Equity Bottom-Up

• Aided by the Japanese Government’s efforts to rebuild the COVID-ravaged leisure sector, Oriental Land (4661 JP)’s 3QFY23 OP surpassed consensus by more than 35%.
• We believe 3QFY23 could be a peak in terms of financial performance for Oriental Land, at least until the opening of the Fantasy Springs.
• In addition, the growth story that OLC offered through the expansion of DisneySea, seems to be no longer compelling as the management has simply stopped talking about its progress.

• Delta Thailand has surged post SET50 re-inclusion and the stock has dramatically outperformed both Delta Taiwan and Thailand’s SET Index.
• For both stocks, forward growth rates are expected to be similar for 2023E and 2024E.
• Delta Taiwan’s stake in Delta Thailand alone is now worth nearly 90% of its market cap.

• GoTo’s share price lost more than 75% last year following its weaker-than-expected performance and lock-up expiry despite the company entering into a coordinated secondary offering of shares with pre-IPO shareholders.
• The company’s share price has moved up 24% YTD partially driven by cost cutting measures that is expected to improve the company’s profitability.
• Nevertheless, we expect this share price rebound to be temporary with e-commerce and food delivery market in Indonesia slowing down.

• Ace Hardware has been a distinct laggard amongst listed retailers in Indonesia, with its valuations drifting to multi-year lows, given a slow recovery from the pandemic and limited digital strategy. 
• The company has continued to see lacklustre SSSG finish flat for last year but has recently opined a more optimistic outlook for 2023, planning to open 10-15 new stores.
• Ace Hardware Indonesia (ACES IJ) trades on 13.7x FY2023E PER and 12.7x FY2024E PER when it used to trade on twice that multiple with not dissimilar growth rates.

• Komatsu Q3 operating profit rose 54% YoY, beating analyst estimates by around 12%
• Construction and Mining Equipment sales rose 31% in the quarter, or ~10% on a constant currency basis versus industry volume of -6%
• Komatsu shares have sharply lagged the recovery at CAT. We still see significant upside with current P/B of 1.2x

• MMP Industries (MMP IN)  is mainly engaged in the business of manufacturing, selling and distribution and trading of aluminum products such as powder, pyro and flake, paste, foils etc.
• The company has been on the main board of NSE since F20 but however, its financials are plagued with several forensic concerns.
• We highlight takeaways mainly related to negative cash flows and their misrepresentation in reporting standards. Additionally, the company is also engaged in various secretarial audit woes.

• Bank Mandiri (BMRI IJ) finished the year with a strong showing of loan growth across the board driven by corporate and commercial loans but micro was also a feature. 
• Both the bank’s consumer app under Livin’ and its digital corporate platform under Kopra continue to help drive CASA growth and transactions plus the bank is opening “smart” branches. 
• Bank Mandiri (BMRI IJ) is optimistic about the outlook for loan growth and NIMs in 2023, with its digital initiatives continuing to gain traction and drive growth. Valuations are attractive.

• In 2022, Samsung Biologics (207940 KS) posted record-high consolidated revenue of KRW3 trillion and, driven by new orders, efficient plant utilization, and inclusion of Samsung Bioepis as a wholly-owned subsidiary.
• Plant 4 is on track to be completed in H12023, with active pre-sale activities are rapidly locking in capacity. Strong order momentum continued, with 2022 CMO contract amount of $9.5B.
• Samsung Bioepis reported revenue growth of 12% to KRW946B, driven by stable sales of existing products and new product launch. Humira biosimilar launch in the US is the biggest catalyst.

• Samsung reported 4Q22 detailed results – Semiconductor earnings evaporated and its memory subsegment likely lost money.
• Samsung re-iterated that it would NOT cut capex despite the market downturn – Samsung appears ready to endure losses which is negative for Nanya Tech, SK Hynix, and Micron.
• Japan and the Netherlands have joined the U.S. with chip technology restrictions for China – Hon Hai is a net winner.

