues Slowed Down Significantly in 4Q2018, Failed in Transition
- The advertising revenues slowed down significantly in 4Q2018.
- We believe the content transition from politics to entertainment was not as good as the management expected.
- We believe WB will not defeat Tencent’s WeChat.
- We believe the stock price has downside of 9%.
3. 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.
4. 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.
5. 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.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.