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Smartkarma Daily Briefs

May 18
0

Daily Brief China: Alibaba (ADR), China Everbright, Tencent, Baidu, Dmall Inc, China Travel International Investment Hong Kong, Tencent Music, Hutchmed China Ltd, Miniso, ZTO Express and more

By | China, Daily Briefs

In today’s briefing:

  • Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
  • StubWorld: China Everbright (165 HK) Trading Wide
  • Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
  • [Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
  • Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers
  • China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play
  • TME: Online Music Drives Earnings; No Recovery in Sight for Social Entertainment Yet
  • Hutchmed China Ltd (13.HK/HCM.US)- Stronger than Expected and Deserves More Attention from Investors
  • [Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY
  • ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance

Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+

By Sumeet Singh

  • On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
  • Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
  • In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.

StubWorld: China Everbright (165 HK) Trading Wide

By David Blennerhassett

  • Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH))) are at multi-year lows.
  • Preceding my comments on China Everbright are the weekly setup/unwind tables for Asia-Pacific Holdcos.
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin

By Ming Lu

  • In 1Q23, the revenue growth rose significantly to 11% YoY.
  • The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
  • We set an upside of 28% and a price target of HK$440 for yearend 2023.

[Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC

By Shawn Yang

  • Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%. 
  • We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC. 
  • Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.

Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers

By Clarence Chu

  • Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
  • Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
  • In this note, we will talk about the positive aspects of the deal.

China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play

By Osbert Tang, CFA

  • China Travel International Investment Hong Kong (308 HK) should have more upside from here given the sharp earnings recovery over FY23-25. But the market seems to have overlooked this.
  • Its FY18 net profit reached HK$687m; but dipped to HK$356m loss in FY22. With its businesses now behind issues like HK social unrest and border closure, there is immense upside. 
  • All of CTII’s business segments have experienced recovery in FY23, especially following the resumption of HK-mainland China traffic. Its 0.54x P/B is still 52% down from the peak. 

TME: Online Music Drives Earnings; No Recovery in Sight for Social Entertainment Yet

By Shifara Samsudeen, ACMA, CGMA

  • Tencent Music reported 1Q2023 results. Revenue increased 5.4% YoY to RMB7.0bn (vs consensus RMB6.9bn) while adj. OP more than doubled to RMB1.09bn (vs consensus RMB1.13bn) vs RMB518m in 1Q2022.
  • Online music services revenue grew 33.8% driven by strong growth in both paying users and monthly ARPU. Social Entertainment further declined during the quarter.
  • 1Q2023 earnings were primarily driven by Online music services and we do not expect a recovery in social entertainment segment’s earnings in the short-term.

Hutchmed China Ltd (13.HK/HCM.US)- Stronger than Expected and Deserves More Attention from Investors

By Xinyao (Criss) Wang

  • HUTCHMED has been a company that is easily overlooked by investors. However, its BD capabilities have been verified after the deal with Takeda, and its commercialization performance is also commendable.
  • Based on our forecast, total oncology/immunology consolidated revenue in 2023 could reach about US$220 million. If product sales growth remains benign, together with good cost control on R&D/SG&A, eventual breakeven is reachable.
  • However, based on the current development trend, HUTCHMED could have to remain at the stage of a biotech, and is difficult to become a biopharma. Investors should be aware of this.

[Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY

By Shawn Yang

  • MNSO reported its C1Q23 revenue (3.7%)/1.1% vs. our estimate/consensus, while non-GAAP net income beat our estimate/consensus by 17.7%/26.1% respectively, driven by gross margin ramp-up strategy and G&A reduction; 
  • We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales. 
  • We maintain Buy rating and raise TP by US$0.5 to US$25.5 to factor in the better gross margin and store expansion outlook.

ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance

By Daniel Hellberg

  • ZTO Express (ZTO US) parcel volume increased by 20.5% Y/Y in Q1, better than market growth
  • Unit prices fell by 3.7%, slightly worse than peers in Q1 2023, and Revenue missed consensus
  • EPS beat expectations on lower unit costs, and management raised full-year volume target

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May 18
0

Daily Brief Australia: Neuren Pharmaceuticals, Kinatico and more

By | Australia, Daily Briefs

In today’s briefing:

  • S&P/​​​​​​​ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
  • Kinatico Ltd – Q3 SaaS Growth Demonstrates the Flex Potential

S&P/​​​​​​​ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning

By Brian Freitas

  • The review period for the June rebalance of the S&P/ASX family of indices ends tomorrow and we expect two changes for the S&P/ASX 200 (AS51 INDEX). 
  • Impact of passive trading on the stocks varies between 4.3-11 days of ADV. Short interest on the potential adds is small while there are significant shorts on the potential deletes.
  • We expect there is pre-positioning on at least three of the four stocks. In some cases that is small, while it could be a lot larger in other stocks.

Kinatico Ltd – Q3 SaaS Growth Demonstrates the Flex Potential

By Research as a Service (RaaS)

  • Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
  • The company recently reported Q3 NPAT of $0.4m and positive cash flow of $0.2m, excluding buyback expenditure.
  • Q3 sales were a record $7.0m, including $1.5m of SaaS revenue, which was up 143% on the previous corresponding period (pcp) and 51% on the prior quarter.

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May 18
0

Daily Brief India: Jindal Steel & Power and more

By | Daily Briefs, India

In today’s briefing:

  • Quiddity Leaderboard NIFTY Sep 23: Some Interesting Long-Short Trades

Quiddity Leaderboard NIFTY Sep 23: Some Interesting Long-Short Trades

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
  • The HDFC Limited (HDFC IN) – HDFC Bank (HDFCB IN) merger could complete earlier than previously expected, triggering intra-review index replacements.
  • Separately, I have presented some interesting new trading ideas involving some of the index change candidates, and I discuss the status of pre-existing trade ideas.

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May 18
0

Daily Brief United States: Futu Holdings Ltd, Inter Parfums, Arista Networks, Freeport Mcmoran, IDEXX Laboratories, Starbucks Corp, Cummins Inc, Seadrill , Advanced Micro Devices, Zoominfo Technologies and more

By | Daily Briefs, United States

In today’s briefing:

  • [Futu Holdings (FUTU US) Company Update]: Futu App Removal Moves One Step to Final Resolution
  • IPAR: Ready for Cash Conversion
  • Arista Networks Inc.: Crushing Market Expectations But Is It Enough? – Key Drivers
  • Freeport-McMoRan Inc: Is The Volumes Expectation For 2023 Too High? – Key Drivers
  • IDEXX Laboratories Inc.: Recurring Veterinary Software Revenues Continue to Grow – Key Drivers
  • Starbucks Corporation: Solid Customer Loyalty Through The Rewards Program & Other Drivers
  • Cummins Inc.: What Is Their Core Business Strategy? – Key Drivers
  • SDRL: Aquadrill Numbers Ahead of Q1 Results
  • Advanced Micro Devices Inc.: Important Strides Towards Speeding Its AI Roadmap – Key Drivers
  • ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers

[Futu Holdings (FUTU US) Company Update]: Futu App Removal Moves One Step to Final Resolution

By Shawn Yang

  • Futu announced to remove the Futubull app in Mainland China in order to fully compliance with the CSRC rectification measures, while the existing paying clients’ trading activities are unimpacted.
  • We think the movement is consistent with CSRC’s previous statements, and thus maintain our 5% user churn rate in 2023 unchanged.
  • We think the full implementation of penalty fine on Futu is unfair. We expect a symbolic fine to be imposed on Futu in the future.

