In this briefing:
- Pasona Non-Grata
- Weimob IPO Valuation: Optically Cheap
- Tencent: A Brief Statistical Review of Game Approvals
- Apple Pain Trade Continues with Key Levels in Focus
- Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
1. Pasona Non-Grata
PASONA NON-GRATA
Source: Japan Analytics
ROUND TRIP – Temporary staffing company Pasona (2168 JP)‘s shares have completed a year-long ’round trip’ after reaching Overbought territory one year ago following the launch of an ‘engagement campaign’ by the activist investor, Oasis. In May 2018, the company took advantage of its elevated share price to sell 2.3m shares (of which 2m were Treasury Shares), prompting a sharp correction in the share price. In recent months, the shares have languished as the company’s business performance has begun to deteriorate, reaching an 18-month low of 1,008 on 25th December, before rebounding 12% to close the year at ¥1,126.
HOLDCO DISCOUNT – According to the Smartkarma HoldCo Monitor, Pasona has the largest ‘ListCo as a % of Market Cap’ percentage at 365%, and the second-largest ‘Discount to Net Asset Value’ (78%) of the 77 companies that are tracked. With Pasona’s interim results due to be released on Friday 11th, January, the Insight will look at the company’s recent business performance, offer some guidelines for valuing the company and make two stock-specific recommendations. The format follows that of our recent Insight on GMO Internet.
2. Weimob IPO Valuation: Optically Cheap
Weimob.com (1260480D CH) is a combination of a SaaS software and an adtech (targeted marketing) business which has started book building to raise gross proceeds of $108-135 million. According to press reports, Weimob is being viewed favourably by investors as it is being offered at a “cheap” valuation of 18-23x 2019 P/E.
However, the valuation of 18-23x 2019 P/E is optically cheap. Our analysis suggests that including capitalised R&D, Weimob is being offered at a material premium to a peer group of major Chinese internet companies. Notably, our forecasts do not adjust for the capitalised contract acquisition costs which would further increase Weimob’s P/E multiple. Consequently, we believe that the proposed IPO price range is unattractive and would sit out this IPO.
3. Tencent: A Brief Statistical Review of Game Approvals
Paused for eight months, China’s authority resumed the domestic game approval in December. The first batch of 80 games was approved recently.
Since the last round of game application approval, the stock price of Tencent Holdings (700 HK) has fallen by 26%. Stock price reacted positively to the recent progress of game approval.
In this insight, we try to assess the significance of recent progress with a statistical approach.
4. Apple Pain Trade Continues with Key Levels in Focus
Following up on our August 2018 AAPL sell call and our insight Apple Trend Fractures but Nearing Tactical Buy Support with a Bumpy Road Ahead. Our core bear thesis for tech from the summer of 2018 is playing out and still has more pain left until we reach key target levels in late Q1 2019.
Sell rally attempts was the bet/call.
Break below 160 support was pivotal.
Core macro bear bias remains toward the higher degree 50% retracement.
Near term down cycle looking increasingly oversold and reaching for our target support outlined in charts and in the previous insight.
Will be watching sell volume on today’s miss.
5. Weimob IPO Quick Take – Less SaaS, More Ads -> Lower Valuation
Weimob.com (1260480D CH), a Tencent Holdings (700 HK) and GIC investee company, plans to raise up to US$135m in its Hong Kong IPO.
I’ve covered most aspects of the deal in my earlier insight, Weimob Pre-IPO – Can Be Steamrolled by Tencent, Anytime, where I spoke about the over-reliance on Tencent, high attrition rates and acquisition costs for SMBs, and the increasing contribution of its ads business.
In this insight, I’ll provide an update from the latest filings, comment on valuations and run the deal through our IPO framework.
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