Daily BriefsEquity Bottom-Up

Daily Brief Equity Bottom-Up: Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert and more

In today’s briefing:

  • Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert
  • Mercari (4385) | We Were Wrong…its Worse
  • Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
  • Bank Jago (ARTO IJ) – Look to the Horizon
  • Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying
  • Matahari Department Store (LPPF IJ) – New Boots and Pants
  • Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
  • Tencent (700 HK): Game Industry Decreasing for First Time and Turning to Overseas Market
  • Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance
  • IPG Photonics Corporation: Initiation of Coverage – Acquisitions

Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert

By Oshadhi Kumarasiri

  • Alibaba Group (9988 HK) announced yesterday that it is seeking to change its listing status in Hong Kong to a primary listing before the end of 2022.
  • With the risk of de-listing from the US, a dual-primary-listing in Hong Kong would allow Alibaba (ADR) (BABA US) to smoothly transition all its trading from the US to Hong Kong.
  • In addition, the company could possibly use this opportunity to raise more money from capital markets as it is desperately seeking funding for its loss making ventures.

Mercari (4385) | We Were Wrong…its Worse

By Mark Chadwick

  • Shopify Inc (SHOP US) ‘s share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends
  • Mercari Inc (4385 JP) ‘s US business is highly correlated with its US peer, as is its stock price
  • A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal 

Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3

By Kirk Boodry

  • Softbank and Z Holdings have confirmed the conversion of PayPay preferred equity into common in-line with previous guidance for ownership levels and a revaluation gain
  • Z Holdings will sell the credit card business to PayPay to align transactional fintech which makes distribution, product development and branding easier
  • Our outlook has not changed but we are lowering our target price to reflect diminished expectations announced at Q4 results. We remain at Buy but prefer NTT/KDDI in telcos

Bank Jago (ARTO IJ) – Look to the Horizon

By Angus Mackintosh

  • Bank Jago recently released its 2Q2022 results. It again registered a quarterly profit, down on 1Q2021, and a victim of its own success but preparing well for future growth.
  • The bank continues to grow its KYC’d customers, which reached 3.3m in 2Q2022, with 300k-400k new customers a month as a result of improvements in the onboarding process. 
  • Bank Jago‘s future is all about its ecosystem and it has only started to scratch the surface of synergies but investors need to look to the long term for returns.

Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying

By Shifara Samsudeen, ACMA, CGMA

  • On 22nd June, China released a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.
  • Alibaba Health’s share price is down more than 10% since the announcement of the draft rule, however, third-party e-commerce platforms accounts for about 10% of Ali Health’s revenues.
  • Pharmaceutical direct sales business has been generating lower GPM compared to JD Health’s direct biz, and the company’s margins have continued to deteriorate during the last 2-years.

Matahari Department Store (LPPF IJ) – New Boots and Pants

By Angus Mackintosh

  • Matahari Department Store (LPPF IJ) reports another positive set of results confirming the success of its ongoing transformation with the promise of an even stronger quarter ahead.
  • Footwear and menswear continued to lead but womenswear, cosmetics, and babywear were also strong, with private labels Nevada Sports, Nevada Denim, Coles, and New Connections booking vibrant sales.
  • Matahari Department Stores omnichannel initiatives are bearing fruit with another marketplace soon to come on stream whilst store opening and renovations will accelerate 2H2022, helping to drive growth.

Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

By Tina Banerjee

  • Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
  • However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
  • Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.

Tencent (700 HK): Game Industry Decreasing for First Time and Turning to Overseas Market

By Ming Lu

  • Online game sales decreased for the first time in 1H22.
  • The main problem is the unstable policy of the new game license.
  • Big companies like Tencent and NetEase are seeking overseas markets.

Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance

By Xinyao (Criss) Wang

  • The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.
  • Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.
  • However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.

IPG Photonics Corporation: Initiation of Coverage – Acquisitions

By Ishan Majumdar

  • This is our first report on IPG Photonics, one of the leading manufacturers of lasers and amplifiers catering to materials processing across the globe.
  • The company was off to a strong start in 2022 profiting from increased demand in Europe, North America, and Japan.
  • IPG Photonics also saw the expansion of medium-power and pulsed lasers, mainly fueled by increased demand for new applications.

💡 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