In today’s briefing:
- Short Note: Position for Upcoming Banking Crisis, BUY Hong Kong & China Property Stocks, and BTC/ETH
- Recruit: Share Price Continues to Fall as Labour Markets Facing Challenges
- Air China (753 HK): Set to Accelerate
- [KE Holdings (BEKE US) Target Price Change]: Raise TP for Better Market Outlook and Profitability
- [ZTO Express (ZTO US) Earnings Review]: Striding Towards Ecosystem Development
- Akeso Biopharma (9926.HK) – Behind the Outstanding Performance in 2022 and the Potential Challenges
- Comms Group Limited – Global Revenue Growth Is Calling
- [NetEase (NTES US) Company Update]: Eggy Party Could Have Long Life Cycle
Short Note: Position for Upcoming Banking Crisis, BUY Hong Kong & China Property Stocks, and BTC/ETH
- Upcoming banking crisis will accelerate in the coming few weeks, it is very likely Fed will slow down rate hike or re-start a rate cut cycle
- To position for this: BUY Hong Kong property developers New World Development 17 HK, Henderson 12 HK, Sun Hung Kai Properties 16 HK
- Apart from HK RE developers, buy China’s name Hang Lung (101 HK) and crypto-currency (BTC and ETH)
Recruit: Share Price Continues to Fall as Labour Markets Facing Challenges
- Recruit Holdings (6098 JP) share price is down 18% YTD and the valuation multiples have more than halved since their peak in November 2021.
- The company’s recent 3QFY03/2022 earnings pointed towards declining profitability with mismatch in the labour markets easing off.
- The job openings in the US have further declined in January suggesting that Recruit’s share price has more room to fall as consensus has further downgraded estimates.
Air China (753 HK): Set to Accelerate
- Air China (H) (753 HK) underperformed China Southern (1055 HK) YTD as domestic traffic recovery is faster than international, but its momentum will accelerate in the rest of the year.
- With Jan-Feb domestic traffic returned to 92.6% of 2019, CSA’s upside is relative limited. Air China, instead, will benefit from more profound international rebound which only back by 10.3%.
- Recent developments including resumption of visa issuance and outbound international group travels, removal of pre-flight negative PCR tests and recovery of visitors to HK all bode well for Air China.
[KE Holdings (BEKE US) Target Price Change]: Raise TP for Better Market Outlook and Profitability
- BEKE (Beike) reported 4Q22 revenue in-line/4.9% vs our est./cons. Non-GAAP operating income 65% higher than our estimate and non-GAAP net income 59%/122% higher than our est./cons.
- We estimate 1Q23/2023 revenue to rise 46%/24% YoY. We think Beike’s strategy on focusing quality above scale is suitable under current real estate market trend, bode well for profitability.
- We maintain BUY rating and raise the TP by US$2 to US$23 to reflect 1) the gross margin improvement, 2)narrower loss-making in new initiatives.
[ZTO Express (ZTO US) Earnings Review]: Striding Towards Ecosystem Development
- ZTO guided at least 1.5ppt market share gain in 2023, which exceeds our previous expectation.
- ZTO, leveraging its highest market share, is the most likely to expand its own end-to-end ecosystem, which leads to improvement in operating efficiency, increase of doorstep delivery, and pricing power.
- Maintain BUY and TP due to share gain, efficiency improvement, and early-mover advantage in expanding ecosystem. Our TP implies 23x P/2023E.
Akeso Biopharma (9926.HK) – Behind the Outstanding Performance in 2022 and the Potential Challenges
- Akeso achieved outstanding product sales last year, mainly due to off-label prescriptions.It means Akeso has “overdrawn” AK104’s performance on other indications in advance. Sales could significantly slow down over time.
- It is difficult to turn loss into profit by selling drugs alone. As the profits from selling drugs are far lower than R&D expenditures, losses are the norm.
- Akeso is overvalued, but if AK112 is successful in head-to-head trial with Keytruda, Akeso would be a player to compete on international stage. Its valuation would reach a new level.
Comms Group Limited – Global Revenue Growth Is Calling
- Comms Group Ltd (ASX:CCG) operates in the broad IT and communication space both domestically and offshore.
- Domestically, CCG provides a full range of IT and communication services in the highly fragmented MSP/ICT market, a sector expected to grow on the back of digitalisation, an increasingly remote workforce, the need for cyber security, and increasing complexity.
- Internationally, CCG is a niche player in the provision of corporate voice solutions for enterprises with an established, capital-light network particularly strong in the Asia Pacific.
[NetEase (NTES US) Company Update]: Eggy Party Could Have Long Life Cycle
- We suggest that the recent strong performance of <Eggy Party> could be sustainable because of the absence of competitive games…
- …an emerging user-generated-content (UGC) ecosystem with much potential, social connections among players, and popularity on social media.
- We maintain our previous estimation that <Eggy Party> could at least contribute RMB 4-5 bn this year. NetEase is one of our top picks in China internet.
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