Well written Oak. I think you have expertly dispatched what clearly amounts to nothing more than reactive throat-clearing by Mr Hill et al.
In addition to the points you made above, I think we need to consider some of the high profile investors in IIG and ask whether they ALL have failed to do their due diligence:
Entain PLC 9%
Sina Corporation (who own a controlling stake in Weibo) 14.1%
Standard Chartered 4.4%
Allwyn (the UK Lottery operator) 3%
Frank Li Tong (Co-CEO of HUI 10) 15%
Daniel Levine (Co-CEO of HUI 10) 5.5%
The holdings of the CEO and Co-CEO of HUI10 should give more comfort to shareholders, as clearly they have skin in the game.
Allwyn and Entain as investors is also surely a positive sign, as these are major players in gaming. While Sina Corporation is one of the largest internet portals, the face of Chinese internationalisation and as mentioned own Weibo, China's leading social media platform.
Do we really think these investors are ready to look like prize duffers?
Those who invest in IIG do so alongside these individuals and entities.
It’s worth noting that recently Helikon, a U.K. reporting hedge fund, agreed to invest £20m on a milestone basis, with other investors investing £15m on the same basis, and that these amounts (assuming milestones re achieved) are sufficient to fully fund HUI, thereby removing the annoying funding overhang. Helikon’s accounts indicate that it is “good for the money”. I wd imagine that Helikon did substantial due dil for a major commitment like this. Annoying that it’s probably all going to be priced at 91p, but removing the funding overhang is a substantial positive factor.
I hold this as a holdover from the David Evans biotech vehicle. I held onto some because of Nigel Rudd, a very experienced bod as chairman of Williams Group of yore, the great industrial consolidator. Quite old now at 79 but seems still sharp.
There’s been quite a lot of TR1 ing here recently indicating an appetite for the stock although mostly from tax haven buyers - no doubt offshore held on tax transparent structures, but not your average institutions.
Zeus and Progressive, who provide coverage, predict the most enormous hockey stick forecasts. Obviously impossible to analyse this stuff or to have any real comfort in these numbers. But even if you “aim off”, that gives bagging potential. Zeus compute 350p today discounting a future value by 20% pa. But who knows?
The real question for me is what weighting can one hold in this pretty opaque stock. Pretty small is my answer, but may now be time to up the position a bit as the fog is clearing. But I cdn’t possibly overweight this in the same way as say GGP, which is now 4x plus, because there there is much less opacity there and one can access management presentations and loads of broker coverage to help triangulate valuations (since I don’t run models myself).
Any idea what other players in China are going after this pot of gold? Seems unlikely that HUI 10 are the only ones, and there are plenty of local, large, potent tech companies who might play?
I suppose exclusivity is conditional ie if they don’t perform, it falls away. Anyhow, that’s helpful info before I top up my small holding tomorrow. NAV is still only 150p ish although the reality is that true “last round value” is Helikon’s 91p.
None of those have anything like the upside offered by IIG, which through HUI 10 has the rights to receive as much as 7% margins on a 1bn adult gambling TAM in China.
Well written Oak. I think you have expertly dispatched what clearly amounts to nothing more than reactive throat-clearing by Mr Hill et al.
In addition to the points you made above, I think we need to consider some of the high profile investors in IIG and ask whether they ALL have failed to do their due diligence:
Entain PLC 9%
Sina Corporation (who own a controlling stake in Weibo) 14.1%
Standard Chartered 4.4%
Allwyn (the UK Lottery operator) 3%
Frank Li Tong (Co-CEO of HUI 10) 15%
Daniel Levine (Co-CEO of HUI 10) 5.5%
The holdings of the CEO and Co-CEO of HUI10 should give more comfort to shareholders, as clearly they have skin in the game.
Allwyn and Entain as investors is also surely a positive sign, as these are major players in gaming. While Sina Corporation is one of the largest internet portals, the face of Chinese internationalisation and as mentioned own Weibo, China's leading social media platform.
Do we really think these investors are ready to look like prize duffers?
Those who invest in IIG do so alongside these individuals and entities.
Wizard, excellent points and I've incorporated those to the article and I should have included them to begin with.
Best,
OB
All good, keep up the great work!
It’s worth noting that recently Helikon, a U.K. reporting hedge fund, agreed to invest £20m on a milestone basis, with other investors investing £15m on the same basis, and that these amounts (assuming milestones re achieved) are sufficient to fully fund HUI, thereby removing the annoying funding overhang. Helikon’s accounts indicate that it is “good for the money”. I wd imagine that Helikon did substantial due dil for a major commitment like this. Annoying that it’s probably all going to be priced at 91p, but removing the funding overhang is a substantial positive factor.
I hold this as a holdover from the David Evans biotech vehicle. I held onto some because of Nigel Rudd, a very experienced bod as chairman of Williams Group of yore, the great industrial consolidator. Quite old now at 79 but seems still sharp.
There’s been quite a lot of TR1 ing here recently indicating an appetite for the stock although mostly from tax haven buyers - no doubt offshore held on tax transparent structures, but not your average institutions.
Zeus and Progressive, who provide coverage, predict the most enormous hockey stick forecasts. Obviously impossible to analyse this stuff or to have any real comfort in these numbers. But even if you “aim off”, that gives bagging potential. Zeus compute 350p today discounting a future value by 20% pa. But who knows?
The real question for me is what weighting can one hold in this pretty opaque stock. Pretty small is my answer, but may now be time to up the position a bit as the fog is clearing. But I cdn’t possibly overweight this in the same way as say GGP, which is now 4x plus, because there there is much less opacity there and one can access management presentations and loads of broker coverage to help triangulate valuations (since I don’t run models myself).
Any idea what other players in China are going after this pot of gold? Seems unlikely that HUI 10 are the only ones, and there are plenty of local, large, potent tech companies who might play?
No others. HUI10 have the exclusive right, however unlikely you believe that to be.
I suppose exclusivity is conditional ie if they don’t perform, it falls away. Anyhow, that’s helpful info before I top up my small holding tomorrow. NAV is still only 150p ish although the reality is that true “last round value” is Helikon’s 91p.
None of those have anything like the upside offered by IIG, which through HUI 10 has the rights to receive as much as 7% margins on a 1bn adult gambling TAM in China.
But each to their own.