In today’s briefing:
- Alibaba – OP Beat Driven By Cost Cutting Masks Dissapointments Everywhere Else
- Tencent/Netease: Breakthrough in November Batch of Game Approval
- Weimob (2013 HK): Strategic Patience Will Be Rewarded
- Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote
- EQD | Alibaba (BABA US): Use Elevated Upside to Buy Call Ratios into Year-End
- Lygend Resources & Technology IPO: Riding the Wave
- Shanghai/Shenzhen Northbound Connect: Weekly Moves (18 November 2022)
- Shanghai/Shenzhen Southbound Connect: Weekly Moves (18 November 2022)
Alibaba – OP Beat Driven By Cost Cutting Masks Dissapointments Everywhere Else
- Alibaba Group (9988 HK) bounced 7.8% yesterday following an OP beat of 24.4% through cost-controls but overall results were quite disappointing with revenue falling a touch below consensus at RMB 207.2bn.
- Alibaba’s cash cows are growing no more, Thus, the company is focusing on ways to improve its profitability.
- Meanwhile, the other growth avenues that Alibaba was proudly speaking of have pretty much disappeared with the company forced to cut down investments in these growing businesses.
Tencent/Netease: Breakthrough in November Batch of Game Approval
- China just announced game approval for November batch after one month break. The number of games approved is inline with the previous three months.
- Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
- Both Tencent and Netease received approval for one game. It is more symbolic than financially material. Sentiments are turning slightly but it is not out of the wood yet.
Weimob (2013 HK): Strategic Patience Will Be Rewarded
- Weimob’s share price more than doubled in a month on encouraging 3Q preliminary data and improved sentiment towards China assets
- We explore socio-economic factors resulting in the slow ramp up of China SaaS sector , size Weimob’s TAM by drawing insights from Alibaba and determine its valuation in two-piece report
- In the first part, we argue that inadequate cost or efficiency competitiveness of SaaS solutions over existing labor-based or manual processes have been a key drag
Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote
- Lifestyle International Holdings (1212 HK)’s vote on Mr Lau’s offer of HK$5.00 per share is at 10 am on Monday, 21 November. The wide spread of 6.6% reflects vote risk.
- Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection). No shareholder holds a blocking stake.
- Ongoing weak Hong Kong retail sales and peers’ slightly de-rating should lower the vote risk. Headcount test not applicable. While light, we continue to expect the offer to succeed.
EQD | Alibaba (BABA US): Use Elevated Upside to Buy Call Ratios into Year-End
- Alibaba unveiled an upsized buyback plan this week and stock rallied despite a revenue miss
- Sentiment in China is changing with tweaks to the Covid strategy and improving economic outlook
- Call buying has elevated upside vols providing trading opportunites for both directional and volatility traders
Lygend Resources & Technology IPO: Riding the Wave
- Lygend Resources & Technology (LR HK), a nickel play, is set to open its books for an HKEx IPO to raise US$700-800 million, according to press reports.
- Lygend had the largest nickel ore trading volume in China in 2019, 2020 and 2021, with a market share of 26.8% in 2021.
- The fundamentals are solid as the consolidation of HPL has delivered strong growth and an improved margin profile, at manageable leverage.
Shanghai/Shenzhen Northbound Connect: Weekly Moves (18 November 2022)
- Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
- Overall, net inflow over the past week was ~US$5.7bn, split between Shanghai (+US$2.98bn) and Shenzhen (+US$2.8bn).
- The largest inflows were into Kweichow Moutai (600519 CH) and Midea Group (000333 CH). The largest outflows were in NARI Technology (600406 CH) and China Yangtze Power (600900 CH).
Shanghai/Shenzhen Southbound Connect: Weekly Moves (18 November 2022)
- Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
- Overall, the net outflow over the past week was ~HK$0.14bn, split (-HK$0.47bn) for Shanghai and (+HK$0.32bn) for Shenzhen.
- The largest inflows were in Tencent (700 HK) and Hang Seng H Share (2828 HK). The largest outflows were inMeituan (3690 HK) and Tracker Fund of HK (2800 HK).
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