In today’s briefing:
- China Internet Weekly (3Oct2022): Tencent, NetEase, Alibaba, Kuaishou, Uxin
- Lasertec (6920 JP): Accumulate for the Long Term
- Asics (7936) | Nike Air Pockets
- Japanese Cosmetics: Trading Around Q3 Earnings
- NTT (Buy) – Investor Day Highlights Global Data Center Business
- Breaking SPAC Convention
- ACCO: Adjusting for Macroenvironment
- Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines
- Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside
- Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality
China Internet Weekly (3Oct2022): Tencent, NetEase, Alibaba, Kuaishou, Uxin
- The global game market can shrink in 2022, which will impact Chinese game companies’ global diversification.
- NetEase formally launched its own social networking service to compete with Tencent.
- Kuaishou announced that it would launch an e-commerce channel on its App’s homepage.
Lasertec (6920 JP): Accumulate for the Long Term
- The shares are down 58% from their January high. Our 3-year forecast brings valuations down to levels not seen since FY Jun-18.
- The great surge in orders is coming to an end, but EUV lithography and SiC power devices should keep demand for Lasertec’s mask inspection systems at high levels.
- The severity of the emerging semiconductor down-cycle and global recession remain to be seen, but the company’s long-term potential warrants another look.
Asics (7936) | Nike Air Pockets
- NIKE reported Q1 results post close on Thursday sending the shares down 9% after hours and hitting the stock price of Asics on Friday (-10.7%).
- ASICS is unlikely to face ALL of the same problems that impacted NIKE, but investors should be aware of the rising inventory risk
- ASICS is less risky given less exposure to apparel. Even so, we remain bearish for now
Japanese Cosmetics: Trading Around Q3 Earnings
- The latest rally in Japanese cosmetics, driven by improving domestic market conditions has strangely avoided two of the big names in the market, Shiseido Company (4911 JP) & Pola Orbis.
- Although both of these names seem to offer big upside potential, we think Pola Orbis Holdings (4927 JP) has a significantly better risk-reward profile in the short term.
- We would also be inclined to hedge the market risk using Kose Corp (4922 JP) on the short side as the name has the biggest downside potential.
NTT (Buy) – Investor Day Highlights Global Data Center Business
- NTT’s global data center business has 6% market share with annual revenue growth of 20% that is twice the industry average
- We have updated our model and valuation summary to reflect the transfer of NTT Ltd, which operates the GDC business, into NTT Data
- Our valuation remains unchanged although we have lowered our target price ¥4,500 to ¥4,450 for payment of the H1 dividend. NTT remains a top pick in our coverage
Breaking SPAC Convention
- Over the last two years, SPACs have emerged as an alternative to the traditional IPO process, especially for those who’ve found it challenging to raise money from the public markets in the past.
- In fact, SPACs have been a great investment vehicle for Space Launch firms, Electric Vehicle Upstarts and even Quantum Computing firms.
- It is surprising then that Italian Luxury Fashion House Zegna, which has a rich 110-year heritage, has decided to take the SPAC route to make its debut in the US markets rather than list in Europe or in Asia like most of its peers.
ACCO: Adjusting for Macroenvironment
- The business climate has not improved for Acco Brands (ACCO) in Europe since the Company reported second quarter results, and thus could result in lower than expected third quarter numbers
- The macroenvironment has been volatile in a quarter dependent on back-to-school sales and more people working from their offices.
- We are updating our earnings model for the rest of the year. Our third quarter sales estimate is now $517.1 million
Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines
- Taiwan’s tech space fell hard last week, with the tech sector down 5.4%, compared to a 4.9% drop for the overall market. Semiconductors performed the worst, down 6.2%.
- Hon Hai, Delta, Lite-On — EV a major theme for the first-ever Taiwan Expo USA coming October 12th.
- Taiwan wafer exports were at an all-time high in August. We note that wafer names have underperformed TSMC.
Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside
- Hanall Biopharma (009420 KS) has two leading pipeline assets, HL161 (batoclimab) and HL036 (tanfanercept), which are being developed by global license partners.
- Batoclimab is in phase 3 trial for myasthenia gravis, which causes weakness of voluntary muscles. Tanfanercept is being developed as a treatment for dry eye disease in China and U.S.
- Batoclimab and tanfanercept trials are approaching multiple data readouts in near-term. Hanall will be entitled for milestone payments for clinical trial progress of its out-licensed assets.
Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality
- United Imaging’s high valuation is driven by pandemic/policy dividends. After the impact of COVID-19 fades,the market needs new stories to judge a sustainable business model with increasing investment value.
- Although in the name of domestic substitution of high-end medical imaging equipment, most of sales still come from middle/low-end products. The real competitiveness in high-end market remains to be seen.
- United Imaging’s fundamentals and prospects hardly justify a market value of more than RMB100 billion. It’s expected that the stock price will return to rationality in the future.
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