In today’s briefing:
- Sea Ltd (SE US): Tencent’s Selldown and Upcoming MSCI Passive Inflow
- Aequitas 2022 Asia IPO Pipeline
- Razer’s Offer Spread Risk/Reward
- Tencent Holdings – From Sea To Shining Sea
- Aequitas 2021 IPOs and Placements Performance Review – Busiest Year on Record
- PT M Cash Integrasi Tbk: Leaning More Towards High-Margin Products
- Coforge: Strong Broad Based Growth; Capitalizing Robust Demand to Sustain Growth
Sea Ltd (SE US): Tencent’s Selldown and Upcoming MSCI Passive Inflow
- Sea Ltd (SE US) stock was down a lot since the announcement of its Q3 results. Tencent (700 HK) selling a 2.6% stake yesterday took the stock down even further.
- Given the large drawdown and Tencent (700 HK) locking in its remaining Sea Ltd (SE US) holding for the next 6 months, the stock could rally in the short term.
- There will be passive inflow from MSCI trackers in February as a part of the tranched inclusion and then more in May due to an increase in the FIF.
Aequitas 2022 Asia IPO Pipeline
- We take a look at the Asia Pacific IPO pipeline for 2022. This list has been compiled on a best effort basis from tracking company filings and other sources.
- For readers who aren’t familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific (ex A-shares), including China ADRs.
- The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.
Razer’s Offer Spread Risk/Reward
- The gross spread to the HK$2.82 per share offer has retouched the high of 23%. The headcount test is a key challenge as some minorities voice displeasure over the price.
- Based on the unaffected price of HK$1.81 and at the last close of HK$2.30, the deal probability retouched lows of 48.5%. A 65% deal probability would imply HK$2.47 per share.
- In the event of a failed deal, Razer Inc (1337 HK)’s strong fundamentals provide solid valuation support. Our SoTP valuation is HK$2.96 per share, 5% higher than the privatisation price.
Tencent Holdings – From Sea To Shining Sea
- Sea Sale: Tencent sold 14.5 mn shares in Sea, raising approximately USD 3 bn in cash – reducing Tencent’s position in Sea from 21.3% to 18.7%;
- Not A Surprise: Given mainland China’s crackdown on the country’s largest internet companies, Tencent’s disposal of Sea shares is not a surprise; and
- Other Stake Sales To Follow: Further divestitures of major stakes are likely if Tencent wishes to remain on the right side of mainland China’s Communist Party.
Aequitas 2021 IPOs and Placements Performance Review – Busiest Year on Record
- 2021 marked our sixth year covering Equity Capital Markets (ECM) in Asia Pacific.
- Most markets were in top gear on the ECM front and we ended the year covering the highest number of IPOs and the second highest number of placements since inception.
- For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.
PT M Cash Integrasi Tbk: Leaning More Towards High-Margin Products
- Upping our estimates on network expansion – We raised our revenue estimates by 5%/4%/9% to IDR15,119bn/IDR17,553bn/IDR19,981bn in FY22E/23E/24E, respectively, largely due to higher number of distribution points (digital product aggregator members).
- Margins to improve given more favorable product mix
- Nurturing WABA, DigiResto and EVs – The group has delivered new initiatives
Coforge: Strong Broad Based Growth; Capitalizing Robust Demand to Sustain Growth
- Deal wins for FY21 stood at $781 Mn, showcasing a growth of 11% YoY and the highest ever in the history of Coforge. The company has also added 45 clients during FY2021.
- Revenue growth in FY21 stood industry-leading at 11.4%. The company also reported healthy expansion in its operating margins
- We recommend a BUY rating on the stock and assign a 37 x P/E multiple to its FY24E earnings of Rs 184/share to arrive at a TP of Rs 6,870/share, implying an upside of 15% from CMP.
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