• Hon Hai’s upcoming results date hasn’t yet been publicly announced, but last year it was 16 March.
• Gross margin could come in well below consensus, and net profit could be minimal for 4Q22E. Look for reiteration of its longer-term margin target from management.
• We remain structurally bullish on Hon Hai and see it as positioned favorably relative to U.S. China semiconductor restrictions. Our TP for Hon Hai is $155, over 50% above today.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Travis Lundy as he gives us a quick rundown about what is the current situation that is happening with Adani Enterprises and where they are headed from this point on.

The webinar will be hosted on Wednesday, 1 February 2023, 17:00 SGT/HKT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

• We believe total revenue growth rate will accelerate from 4Q22 and grow by 9% in 2023.
• We believe the operating margin will be stable from 4Q22 to 2Q23, but the margin will climb up from 3Q23.
• We believe that EPS will increase by 16% and the stock will have an upside of 21%~44%.

• Inventory levels rose to highs in 3Q22 — Now increased margin pain may come through as we move through the latest earnings season.
• Forecasts still assume relatively strong margins vs. history and thus appear at risk of disappointment.
• Earnings forecasts, while assuming a down-cycle, are still assuming a relatively benign down-cycle.

• Two of the biggest department store chains in Japan, H2 O Retailing (8242 JP) & Isetan Mitsukoshi Holdings Ltd (3099 JP) are set to disclose FQ3 earnings this week.
• The ones with FQ3 ending in November, J Front Retailing (3086 JP) and Takashimaya (8233 JP) surprised to the upside with 6% and 8% price gains on earnings.
• Our analysis indicates that H2O Retailing & Isetan Mitsukoshi could deliver stronger FQ3 results. Thus, we would look to trade Japanese Department Stores before earnings this week.

• We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G
• NEC’s Network Services registered double-digit revenue and profit gains in Q3 on the back of growth in 5G equipment sales and IP income.
• We believe that the current share price (+4% over the past 12m) and valuation (10x PE, 0.8x PB) do not reflect the positive mid-term outlook

• Kasikornbank PCL (KBANK TB) remains one of Thailand’s top-tier banks with particular strength in SME lending and consumer lending making it a beneficiary of both consumption and tourism recovery. 
• The bank continues to grow its digital banking and business through its K PLUS app which now has more than 21m users, with multiple use cases and self-apply loan applications. 
• Kasikornbank remains a core holding for exposure to Thailand’s tourism-driven recovery through its SME exposure. Valuations are attractive with the bank trading at 0.7x FY2023 PBV and 8.3% FY2023E ROE. 

• Gujarat Ambuja Exports (GAEX IN) is an Agro Processing conglomerate having a diverse product profile across oil seeds, edible oil refining, maize and starch, cotton yarn, wheat processing, etc. 
• Our forensics primarily include the takeaways on MACPPL acquisition, its true rationale, accounting impact on the balance sheet and few disclosure errs.
• Other major takeaway relates to capex story and grey areas relating to the capacity size and timely completion, especially for its marquee plant in Malda.

• Bukalapak (BUKA IJ)  is one of Indonesia’s most differentiated digital economy players plus it is unusual in that it has one of the longest runways amongst peers at 15 years. 
• Despite operating a marketplace model, the platform uses this to generate traffic for its other businesses including its O2O Mitra Bukalapak business and its growing online speciality store business. 
• Bukalapak (BUKA IJ) also has strong ESG credentials, the most obvious of which is in the empowerment of MSMEs through its Mitra business. It is also making headway toward profitability.

• Nihon M&A Center (2127 JP) reported 3QFY03/2022 results. Revenue declined 9.9% YoY to JPY9.8bn (vs consensus JPY13.6bn) while OP dropped 21.9% YoY to JPY3.2bn (vs consensus JPY6.1bn).
• Though there had been an increase in the no. of transactions completed during the quarter, revenue declined due to price pressures.
• Share price has declined 22.8% during today’s trade due to weaker-than-expected earnings and we think full-year FY03/2022E guidance is too hard to achieve.

