Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Thematic (Sector/Industry)

<p>This is the 13<sup>th</sup> issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong Kong and Taiwan. This is a collaborative report compiled by <a href="https://www.smartkarma.com/profiles/820" target="_blank">Scott Laprise/ 乐天虎</a>, <a href="https://www.smartkarma.com/profiles/803" target="_blank">Valerie Law, CFA</a>, <a href="https://www.smartkarma.com/profiles/9" target="_blank">Ke Yan, CFA, FRM</a>, and <a href="https://www.smartkarma.com/profiles/605" target="_blank">Daniel Hellberg</a> on a rotating basis. Please let us know if you would like to be included in this collaborative effort.</p>

This is the 13th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong Kong and Taiwan. This is a collaborative report compiled by Scott Laprise/ 乐天虎, Valerie Law, CFA, Ke Yan, CFA, FRM, and Daniel Hellberg on a rotating basis. Please let us know if you would like to be included in this collaborative effort.

The Week that Was in Greater China@SmartKarma: A Himalayan Spat, Bull Vs Bear, & Wanda's Wonderland

Asia and Global Semiconductor and Tech Research

Andrew Lu

Equity Bottom-Up

<h2>Double digit 2Q17 sales beat but guides 3Q17 below seasonal growth</h2><ul><li>
<strong>Double digit 2Q17 sales beat</strong>: The leading gaming and AI graphic chip vendor, <a href="https://www.smartkarma.com/entities/5891" target="_blank" data-smartkarma-citation="entities:5891:1">Nvidia Corp (NVDA US)</a> reports 2Q17 EPS of US$0.92, which was US$22 cents or 31% better than Bloomberg consensus estimates mainly due to 14% beat on sales to US$2.23bn (15% q/q and 56% y/y) and 3ppts better on net margin. We attribute 2Q17 sales upside surprise from Pascal-based GeForce gaming (15% q/q, 52% y/y), professional visualization for high-end…</li></ul>

Double digit 2Q17 sales beat but guides 3Q17 below seasonal growth
Double digit 2Q17 sales beat: The leading gaming and AI graphic chip vendor, Nvidia Corp (NVDA US) reports 2Q17 EPS of US$0.92, which was US$22 cents or 31% better than Bloomberg consensus estimates mainly due to 14% beat on sales to US$2.23bn (15% q/q and 56% y/y) and 3ppts better on net margin. We attribute 2Q17 sales upside surprise from Pascal-based GeForce gaming (15% q/q, 52% y/y), professional visualization for high-end…

Nvidia - Most of Good News Priced in if Following the Below Seasonal Sales Guidance?

China, Emerging Markets

Ryan Soh 苏祥发

<p><em>Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remain</em></p><p><a href="https://www.smartkarma.com/entities/179" target="_blank" data-smartkarma-citation="entities:179:1">Baidu</a> had a good Q2 - it <a href="http://ir.baidu.com/phoenix.zhtml?c=188488&amp;p=irol-newsArticle&amp;ID=2289721" target="_blank">beat</a> earnings expectations by 56%, and grew revenue, operating income and net income by 14%, 47% and 83%. </p><p>Consequently, the stock traded up 9.45%, on the last Friday of July this year, comfortably beating whatever benchmarks set before it.</p><p>The main reason it did well this quarter is because it managed to cut costs, and the market missed this - revenues were <a href="https://markets.ft.com/data/equities/tearsheet/forecasts?s=BIDU:NSQ" target="_blank">broadly in line</a> with analyst…</p>

Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remainBaidu had a good Q2 - it beat earnings expectations by 56%, and grew revenue, operating income and net income by 14%, 47% and 83%. Consequently, the stock traded up 9.45%, on the last Friday of July this year, comfortably beating whatever benchmarks set before it.The main reason it did well this quarter is because it managed to cut costs, and the market missed this - revenues were broadly in line with analyst…

Analyst, qcAlpha Earnings Coverage, Zero One

Vincent Fernando, CFA

Analyst, qcAlpha Earnings Coverage

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<div class="content-highlight"><h2><strong>What You Need to Know</strong></h2></div><ul>
<li>
<strong>Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. </strong>Revenue was in-line with analyst consensus, while EPS crushed estimates by 56%.</li>
<li>
<strong>Baidu’s advertiser cleanup efforts continue.</strong> Online Marketing Customers fell by 20.9% YoY to 470,000 customers, while ARPUs rose by 32% YoY to RMB37,500.</li>
<li>
<strong>Margins recovered strongly on tighter spending.</strong> 2Q17 adjusted operating margins expanded by 610 basis points to 24.0% due to less spending in O2O…</li>
</ul>

What You Need to Know

Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. Revenue was in-line with analyst consensus, while EPS crushed estimates by 56%.

Baidu’s advertiser cleanup efforts continue. Online Marketing Customers fell by 20.9% YoY to 470,000 customers, while ARPUs rose by 32% YoY to RMB37,500.

Margins recovered strongly on tighter spending. 2Q17 adjusted operating margins expanded by 610 basis points to 24.0% due to less spending in O2O…


Baidu 2Q17 Earnings: EPS Smashes Consensus on Tighter Spending; 3Q17 Guidance Slightly Ahead

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI AC Asia Pacific Excluding Japan Index / Technical Analysis

MSCI AC Asia Pacific Excluding Japan Index

<p>As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is breaking out from a two-year base. Relative strength (vs. MSCI ACWI ex-US) depicts a similar pattern; after lagging since mid-2015, its RS trend has slowly rounded higher, resulting in the recent breakout. Combined, this warrants an overweight.</p><p>Today’s report is a country by country review of leadership and actionable themes within the region, including stock recommendations.</p>

As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is breaking out from a two-year base. Relative strength (vs. MSCI ACWI ex-US) depicts a similar pattern; after lagging since mid-2015, its RS trend has slowly rounded higher, resulting in the recent breakout. Combined, this warrants an overweight.Today’s report is a country by country review of leadership and actionable themes within the region, including stock recommendations.

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

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Baidu (BIDU US)

The Week that Was in Greater China@SmartKarma: A Himalayan Spat, Bull Vs Bear, & Wanda's Wonderland

This is the 13th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong...

Valerie Law, CFA

Nvidia - Most of Good News Priced in if Following the Below Seasonal Sales Guidance?

Double digit 2Q17 sales beat but guides 3Q17 below seasonal growth Double digit 2Q17 sales beat: The leading gaming and AI graphic chip...

Andrew Lu

Thinking Through Baidu's Q2

Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remainBaidu had a good Q2 - it beat earnings expectations by 56%, and grew...

Ryan Soh 苏祥发

Baidu 2Q17 Earnings: EPS Smashes Consensus on Tighter Spending; 3Q17 Guidance Slightly Ahead

What You Need to Know Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. Revenue was in-line...

Vincent Fernando, CFA

Asia: Developing Leadership

As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is...

Vermilion Research

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