In this briefing:
- Softbank Corp: When Does It Become a Buy?
- SoftBank Group (9984 JP): SoftBank Corp IPO Has Failed to Meaningfully Narrow the Holdco Discount
- Tencent Music (TME): Both Live Video and Music Fairly Valued, No Action
- AsiaInfo Tech (亚信科技) IPO: What You Need to Know Before the Trading Debut
- Softbank Corp IPO – Trading Strategies
1. Softbank Corp: When Does It Become a Buy?
Although we were bearish on the IPO initially and turned increasingly so following the relatively poor reception among retailers that was discussed in Softbank IPO: Signs Point to Risk of Early IPO Price Break, we were still a touch surprised at the extent of the drop today, with the stock finishing down 14.53% to close at the lows with 271.5m shares changing hands. With a rising dividend yield and looming buying from passive funds on the on hand and a potentially large overhang from retailers who may have been looking to flip for a profit on the other, we discuss what would turn us more bullish below.
2. SoftBank Group (9984 JP): SoftBank Corp IPO Has Failed to Meaningfully Narrow the Holdco Discount
Softbank Group (9984 JP)’s market cap has consistently traded below its NAV. A popular expectation was that the Softbank Corp (9434 JP) IPO should be a catalyst to narrow the conglomerate discount (holdco discount). On its trading debut today, SoftBank Corp’s shares fell 14.5% from its IPO price of JPY1,500 to JPY1,282 per share – the worst first-day decline ever for a major IPO in Japan since the Japan Display (6740 JP) IPO in 2014.
In our previous research, we stated that the SoftBank Corp IPO is unlikely to meaningfully narrow SoftBank’s holdco discount. Our updated SoftBank SoTP analysis which reflects SoftBank Corp’s trading debut suggests that SoftBank’s holdco discount has not meaningfully narrowed.
3. Tencent Music (TME): Both Live Video and Music Fairly Valued, No Action
- We believe that TME is fairly valued based on peer companies’ price / sales ratios.
- The Chinese internet peer companies as comparison bases in valuation have declined significantly more than indices, we believe it is not a concern that indices declined further.
- We believe that the main business of music will grow strongly in 2019 and 2020 due to the rapid growth of both the paying user base and ARPU (Average Revenues per User per month).
4. AsiaInfo Tech (亚信科技) IPO: What You Need to Know Before the Trading Debut
AsiaInfo Tech priced its IPO at HKD 10.50/share and will start trading today. Prior to the trading debut, in this short note, we summarize the latest information with updates on our valuation.
Our Previous Insight on AsiaInfo Tech:
- AsiaInfo Tech (亚信科技) IPO: Cost Control Is the Key (Part 1)
- AsiaInfo Tech (亚信科技) IPO: Lessons from Privatization and Three Bearish Trends (Part 2)
- AsiaInfo Tech (亚信科技) IPO: Latest Numbers Showcase the Company’s Questionable Expansion Plan
- AsiaInfo Tech (亚信科技) IPO: Valuation Rich Vs Delisting and Peers
5. Softbank Corp IPO – Trading Strategies
Bloomberg reported Softbank Corp (9434 JP)‘s international bookbuild was 2 – 3x covered while retail offering was at almost 2x. There were other reports of bookrunners struggling to sell shares to retail investors.
In this insight, we will look at how peers and market have performed since bookbuild and provide a sensitivity table with implied valuations for different price points and thoughts on the price range for near-term trading.
We have already covered most aspects of Softbank Corp (9434 JP) ‘s IPO in our previous insights:
- Valuation from a retail investor POV – Softbank IPO Review – Attractive from a Retail Perspective, Could Provide Short-Term Upside
- Valuation from an institutional investor POV – Softbank Corp IPO Review – Yield Ensured Demand May Not Guarantee Performance
- Updates from prospectus – Softbank Corp IPO Review – Segment Breakdown, Capex, and Risks
- Operating metric comparison – Softbank Telecom Pre-IPO – Higher Yield to Compensate for Poorer Metrics
- Impact of Rakuten entry and FCF and dividend sustainability analysis – Softbank Telecom Pre-IPO – All About the Yield
- Company background and overview – Softbank Telecom Pre-IPO Review – Vision Is Needed to Arrive at US$90bn Valuation
