In today’s briefing:
- Pinduoduo: Trading off Between Top-Line Growth and Bottom-Line Slowdown
- 3P Learning (3PL): Rare Listed EdTech, Offering Exposure to the Growth in Digital Instruction
- MFE/Mediaset España: Merger Approval, Spread and Delisting
- RPSG Ventures: FMCG Business Continues to Scale Up | Outsourcing Business Is Seeing Weak Demand
- Global Pullback Continues; Focus on Defensives: Buys in Staples, Utilities, Precious Metals Miners
- Sustainability Reporting Is Expected to Share Valuable Information, Not PR Magazine Type Information
Pinduoduo: Trading off Between Top-Line Growth and Bottom-Line Slowdown
- PDD stock price has been increasingly driven by TEMU as of late, thanks to TEMU’s fast growth and aggressive geographical expansion.
- TEMU rollout introduces more variables to upcoming 4Q results , especially with regard to incremental investments that pose downside risks to earnings, which will sharply decelerate in 4Q and beyond.
- We are turning more constructive on TEMU, but acknowledge the challenges in trading off between topline growth and bottom line deceleration in a potentially prolonged tightening cycle. Stay neutral.
3P Learning (3PL): Rare Listed EdTech, Offering Exposure to the Growth in Digital Instruction
- Addition of Writing Legends to existing maths and literacy apps will create more opportunities to upsell and cross-sell.
- Brightpath, the recently acquired assessments technology provider, adds a new horizontal with the potential to reduce school customer churn
- Competition is high from groups such as DreamBox, IXL, ABC Mouse, Khan Academy and BYJU’S . 3P Learning remains a significant player with a strong customer base and improving product portfolio.
MFE/Mediaset España: Merger Approval, Spread and Delisting
- TL5 holdouts have exposed themselves to being trapped by MFE, which has already shown in the past that it has no qualms about running its subsidiary for its own interests.
- The implied exchange values the audiovisual business of TL% at 1.2 EV/22eEBITDA TL5/MFEA spread is +3.02%, I would wait for it to turn negative to open a position.
- MFE A shares are trading at a 34.7% discount, which seems excessive nevertheless. With more A shares coming in the market (and higher liquidity), I would be long MFEA/short MFEB.
RPSG Ventures: FMCG Business Continues to Scale Up | Outsourcing Business Is Seeing Weak Demand
- RPSG Ventures Limited (RPSGVENT IN) [“RPSGV”] continues to scale up its FMCG business. Q3FY23 FMCG revenues saw a YoY growth of 23%. QoQ, there was some de-growth due to seasonality.
- Excluding one-off other income, Firstsource Solutions (FSOL IN) reported weak Q3FY23 earnings led by sluggish growth and weak margins.
- RPSGV remains a deep-value holding company that is trading at a discount of >85%. As its FMCG and Sports businesses scale up, the stock has potential to re-rate significantly.
Global Pullback Continues; Focus on Defensives: Buys in Staples, Utilities, Precious Metals Miners
- On March 2 we discussed how the pullback in global equities was in full swing as Europe/UK indexes displayed 4.5-month uptrend breaks, joining the pullback in the MSCI ACWI.
- At the time, we expected this pullback in the MSCI ACWI (ACWI-US) to move down to $86-87 at minimum, and potentially $84 (December 2022 low) or $75-77 (the 2022 lows).
- ACWI-US broke below $86 and is approaching $84. $84 will be an important support level to monitor, but if it breaks, the $75-77 level is still firmly in the cards.
Sustainability Reporting Is Expected to Share Valuable Information, Not PR Magazine Type Information
- Japanese companies are keen on obtaining ISO certifications, so it’s relatively easy for companies that have obtained these certifications to ensure the comprehensiveness of sustainability information by disclosing such information.
- It’s useful to know the degree to which management recognized the challenges and the leadership that management could exercise in solving those challenges, rather than laundry list of self-praise information.
- For management to recognize issues and implement initiatives at global level, it’s expected to hire a head who is sensitive to global initiatives and work with him/her to resolve issues.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
