In today’s briefing:
- Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
- Meituan’s Recent Expansion in Hong Kong: A Review
- CRISPR Therapeutics AG (CRSP US): First Genome Editing Based Drug Candidate Seeking FDA Approval
- Suzuki (7269) | EV Strategy – A Dead End?
- Alibaba Health: Healthy 2H but Margins Have Very Little Room for Improvement (Quantamental)
- Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)
- Buy Signals on Sand China Ltd. Getting Stronger as Macau Recovery Gains Steam
- Itochu and Donki Tie on Retail Media to Create Major New Revenue Stream
- Pinduoduo(PDD US): The Worst Is yet to Come
- Xinhua Winshare (811 HK): We Love the Boredom
Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
- Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value).
- The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
- With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.
Meituan’s Recent Expansion in Hong Kong: A Review
- On May 22nd, Meituan launched its food delivery platform called KeeTa in Hong Kong SAR.
- KeeTa’s expansion stratgies include Collaboration with branded chain merchants,lower ASP, subsidy campaign, and launching “On-time Guarantee”.
- Sofar the initial results after launch seems to be in-line with expecation, while there will still be a lot of challenges, like small market size and stabilized competition landscape.
CRISPR Therapeutics AG (CRSP US): First Genome Editing Based Drug Candidate Seeking FDA Approval
- CRISPR Therapeutics AG (CRSP US) completed regulatory submissions for exa-cel in the U.S., EU, and UK, positioning exa-cel to potentially become the first approved CRISPR-based therapy in the world.
- According to Evaluate Pharma, if approved, exa-cel’s revenue is expected to be $1B+ in 2028, with expected market share of 20% in sickle cell and 36% in beta thalassemia.
- As of March 31, 2023, CRISPR has cash, cash equivalents, and marketable securities of $1,889.5M, which is sufficient to fund its operating expenses for ~3 years.
Suzuki (7269) | EV Strategy – A Dead End?
- After reviewing Suzuki’s EV Strategy we turn Bearish on the outlook and see downside for the share price.
- We believe that Street has missed the rising costs associated with the electrification strategy. We see a period of weaker margins.
- Suzuki only targets 20% of sales to come from EVs in India, its largest market. It could be viewed as a laggard.
Alibaba Health: Healthy 2H but Margins Have Very Little Room for Improvement (Quantamental)
- Alibaba Health Information Technology (241 HK) ’s 2HFY03/2023 revenues beat consensus by 1.4% while adjusted operating losses of RMB1.74m (0.01% of revenue) is significantly lower compared to 2HFY03/2022 and consensus.
- Improvement in profitability was driven by improved GPM coupled with decrease in SG&A costs which helped offset increase in fulfilment costs as a result of the Covid-19 outbreak.
- Our quantamental analysis suggests that Ali Health’s margins have very little room for improvement unless the company cuts down SG&A significantly while improving revenue % from non-direct pharmaceutical businesses.
Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)
- Industry and company reports show ASP declines gained momentum in April
- April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
- Our thesis: pricing is getting weaker, and this trend will soon impact margins
Buy Signals on Sand China Ltd. Getting Stronger as Macau Recovery Gains Steam
- Since the January 6th end of zero covid, all macro developments impacting the Asia casino sector are proving bullish despite a lingering concern about long term recovery.
- SCL’s strengths play to the rapidly growing mass segment player base.
- SCL’s dominant room capacity is a de facto moat when peers are not even a close second in terms of percentage of available rooms.
Itochu and Donki Tie on Retail Media to Create Major New Revenue Stream
- Itochu, Familymart, PPI (Don Quijote) and their data analytics partners have come together in the first case of cross-retailer ad platform development.
- Itochu provides the central relationship that ties these companies together, and other deals are likely given the significant potential for retail media.
- The opportunity for brands to market to these retailers’ customers through highly targeted ads will become ever more compelling, delivering new revenue streams for Donki and Familymart.
Pinduoduo(PDD US): The Worst Is yet to Come
- The odds are high for PDD to miss consensus for 1Q results this Friday due to high base and deflating domestic growth drivers, despite TEMU’s momentum.
- Among major China tech companies, PDD is likely to be the only one to register stagnant or even negative earnings growth for FY23, which has not been in the price.
- A down cycle for PDD’s earnings growth leads us to assign 12x P/E to an estimated non-GAAP net profit of RMB39 billion for FY23, implying 15% downside.
Xinhua Winshare (811 HK): We Love the Boredom
- Despite solid outperformance, share price of Xinhua Winshare (811 HK) is more than 100% covered by net cash of Rmb7.6bn. DPS has also risen uninterruptedly in the last 3 years.
- 1Q23 result demonstrated operating resilience as recurring profit soared 48.5%. Its franchise in textbook publication and distribution stayed well protected, securing profitability outlook.
- We like XW’s boring businesses in the current depressed market. It trades on 4.5x PER with secured 6.6% dividend yield. The HA discount has widened to 10pp deeper than average.
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