Daily BriefsEquity Bottom-Up

Daily Brief Equity Bottom-Up: Alibaba’s Sum of the Parts Valuation:  Why the Initial Excitement May Be Overblown and more

In today’s briefing:

  • Alibaba’s Sum of the Parts Valuation:  Why the Initial Excitement May Be Overblown
  • Bukalapak (BUKA IJ) – Big on Take Rates and Execution
  • Taiwan Dual-Listings: ADR Premiums on the Rise; TSMC Premium Persistently Higher Lately
  • Cisarua Mountain Dairy (CMRY IJ) – Bedding Down with a Portfolio of Growth Products
  • [Kuaishou (1024 HK) Target Price Change]: Video Account Continues to Be the Threat
  • Prodia (PRDA IJ) – Back to Core Testing
  • Dr Lal PathLabs (DLPL IN): Losing Path Amid Competition; Non-COVID Growth Underwhelming
  • Taiwan Tech Earnings Season Analysis: Inventory Levels Appear to Have Peaked
  • Indonesian Banks Screener; Mandiri Is Our Top Pick
  • Vonovia: German Real Estate – Revisiting a Sector with Strong Long-Term Fundamentals

Alibaba’s Sum of the Parts Valuation:  Why the Initial Excitement May Be Overblown

By Oshadhi Kumarasiri

  • Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
  • Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
  • Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

Bukalapak (BUKA IJ) – Big on Take Rates and Execution

By Angus Mackintosh

  • Bukalapak (BUKA IJ) may have disappointed some in missing on TPV but that is unimportant when it executes convincingly on improving take rates for both marketplace and its Mitra business. 
  • The number of Mitra Bukalapak partners has increased to over 16m, with active Mitras taking increasing services and higher take rate products from Buka’s marketplace and specialty stores.
  • Bukalapak beat on revenues and adjusted EBITDA and its guidance for adjusted EBITDA-positive by 4Q2023, with continuing improvements to take rates driving improvements. Valuations are attractive at <1x FY2024E EV/Sales.

Taiwan Dual-Listings: ADR Premiums on the Rise; TSMC Premium Persistently Higher Lately

By Vincent Fernando, CFA

  • ADR premiums for dual-listed Taiwan shares have overall been on the uptrend this week, as semiconductor industy optimism in the U.S. as increased.
  • TSMC’s ADR premium appears to be trading at a new higher range in the last few months.
  • Other spreads have risen as well lately; it’s probably best to wait for significant reversals, which usually happen within two weeks at most.

Cisarua Mountain Dairy (CMRY IJ) – Bedding Down with a Portfolio of Growth Products

By Angus Mackintosh

  • Cisarua Mountain Dairy (CMRY IJ) is one of the most interesting consumer staples players in Indonesia, with a leading position in dairy and specifically yoghurt, and increasingly premium consumer foods.
  • 4Q2022 saw a slowdown in sales growth as consumers returned to the mall due to inflationary pressure but December saw a sharp recovery and 2023 should see continued recovery.
  • Flavoured UHT Milk and a new Yoghurt stick aimed at the mass market will help to fuel growth and raw material cost pressures have started to alleviate. Valuations are attractive. 

[Kuaishou (1024 HK) Target Price Change]: Video Account Continues to Be the Threat

By Shawn Yang

  • Kuaishou’s 4Q22 top line beat our est. by 3.9%, and non-IFRS net income was higher than our est. by 85% due to cost-saving measures.  
  • We raise forecasts for its ads and eCommerce growth due to on-track macro recovery. However, we are still concerned about the intensified competition from WeChat Video Account.
  • Maintain SELL for competition scenario, but slightly raise TP to HK$ 58 to reflect macro recovery. Our TP implies 2.1X PS/239X PE in 2023.

Prodia (PRDA IJ) – Back to Core Testing

By Angus Mackintosh

  • Prodia (PRDA IJ) FY2022 results saw declines in revenues and profits but from a COVID-high base and the numbers are now well-above 2019, with strong prospects ahead.
  • The company is seeing a return to routine testing with tests per visit back to pre-COVID and revenues per visit also rising strongly, with a diverse customer base providing comfort.
  • Prodia also has an increasing digital angle with the rising use of its app and a new app that tracks patients’ health just launched. Prodia (PRDA IJ) is too cheap.

Dr Lal PathLabs (DLPL IN): Losing Path Amid Competition; Non-COVID Growth Underwhelming

By Tina Banerjee

  • Dr Lal PathLabs Ltd (DLPL IN) reported 2% and 8% revenue and net profit decline in Q3FY23, respectively. Q3 results were dragged by an 80% YoY decline in COVID-19 revenue.
  • While non-COVID revenue increased 9% YoY to INR4.78 billion, it declined 7% QoQ. In fact, Q3FY23 non-COVID revenue was the lowest over the last three quarters.
  • Although diagnostics is a big and attractive market opportunity in India, the sector is overcrowded, leading to heated price competition and declining realization per test.

Taiwan Tech Earnings Season Analysis: Inventory Levels Appear to Have Peaked

By Vincent Fernando, CFA

  • We review Taiwan’s recently completed earnings season for both the Semiconductor and Tech Hardware sectors.
  • Companies by and large missed expectations, with the % of revenue and earnings misses substantially higher for the 4Q22 earnings season than was the case for the 3Q22 earnings season.
  • High inventory levels have persisted in both Semiconductors and Hardware, however appear to have leveled off at high levels rather than having become worse.

Indonesian Banks Screener; Mandiri Is Our Top Pick

By Victor Galliano

  • We rate Bank Mandiri as our top pick with its attractive valuations including PEG ratio relative to solid returns and strong balance sheet – including liquidity –  metrics
  • We also continue to favour Bank Negara, but it is our secondary value pick to Mandiri; Bank Central Asia, albeit fully valued, has impressive liquidity and return metrics
  • Bank Rakyat had mixed returns in 4Q22, with pre-provision returns declining sharply QoQ although cost of risk continued to improve, due to better credit quality, thereby supporting post-provision profits

Vonovia: German Real Estate – Revisiting a Sector with Strong Long-Term Fundamentals

By Alexis Dwek

  • Vonovia has a high negative correlation to interest rates. What if interest rates were to stabilize or fall?
  • Feedback from discussion with Head of IR gives confidence in the long-term prospects of the group
  • Share price -32% ytd. Vonovia trades on a ~70% discount to its adjusted NTA

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