In today’s briefing:
- Sea Ltd (SE US) – Leaning Towards Profitability and Sustainability
- Russian Impact on MSCI Korea: Total Inflow Size & Top 20 Inflow (X ADTV) Stocks
- Razer’s Offer Spread Risk/Reward – Takeaways from Logitech’s Investor Day
- Three Ways of Settling Nexon Inheritance Tax Payment: Each Way’s Ramifications
- IQiyi: Huge Drop in Operating Losses Despite Flat Revenues; Path to Profits Becoming Clear
- Visa: Don’t Mind The Disruptors
- Tencent Support to Give Way
- Datadog ($DDOG): The Dog in the SaaS Fight
Sea Ltd (SE US) – Leaning Towards Profitability and Sustainability
- Sea Ltd (SE US) results were in line but given a slow down in gaming and bearish guidance partly with India ban on FreeFire, the stock was sold off aggressively.
- Strong performance from e-commerce and digital financial services was ignored, with improving take rates in core markets and comments on impending profitability overlooked, with hardly a mention in press commentary.
- The risk for Sea Ltd (SE US) is squarely on the upside with valuations now looking attractive, trading at a discount to MercadoLibre (MELI US) despite its broader footprint.
Russian Impact on MSCI Korea: Total Inflow Size & Top 20 Inflow (X ADTV) Stocks
- Korea’s local market estimates an inflow (resulting from the Russian departure) to Korea at ₩1T
- Most of the preferred stocks in MSCI Korea top the list with the highest passive buying ratios to the 30-day average trading value.
- Other than that, S1 Corp, Coway, Samsung SDS, C&T, and KT&G are the others that sit high on the list.
Razer’s Offer Spread Risk/Reward – Takeaways from Logitech’s Investor Day
- Razer Inc (1337 HK)‘s scheme document will be released after the FY21 results, which are on 17 March. The headcount test is a key challenge.
- Logitech International SA (LOGN SW)’s investor/analyst day on 3 March underscores Razer’s opportunity and adds to minorities’ grievances that the offer price is unattractive.
- Current deal probability implies broadly a 50/50 chance of success with a gross spread of 19%. We would be buyers up to HK$2.5 per share (implies 65% deal probability).
Three Ways of Settling Nexon Inheritance Tax Payment: Each Way’s Ramifications
- There are three ways families can settle inheritance tax: 1. payment in Kind, 2. direct sale of the NXC stake, and 3. NXC sells its stake in Nexon Japan.
- They have different ramifications from an investment point of view, and the third option is probably the one that the market desires most.
- If the family goes for the third option, they will likely sell all of NXC’s Nexon Japan stake (47.89%), which will lead to a TOB to Nexon Japan minority shareholders.
IQiyi: Huge Drop in Operating Losses Despite Flat Revenues; Path to Profits Becoming Clear
- IQIYI Inc (IQ US) reported 4Q and full-year 2021 results on Tuesday. Revenue for the quarter declined 0.9% YoY to RMB7.39bn (vs consensus RMB7.31bn).
- Operating losses for the quarter was RMB975.2m (vs consensus RMB1.33bn), about 13.2% of revenues compared to RMB1.31bn (17.5% of revenues) in 4Q2020.
- IQiyi’s ADRs jumped 21.5% at the end of Tuesday’s close as the company mentioned that it expects quarterly non-GAAP operating break-even as soon as possible.
Visa: Don’t Mind The Disruptors
- Well-established digital payment platforms, such as Visa, are enjoying renewed interest from long-term investors.
- In spite of certain narratives, rotation to value stocks has little to do with Visa’s recent outperformance.
- The impact of short-term headwinds will likely remain muted due to Visa’s increased penetration in certain markets and new flow channels.
Tencent Support to Give Way
- Tencent is commencing a fresh down leg below 413 support. We have been bearish/short from the 500 handle with a projection of 370.
- Tencent’s breakdown is lagging the HK tech index which raises conviction for Tencent weakness/follow through to the downside.
- 320 macro support attracts in Q3 as long as we stay below 413.
Datadog ($DDOG): The Dog in the SaaS Fight
- The origin story of the company I am delving into today arguably started more than 10 years ago, when Oliver Pomel and his co-founder Alexis Lê-Quôc were working at Wireless Generation
- The company is likely to benefit from the continued digital transformation, mainly spurred by further cloud penetration
- Observability and IT Operations Management is a significant opportunity for Datadog to capitalize on
Before it’s here, it’s on Smartkarma
