Daily Briefs

• Shimano Q3 results show a 32% YoY net sales decline, led by a 38% drop in bike component sales, BUT both sales and profit beat expectations
• The company maintains cost control, sees improving gross margins, and reduces inventories, while cash flow and balance sheet remain strong
• With the upward revision in full-year guidance, we believe the market will look through the still challenging Q4 outlook and focus instead on 2024 normalization and relatively low valuation

• Pop Mart International Group L (9992 HK) announced at noon today a business update on 3Q23.
• Overall sales in 3Q23 grew 35-40% yoy, with domestic China sales up 25-30% yoy and international sales up 120-125% yoy. 
• Thesis intact, as the 3Q23 update showed that the international business continued to grow rapidly at 120-125% yoy growth.

• Due to the ongoing earnings season, for the next two weeks, we will temporarily deviate from our regular format and instead focus on reported earnings.
• We focus on reported earnings, performance against expectations, and the top three highlights that we believe are important from earnings calls for each company that is usually under coverage.
• Besides the Bullish/Bearish names, we draw attention to the ones that are highlighted as interesting and would be pleased to engage in discussions about any of them.

• In the past several days, there have been numerous local news about a substantial defense cooperation between Saudi Arabia and South Korea. 
• This could result in billions of dollars in new military/defense related systems new orders for numerous companies in Korea in the coming decade. 
• If there are major long-term arms deal between Saudi Arabia and South Korea, it could benefit the top defense companies in Korea including Hanwha Aerospace and Korea Aerospace Industries. 

• Hansoh Pharmaceutical Group (3692 HK) entered into a license agreement with GlaxoSmithKline PLC (GSK LN) for a B7-H4 targeted antibody-drug conjugate candidate, HS-20089, targeted toward gynecological cancers.  
• Hansoh will receive an upfront payment of $85M and be eligible to receive milestone payments of up to $1.485B subject to achievement of relevant milestone events with respect to HS-20089.
• Currently, HS-20089 is in phase 1 clinical trial in China. GSK plans to begin phase 1 trial of HS-20089 outside of China in 2024.

• MR DIY (MRDIY MK) remains a standout retailer in Malaysia with its commanding position in the home improvement space and beyond, playing into increased demand for value-for-money products.
• The slower growth last quarter came from a high base last year. 3Q2023 should see a strong rebound in growth providing a positive catalyst plus its store expansion is on-track.
• MR DIY‘s can finance its store expansion from internally generated cashflows and should start to see SSSG recover over the coming quarters. Valuations looking more reasonable as growth recovers.

• Ryohin Keikaku’s biggest weakness is its unwieldy and expensive supply chains, with hundreds of suppliers across its three main categories of household, apparel and food.
• The Muji operator just acquired a large team from one of its principle clothing supply partners, Mitsubishi, to finally streamline its supply chains and improve cost performance in clothing. 
• This should have a positive impact on its cost of goods, margins and inventory levels, allowing for quicker responses to trends at a lower price at home and overseas.

Freelancer achieved a key profitability target in Q323 by delivering positive operating EBITDA across divisions, leading to positive operating cash flow generation and an uplift in gross cash. Despite lower group gross merchandise value (GMV), revenue likely grew given the higher take rate of the marketplace division, where GMV increased. Near-term pipeline highlights include accelerating Enterprise momentum from US expansion and a Chinese retailer partnership, Loadshift’s ongoing marketplace transition and new Escrow.com partnerships to drive diversification.

• We estimate that the outlook is still moderate downward in 4Q23F, which is a typically seasonality.
• SPIL, in ASEH group, is serving only limited on-Substrate (oW) of Chip-on-Wafer-on-Substrate (CoWoS).
• We note that the major big clients of ASEH are not changing at all during this time downturn.

• Angelalign’s internationalization strategy requires significant ongoing marketing spending. Lower-tier market expansion in China requires Angelalign to continuously reduce product prices to cope with the low-price strategies of other domestic competitors.
• Angelalign is in a period of business transformation. High SG&A expenses help increase market share, but may not necessarily result in improvement in profit margin. Angelalign actually lacks core competitiveness.
• We remain conservative on Angelalign’s outlook at this stage. It’s difficult for Angelalign to make significant improvements in financial performance or reversal of fundamentals in the short term.