IPAR: Ready for Cash Conversion

By Hamed Khorsand

  • Inter Parfums (IPAR) continuing to experience demand for its fragrances has not been enough to overcome investor concerns related to the slow demand environment in China and the duty-free segment
  • IPAR’s top three brands each grew by more than 20 percent compared to last year with Jimmy Choo sales up 63 percent
  • IPAR managing through its inventory balance could result in cash conversion that should improve investor sentiment

Arista Networks Inc.: Crushing Market Expectations But Is It Enough? – Key Drivers

By Baptista Research

  • Arista Networks delivered strong results in the quarter, with $1.35 billion in revenue and $1.43 in non-GAAP earnings per share, crushing market expectations.
  • Throughout this year, Arista anticipates seeing increases in its gross margins every quarter.
  • We give Arista Networks a ‘Hold’ rating with a revised target price.

Freeport-McMoRan Inc: Is The Volumes Expectation For 2023 Too High? – Key Drivers

By Baptista Research

  • It was a challenging first quarter for Freeport-McMoRan due to disruptions caused by extreme weather conditions and labor shortages.
  • The company managed an all-around beat and achieved essentially in-line consolidated unit net cash costs, averaging $1.76 per pound despite lower-than-expected volumes.
  • Freeport-McMoRan ended the quarter with $1.3 billion in net debt, and its balance sheet, liquidity, and financial flexibility are in great shape.

IDEXX Laboratories Inc.: Recurring Veterinary Software Revenues Continue to Grow – Key Drivers

By Baptista Research

  • IDEXX Laboratories had a strong Q1 2023 performance and delivered an all-around beat.
  • The company’s strategic focus on execution, organic growth, and product portfolio expansion resulted in significant new business gains and sustained growth in recurring veterinary software revenues.
  • The company’s performance was reflected in its key metrics, such as high first-quarter premium instrument placements, steady new business gains, and continual growth in recurring veterinary software revenues.

Starbucks Corporation: Solid Customer Loyalty Through The Rewards Program & Other Drivers

By Baptista Research

  • Starbucks Corporation delivered a strong performance in the quarter and managed an all-around beat.
  • The company achieved double-digit comp in all company-operated markets, driven by a stronger-than-expected recovery and observed ongoing momentum in its licensed markets.
  • The primary drivers of revenue growth were comparable store sales, the year-over-year increase in net new company-operated stores, and the sustained momentum in the company’s worldwide license to market.

Cummins Inc.: What Is Their Core Business Strategy? – Key Drivers

By Baptista Research

  • Cummins had a successful first quarter, marked by a 12% increase in organic revenue growth, as well as higher-than-anticipated quarterly earnings before interest, taxes, depreciation, and amortization, net income, and earnings per share.
  • The higher EBITDA percentage was mainly driven by higher volumes and improved pricing, despite increased investment in new products and capabilities.
  • Operating cash flow was an inflow of $495 million, $331 million higher than the first quarter of last year, essentially due to higher earnings.

SDRL: Aquadrill Numbers Ahead of Q1 Results

By Hamed Khorsand

  • SDRL is scheduled to report first quarter results on May 23, 2023, before the market open and has provided a glimpse to the profitability Aquadrill is operating at
  • The Aquadrill fourth quarter results affirm our investment thesis of the profitability the business is operating at with the day rates Aquadrill has secured
  • SDRL is the last company of the major drill ship owners to report first quarter results. Peers have shed a positive outlook on the industry and day rate trend

Advanced Micro Devices Inc.: Important Strides Towards Speeding Its AI Roadmap – Key Drivers

By Baptista Research

  • In the first quarter, Advanced Micro Devices performed well, delivering better-than-anticipated revenue and earnings in a mixed demand environment, launching numerous products across its businesses.
  • Revenue for the first quarter was $5.4 billion, down 9% from the same period last year.
  • Revenue in the Data Centre category was $1.3 billion, flat year on year, with greater cloud sales offsetting decreased enterprise sales.

ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers

By Baptista Research

  • ZoomInfo Technologies achieved better-than-expected revenues and profitability in Q1 with an adjusted operating income margin of 40% and more than $121 million in unleveraged free cash flow.
  • Moreover, ZoomInfo is investing resources in products to develop engaging customer experiences, enhance data leadership, and go upmarket.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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May 18
0

Daily Brief Japan: Canon Inc, ZOZO Inc, freee, Peptidream Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
  • Zozo Consolidates Market Share
  • Freee: User Acquisition Strategy Paying Off
  • Peptidream (4587 JP): 1Q23 Result- Radiopharma Drove Sales; Losses Narrowed; Guidance Reiterated
  • Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start

By Travis Lundy

  • Canon has conducted 18 buybacks in the last 15 years. Every single one has been the same size. And the parameter-setting and how they are executed is… particular.
  • For those with Canon to execute, using the information about patterns may be helpful. 
  • For those interested in a trade, there may be one here.

Zozo Consolidates Market Share

By Michael Causton

  • Zozo managed a 7% gain in GTVs last year which meant it grew its share of the fashion market. 
  • It now has more than 10 million active users and has laid down plans to reach ¥800 billion in GTVs in the medium term.
  • Zozo’s momentum is clear and its targets look realistic. Shame about the performance of Z Holdings.

Freee: User Acquisition Strategy Paying Off

By Shifara Samsudeen, ACMA, CGMA

  • freee (4478 JP) reported 3QFY06/2023 results. Revenue increased 39.5% YoY to ¥5.1bn (vs consensus ¥4.9bn) while adj. operating losses increased to ¥1.9bn (vs consensus ¥1.9bn) from ¥676m in 3QFY03/2022.
  • Widened operating losses is no big surprise as freee had already guided for increased investments related to invoicing system and tax filing season which has helped increase paying user numbers.
  • As we continue to emphasise, freee’s business model is superior to that of MF who has resorted to several mediocre businesses (non-BA SAAS) to pursue aggressive top line growth.

Peptidream (4587 JP): 1Q23 Result- Radiopharma Drove Sales; Losses Narrowed; Guidance Reiterated

By Tina Banerjee

  • In 1Q23, Peptidream Inc (4587 JP) recorded revenue of ¥4,963 million, compared to ¥419 million revenue in year-ago period, driven by radiopharmaceutical business segment, which contributed 80% of total revenue.
  • As of March 31, 2023, the company’s pipeline consisted of 127 discovery and development programs (representing a net increase of 1 program from the end of the prior financial year).
  • Peptidream reiterated guidance for full-year 2024. Revenue is expected to increase 12% to ¥30B in 2024, while operating and net profits are expected to decline 30% and 64%, respectively.    

Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

By Aki Matsumoto

  • The increase in the number of companies adopting restricted stock is a positive development, but the bias toward fixed remuneration and the non-disclosure of individual director compensation are unsolved issues.
  • It’s ironic that 90% investors see ROE as equal to or lower than the cost of capital, while 93% companies know their cost of capital but only 2.3% disclose it.
  • If affiliated companies with 20% shareholdings are included, there are still large number of companies covered (36.7% in the prime market), and “parent-subsidiary listings” continue to be a hot topic.

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May 18
0

Daily Brief Private Markets: SK Pharmteco Pre-IPO Funding & Impact on SK Inc and more

By | Daily Briefs, Private Markets

In today’s briefing:

  • SK Pharmteco Pre-IPO Funding & Impact on SK Inc

SK Pharmteco Pre-IPO Funding & Impact on SK Inc

By Douglas Kim

  • SK Pharmteco is currently 100% owned by SK Inc. It is one of the largest CMO players in Korea. SK Pharmteco is trying to raise nearly 600 billion won. 
  • SK Pharmteco is seeking valuation of about 5 trillion won which is much higher than its book value of 1.65 trillion won.
  • Our NAV valuation of SK Inc suggests an implied NAV of 21.2 trillion won or 286,636 won per share, representing 75% upside from current levels.

