Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p>Xiaomi reported its 3Q2020 results yesterday (24<sup>th</sup> November 2020) which saw revenues growing 34.5% YoY while reported OP grew 115.1% YoY to RMB6.7bn from RMB3.1bn a year ago. On adjusted basis, the OP for the quarter grew 7.9% YoY to RMB3.5bn from RMB3.3bn in 3Q2019. Both revenue and OP beat consensus estimates by 6.2% and 83.7% respectively.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/775/original/image_14518698921606243462074.png?1606243462" class="editor-image img-responsive" data-smartkarma-image-id="173775"></figure><div class="content-caption"><em>Source: Company Disclosures</em></div><p>We discuss the details below.</p>

Xiaomi reported its 3Q2020 results yesterday (24th November 2020) which saw revenues growing 34.5% YoY while reported OP grew 115.1% YoY to RMB6.7bn from RMB3.1bn a year ago. On adjusted basis, the OP for the quarter grew 7.9% YoY to RMB3.5bn from RMB3.3bn in 3Q2019. Both revenue and OP beat consensus estimates by 6.2% and 83.7% respectively.Source: Company DisclosuresWe discuss the details below.

Xiaomi 3Q: Strong Smartphone Demand Across Domestic and Overseas Markets, Shares Are Still Expensive

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*More Transformation To Come:</em></strong> What a magnificent amazing six months this has been for Tencent Holding’s (700.HK) [Tencent] Afterpay Touch (APT.AU) [Afterpay]. Afterpay provided positive commentary at its Annual General Meeting (AGM) where the next six months look to be even more transformational with operations beginning in the European Union, launches of banking products, and potentially the launch of the business in Asia (likely under the tutelage of Tencent); and</p><p><strong><em>*More Magic Fairy Dust:</em></strong> Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology Buy Now Pay Later (BNPL) company is paying dividends to Tencent in numerous other ways.</p>

*More Transformation To Come: What a magnificent amazing six months this has been for Tencent Holding’s (700.HK) [Tencent] Afterpay Touch (APT.AU) [Afterpay]. Afterpay provided positive commentary at its Annual General Meeting (AGM) where the next six months look to be even more transformational with operations beginning in the European Union, launches of banking products, and potentially the launch of the business in Asia (likely under the tutelage of Tencent); and*More Magic Fairy Dust: Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology Buy Now Pay Later (BNPL) company is paying dividends to Tencent in numerous other ways.

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>A short while ago, S&amp;P Dow Jones Indices <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201116-1258362/1258362_tdec215addconsult.pdf" target="_blank" rel="noopener">announced</a> the inclusion of <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> in the <a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a> effective after the close of trading on 18 December. The deletion will be announced later.</p><p>S&amp;P DJI have also announced they will be conducting a <a href="https://www.spglobal.com/spdji/en/governance/consultations/sp500consultationonimplementationoftslaaddition11-16-20.pdf" target="_blank" rel="noopener">market consultation</a> on whether <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> should be added to the S&amp;P500 all at once or in two tranches to reduce the impact of the funding trade.</p><p>From the numbers, the market should be able to absorb the buying on <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> and the selling on the other index constituents pretty easily. However, with Christmas just a week away from the implementation date and possibly lower liquidity, market participants may have different views and the trade could be split into two tranches.</p>

A short while ago, S&amp;P Dow Jones Indices announced the inclusion of Tesla Motors (TSLA US) in the S&amp;P 500 (SPX INDEX) effective after the close of trading on 18 December. The deletion will be announced later.S&amp;P DJI have also announced they will be conducting a market consultation on whether Tesla Motors (TSLA US) should be added to the S&amp;P500 all at once or in two tranches to reduce the impact of the funding trade.From the numbers, the market should be able to absorb the buying on Tesla Motors (TSLA US) and the selling on the other index constituents pretty easily. However, with Christmas just a week away from the implementation date and possibly lower liquidity, market participants may have different views and the trade could be split into two tranches.

Tesla: S&P500 Inclusion (Finally) Secured

<p><strong><em>*Another Positive Update Ahead of AGM: </em></strong>The Australia Securities &amp; Investments Commission (ASIC) recently released its second report on the Buy Now Pay Later (BNPL) space, and the findings appear to be similar to its first report. This is quite positive for the shares of Afterpay Touch (APT.AU) [Afterpay], where Tencent Holdings (700.HK) [Tencent] holds what is likely to be a growing 5% stake. The AGM for Afterpay is on November 17<sup>th</sup>; and  </p><p><strong><em>*More Magic Fairy Dust:</em></strong> Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways. </p>

*Another Positive Update Ahead of AGM: The Australia Securities &amp; Investments Commission (ASIC) recently released its second report on the Buy Now Pay Later (BNPL) space, and the findings appear to be similar to its first report. This is quite positive for the shares of Afterpay Touch (APT.AU) [Afterpay], where Tencent Holdings (700.HK) [Tencent] holds what is likely to be a growing 5% stake. The AGM for Afterpay is on November 17th; and  *More Magic Fairy Dust: Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways. 

