Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo's (PDD US)</a> share price skyrocketed 6x in the last 12 months and 2.2x since the regulators released the anti-monopoly guidelines (AML) and opened an investigation on Alibaba on 10 November 2020. We believe investors flocked to PDD as they interpreted <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group's (BABA US)</a> loss as PDD's gain. The current price level implies a 54% Price to GMV premium to Alibaba.There are five reasons why I would consider cashing in the chips and look for better value in Alibaba: 1) Better operating metrics2) Cheaper valuations3) Greater operating efficiency4) PDD's execution risk5) Is PDD really immune from AML?

Pinduoduo's (PDD US) share price skyrocketed 6x in the last 12 months and 2.2x since the regulators released the anti-monopoly guidelines (AML) and opened an investigation on Alibaba on 10 November 2020. We believe investors flocked to PDD as they interpreted Alibaba Group's (BABA US) loss as PDD's gain. The current price level implies a 54% Price to GMV premium to Alibaba.There are five reasons why I would consider cashing in the chips and look for better value in Alibaba: 1) Better operating metrics2) Cheaper valuations3) Greater operating efficiency4) PDD's execution risk5) Is PDD really immune from AML?  

Pinduoduo (PDD US): Know When to Fold, Know When to Run

In this report, we summarize the potential impact of the Internet consumer lending guidelines announced by CBIRC on Ant Group and why its value remains intact, which bodes well for the underperformed Alibaba shares.  We provide a more in-depth look at the following: <ul>
<li>Ant’s revised valuation and sensitivity analyses focusing on consumer loan growth assumption and various valuation multiples.</li>
<li>The argument for why <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> shares were excessively penalized when <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> remains unscathed.</li>
<li>Our own Ant Group’s financial forecasts.</li>
<li>A closer look at each of Ant's business segments and their monetization rates.</li>
<li>Ant’s market share by segment. </li>
</ul>

In this report, we summarize the potential impact of the Internet consumer lending guidelines announced by CBIRC on Ant Group and why its value remains intact, which bodes well for the underperformed Alibaba shares.  We provide a more in-depth look at the following: 
Ant’s revised valuation and sensitivity analyses focusing on consumer loan growth assumption and various valuation multiples.
The argument for why Alibaba Group (BABA US) shares were excessively penalized when Tencent Holdings (700 HK) remains unscathed.
Our own Ant Group’s financial forecasts.
A closer look at each of Ant's business segments and their monetization rates.
Ant’s market share by segment. 


Alibaba (BABA US): Ant Group Woes Overly Priced-In

As one of the rare comeback stories among the Asian Internet platforms, <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings' (VIPS US)</a> share price rose 3x in the last 12 months (Figure 1). While the skeptics questioned whether the WeChat synergy would be sustainable, VIPS has answered the critics with robust results in the last three quarters, including the impressive 4Q20 results (Figure 3). There is no argument about the fundamental argument thus far for VIPS shares’ resurgence considering the strong customer acquisitions partly due to the power of the WeChat and margin improvement as the management refocused on its core strength in apparel and shed the margin dragging logistics unit. However, chasing the stock at this price level is not for the faint-hearted. We noted that the stock is now trading at the highest forward P/E multiple based on FY2021 GAAP EPS since July 2018 (Figure 2).       Having said that positive sentiment on the stock will likely persist in the near-term.  The management’s guidance of 45-50% revenue growth for 1Q21 (the guidance implies 19% YoY growth normalized) should provide the momentum and revenue growth will continue to be compared against the COVID-19 lockdown quarters.  The real growth test will come in 3Q21 when VIPS’ growth will be compared with the high customer growth which started in 3Q20. Decelerating growth could trigger a potential pullback, in our view.

