In today’s briefing:
- GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week
- FTSE TWSE Taiwan 50 Index Rebalance: PSMC (6770) Replaces Momo (8454)
- Meituan (3690 HK): 1Q22 Looks Normal, But Layoff Will Slow Down Revenue
- TSMC: Precariously Balanced; Robust Medium-Term Earnings Outlook and Discount Valuation Levels
- Preferred Networks – The AI Revolutionary
- RiverPark Large Growth Fund Q1 2022 Letter
- SmartNews – Potentially A Global Champion?
- Meituan – Omicron Impact Was Not as Big in 1Q but 2Q Will Have the Full Impact
- Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs
- Arch Capital Q1 2022 Investor Letter
GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week
- The IDX has announced that GoTo (GOTO IJ) will be included in the IDX30, LQ45 and IDX80 indices at a float of 66.4% at the close on 7 June.
- Waskita Karya (Persero) (WSKT IJ) will be deleted from the IDX30 and LQ45 indices, while Buyung Poetra Sembada PT (HOKI IJ) will be deleted from the IDX80 index.
- Passive trackers need to buy around 12.78% of the real float on GoTo (GOTO IJ). Add the impact from open ended funds and that could move up to 20%.
FTSE TWSE Taiwan 50 Index Rebalance: PSMC (6770) Replaces Momo (8454)
- Powerchip Semiconductor Manufacturing Corp (6770 TT) will replace Momo.Com Inc (8454 TT) in the FTSE TWSE Taiwan 50 index at the close of trading on 17 June.
- Passive trackers will need to buy 0.7 days of ADV on Powerchip Semiconductor Manufacturing Corp (6770 TT) and sell 0.65 days of ADV on Momo.Com Inc (8454 TT).
- There is over 3 days ADV of short interest on Powerchip Semiconductor Manufacturing Corp (6770 TT) and 2.5 days ADV of shorts on Momo.Com Inc (8454 TT).
Meituan (3690 HK): 1Q22 Looks Normal, But Layoff Will Slow Down Revenue
- Revenue growth mainly came from initiatives, which is the focus of April layoff.
- We believe revenue will slow down and the operating loss will shrink.
- We set a downside of 11.5% and a price target of HK$160.
TSMC: Precariously Balanced; Robust Medium-Term Earnings Outlook and Discount Valuation Levels
- Medium-Term revenue growth expectations could be exceeded given capacity expansion plans, announced pricing increases and a continued tight semiconductor supply market.
- Based on TSMC’s robust medium-term outlook, for revenue growth and profitability, current sell-side estimates of only 10% EPS growth for FY2023f seem conservative.
- TSMC is currently trading at a 16.2x forward PE ratio, one standard deviation below its 5-year average, a level which has historically proven to be a good entry point.
Preferred Networks – The AI Revolutionary
- Preferred Networks is generally considered Japan’s leading AI and deep learning company with collaborations with numerous conglomerates across many industries.
- The company offers significant gearing into labour saving technologies and could potentially become a global leader in AI over time.
- In addition, it has demonstrated exceptional power efficiency with its deep learning technology which could prove a critical competitive advantage.
RiverPark Large Growth Fund Q1 2022 Letter
- Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
- Over this year’s first three months, the RiverPark Large Growth Fund (the “Fund”) lost 19.6%.
- Rather than follow the market’s so-called “de-risking” strategy, we “leaned in” to our higher growth positions (in some cases materially) at what we believe to be generationally attractive prices.
- While we are deeply disappointed by our recent losses, we believe thatwe are currently invested in an exceptional risk-reward portfolio and look forward to strongabsolute and relative returns in the quarters to come.
SmartNews – Potentially A Global Champion?
- SmartNews is a news aggregation app using an advertising-based business model originally established in Japan in 2012 with an expansion into the US market in 2014.
- The company is interesting in that it funds initiatives to improve the quality of investigative journalism and address problems arising from social media such as increasing polarisation.
- However, what truly piques our interest is its demonstrated success in the US which remains unusual for Japanese software companies.
Meituan – Omicron Impact Was Not as Big in 1Q but 2Q Will Have the Full Impact
- Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
- As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
- Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel & Travel which seems strange, suggesting 2Q numbers could be worse.
Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs
- Elastic just dramatically raised its revenue guidance for FY2025…implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.
- Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.
- The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.
Arch Capital Q1 2022 Investor Letter
- Arch Capital is a concentrated, long-only equity fund aiming to compound capital at an above-market rate.
- The fund holds a concentrated collection of high-quality businesses purchased at prices where we believe forward returns can exceed a rate of 15% a year.
- With the fund down 15.3% since inception, the market does not agree with our assessments.
Before it’s here, it’s on Smartkarma
