Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<ul>
<li>Whilst the Chinese online games market has struggled since 2023, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> has continued to gain revenue market share driven by the success of its mobile titles.</li>
<li>Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.</li>
<li>NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.</li>
</ul>


Whilst the Chinese online games market has struggled since 2023, NetEase (9999 HK) has continued to gain revenue market share driven by the success of its mobile titles.
Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.
NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.


NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Cloud Music announced FY23 financial results: total revenue dropped by 13% YoY to RMB7.87bn in FY23, in line with our/consensus estimate.</li><li>2H23 total revenue was down by 16% YoY to RMB3.96bn, mainly due to the adjustment of social entertainment business (-42% YoY).</li><li>Cloud music recorded adjusted net income of RMB819mn in FY23, beating our/consensus estimate of RMB686/629mn, thanks to the solid GPM improvement (+12.3ppt YoY). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music announced FY23 financial results: total revenue dropped by 13% YoY to RMB7.87bn in FY23, in line with our/consensus estimate.2H23 total revenue was down by 16% YoY to RMB3.96bn, mainly due to the adjustment of social entertainment business (-42% YoY).Cloud music recorded adjusted net income of RMB819mn in FY23, beating our/consensus estimate of RMB686/629mn, thanks to the solid GPM improvement (+12.3ppt YoY). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music (9899 HK) - Solid Core Music Business and Margin Expansion Outlook

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/vertex-technology-acquisition-corporation-ltd" target="_blank" data-smartkarma-citation="entities:35394:1" rel="noopener">Vertex Technology Acquisition Corporation (VTAC SP)</a> agreed to a De-SPAC transaction with 17LIVE, the top pure-play live streaming platform (by revenue) in Japan and Taiwan combined.</li>
<li>Industry data and the financials suggest that 17LIVE does not have a sustainable competitive advantage to translate its position into high earnings quality. </li>
<li>The purchase consideration of 17LIVE in the De-SPAC transaction is S$925.1 million (US$682.2 million). Our valuation analysis suggests that this consideration is full.</li>
</ul>



Vertex Technology Acquisition Corporation (VTAC SP) agreed to a De-SPAC transaction with 17LIVE, the top pure-play live streaming platform (by revenue) in Japan and Taiwan combined.
Industry data and the financials suggest that 17LIVE does not have a sustainable competitive advantage to translate its position into high earnings quality. 
The purchase consideration of 17LIVE in the De-SPAC transaction is S$925.1 million (US$682.2 million). Our valuation analysis suggests that this consideration is full.


Vertex Technology Acquisition (VTAC SP)/17LIVE: Turn Off

<ul><li>Cloud Music reported 1H23 financial results: total revenue declined by 8% YoY to RMB3.9bn (in line with consensus estimate), mainly due to the operational adjustment to social entertainment business.</li><li>Adjusted net income was RMB332mn in 1H23 (1H22: net loss of RMB217mn), beating consensus estimate of RMB96mn, primarily due to the enhanced GPM (+12pct YoY).</li><li>As social entertainment business continues to face pressure, we lower FY23-25E total revenue forecast by 8-9%; but we raise FY23-FY25E adjusted net income forecast to RMB686/974/1,365mn (previous: RMB194/618/1,065mn) on 1) better content cost saving; 2) optimized live streaming revenue-sharing ratio; 3) enhanced operating efficiency. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music reported 1H23 financial results: total revenue declined by 8% YoY to RMB3.9bn (in line with consensus estimate), mainly due to the operational adjustment to social entertainment business.Adjusted net income was RMB332mn in 1H23 (1H22: net loss of RMB217mn), beating consensus estimate of RMB96mn, primarily due to the enhanced GPM (+12pct YoY).As social entertainment business continues to face pressure, we lower FY23-25E total revenue forecast by 8-9%; but we raise FY23-FY25E adjusted net income forecast to RMB686/974/1,365mn (previous: RMB194/618/1,065mn) on 1) better content cost saving; 2) optimized live streaming revenue-sharing ratio; 3) enhanced operating efficiency. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music (9899 HK) – 1H23 Earnings Beat on Strong GPM Expansion

