In this briefing:
- China Mobile and SK Telecom Defensive Plays and Top Trade Set Ups
- Mobvista IPO Trading Update – Not a Buyer at Anywhere Close to These Level
- Naspers: Profitability Improvements Continue
- GMO Internet Inc. – Limited Downside as Crypto Business Weighs Little on Consolidated Performance
- Tencent Music IPO – Firework – Trading Strategies
1. China Mobile and SK Telecom Defensive Plays and Top Trade Set Ups
We are playing any surprise bounce via Shanghai A 50 futures and the HSCE.
RIO tactical bounce trade presented.
Duration defensive long set ups outlined with stops and rally targets in China Mobile and SK Telecom.
KLSE bear triangle second trade in the making for a press toward 1,620/15.
In Europe, Italy is lagging the break down and a prime short candidate for a break below triple lows/out of flat congestion.
S&P tactical break points outlined with a bounce set up in the DJI. Base case view is to short a bounce.
Higher conviction pivot levels for a USD/JPY short are laid out with action turn levels and risk points.
2. Mobvista IPO Trading Update – Not a Buyer at Anywhere Close to These Level
Mobvista (1860 HK)‘s IPO was priced just above the low-end at HKD4/share, the retail tranche was 1.8x covered while the institutional tranche was moderately oversubscribed. I have covered most aspects of the deal in my earlier insights:
- Mobvista Pre-IPO – Impairments Would Have Wiped off past Profit, Related Parties Still Owed Money, and
- Mobvista IPO – One Client Rescued 1H18, the Slowdown Has Been on Since 2H17. P/ E Doesn’t Matter
In this insight, I’ll provide an update on the deal dynamics, valuations and provide a table with the implied valuations at different share price levels.
3. Naspers: Profitability Improvements Continue
Following David Blennerhassett‘s recent StubWorld note, we wanted add a bit more detail on the non Tencent Holdings (700 HK) part of Naspers (NPN SJ). In any discussion of Naspers, this tends to get overlooked but in fact, Naspers has generally done quite well in these businesses, by building them, monetizing them, and in some cases selling them. Alastair Jones believes that, given moves to unbundle the pay-TV assets in 2019, there is scope for the NAV discount to narrow. The current low/negative valuation for the unlisted assets ignores their significant value.
Naspers valuation:
4. GMO Internet Inc. – Limited Downside as Crypto Business Weighs Little on Consolidated Performance
GMO Internet is currently trading at JPY1,485 per share which is just 7.6% above its 12-month low of JPY1,380 per share. The Group’s share price reached an all-time high of JPY3,020 in June 2018, however, it has declined by more than 50% since then following the company’s poor performance in its cryptocurrency and mining related segment led by stagnant crypto prices coupled with negative news on issues concerning advertising fraud in its Online Advertising & Media segment. This was further exacerbated by news that there will be delays in shipments of two bitcoin mining rig lines with refunds already issued in November. However, we believe, the downside is limited as the weaknesses of its crypto related business will weigh little on the consolidated earnings of the business. GMO’s business is structured in a way that its two main segments, namely, the Internet Infrastructure and Online Advertising and Media businesses are not prone to much volatility with recurring revenues. Therefore, we believe the negativity surrounding the company is exhausted and we expect the company to continue its strong growth trajectory.
5. Tencent Music IPO – Firework – Trading Strategies
Tencent Music Entertainment (TME US)‘s IPO was priced at the low-end US$13/share. The shares will begin trading tonight. As per earlier media reports, books were well covered.
I have covered most aspects of the deal in my previous series of insight, links to which are below. In this insight, I’ll re-look at what peers have been doing since book building began and how its main listed peer Spotify Technology Sa (SPOT US) has been performing. I’ll also provide a sensitivity table of the implied valuations at different price points and my thoughts on the price range for near-term trading.
My previous insights on TME’s IPO:
- The company’s performance: Tencent Music Pre-IPO Review – The Final Countdown – Growth Doesn’t Seem to Be Slowing Down,
- The working of the apps: Tencent Music Pre-IPO – This Is How We Do It – A Quick Look at How the Apps Work,
- Industry dynamic: Tencent Music Pre-IPO – Industry – Don’t Cry – In 2010 a Little Red Dot Almost Overtook the Dragon, and
- Peer analysis: Tencent Music Pre-IPO – Quick Peer Analysis – If I Was You, I’d Wanna Be Me Too – Bigger and Faster,
- Valuations overview: Tencent Music Pre-IPO – Valuations Estimates – Leaving on a Jet Plane – $30bn Was Quite Stretched.
- First take on the IPO pricing: Tencent Music Pre-IPO Updates – Welcome to the Jungle – Rumoured Asking Valuations More Reasonable
- IPO valuation update: Tencent Music IPO – Don’t Stop Me Now – 9M18 Updates, Outlook and Price Limits
- Some more information on Ultimate Music acquisition: Tencent Music IPO – A Little Less Conversation – A Little More Information on Ultimate Music
