Momo Inc

Momo Inc (NASDAQ: MOMO) provides mobile-based social networking services. The firm enables its users to establish and expand social relationships based on location and interests. Its platform includes Momo mobile application and various related features, functionalities, tools, and services that it provides to users, customers and platform partners.

Key highlights 

• Sloppy performance from most significant segment:The company’s Live video service segment reported revenues of RMB 2,374.8 million in Q3 2020, a decrease of 27% from RMB 3,275.4 million, compared to the previous corresponding period. The decline was primarily due to the structural reform on Momo’s core live video business and the impact of COVID-19 affecting the sentiment of paying users, especially among the top of the pyramid paying users.

• Downgraded revenue guidance:For the Q4 2020, the management expects total net revenues to be between RMB3.65 billion to RMB3.75 billion, representing a decrease of 22.1% to 20.0% year over year. This forecast considers the potential impact of the COVID-19 outbreak. It reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change, particularly as to the potential impact of the COVID-19 on China's economy.

• Decrease in Net cash from operating activities: The company witnessed a decrease in net cash provided by operating activities in Q3 2020 at RMB 691.1 million, compared to RMB 1,175.9 million in the previous corresponding period. The decline was primarily due to higher prepaid expenses made by the company in the reported quarter. 

Financial overview (All amounts in thousands of RMB)

Source: Company 

• In Q3 2020, the company witnessed a fall of 15.4% in revenues to RMB 3,766.6 million against RMB 4,451.6 million in the previous corresponding period. All the segments except Value-added service reported a decline in revenue; Value-added service registered an increase of 25% from RMB 1,064.6 million to RMB 1,330.8 million, primarily driven by more innovative products launched.
• Income from operation in the reported quarter stood at RMB 531 million compared to RMB 993.1 million in the previous corresponding period. The company booked loss from operations from Tantan segment worth RMB 121.5 million in Q3 2020.
• Net income stood at RMB 456 million in Q3 2020, compared to RMB 890.7 million in the previous corresponding period. The MOMO segment's net income dropped to RMB 576.2 million from RMB 1,110.2 million in Q3 2019, and Net loss from Tantan segment was RMB 114.2 million, compared to a net loss of RMB 214.1 million in the Q3 2019. 

Risks associated with investment 

The investment in the company is subject to various risks including difficulties in forecasting the company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the company’s business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which the company operates.

Valuation Methodology (Illustrative): Price to Cash Flow 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The management expects its revenues to be between RMB 3.65 billion to RMB 3.75 billion for the upcoming quarter, representing a decrease of 22.1% to 20.0% year over year. This forecast considers the potential impact of the COVID-19 outbreak, particularly the potential impact on China's economy. In some part of China, new cases of Covid-19 are speeding again; this could further drag their numbers down. Therefore, based on the above rationale and valuation, we recommend an "Avoid" rating at the closing price of USD 15.16 on January 14, 2021. We have considered Cheetah Mobile Inc, GFT Technologies SE, and Alibaba Group Holding Ltd, etc. as the peer group for comparison.

Source: Refinitiv (Thomson Reuters)

SCYNEXIS, Inc.

SCYNEXIS, Inc. is a biotechnology company which is focusing on developing medicines which would be used for difficult-to-treating and often life-threatening infections by developing innovative therapies.

Key Updates:

• Recently, the group announced the closing of its previously announced underwritten public offering of common stock, pre-funded warrants and warrants. The selling price of shares and warrants were USD 6.25 per share while accompanying warrants and pre-funded warrants were sold at a public offering price of USD 6.249.
• The company is expecting two approvals, which are likely to be expected in FY21-FY22 along with IV Phase 1 initiation and additional data readouts in Q1FY21 for the hospital-based program in refractory invasive fungal infections and Candida Auris.

Q3FY20 Financial Highlights:

• SCYX announced its quarterly results, wherein the company posted Loss from operations of USD 11.511 million, slightly lower than USD 11.756 million in the previous corresponding period (pcp). Research and development cost stood lower at USD 8.030 million versus USD 9.276 million in pcp, while selling, general and administrative costs increased to USD 3.481 million versus USD 2.480 million in pcp.
• SCYX reported an income before taxes of USD 0.909 million, versus a loss of USD 7.94 million in Q3FY19. The improvement was supported by gain from warrant liabilities fair value adjustment and derivative liabilities fair value adjustment amounting USD 7.786 million and USD 5.290 million, respectively.
• The company reported its net income of USD 0.909 million, as compared to USD 7.941 million in pcp.
• The corporation reported cash and cash equivalents of USD 29.494 million, while total assets were recorded at USD 36.752 million.

Source: Company Reports

Risks: The company is yet to report a visible income due to the absence of any regulatory approval for the company’s recent clinical trials. Any setback to the desired outcome would hamper the group’s performance.

Stock Recommendation:

The company’s product Novel IV/oral, potent, broad-spectrum antifungal has the potential to serve the invasive fungal infections patients. Moreover, the group is planning to launch Vulvovaginal Candidiasis (VVC) in FY21. Despite, above estimated launches, we are skeptical on the business, due to the lack of any confirmation from the regulatory bodies. Due to the lack of income, the company has to use its equity capital to fund the operations and hence, any delay in the approvals would result in a deficit for the company. Hence, considering the above facts, we prefer to remain on the sidelines and would recommend an ‘Avoid’ rating on the stock at the current market price of USD 7.93 on January 14, 2021.

SCYX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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