Invest in MStar before IPO through Hotung Investment

Ok, now I would like to share a way to invest in MStar before its IPO through a SGX proxy, ie Hotung Investment.

Before I proceed, I would like to declare that I have invested in Hotung. And below is my opinion based on my understanding and certain assumption. Please make your own study before making any decision. Of course I welcome your questions or comment here.

Hotung has 2 key business groups, (1) venture capital investment, and (2) fund management. Now, Hotung owns about NT$668 million as valued end of 2009.

I would not go into the detail analysis of Hotung valuation analysis, rather I will use a quite conservative way to evaluate Hotung as an effective proxy of a high potential company, MStar.

If you look at the table below, Hotung today owns about USD$0.084 of cash, and USD$0.020 of MStar share. The USD$0.020 was the valuation end of Dec 2009. In other words, Hotung is worth $0.104 just based on cash and MStar shareholding. Well, you may ask, if MStar is not IPO yet, how sure are we on the MStar worth? My take is this:
a) the valuation is based on end 2009, and since then the semiconductor (in which MStar resides) has grown tremendously
b) Hotung knows that MStar is going to IPO this year, therefore the fair value estimate should not be too far off

The share price of Hotung as of last trading day 04/Nov/2010 was USD$0.105. Can you see the significance? It means that your investment in Hotung is fully accountable by just cash and MStar shareholding!

What makes it even more attrative is this:
1) Don't forget Hotung still has a fund management business
2) Hotung still has shareholding in more than 170 companies, estimate worth around USD$0.12. Assuming 50% of them fail, and the rest just retain their value without growth, they would still worht USD$0.06, thus bring the value of Hotung share to $0.165, more than 50% growth from current price.

MStar Chairman elected as member to GSA AP Leadership Council

Well, this does not mean MStar will therefore be a very profitable company. However, it has at least shown that, the company is in good hands of an experienced veteran in the industry.

---- Extract ----

SAN JOSE, Calif. (September 1, 2010) – The Global Semiconductor Alliance (GSA), the voice of the global semiconductor industry, today announced the addition of four new members to the GSA Asia-Pacific Leadership Council, which serves as advisors to the GSA Board of Directors on regional issues. The new members added to the council include:

• Dr. Youm Huh, chief executive officer, president and chairman of the board, Silicon Mitus, Inc.
• Dr. Tetsuya Iizuka, chief executive officer and founder, THine Electronics, Inc.
• Wayne Liang, founder and chairman, MStar Semiconductor, Inc.
• Dr. Sung-Wook Park, executive vice president and chief technology officer, Hynix Semiconductor, Inc.

“The addition of these extraordinary leaders to the Asia-Pacific Leadership Council extends the council’s diversity of knowledge and industry experiences. GSA is devoted to identifying the best and brightest global leaders who have a passion for this organization. I feel honored to have these outstanding leaders’ participation,” said Jodi Shelton, co-founder and president of GSA. “I would especially highlight Dr. Iizuka san, our first Japanese representative on the council. His support will help us to achieve one of GSA’s major goals in 2011 and beyond of expanding mutual collaboration between Japan and the global semiconductor industry.”

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Mr. Liang served several key positions in wafer foundry sales and marketing functions with companies such as TSMC, WSMC and Winbond Electronics prior to Mstar. MStar, a fabless IC design company focused on the display and communication products, was founded in 2002 by Mr. Liang and several partners. He was VP of sales and marketing at WSMC before WSMC was merged with TSMC.

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http://www.gsaglobal.org/news/article.asp?article=2010/0901

MStar chipset is used in highend Lamborghini handphone

According to this report, MStar chipset is used in highend Lamborghini handphone. Compared to past few reports, the significance here is that at least, MStar is not solely competing on price, but also on differentiation of quality and capability.

Indirectly vested.

