In this briefing:
- Snippets #20: Dark Clouds in Thai Equities
- Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability
- Ruhnn IPO Preview: Hard to Stay Red-Hot for Long
1. Snippets #20: Dark Clouds in Thai Equities
Of the five interesting trends/events/developments we heard this month, we highlighted five and how they could impact Thai equities in the near term:
- Thai Raksa Chart Party dissolution. The dissolution of the TRC, the second largest Thaksinite party, poses some political risks but could affect sentiments for companies founded by Thaksin, such as Intuch and AIS.
- Thai Air Asia says no to Nok Air. After the briefest considerations, the larger airline came to the conclusion that they wouldn’t acquire a stake in struggling Nok Air.
- Capital Gains Taxes are currently under consideration by the government for the first time. If implemented, they are likely to have negative impact on overall equities but the brokers in particular.
- From LINE to BEC. LINE (Thailand)’s Country Manager Ariya Phanomyong has agreed to move to BEC. Though mildly positive, we believe improvements will revolve around distribution rather than the more key issue of content.
- True Move’s Request for 5G delay may sound odd at first glance, but we see it as a rational, if not very tactful, way of delaying a new round of capex.
2. Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability
- Conference call with Meituan Dianping (3690 HK) reveals that ballooning losses from new initiatives (incl. one-off expenses) largely contributed to record quarterly EBIT losses in 4Q18.
- Importantly, this masks Meituan Core’s (combined food delivery and in-store, hotel & travel divisions) continued progress toward profitability.
- Management is bullish on every division’s outlook in 2019, particularly guiding for 1) balanced growth and profitability strategy for food delivery and 2) disciplined investments in new initiatives.
- Meituan attractively trades at 2.9x 2019E P/S, only around half of peers’ valuation (5.5x).
3. Ruhnn IPO Preview: Hard to Stay Red-Hot for Long
Ruhnn Holding Ltd (RUHN US) is an e-commerce platform which drives sales through KOLs (key opinion leaders). Ruhnn is the largest internet KOL facilitator in China as measured by revenue, the number of online stores and GMV in 2018 according to Frost & Sullivan. Ruhnn is backed by Alibaba Group Holding (BABA US), an 8.6% shareholder, and is seeking to raise $200 million through a Nasdaq IPO.
However, Ruhnn’s rhetoric does not match its financial performance. On balance, we are inclined to give this IPO a pass.
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.