• This is our second Insight into Tobila Systems – the absolute dominator in the niche of fraud/spam call and message filtering services in Japan;
• We like the high-quality, unique assets owned by the company, although capital allocation appears to stand out as a wild card in our formula of long-term shareholder-value creation;
• At the current level, we would hold the shares firmly and wait patiently for more opportunistic offerings from Mr. Market to accumulate more shares.

• TSMC’s ADR premium is in the double digits, representing a major breakout.
• ASE Technology’s premium is also in the double digits and the company will be reporting results next week.
• Chunghwa’s premium is high for its tight range, and results will be coming out for the company this week.

• China catering players have seen strong recovery during the Chinese New Year starting from Jan 22th, amidst a broad-based revival of the service sector as a whole.
• For Xiabuxiabu, latest data points suggest significant progress in turnaround and higher visibility into 2023 performance.
• We see upside to our financial projection for 2023 and are more confident that Xiabuxiabu is the most attractively-priced to play re-opening in China catering sector. Expect 50% upside.

• Intel reported weak results at the end of last week, with its PC segment hit worst.
• PC total addressable market to fall by 7.5% based on Intel’s guidance.
• Asus and Acer inventory levels show the problem impacting Intel, and for the industry as a whole right now.

• ST reported solid Q4 results, 4% above consensus expectations at the EBIT level. Q1 2023 guidance is much better than consensus expectations on sales (11% beat) 
• ST confirmed its view that 2023 will be another growth year, with sales indicated at US$17.3bn, which is +7.5% year over year and well above consensus
• Stock is up 21% since our initial note. We still see over 30% upside from here

• Cipla Ltd (CIPLA IN) reported revenue growth of 6% in Q3FY23. Ex-COVID revenue growth was 11%. Despite price erosion and surging R&D investment, EBITDA margin expanded 153bps YoY to 24.2%.
• Ex-COVID India business recorded 11% revenue growth, driven by double-digit traction in core portfolio across therapies and business segments. Branded prescription business reported seventh consecutive quarter of market beating growth.
• US business recorded record high revenue, representing 30% growth in USD terms. Strong traction in respiratory products was further propelled by new launches including peptides. In December, Cipla launched leuprolide.

• Dr. Reddy’s Laboratories (DRRD IN) recorded record high revenue, EBITDA, and net profit in Q3FY23, driven by US business. The company generated healthy cash flow of INR20B during the quarter.
• Revenue from North America surged 64% INR30.6B, driven by new products launches, increase in volumes, and a favorable forex movement. gRevlimid contributed ~34% of North America revenue.
• The company plans to launch ~30 products in the U.S. market in FY24. With the pipeline shifting toward complex products, Dr. Reddy is well-positioned to maintain double-digit revenue growth.

• Digital Publisher BuzzFeed’s stock has seen an epic rally in the past week, with most of the gains driven by the company’s decision to use Artificial Intelligence tools like OpenAI’s ChatGPT to build quizzes and write content.
• Essentially, investors have been cheering about the potential for improved profitability and content that can be written at scale by using these various tools.
• This is a welcome change for the media outlet, which has seen its advertising revenues plummet, its site traffic decline across the board, and its balance sheet crumble.

• Thungela’s Goedehoop mine continues to deliver robust results, but most of its assets are underperforming.
• The stock’s more than 35% ex-post dividend yield had many investors excited.
• Nevertheless, cyclicality could play its hand soon, according to the canary.

• On 27 January, LG Energy Solution provided financial and operational guidance for 2023.
• We believe that the consensus is likely to reduce sales estimate by 3% and operating profit estimates by 10-15% in 2023.  
• Out of the total of 3.4% of ESOP shares, about 0.5% to 1.5% of the shares could be sold in the first few weeks after the end of the lock-up. 

• Jabil’s Q1 performance was impressive and the company delivered an all-around beat which helped propel its stock price.
• The company’s strength resulted in the quarter’s double-digit rise in revenue, core operating income, and core diluted profits per share.
• 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.

• Kimberly-Clark delivered a mediocre performance in the last quarter of 2022 as it failed to meet the revenue expectations of Wall Street.
• Despite that fact, the company managed to get 1/3rd of profit from the international market in the last quarter.
• The new products created by Kimberly-Clark in the last 3 years have contributed to 60% of the total sales growth in 2022.