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May 18
0

Daily Brief ESG: Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements and more

By | Daily Briefs, ESG

In today’s briefing:

  • Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

By Aki Matsumoto

  • The increase in the number of companies adopting restricted stock is a positive development, but the bias toward fixed remuneration and the non-disclosure of individual director compensation are unsolved issues.
  • It’s ironic that 90% investors see ROE as equal to or lower than the cost of capital, while 93% companies know their cost of capital but only 2.3% disclose it.
  • If affiliated companies with 20% shareholdings are included, there are still large number of companies covered (36.7% in the prime market), and “parent-subsidiary listings” continue to be a hot topic.

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May 18
0

Daily Brief Equity Bottom-Up: Shopee Enters a New Era of Slower GMV Growth and Higher Fees for Sellers and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Shopee Enters a New Era of Slower GMV Growth and Higher Fees for Sellers
  • Sea Ltd: Free Fire’s Downfall, Shopee’s Struggles, Is Fintech the Next Challenge?
  • Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
  • Notable Recent Insiders Buying in Five Korean Companies
  • [Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
  • Zozo Consolidates Market Share
  • Rio Tinto: Final Chapter in the Consolidation of Its Mongolian Crown Jewel Oyu Tolgoi
  • [Sea Limited (SE US, SELL, TP US$60) Target Price Change]: Cut Gaming Revenue and Margin Forecast
  • Freee: User Acquisition Strategy Paying Off
  • China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play

Shopee Enters a New Era of Slower GMV Growth and Higher Fees for Sellers

By Simon Torring

  • Shopee, Southeast Asia’s largest e-commerce player, has been on a strict financial diet to reach profitability in the last year.
  • That’s been welcome news for shareholders of its listed parent, Sea Ltd, but more challenging for sellers on the platform who have faced lower sales growth and higher selling costs after years of heavily subsidised operations. 
  • In this blog post we report on the most important figures from Shopee’s newly published Q1-2023 results (released 16 May) as well as the key implications for e-commerce sellers in Southeast Asia.

Sea Ltd: Free Fire’s Downfall, Shopee’s Struggles, Is Fintech the Next Challenge?

By Oshadhi Kumarasiri

  • Sea (SE US)‘s shares dropped by 18% as its operating profit fell short of consensus by around 60% at $125m, compared to the expected $311m.
  • Shopee’s revenue shows improvement due to increased monetization, but there are no signs of exponential growth potential in operating profit.
  • Projected decline in paying users poses further downside for Free Fire, while the previously positive fintech segment underperformed in Q1 with revenue and operating profit below expectations.

Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin

By Ming Lu

  • In 1Q23, the revenue growth rose significantly to 11% YoY.
  • The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
  • We set an upside of 28% and a price target of HK$440 for yearend 2023.

Notable Recent Insiders Buying in Five Korean Companies

By Douglas Kim

  • In this insight, we discuss recent insiders buying in five Korean companies including Dongsuh, Green Cross Holdings, Megastudy, Yuanta Securities, and YG Entertainment. 
  • With the exception of YG Entertainment, the share prices of the four other companies are trading at nearly 50% since their peak levels in the past several years. 
  • Of these five companies, three of them (YG Entertainment, Yuanta Securities, and Dongsuh Co) generated positive operating profit on a YoY basis.

[Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC

By Shawn Yang

  • Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%. 
  • We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC. 
  • Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.

Zozo Consolidates Market Share

By Michael Causton

  • Zozo managed a 7% gain in GTVs last year which meant it grew its share of the fashion market. 
  • It now has more than 10 million active users and has laid down plans to reach ¥800 billion in GTVs in the medium term.
  • Zozo’s momentum is clear and its targets look realistic. Shame about the performance of Z Holdings.

Rio Tinto: Final Chapter in the Consolidation of Its Mongolian Crown Jewel Oyu Tolgoi

By Nicolas Van Broekhoven

  • Rio Tinto Ltd (RIO AU) last year started the long-awaited simplification of its Oyu Tolgoi ownership via the $3.1 billion purchase of Turquoise Hill Resources (TRQ CN). 
  • With Oyu Tolgoi having an 80-year mine life and ramping up to become the world’s fourth-largest copper mine the ultimate consolidation of its last remaining minority investment is upon us.
  • Entree Resources (ETG CN), where Rio already owns 16%, is the final M&A target to consolidate ownership.  With arbitration set for April 2024, the clock is ticking.

