In today’s briefing:
- Tencent 331 Support Pressure
- Kuaishou (1024 HK) 4Q22 Earnings Preview: Weak Growth, But Loss to Shrink Significantly
- Wharf Real Estate Investment Co Ltd (1997 HK) – Pending Confirmation of 12% Multi-Month Uptrend
- StubWorld: Impairments Weigh Down Kingsoft Solid Results
- Tencent (700 HK): 4Q22, Stop Decreasing WeChat Ad Recovered Earlier
- CSPC Pharmaceutical (1093 HK): Double-Digit Sales and Profit Growth in 2022; MRNA Vaccine Approval
- Tencent: Gradual Recovery in Earnings; Domestic Gaming to Resume Growth
- Jiangnan Group (1366 HK): Irrevocable from the Shareholder with a Blocking Stake
- Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities’ Growth
- TME: Social Entertainment Losing Its Importance with Top Line Growth Keep Declining
Tencent 331 Support Pressure
- Our Tencent sell from 385 has formed a flat range with a bias to pressure the 331 pivot support to reach our 300-305 buy (cover) target.
- The descending wedge or channel is the dominant chart pattern that will drive the medium term trend. Global and HK bear pressure will influence Tencent near term.
- From the 300 support zone we see a better macro set up that will see the bull wedge mature and break higher once summer turbulence subsides.
Kuaishou (1024 HK) 4Q22 Earnings Preview: Weak Growth, But Loss to Shrink Significantly
- We believe both 4Q22 and 1Q23 can be weak quarters.
- However, we believe operating losses will shrink significantly in 4Q22 and 2023.
- We believe the stock has an upside of 77% for year end 2023.
Wharf Real Estate Investment Co Ltd (1997 HK) – Pending Confirmation of 12% Multi-Month Uptrend
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- The 2018/2020 downtrend was broken in December 2022. Q1 2023 has delivered a correction and opportunity to enter the uptrend at improved entry levels.
- March has the potential to complete a bullish monthly reversal pattern upon a month end close above 44.89 and confirm a likely multi-month 12% uptrend towards 50.67.
StubWorld: Impairments Weigh Down Kingsoft Solid Results
- Despite the topline growth of 20%, Kingsoft Corp (3888 HK) recorded a loss in FY22 after a large impairment for its holding in Kingsoft Cloud (KC US).
- Preceding my comments on Kingsoft 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): 4Q22, Stop Decreasing WeChat Ad Recovered Earlier
- As we expected in the preview, total revenue stopped decreasing in 4Q22.
- WeChat advertising recovered in 4Q22 earlier than we expected in the preview.
- We believe game-related revenues will grow by 8% in 2023 and 19% in 2024.
CSPC Pharmaceutical (1093 HK): Double-Digit Sales and Profit Growth in 2022; MRNA Vaccine Approval
- CSPC Pharmaceutical Group (1093 HK) reported 11% YoY revenue growth in 2022. The finished drug business maintained steady growth in 2022, with a continued increase in contribution from new products.
- Within the next 5 years, more than 40 innovative drugs are expected to be approved, which will provide continuous momentum for the company’s development.
- In March 2023, CSPC’s COVID-19 mRNA vaccine SYS6006 has become the first independently developed mRNA vaccine product in China that has been granted for emergency use.
Tencent: Gradual Recovery in Earnings; Domestic Gaming to Resume Growth
- Tencent (700 HK) reported 4Q2022 results yesterday. Revenue increased 0.5% YoY to RMB145bn (vs consensus RMB)143.5bn while adjusted OP increased 30.1% YoY to RMB28.4bn (vs consensus RMB37.2bn).
- Online advertising revenues saw a 14.8% YoY increase during 4Q2022 after 4-consecutive quarters of decline with January and February showing sustained recovery.
- Though Domestic gaming revenues declined in 4Q2022, with new gaming licenses and international expansion, we expect gaming revenues to start growing from 1Q2023.
Jiangnan Group (1366 HK): Irrevocable from the Shareholder with a Blocking Stake
- The shareholder with a blocking stake has provided an irrevocable to accept Mr Chu Hui (Chairman and CEO)’s offer to privatise Jiangnan (1366 HK) at HK$0.40 per share
- Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). There are no other shareholders with a blocking stake.
- The price is final and attractive in the context of historical prices and multiples. At the last close, the gross spread is 8.1%. Scheme document likely despatched in mid-April.
Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities’ Growth
- While adjusted net profit of Tongcheng Travel Holdings Ltd (780 HK) plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.
- Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.
- Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength.
TME: Social Entertainment Losing Its Importance with Top Line Growth Keep Declining
- Tencent Music (TME US) reported 4Q2022 results yesterday. Revenue decreased 2.4% YoY to RMB7.4bn (vs consensus RMB7.3bn) while reported operating profit more than doubled to RMB1.4bn (vs consensus RMB1.3bn).
- Online music revenues grew 24% YoY while social entertainment business continues to see decline in paying users and ARPU. Margin improvements were driven by spending cuts.
- Social Entertainment is losing its importance and the segment continues to remain under pressure due to competition from other platforms.
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