• Despite a series of macroeconomic challenges, Dropbox had a good last quarter and managed an all-around beat.
• They also continue to return a sizable percentage of their free cash flow to shareholders through share repurchases.
• Although they are experiencing moderate growth in their Sign business, it is important to set Dropbox Sign apart from conventional eSign solutions.

• Schlumberger maintained its growth momentum throughout the fourth quarter, producing significant revenue growth and additional sequential and annual margin increase.
• They had sequential revenue growth and margin expansion in North America and internationally.
• On the other hand, exploration data sales, INNOVATION FACTORI, and AI solutions saw a significant increase in the digital sector.

• Textron delivered a decent result in the last quarter with revenues of $3.6 billion which surpassed Wall Street expectations.
• The company faced a strong demand, a strong pricing net of inflation, and a higher aftermarket volume in this quarter.
• It was a quarter of strong customer demand and solid cash flow.

• Levi Strauss had a successful fourth quarter with strong fiscal 2022 performance.
• Levi Stauss managed to enhance its brand positioning and market share in the global market.
• 40% of the company’s revenues came from outside of denim bottoms in this quarter.

• Central Retail Corp remains a core holding to play the retail recovery in Thailand and Vietnam, with the tailwind from the recovery in tourism providing an additional boost. 
• The company has seen a dramatic recovery in its fashion business along with higher margins plus it is expanding new stores and launching new formats such as Tops CLUB. 
• Vietnam provides an additional growth driver through BigC and GO Stores, where it is the omnichannel market leader, with Italy under Rinascente already ahead of pre-COVID sales levels.

• Delta in core net interest income growth is accelerating like no other peer
• Net interest margin’s are now up 50% YoY at a reasonable level of 3.02%
• Credit costs have yet to decline despite NPL ratio down sharply

• We have a positive view of Luxshare Precision Industry (002475 CH) and we believe its shares are well poised to outperform the market this year. 
• The recent production halts and protests at Foxconn’s Zhengzhou facility due to the overly stringent COVID measures has benefited Luxshare since Apple has given more orders to the company.
• We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023.

• Fanuc’s Q3 sales and earnings beat analyst expectations. Sales rose 17% YoY and profit increased by 14%. 
• The bears will be able to point to the collapse in FA orders in Q3, but this just confirms what the Japan Machine Tool numbers have been signalling.
• Robot orders remain strong as Fanuc continues to benefit from de-globalization and the need to modernize global supply chains.

• How many kitchens does Intel have? Intel guided 1Q2023 revenues to $11B, down 40% YoY / 22% QoQ and 21% (!!) below consensus $14B. 
• 1Q23 gross margins ex-accounting change guided to 36%, the lowest since 1986!
• Intel’s worsening FCF means dividend cuts are on the table.

• Bank Central Asia came through with a strong finish to the year as it took the brakes off lending, with the advantage of the highest CASA amongst Indonesian banks. 
• Loan growth was focused on corporate borrowers, commercial & SMEs, and consumers, with mortgages and autos seeing strong growth in 4Q2022, whilst loans-at-risk continues to decline, boosting profitability. 
• Bank Central Asia is highly capitalised but continues to invest in growth without sacrificing underwriting standards and continues to embrace its digital reach with growing numbers of customers. 

• Krung Thai is our pick; it ranks top in terms of post-provision profitability, as well as screening well on NPL coverage and valuations, including its low PEG ratio
• We also like Ayudhya, with its strong pre and post-provision profitability in 4Q22, strong credit quality metrics and attractive valuations
• Kasikorn has had a difficult 4Q22 due to its high cost of risk and its need to bolster provision coverage; Kasikorn may be a 2023 opportunity, but not yet

• Hogy Medical (3593 JP) reported 6.2% growth in revenue to ¥29.5B during 9MFY23, driven by healthy sales of Premium Kit and other non-woven products. Sales of Premium Kit climbed 12%.
• Rising cost pressure has negatively impacted margins. Gross profit margin contracted 180bps YoY to 40.6% in 9MFY23. Operating profit margin declined 20bps YoY to 17.1%.
• Hogy continued to expect revenue to rise 5.3% YoY to ¥38.7B, operating profit to grow 6.1% YoY to ¥6.5B, and net profit to increase 4.6% YoY to ¥4.57B in FY23.