MStar请来的重要客户——深圳高威尔（Gowell）的一个成功案例，更是证明了MStar有这个实力。Gowell总裁王操在会上透露，他们下面的一个子公司Legenda已将MStar的MSW8535N做进了兰博基尼品牌手机，“最低价的一款卖13800元，最高价的一款售20万元一台，全球限量版仅一万台。兰博基尼总共订了10万只。”他还特别补充道，“你们不要小看这10万只，这可是奢侈品牌啊。”

接下来，王操还特别介绍了下MSW8535N是如何进入兰博基尼品牌手机的。王操解释：“刚开始，客户是采用的MTK6239平台，但是前前后后设计了一年多，客户都不满意。后来，Legenda替换到8535N平台，客户一次性就满意了。特别是8535N平台强大的视频能力，如高清MP4格式D1分辨率录像、多格式D1高清播放、3D加速引擎等以及最大可支持到WVGA的屏等功能。”他接着透露，“我们目前正在与LV等其它奢侈品牌洽谈。”这个做DVD起家的Gowell和沃尔玛有着紧密的合作，在海外市场网络很牢固。“目前印度有十大品牌厂商都在采用Mstar的方案了。”他称。

http://forum.esm-cn.com/BLOG_ARTICLE_3078.HTM

MStar to increase China 2G handset chipset mkt share from 7% to 20%

According to this report, MStar market share in China 2G handset chipset will increase from 7% to 20% in 2011.

Mediatek: 70% -> 50%
Spreadtrum: 25% -> 30%
MStar: 7.5% -> 20%

Indirectly vested.


11月1日消息，据台湾媒体报道，联发科于10月初启动的新一波价格战，暂时缓解了其在中国手机芯片市占率下滑的压力，今年第4季度联发科市占率将守稳7 成附近，而展讯市占率将升至25％，晨星则有机会拿下5-7.5％。至于明年市况如何？目前已有业者大胆预估，联发科的占有率将掉到5成，展讯扩大为3 成，晨星则可以拿下2成，中国手机芯片“三分天下”态势将确立。

http://laoyaoba.com/ss6/?action-viewnews-itemid-134860

MStar has 65% FP TV chipset market share in Mainland China

According to this report, MStar dominates China FP TV chipset market. And in my opinion, the explosive demand in China would at least carry its momentum for another 2 to 3 years.


Indirectly vested.

Extract of report -----

The global TV market has mainly the following manufacturers, like Sony, Panasonic, Sharp, Samsung, LG, Philip and TTE. In the era of CRT, Sony was the top TV brand with all its IC developed independently. In the era of panel TV, Sony lagged behind. It started to compete with low prices with all its IC for TV outsourced. Samsung and Sharp are the loyal clients of Trident, while LG depends on Genesis, Trident and Broadcom. Philip relies on NXP. Only Panasonic develops all its IC independently. The manufacturers in Mainland China are eager to adopt the products of Media Tek and MStar Semiconductor. Nearly all the flat panel TVs of Konka adopts MStar Semiconductor's IC, while TTE and Changhong prefer Media Tek. However, MStar Semiconductor enjoys 65% of the flat panel TV market share in Mainland China. Currently, Media Tek is entering the U.S. market through the TV OEMs in Taiwan, but the progress is not as smooth as MStar Semiconductor's exploitation in mainland market.

http://www.techzone360.com//news/2010/05/06/4771846.htm

MStar Semiconductor to IPO

Not many people are familiar with this company, let alone to evaluate the opportunity. I will be publishing more related information for sharing.

Indirectly vested.

MStar Semiconductor files for primary listing on Taiwanese stock exchange

By Kevin Chen  /  STAFF REPORTER

MStar Semiconductor Inc (晨星半導體), an IC design house registered in the Cayman Islands, has filed an application with the Taiwan Stock Exchange Corp (TWSE, 台灣證交所) for a primary listing, the exchange regulator announced on its Web site on Friday.
MStar, which industry analysts have viewed as a likely competitor to local fabless chip designer MediaTek Inc (聯發科), is headquartered in Hsinchu, with a sales office in Taipei City’s Neihu District (內湖). It mainly provides mixed-signal IC solutions for consumer electronics applications.

Source
http://www.taipeitimes.com/News/biz/archives/2010/08/23/2003481104