Summary
- AMTD IDEA Group - along with AMTD Digital - had a huge IPO pop followed by the inevitable decline.
- The question now is whether there's something worth this very much lower price.
- My answer is that I can't see anything that is - even if that be my eyesight at fault.
The basic AMTD idea
The basic idea at AMTD - so this encompasses the two listed stocks, AMTD IDEA ( AMTD ) and AMTD Digital ( HKD ) is that they're really plugged in merchant bankers connecting internet and online business on the Mainland with the wider world through Hong Kong. Sounds like an excellent plan, to be honest.
There's long been good money to make in investment banking, being the right people at the heart of the nexus is indeed a potentially profitable place to be. So, there's no obvious reason why this couldn't work.
I've my doubts though
There's no one thing that I can point to which makes me nervous. Obviously, that absurd pop in HKD stock to be worth the same as Goldman Sachs wasn't going to be maintained. As I noted back then AMTD owned some 89% or so of HKD, so the two stock prices were going to move in something like a tandem, which they did for a bit.
But that has indeed all calmed down, and we've now got to think about what AMTD itself might really be worth. There's still that 89% or so in HKD stock which, at current market prices, is worth perhaps $1.2 billion (rough, back of the envelope sorta number from market prices). AMTD is worth, apparently, $3 billion minus a bit of change. Or, minus the HKD stake $1.8 billion on its own.
Which isn't something I can really see
Again, there's no one thing I can point to and say that this is a wrong, or incorrect, valuation. There's simply a flavour, a taste, which I don't like. Another way to put this is that I can't see what there is.
This could be just because I'm not plugged into the Hong Kong and Mainland internet nexus. Could be a language issue. Or, it's even possible that there's not all that much there to be seen.
The last results
The last set of results we've got for AMTD was in October for the year to June 2022. Profits were $102 million on revenue of $118 million. Which is, I think we can all agree, entirely astonishing. They're also unaudited.
$100 million of profits and $1.8 billion of market capitalisation (absent the HKD stake) well, yes, that could be a supportable valuation. We'd want to be certain about those recorded profits, of course.
But that does mean that we want to have a look at what they're doing, how, and also at least get a vague grasp on whether the HKD valuation is sensible.
This is where I get antsy.
The base AMTD plan
So, in their own words, the AMTD plan is to :
AMTD Group is a Hong Kong headquartered conglomerate focusing on the "IDEA" strategy to develop the four pillars of core businesses, namely international connectors and business services, digital solutions, education and training, and premium assets and hospitality.
That doesn't really make sense to me. Lots of very asset-light advisory work in investment banking and so on. Allied with investing in real estate assets and hotels? It's simply a weird combination of ideas.
This is before we get to that weirdness with hotel assets done last year. As I described it here . Hotel assets went from AMTD Group to AMTD Digital while passing through AMTD IDEA. Which is simply odd. Why do that? There's more detail there of how they did it.
My point here simply being that when go go and hot stocks start doing things that don't seem to make sense, then we obviously have to wonder whether there's any good reason that they're go go and hot stocks. Which is the thing I'm not seeing.
Persnickety details
This also worries me. Sure, we've got those unaudited results up to June last year. No doubt we'll be getting full year results for 2022 soon enough. But having a look at their investors' webpage doesn't exactly inspire with confidence. They list their SEC releases, sure . But their listing of annual reports only gives us to 2020 . 2021 isn't there. Quarterlies aren't there at all (maybe they only report semi-annually but still).
Yeah, yeah, this is trivia, all I'm complaining about is their website management. Except, well, they themselves claim to be the hotshot investment bankers in websites and web management and so on. Maybe it is only true that this isn't a good look but given the paucity of their explanations of their actual business that's all I've really got to go on.
A slightly deeper dive
A few weeks back, I did a deeper dive into AMTD Digital (that's the HKD ticker). Didn't publish it, so here are the bones of it now. The basic thing I'm getting out of this is that the digital business isn't, in fact, so hotshot and go go. Again, this could all be a language thing and if it is then I'll be shown to be a fool and so on. But even so.