• After combining the Norton LifeLock and Avast businesses, the company has been renamed as Gen Digital – a corporation with the goal to develop technological solutions that will allow users to profit fully from the online environment while maintaining their privacy and confidence.
• Today, the company’s brand portfolio includes well-known brands, including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender, and CCleaner.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• In December many NPL ratio categories improved MoM, but there are still some areas of concerns namely household and SME credit
• System loan growth for full year 2022 decelerated further (from an annualized 14.7% in November) but still grew by +14%, due primarily to slower consumer loan growth
• New credit spreads declined MoM, along with lending rates implying that this was not due solely to funding costs; we favour Banco do Brasil, and are cautious on Santander Brasil

• Tesla reported a 6% Q4 EPS beat, but stripping out a one-off deferred revenue booking & higher than expected regulatory credits, Q4 results missed by 9%.  
• Tesla rose +5.5% post market close after Musk said YTD orders are “2x” output. None of the data we have seen implies such demand, especially weekly China sales. 
• What went unnoticed on the earnings call is that Tesla created a $7bn credit facility this month, which should dash all hopes of them doing a share buyback in 2023. 

• ASML and Lam Research’s latest guidance implies extremely different near-term revenue outlooks but shows an industry pulling back near-term while investing for long-term.
• Results show the much weaker situation for Memory chips vs. Logic chips, and little discussion of a recovery for Memory from the firms so far.
• Firms servicing long-term strategic, specialized demand from customers are indeed performing better than those servicing more commoditized demand.

• Hyundai Motor’s EV sales as a percentage of total sales increased from 4.3% in 4Q 2021 to 5.7% in 4Q 2022. 
• Hyundai Motor announced that it will cancel 2.14 million common shares, representing 1% of its outstanding common shares.
• The company beat consensus sales and operating profit estimates in 4Q 2022 and the consensus is likely to revise up their earnings estimates. 

• Hindustan Unilever (HUVR IN)‘s strong quarterly performance was overshadowed by a proposed hike in royalty payments to parent Unilever PLC (ULVR LN) 
• HUVR’s historical royalty growth has been below revenue and PBT growth and hence does not generate any red flags in terms of minority shareholder protection.  
• While the impact on EPS is ~3%, we believe much of the reaction around HUVR’s Royalty is Noise. 

• S&P (the company) may be a lot more exposed than S&P (the index) if rates stay higher for longer and bets against the Fed unwind in 2H23.
• While we like the rating agency and financial data provider’s business portfolio, valuation is looking a bit stretched based on fundamental, relative and technical valuation metrics.
• We believe it is unlikely that the stock will push through the USD375/share resistance level in the near term, and would look for entry opportunities closer to USD325/share.

• Exxon Mobil Corporation is engaged in energy business. The Company’s principal business involves the exploration for, and production of, crude oil and natural gas, and the manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and a range of specialty products.
• The Company’s segments include Upstream, Downstream and Chemical.
• The Upstream segment is organized and operates to explore for and produce crude oil and natural gas.

• JR Takashimaya is a newbie in the world of department store retailing but has grown to become the fourth highest selling store in the two decades since it opened. 
• As a result, it is increasingly regarded by brands as the Nagoyan version of Isetan Shinjuku in Tokyo and Hankyu Umeda in Osaka.
• The store is an example of Takashimaya’s successful strategy to surround its key stores with more shopping facilities to suit all population segments, so driving traffic to the main store.

• We might get a reasonable amount of flak for this article, as many investors fear a recession, and concurrently are staying away from high-yield bonds.

• However, credit spreads are narrowing, and the equity market is receiving substantial support.

• Thus, we believe the time is right to “risk it” on cyclical, high-yield corporate bonds with favorable interest rate sensitivity.