Tencent – This Deal Keeps Rolling Along

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Thematic (Sector/Industry)

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<div>During COVID-19, tech stocks have led the markets supported by demand expansion, strong balance sheets filled with cash, and innovative products. At the end of the cycle, there should be a rotation towards cyclical and value stocks but this time around is policy-induced recovery and during the COVID-19 crisis, tech stocks have led the recovery ahead of the cyclical. The question is whether this will carry on and large tech names to continue leading market recovery while cyclical drag their feet?</div>
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<div>The regulator in China has given dominant tech names a slap in the wrist with the anti-trust law that proposes to democratize the payment systems that will inevitably break up the monopolies and these companies will lose their customers' stickiness. </div>
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<div>In light of the <strong>antitrust</strong> law and the real economic recovery in China, investors should start to underweight technology stocks in China such as Tencent, Alibaba, Meituan, and start to overweight travel and tourism stocks such as <a href="https://www.smartkarma.com/entities/air-china-ltd-a" target="_blank" data-smartkarma-citation="entities:1080:1" rel="noopener">Air China Ltd (A) (601111 CH)</a> , <a href="https://www.smartkarma.com/entities/travelsky-technology-ltd-h" target="_blank" data-smartkarma-citation="entities:19829:1" rel="noopener">Travelsky Technology Ltd H (696 HK)</a> , <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific Airways (293 HK)</a> and also Industrials such as <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry H (1157 HK)</a> and <a href="https://www.smartkarma.com/entities/sany-heavy-equipment-intl" target="_blank" data-smartkarma-citation="entities:11104:1" rel="noopener">Sany Heavy Equipment Intl (631 HK)</a>expecting that construction works can resume at full capacity anytime soon. </div>
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<div>Globally, dominant tech stocks (FANGS) such as <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> , <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> , <a href="https://www.smartkarma.com/entities/netflix-inc" target="_blank" data-smartkarma-citation="entities:20451:1" rel="noopener">Netflix Inc (NFLX US)</a> and <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a> should start to be underweight due to the potential punitive measures from the House if Democrats win. Investors should start to overweight industrial stocks such as <a href="https://www.smartkarma.com/entities/caterpillar-inc" target="_blank" data-smartkarma-citation="entities:697:1" rel="noopener">Caterpillar Inc (CAT US)</a> and staples such as <a href="https://www.smartkarma.com/entities/procter-gamble-co" target="_blank" data-smartkarma-citation="entities:978:1" rel="noopener">Procter &amp; Gamble Co (PG US)</a> and <a href="https://www.smartkarma.com/entities/nestle-sa-020546b9-e58a-465b-a5ac-98e84143bf4c" target="_blank" data-smartkarma-citation="entities:27908:1" rel="noopener">Nestle SA (NESN SW)</a> . </div>
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<div>Investors should also consider start building positions in blue-chip with moat names such as <a href="https://www.smartkarma.com/entities/visa-inc-class-a-shares" target="_blank" data-smartkarma-citation="entities:8707:1" rel="noopener">Visa Inc Class A Shares (V US)</a> and <a href="https://www.smartkarma.com/entities/travelers-cos-inc" target="_blank" data-smartkarma-citation="entities:10300:1" rel="noopener">Travelers Cos (TRV US)</a> as they provide stability and proxy to America's economic recovery. </div>


During COVID-19, tech stocks have led the markets supported by demand expansion, strong balance sheets filled with cash, and innovative products. At the end of the cycle, there should be a rotation towards cyclical and value stocks but this time around is policy-induced recovery and during the COVID-19 crisis, tech stocks have led the recovery ahead of the cyclical. The question is whether this will carry on and large tech names to continue leading market recovery while cyclical drag their feet?


The regulator in China has given dominant tech names a slap in the wrist with the anti-trust law that proposes to democratize the payment systems that will inevitably break up the monopolies and these companies will lose their customers' stickiness. 



In light of the antitrust law and the real economic recovery in China, investors should start to underweight technology stocks in China such as Tencent, Alibaba, Meituan, and start to overweight travel and tourism stocks such as Air China Ltd (A) (601111 CH) , Travelsky Technology Ltd H (696 HK) , Cathay Pacific Airways (293 HK) and also Industrials such as Zoomlion Heavy Industry H (1157 HK) and Sany Heavy Equipment Intl (631 HK)expecting that construction works can resume at full capacity anytime soon. 

Globally, dominant tech stocks (FANGS) such as Facebook Inc A (FB US) , Apple Inc (AAPL US) , Netflix Inc (NFLX US) and Alphabet Inc Cl C (GOOG US) should start to be underweight due to the potential punitive measures from the House if Democrats win. Investors should start to overweight industrial stocks such as Caterpillar Inc (CAT US) and staples such as Procter &amp; Gamble Co (PG US) and Nestle SA (NESN SW) . 

Investors should also consider start building positions in blue-chip with moat names such as Visa Inc Class A Shares (V US) and Travelers Cos (TRV US) as they provide stability and proxy to America's economic recovery. 

United States

Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related accessories. The Company also offers payment, digital content, cloud and advertising services. Apple Inc.'s customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.

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Apple (AAPL US)

Xiaomi 3Q: Strong Smartphone Demand Across Domestic and Overseas Markets, Shares Are Still Expensive

Xiaomi reported its 3Q2020 results yesterday (24th November 2020) which saw revenues growing 34.5% YoY while reported OP grew 115.1% YoY to...

Shifara Samsudeen, FCMA, CGMA

Tencent Holdings - After The AGM

TENCENT HOLDING: Afterpay Touch AGM Exhibits Strength Of Franchise Post-Tencent Stake. Next Six Months To Be Transformational.

Thomas J. Monaco

Tesla: S&P500 Inclusion (Finally) Secured

Tesla has been included in the S&P500 after 5 consecutive quarters of profitability. The passive buying on Tesla will be around US$54bn and the...

Brian Freitas

Tencent – This Deal Keeps Rolling Along

TENCENT HOLDINGS: ASICs Second Report On The Buy Now Pay Later Space Is Yet Another Positive For Tencent's Afterpay Investment.

Thomas J. Monaco

Tech Sell-Off: Stop or Carry On?

In light of the anti-trust law in China, real economic recovery, higher corporate tax rates in the US, and breakup of dominant tech firms,...

Henry Soediarko

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