AMTD Digital
Here's The Problem - What Is The Rest Of The Business?
Which is where my problem is now. I went looking for that business, and I have to admit that I couldn't really find it. OK, that could be my research skills. One barrier could be language. Their work could all be in Cantonese (that's the HK part) or perhaps Mandarin on the Mainland.
What I could find was a certain amount of management burble (that might be unkind of me) about Web3 and the rest. But not, in fact, much else.
For example, here's one of their online videos. It's about metaversey things, Web3 - and NFTs .
Oh, right, that's a business we're all really excited about still, right? This is "10th episode of the AMTD SpiderNet Infinity Power Vidcast series. " And it's got 672 views as of today. That's been up on the interwebs for 13 months now, and it has that many views? The 9th in the series has some 2,700 views - after 14 months.
Now, don't forget, these are videos from one of the grand meme stocks of recent times. A company that rivaled - for a week or two - GS in capitalisation.
Hey, sure, maybe it's me. Maybe I'm just not finding their proper output or something. But the base idea of the company seems to be movers and shakers in this world of metaversey and Web3 things. They're releasing videos to smaller global audiences than I used to play live music to 40 years ago (and boy oh boy was I a minor league musician).
AMTD Digital@AMTDDigital
413 subscribers
Well, no, I don't see it, I'm afraid. Not $2 billion of value in a webby, multiverse, company that can't scare up more subscribers than the Crochet Channel . Actually, crochet - that single one - seems to have 100x the audience. And Pink Floyd has 3.4 million.
Looking at their own home page of what they say they do :
As the fusion reactor at the core of the AMTD SpiderNet ecosystem, AMTD Digital ( HKD ) is a one-stop digital solutions platforms in Asia with businesses spanning multiple verticals, including digital financial services, digital media, content & marketing, SpiderNet ecosystem solutions, and digital investments.
Well, it's good corporate speak. As is the video of the CEO of the whole AMTD system. But, well, where's the beef here? There doesn't even seem to be any sizzle.
I just can't see any actual business here that is achieving anything. Yes, of course, this is a purely personal opinion, I'm not even pretending that this is a deep financial analysis. I just don't see that this is a significant operating business worth $1.89 billion (now lower). In those places where we'd expect to see some presence - that YouTube channel for example - we're just not.
They're spending proper money on those YouTube videos but not, seemingly, gaining any great traction. Which isn't a great advertisement for the merits of the digital skills so being touted.
My view
In the absence of any better evidence, I just can't see what it is that is being invested in here. There's the oddity of the conglomerate structure, the movement of hotel assets through it. The lack of any significant traction on their online efforts - in the English language at least. And they are spending real money on those videos, so it's not just that they're only trying to appeal to Mainland customers.
I can imagine - that is, think through - varied different ideas of what is really happening here, but they'd all be entirely speculation. Trains of thought which connect what we are seeing. But it would be unfair to speculate like that in print.
So I'm left with the thought that as I can't see anything here worth a few $ billion then I'll have to conclude that, for me, it's not worth a few $ billion. Which is about as categoric as I'm willing to get.
Why I'm wrong
It could be that in fact there's a thriving business in here. Investment banking for Mainland companies through Hong Kong, perhaps. Their reported revenue and profits certainly seem to indicate that. Perhaps it's all happening in Chinese, and so I'm not privy to the real information.
Maybe I'm just not understanding it all.
The investor view
It is necessary to understand something so as to be able to gain a view on it. The strongest I'm going to say here is that I don't understand this. Therefore, I don't in fact have a view. No, not about to start saying go short or long. Not advising the sale of current positions nor the acquisition of any either way.
What I would insist is that before any position - or trading decision of any type - is taken, it's necessary to grasp exactly what AMTD is doing and how. That I can't doesn't mean that no one can. But anyone wanting to trade in AMTD really needs to.
So, what is the actual business here? On that, all subsequent decisions rest.
For further details see:
AMTD IDEA Group: I'm Still Deeply Unimpressed