• Three years ago, Itochu Corp made it clear it would be investing heavily in its brand business.
• It has been true to its word, adding the likes of Reebok, Under Armour and Forever 21 to its portfolio in the last year alone.
• It has now signed a deal with long-term Japan operator, L.L.Bean, while gearing up for a major relaunch of Eddie Bauer.

• The enterprise segment has fueled revenue growth at Ubiquiti (UI) and it should remain the same in the fiscal second quarter
• Ubiquiti has expanded its product offering for enterprise customers where it includes a complete solution down to the EV charging station
• We have made several adjustments to our earnings model. We continue to assume gross margin rising sequentially due to lower costs

• We don’t see a way for Sea Ltd (SE US)’s e-commerce business to turn profitable in the next few years.
• For the moment, the Digital-Entertainment segment is capable of absorbing most of e-commerce losses, but we are expecting the segment profitability to fall 70% to $135m per-quarter over the-next two-years.
• Once that happens, we think it will be game over for Sea Ltd.

• Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
• Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
• That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.

• CyberAgent Q1 loss on one-off expenses from World Cup streaming. We see Q1 as a bottom this fiscal year
• Share price already discounted weak FY9/23 guidance last October and focus is now on recovery 
• The World Cup was a success for the Japanese National side and for Abema

• In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 1Q 2023.
• Of the 33 pair trades, 2/3 of them involved holdcos outperforming opcos in the past year and 1/3 of them involved opcos outperforming holdcos in the same period.
• We highlight 33 pair trades that involve Korean holdcos and opcos.

• CyberAgent Inc (4751 JP) reported 1QFY09/2023 results. Revenue declined 2.1% YoY to JPY167.6bn (vs consensus JPY176.1bn) while OP turned negative JPY1.25bn (vs consensus OP of JPY4.1bn.
• CA’s largest investment to-date was for FIFA 2022 but top line growth has largely been in line with previous quarter. WAU have dropped to pre-FIFA levels.
• Though AbemaTV’s monetisation strategy seems to work, the growth prospects for other two segments are concerning and likely to drag down the consolidated performance.

• Nidec is headed into the red due to market disruption in China, restructuring charges and stagflation.
• The first two of these factors should be temporary, but the third points to longer term pressure on margins. Competition in EV motors is another problem that won’t go away.
• In a weak economy characterized by stagflation, it is too early to turn bullish.

• Bank Negara Indonesia finished 2022 with a strong set of numbers beating guidance and consensus, as it continued to benefit from low cost of funds and strong loan growth. 
• The bank has increased its exposure to higher-quality corporate customers, and large commercial customers in their supply chain plus growing government-backed KUR loans as well as consumer loans. 
• BNI’s strategy in digital banking for consumers and business customers is driving loan growth and fee income as well as funding. Valuations are attractive with rising returns increasing the appeal. 

• Krishna Institute of Medical Sciences (KIMS IN) is seeing a continued business recovery reflected in improving operating metrics. In Q2FY23, KIMS reported record high quarterly sales, EBITDA, and footfall.
• KIMS is following a disciplined growth strategy and plans to grow into markets that are adjacent to the current core markets of Andhra Pradesh and Telangana.   
• KIMS has set foot in a new market of Maharashtra, outside of its core market. With lower margins from acquired assets than matured hospitals, KIMS has scope for margin improvement.

• Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk
• Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator
• BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns

• Nidec slashed its full year operating profit guidance by 48% to 110 billion yen
• For Q3, Nidec reported an operating profit of 28 billion yen (-37% YoY), significantly below street expectations (51 billion)
• We remain bullish, expecting cost cutting efforts to ignite a profit recovery next year

• Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
• Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
• Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.

• New leadership with expertise in Australia could lead to value unlocking for Australian assets. 
• Q3 22 ridership has gone up to 85% and 83% of pre-COVID level for NEL and DTL while in Q3 21 was only 49% for NEL and 43% for DTL.
• The reopening has brought tourists back and increased ridership level while China’s reopening has just started and is not yet priced in. 

