In today’s briefing:
- Alibaba (BABA US): What It Takes for Re-Rating
- Grab (GRAB US) – Living in an Ethereal World
- Kuaishou (1024 HK): 1Q23, All Business Lines Accelerated
- Eve Energy (300014 CH): Hooked On Lithium
- Kuaishou 1Q2023: Upbeat Quarter with a Small Share Buyback
- NTES.US: NetEase Holds Annual Game Conference, Announced New Game Pipelines, and Our Estimations(+)
- South Korea Banks Screen; Focus on Hana Financial (086790 KS) & Industrial Bank of Korea (024110 KS)
- Sambu Construction: Likely to Be Included in Ukraine Reconstruction Projects
- Getting Tactical with Nasdaq-100 NDX ($QQQ): Valuation Disconnected Via Its Cost of Capital
- 3M Company – Equity Research Flash Note – March 3, 2023
Alibaba (BABA US): What It Takes for Re-Rating
- Weaknesses of BABA stock and China tech sector in general post their strong earnings recovery for March quarter suggest market’s concerns centering around growth outlook.
- BABA fundamental has tracked well to our projection since last November. P/E multiple contraction – which priced in too much pessimism – prevented our bullish call from materializing, for now.
- We stick to our thesis that March quarter results set stage for BABA re-rating on sustained recovery, well-executed overhaul effectively unlocking value and investors’ renewed appetite for China assets.
Grab (GRAB US) – Living in an Ethereal World
- Grab‘s1Q2023 made for positive reading with rapid revenue growth and a quickening of progress towards profitability but the focus perplexingly seemed to be drawn to the ethereal measure of GMV.
- The delivery segment saw the most significant GMV slowdown, impacted by a high base and seasonality but saw rapid revenue growth and record margins. Mobility remained the cash cow.
- Grab‘s profitability improved considerably in 1Q2023 across all segments, with management upgrading the outlook for FY2023 for adjusted EBITDA and maintaining its breakeven target for 4Q2023, which now looks conservative.
Kuaishou (1024 HK): 1Q23, All Business Lines Accelerated
- The revenue growth rates of all business lines accelerated in 1Q23.
- Operating losses shrank to RMB1.3 bn in 1Q23, less than RMB3 bn in two previous quarters.
- We believe the stock has an upside of 66% for the yearend 2023.
Eve Energy (300014 CH): Hooked On Lithium
- Lithium battery maker, EVE Energy (300014 CH), is expected to invest US$2.3bn in expanding its battery manufacturing capabilities in two new plants.
- Both plants are expected to come online within 18-24 months, depending on market conditions and various approvals.
- Eve is down 57% from its December 2021 high, and trading around its lowest level since November 2020, excluding a brief dip in April 2022.
Kuaishou 1Q2023: Upbeat Quarter with a Small Share Buyback
- Kuaishou Technology (1024 HK) ’s 1Q2023 earnings were above consensus estimates with the company reporting positive adj. EBITDA and adj. net profit during the quarter.
- Operating profit margin of the domestic business further improved while the company managed to significantly reduce operating losses of the overseas business during the quarter.
- Kuaishou also announced a small share buyback worth of HK$4bn which further affirms the company’s improving fundamentals and should help attract investors.
NTES.US: NetEase Holds Annual Game Conference, Announced New Game Pipelines, and Our Estimations(+)
- In the evening of May 20th, NetEase held an online conference where it announced release dates for games…
- …that It has Previously Announced, and Unveiled New Titles that Will Be Launched in the Future.
- Overall, June Will Be the Peak Month for Newly Launched Titles from NetEase, with One Big Game (Justice Mobile) And Two Smaller Games (Badlanders and Racing Mobile)
South Korea Banks Screen; Focus on Hana Financial (086790 KS) & Industrial Bank of Korea (024110 KS)
- In our latest South Korean banks screener; we stick with quality play Hana Financial and deep value Industrial Bank of Korea, despite rising credit quality headwinds
- We introduce delinquency ratio charts that show that NPLs and other poor quality credits are on a rising trend, yet most banks have healthy NPL provisions coverage
- Hana has a low PBV ratio relative to its premium ROE and an undemanding PEG; Industrial Bank of Korea has attractive multiples, PEG ratio and near top returns versus peers
Sambu Construction: Likely to Be Included in Ukraine Reconstruction Projects
- On 22 May, it was announced that Sambu Construction was invited to the Ukraine Global Reconstruction Forum held in Warsaw and Krakow, Poland from 22 to 25 May.
- Sambu Construction is likely to be one of the Korean construction companies to be involved in the Ukraine reconstruction projects.
- The total cost of reconstruction of Ukraine has been estimated from about $0.4 trillion to $1.1 trillion.
Getting Tactical with Nasdaq-100 NDX ($QQQ): Valuation Disconnected Via Its Cost of Capital
- First of all, let’s see how the Nasdaq-100 (QQQ) did in 2023 along with the S&P 500 (SPY) and the Dow Jones (DIA): QQQ with a big 21.64% return in 2023 & outperforming by a big margin the other 2 main indices.
- For an even broader perspective, US indices 2023 performance shown in this order: Nasdaq 100 (NDX) > S&P 500 (SPX) > S&P Midcap 400 MID > Russel 2000 (RTY) > Russell Microcap (RMICRO).
In short, from Megacaps > to Microcaps: Nasdaq 100 (NDX) leading by a big margin.
3M Company – Equity Research Flash Note – March 3, 2023
- 3M Company is a diversified technology company.
- The Company is a manufacturer and marketer of a variety of products and services.
- It operates through four segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. Its Safety and Industrial segment include abrasives, auto- motive aftermarket, closure and masking systems, electrical markets, personal safety, roofing granules, and industrial adhesives and tapes.
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