[Sea Limited (SE US, SELL, TP US$60) Target Price Change]: Cut Gaming Revenue and Margin Forecast

By Shawn Yang

  • SE reported C1Q23 revenue/non-GAAP net income in-line/(37%) vs. cons., and (3.2%)/(31%) vs. our est. Profit miss is mainly due to the 53% YoY decline in game revenue
  • We suggest that 1) game development and S&M cost cutting, as well as 2) disappointing game content updates during 1Q23, lead to the weak result; 
  • In the long run, we still expect Shopee growth to be SE’s major issue, as TikTok continues to grow rapidly. We maintain SELL and cut TP to US$ 60.

Freee: User Acquisition Strategy Paying Off

By Shifara Samsudeen, ACMA, CGMA

  • freee (4478 JP) reported 3QFY06/2023 results. Revenue increased 39.5% YoY to ¥5.1bn (vs consensus ¥4.9bn) while adj. operating losses increased to ¥1.9bn (vs consensus ¥1.9bn) from ¥676m in 3QFY03/2022.
  • Widened operating losses is no big surprise as freee had already guided for increased investments related to invoicing system and tax filing season which has helped increase paying user numbers.
  • As we continue to emphasise, freee’s business model is superior to that of MF who has resorted to several mediocre businesses (non-BA SAAS) to pursue aggressive top line growth.

China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play

By Osbert Tang, CFA

  • China Travel International Investment Hong Kong (308 HK) should have more upside from here given the sharp earnings recovery over FY23-25. But the market seems to have overlooked this.
  • Its FY18 net profit reached HK$687m; but dipped to HK$356m loss in FY22. With its businesses now behind issues like HK social unrest and border closure, there is immense upside. 
  • All of CTII’s business segments have experienced recovery in FY23, especially following the resumption of HK-mainland China traffic. Its 0.54x P/B is still 52% down from the peak. 

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May 18
0

Daily Brief ECM: Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao and more

By | Daily Briefs, ECM

In today’s briefing:

  • Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
  • Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers
  • Freeport-McMoRan Inc: Is The Volumes Expectation For 2023 Too High? – Key Drivers
  • Cummins Inc.: What Is Their Core Business Strategy? – Key Drivers
  • DuPont de Nemours Inc.: Acquisition Of Spectrum Plastics & Other Key Drivers
  • ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers

Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+

By Sumeet Singh

  • On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
  • Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
  • In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.

Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers

By Clarence Chu

  • Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
  • Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
  • In this note, we will talk about the positive aspects of the deal.

Freeport-McMoRan Inc: Is The Volumes Expectation For 2023 Too High? – Key Drivers

By Baptista Research

  • It was a challenging first quarter for Freeport-McMoRan due to disruptions caused by extreme weather conditions and labor shortages.
  • The company managed an all-around beat and achieved essentially in-line consolidated unit net cash costs, averaging $1.76 per pound despite lower-than-expected volumes.
  • Freeport-McMoRan ended the quarter with $1.3 billion in net debt, and its balance sheet, liquidity, and financial flexibility are in great shape.

Cummins Inc.: What Is Their Core Business Strategy? – Key Drivers

By Baptista Research

  • Cummins had a successful first quarter, marked by a 12% increase in organic revenue growth, as well as higher-than-anticipated quarterly earnings before interest, taxes, depreciation, and amortization, net income, and earnings per share.
  • The higher EBITDA percentage was mainly driven by higher volumes and improved pricing, despite increased investment in new products and capabilities.
  • Operating cash flow was an inflow of $495 million, $331 million higher than the first quarter of last year, essentially due to higher earnings.