• Baycurrent’s share price has moved up 41.3% YTD with the company reporting strong earnings for 3QFY02/2023 which beat consensus estimates by a huge margin.
• With pandemic conditions fading off, share price began to fall with top-line growth declining slightly. However, growth rates have bounced back, and margins have seen strong improvement reaching new highs.
• Though share priced has rallied significantly over the last few months, we think there is further upside driven by value-added projects and expansion into new consulting areas.

• Asian Paints (APNT IN) reported flat year-over-year volumes and flat sales in domestic decorative paints in 3Q FY23. The company’s gross margin recovery is aligned with easing raw material prices.  
• The company attributed the rough quarter to a heavy base from last year’s price increases and a prolonged monsoon, which impacted October volumes.
• We believe that the volumes are lower than what has been reported.  Increasing competition could challenge APNT’s premium valuation.

• HUTCHMED entered into an exclusive license agreement with Takeda- HUTCHMED will receive up to US$1.13 billion including US$400 million upfront, the third highest upfront among China’s TOP 10 license-out deals.
• Even if fruquintinib may probably not become a blockbuster product in the future, HUTCHMED still gets a decent upfront to relieve its cash flow pressure and an internationalization admission ticket.
• Hutchmed China Ltd (13 HK) is undervalued based on our sales forecast. After savolitinib has been included in the updated NRDL, this year’s performance growth is worth looking forward to.

• PolyNovo Ltd (PNV AU) reported record high sales of A$27.3 million, up 67.5% YoY during H1FY23, mainly driven by the strong momentum in the U.S.
• The company has continued to increase the sales team, particularly in the U.S. which has driven sales growth and customer account acquisition, entailing long-term visibility.
• Recently, PolyNovo has raised A$53 million to fund its global growth aspirations. The company is entering new markets, enhancing portfolio, and expanding manufacturing facility to support 5x sales.

• The equity story expands across all of Bayer’s three segments. Positive signs in Pharma, Crops Sciences, and Consumer Health are showing, which we believe are misunderstood by the investment community
• Bayer has seen a material share price decline driven by litigation issues, while earnings showed solid progress.
• Positive news from the Pharma pipeline and progress in the high value seed business as well as the litigation cases removed from the spotlight should help the stock rerate.

• Teladoc Health delivered a decent result for the last quarter and managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• Teladoc concluded the quarter with a total US paid membership of 57.8 million members, an increase of 1.2 million members over the second quarter, driven by a combination of new virtual care client onboardings and population expansions within current clients.
• The management conducted their client advisory panel with representatives from 30 health plans, sizable employers, and health systems in attendance.

• ON Semiconductor Corporation delivered another all-around beat in its last result.
• The company is a well-known provider of intelligent sensing and power solutions and has established a good market position within its niche in the semiconductor market.
• More and more companies are considering ON Semiconductors as their long-term strategic partners as the company walks according to an amazing foresight.

• The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
• Tencent closed its XR business and terminated a property rental contract.
• NetEase refused to extend service for Activision Blizzard for additional six months.

• The long, tortured legal mess between Universal and its ousted founder over control of its lucrative Manila integrated casino resort now has a clear path to its spin off IPO.
• The Okada Manila resort is among the sector leaders in the burgeoning Philippines gaming market now ramping rapidly toward full GGR recovery.
• At UE’s current price of 2,347jpy, the stock bears a built in premium of a Spac IPO now appearing to be pointed to debut this year.

• Takeda announced Monday that it has entered into an exclusive licensing agreement with HUTCHMED (China) for further development and commercialisation of Fruquintinib outside of Mainland China, Macau and Hong Kong.
• Takeda will pay HUTCHMED $400m upfront and up to $730m in additional potential payments relating to regulatory, development and commercial sales milestones, as well as royalties on net sales.
• Fruquintinib was approved in China in 2018, is a highly selective, oral VEGFR1/2/3 Tyrosine Kinase Inhibitor and offers potential new treatment option for patients with refractory metastatic colorectal cancer (CRC).

