In this briefing:
- 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
- LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
- Quick Read of 2019 Government Work Report – Bulls and Bears
1. 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.
2. 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.
3. 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.
4. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports.
Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.
In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.
5. Quick Read of 2019 Government Work Report – Bulls and Bears
The Premier Li Keqiang had just conducted an annual Government Work Report in the two session conference (两会) in Beijing this morning. In this insight, we will briefly walk through key points of his report and identify bulls and bears in the market.
While the theme of cost reduction benefits manufacturing companies, it will negative for some infrastructure service providers, such as telecom companies.
The full text in Chinese can be accessed here.
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