Sohn Hong Kong: How to Own Weibo Without Buying the Stock
By Isabella Zhong Updated June 7, 2017 2:57 a.m. ET
James Tu, managing partner and co-founder of Nine Masts Capital Management, is a fan of China microblogging platform Weibo (WB).
Weibo grew advertising revenues by a speedy 71% year-on-year in the March quarter. But the stock trades at a dizzying 51 times forward earnings following a 166% rally over the past year.
Tu recommends that investors get exposure to Weibo through the platform's parent company Sina. Sina's stake in Weibo is set to decrease to approximately 46%.
Tu points out the implied price per share for Weibo in Sina's share price is $35.55, meaning there's a 52% margin of safety to the $75.48 a share at which Weibo currently trades.
For more risk averse investors, an alternative is to buy Sina's convertible bonds, which Tu says offers the best risk-reward balance.
Tu summarizes his thesis as: "Buy Sina convertible bonds, which give you a balanced exposure to Sina, which has a Chairman who is doing everything in his power to close the value discount in Sina by either spinning off Weibo shares or buying large amounts of Sina shares."
Source: Barron's Asia
http://www.barrons.com/articles/sohn-ho ... yptr=yahoo