As one of the rare comeback stories among the Asian Internet platforms, Vipshop Holdings' (VIPS US) share price rose 3x in the last 12 months (Figure 1). While the skeptics questioned whether the WeChat synergy would be sustainable, VIPS has answered the critics with robust results in the last three quarters, including the impressive 4Q20 results (Figure 3). There is no argument about the fundamental argument thus far for VIPS shares’ resurgence considering the strong customer acquisitions partly due to the power of the WeChat and margin improvement as the management refocused on its core strength in apparel and shed the margin dragging logistics unit. However, chasing the stock at this price level is not for the faint-hearted. We noted that the stock is now trading at the highest forward P/E multiple based on FY2021 GAAP EPS since July 2018 (Figure 2).       Having said that positive sentiment on the stock will likely persist in the near-term.  The management’s guidance of 45-50% revenue growth for 1Q21 (the guidance implies 19% YoY growth normalized) should provide the momentum and revenue growth will continue to be compared against the COVID-19 lockdown quarters.  The real growth test will come in 3Q21 when VIPS’ growth will be compared with the high customer growth which started in 3Q20. Decelerating growth could trigger a potential pullback, in our view.

VIPS US: 4Q20: Commendable Reincarnation but Fully Priced

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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 Capital Markets

<a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a>, the largest e-commerce company in South Korea with $12.0bn in annual revenue and 14.9m in quarterly active customers, filed for an NYSE IPO under the ticker “CPNG” with a placeholder value of $1.0bn.In our two previous insights on the IPO; <a href="https://www.smartkarma.com/insights/coupang-ipo-not-worth-subscribing-at-rumoured-50-0bn-valuation" target="_blank" rel="noopener">Coupang IPO: Not Worth Subscribing at Rumoured 50.0bn Valuation</a>, <a href="https://www.smartkarma.com/insights/coupang-ipo-lacks-margin-upside" target="_blank" rel="noopener">Coupang IPO: Lacks Margin Upside</a>, we looked at the company’s business model, future prospects, and revenue and earnings estimates. In this insight, we assess the fairness of the company's rumoured $50.0bn valuation.

Coupang (CPNG US), the largest e-commerce company in South Korea with $12.0bn in annual revenue and 14.9m in quarterly active customers, filed for an NYSE IPO under the ticker “CPNG” with a placeholder value of $1.0bn.In our two previous insights on the IPO; Coupang IPO: Not Worth Subscribing at Rumoured 50.0bn Valuation, Coupang IPO: Lacks Margin Upside, we looked at the company’s business model, future prospects, and revenue and earnings estimates. In this insight, we assess the fairness of the company's rumoured $50.0bn valuation.

Coupang IPO: Initial Thoughts on Rumoured $50.0bn Valuation

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>, <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a>, <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Baidu (BIDU US), Vipshop Holdings (VIPS US), TSMC (2330 TT), ByteDance (1460967D CH), Tencent Holdings (700 HK)

Global Emerging Markets Weekly: 12 February 2021

China

Vipshop Holdings Ltd. retails branded products at discount over the Internet. The Company retails through flash sales, in which limited quantities of an item are sold at deep discount for a specified period of time.

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Vipshop Holdings (VIPS US)

Pinduoduo (PDD US): Know When to Fold, Know When to Run

Pinduoduo's (PDD US) share price jumped 2.2x since last November. The company will have a tough time meeting lofty consensus expectations. Rotate...

Mitchell Kim

Alibaba (BABA US): Ant Group Woes Overly Priced-In

In this report, we summarize the potential impact of the recently announced regulation by CBIRC on Ant Group and why its value remains intact,...

Mitchell Kim

VIPS US: 4Q20: Commendable Reincarnation but Fully Priced

4Q20 results proved VIPS' rejuvenated growth is more sustainable than we thought. But the expected growth deceleration in 2H21 and expensive...

Mitchell Kim

Coupang IPO: Initial Thoughts on Rumoured $50.0bn Valuation

Coupang is fundamentally different from other e-commerce platforms as it generates over 92% of revenue from own inventory retail. Therefore a EV...

Oshadhi Kumarasiri

Global Emerging Markets Weekly: 12 February 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

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