• Zadaxin has been the biggest performance driver of SciClone, but it would face the risk of losing market share and increased pricing pressures after generic drugs were included in VBP.
• SciClone is primarily a pharmaceutical development/sales company, rather than a research-based innovative drug company.The increasingly low cost performance of in-licensed products has made the capital “reconsider” and be more rational.
• SciClone is a good stock for short-term trade, especially by taking advantage of the positive momentum after it reaches licensing deals/launches new products, but we’re concerned about its long-term prospects.

• New China semiconductor restrictions could be announced by the Netherlands and Japan by end-January.
• Realtek 4Q22 results — Signals weakness for companies serving the PC market, and could get worse in 1Q23E.
• Western Digital & Kioxia could merge NAND flash units to create a rival to Samsung.

As Medlab Clinical moves into 2023, the expected commencement of a Phase III trial for NanaBis (the company’s cannabinoid based analgesic therapy) in cancer-induced bone pain will be the focus for investors. Management made considerable progress towards Phase III in 2022, by switching to a purely synthetic cannabinoid formulation and gathering encouraging real-world data on NanaBis use. We believe these actions should maximise the potential for NanaBis in both a regulatory and a commercial setting. We note that successful progression of the company’s programmes will be contingent on Medlab’s ability to raise capital, given the short cash runway (funded into March 2023) and recent setback with the Nasdaq listing plans. We update our estimates to reflect the financing risk and macro uncertainty, resulting in our valuation decreasing to A$183.5m or A$80.4/share, from A$236.1m or A$103.5/share.

• Naspers’ South African ventures exhibit solid growth, but an inflection point awaits, according to the company.
• The company’s exposure to China’s reopening is a roll of the dice, says Naspers.
• Naspers’ (OTCPK:NPSNY) stock has climbed by more than 20% in the past month, subsequently luring investors’ attention.

• Chugai Pharmaceutical (4519 JP) recorded double and triple-digit revenue growth from Hemlibra in domestic and export markets, respectively during 9M2022. Growth momentum is expected to continue.
• Both Actembra and Ronapreve have limited revenue potential from COVID-related indications. Ronapreve reported revenue of ¥60.8 billion in 1Q22 in domestic market, with no reported revenue in two subsequent quarters.
• Actemra will face biosimilar competition. This month China has approved first Actembra biosimilar, while a couple of others are under review of the FDA.  

• The 2022 NRDL negotiation results were released. We analyzed some points worth investor’s attention.
• The “safety pad” brought by medical insurance is difficult to ensure products future sales.Even after entering NRDL, how to improve patient/doctor coverage is an important problem for enterprises to consider.
• Here are some companies that investors are interested in. We mainly analyzed some key points of them, including Sirnaomics (2257 HK), JW Therapeutics (2126 HK), Antengene (6996 HK). 

• Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months. 
• Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
• Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.  

• We estimate that TME’s 4Q22 topline/bottom line would be (2.5%)/3.8% vs cons., because of disturbance in its social entertainment and ads business.
• We forecast net income would only slightly beat cons by 6.1%, due to likely expense rebound and no major improvement on main businesses.
• Reiterate SELL rating but raise TP to US$ 6.7 to reflect margin beat and improvement of macro environment. Our TP implies 12.3X PE in 2023.

• Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
• ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
• Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

• While BILI’s top line in 4Q22/2023 would be in line, we suggest that its bottom line in 4Q22/2023 would beat cons. by 6%/18% due to cost-savings and optimized monetization efficiency. 
• BILI’s adjusted net loss would be significantly narrowed to (3.2)bn RMB in 2023, per our estimation. However, we still have concerns about some of BILI’s fundamentals.
• Maintain SELL but raise TP to US$ 16.4, implying 1.8X PS in 2023.

• We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
• We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
• Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

• We expect BEKE C4Q22 revenue and non-GAAP NI to be 9% and 64% above consensus. The bottom line beat is a result of earning leverage;
• We expect the market monthly EH/NH transaction volume to turn positive growth in C1H23, with resumed offline activities and continuing policy support as main drivers
• We raise TP by US$1 to US$20: 1) dialling up GTV in 4Q22, 2) faster pace transaction recovery in 2023, and 3) rebase FX from 7.05 to 6.77 in valuation.