DuPont de Nemours Inc.: Acquisition Of Spectrum Plastics & Other Key Drivers

By Baptista Research

  • DuPont de Nemours had a challenging 2023 first quarter as organic revenue declined by 3%, although there was broad demand strength in areas including water, automotive, aerospace, and healthcare.
  • DuPont de Nemours recently announced a $1.75 billion definitive agreement to acquire Spectrum, a leading manufacturer of critical components and devices for medical end markets.
  • We give DuPont de Nemours, Inc. a ‘Hold’ rating with a revised target price.

ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers

By Baptista Research

  • ZoomInfo Technologies achieved better-than-expected revenues and profitability in Q1 with an adjusted operating income margin of 40% and more than $121 million in unleveraged free cash flow.
  • Moreover, ZoomInfo is investing resources in products to develop engaging customer experiences, enhance data leadership, and go upmarket.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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May 18
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan|Relief Equity Rally and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan|Relief Equity Rally, But Still No Deal; NUGGET: Rapidus: Key to Japan’s Semi Resurgence
  • Silicon Wafers Imminent Capacity Glut
  • Bloomberry Resorts: 1Q23 Results Continue Momentum to Support Higher Valuations in Coming Quarters
  • Nissan’s China Sales Tumble as EV-Makers Gain Ground
  • Expect Cash Build Despite Near-Term Margin Pressure

Ohayo Japan|Relief Equity Rally, But Still No Deal; NUGGET: Rapidus: Key to Japan’s Semi Resurgence

By Mark Chadwick

  • OVERSEAS.  Risk on as US Equities Jump on Debt Ceiling Hopes; China April House px rise;  Solid US Housing starts; Musk Says 2 new Blockbuster Telsa models to come.
  • JAPAN.  NKY Futs 1.4% vs Cash; Japan Equities poised to make new highs on US rally and weaker yen;  Japan GDP print 1.6%, better than expected;  Chinese Tourist Back
  • NUGGET. Rapidus aims to rejuvenate Japan’s semiconductor industry by developing advanced 2-nanometer logic semiconductors, with plans for a prototype production line by 2025 and mass production by 2027.

Silicon Wafers Imminent Capacity Glut

By William Keating

  • Wafer demand in 2023 has fallen to just 86% of global capacity, the lowest in a decade
  • Demand for Epitaxial wafers (used for Logic) is not going to recover until EOY’23. Demand for Polished wafers (used for Memory) will likely take until H2’24 to recover
  • It could potentially take until 2026 for supply and demand to return to balance. 

Bloomberry Resorts: 1Q23 Results Continue Momentum to Support Higher Valuations in Coming Quarters

By Howard J Klein

  • Our calls since last year have included focus on Manila’s Entertainment Zone casino stocks taking note of surging growth both before and post covid.
  • We continue to guideBUY on the shares as we see growing acceleration of GGR increases.
  • Latest results indicate growth both in domestic play as well as growing visitation from nearby Asian origin points, some of which is diverted from Macau.

Nissan’s China Sales Tumble as EV-Makers Gain Ground

By Caixin Global

  • Nissan Motor Co. Ltd. posted a sharp drop in its China car sales last year as the Japanese company trailed many of its rivals in shifting toward electrification in the world’s largest auto market, where homegrown electric-vehicle (EV) brands are increasingly gaining traction.
  • Nissan sold just over 1 million cars in China in 2022, a 24.3% drop on the year, according to its earnings report released on Thursday.
  • In comparison, it booked respective annual drops in car sales of 5.2% and 5.8% in the two previous years. But the country is still the auto giant’s largest market, followed by North America, Japan and Europe, respectively.

Expect Cash Build Despite Near-Term Margin Pressure

By Water Tower Research

  • Strong demand for pad-optimal super-spec drilling rigs drove ICD’s solid 1Q23 financial and operating results.
  • ICD generated 1Q23 adjusted EBITDA of $21.4 million on revenue of $63.8 million, up 16% from 4Q22.
  • Adjusted EBITDA in 1Q22 was $3.6 million.

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