<ul><li>Cloud Music gradually shifts its focus from revenue growth to sustainable earnings growth.</li><li>We forecast total revenue to decline by 9% YoY to RMB3.9bn in 1H23, as the Company reduced in-app exposure of live streaming functions and lowered revenue sharing ratio to drive quality growth of social entertainment business.</li><li>Despite the revenue decline, we expect Cloud Music to achieve breakeven and generate adjusted net income of RMB42mn in 1H23 (1H22: net loss of RMB217mn), mainly due to the enhanced GPM (+10pcts YoY). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music gradually shifts its focus from revenue growth to sustainable earnings growth.We forecast total revenue to decline by 9% YoY to RMB3.9bn in 1H23, as the Company reduced in-app exposure of live streaming functions and lowered revenue sharing ratio to drive quality growth of social entertainment business.Despite the revenue decline, we expect Cloud Music to achieve breakeven and generate adjusted net income of RMB42mn in 1H23 (1H22: net loss of RMB217mn), mainly due to the enhanced GPM (+10pcts YoY). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cloud Music (9899 HK) – 1H23 Preview: Solid Improvement in Profitability

China

NetEase Cloud Music operates as one of China's leading online music platforms, offering music streaming, membership subscriptions, digital music sales, and social entertainment services including live streaming and online karaoke. It provides an interactive content community for music enthusiasts with personalized recommendations. The company is headquartered in Hangzhou, China, and was launched in 2013.

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NetEase Cloud Music (9899 HK)

Cloud Music (9899 HK) - Solid Core Music Business and Margin Expansion Outlook

Cloud Music announced FY23 financial results: total revenue dropped by 13% YoY to RMB7.87bn in FY23, in line with our/consensus estimate.

CMB International

Vertex Technology Acquisition (VTAC SP)/17LIVE: Turn Off

Industry data and the financials suggest caution is warranted. The purchase consideration of 17LIVE in the De-SPAC transaction is S$925.1 million...

Arun George

Cloud Music (9899 HK) – 1H23 Earnings Beat on Strong GPM Expansion

Adjusted net income was RMB332mn in 1H23 (1H22: net loss of RMB217mn), beating consensus estimate of RMB96mn, primarily due to the enhanced GPM...

CMB International

Cloud Music (9899 HK) – 1H23 Preview: Solid Improvement in Profitability

We forecast total revenue to decline by 9% YoY to RMB3.9bn in 1H23, as the Company reduced in-app exposure of live streaming functions and lowered...

CMB International

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NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

In this insight we analyse the Chinese online games market, NetEase’s revenue growth outlook, current valuation level, and shareholder returns.

Wium Malan, CFA

Cloud Music (9899 HK) - Solid Core Music Business and Margin Expansion Outlook

Cloud Music announced FY23 financial results: total revenue dropped by 13% YoY to RMB7.87bn in FY23, in line with our/consensus estimate.

CMB International

Vertex Technology Acquisition (VTAC SP)/17LIVE: Turn Off

Industry data and the financials suggest caution is warranted. The purchase consideration of 17LIVE in the De-SPAC transaction is S$925.1 million...

Arun George

Cloud Music (9899 HK) – 1H23 Earnings Beat on Strong GPM Expansion

Adjusted net income was RMB332mn in 1H23 (1H22: net loss of RMB217mn), beating consensus estimate of RMB96mn, primarily due to the enhanced GPM...

CMB International

Cloud Music (9899 HK) – 1H23 Preview: Solid Improvement in Profitability

We forecast total revenue to decline by 9% YoY to RMB3.9bn in 1H23, as the Company reduced in-app exposure of live streaming functions and lowered...

CMB International