In today’s briefing:
- Oriental Watch Update: June and July Improve, Cautious H1 FY23
- AMTD Digital: The Biggest Bubble in 2022
- Pinduoduo: Community Group Buying Is Facing Multiple Challenges
- Tencent: Excluded from 4th Batch of Game Approvals; Domestic Game Revenue to Drop Further
- Clinuvel Pharmaceuticals (CUV AU): Great Marketed Product; Strong Financials; Rich Pipeline
- Tesla Inc.: Capacity Expansion
- QH : 2Q22 Results Will Expand YoY
- China Comm Const (1800 HK): Accelerating New Contract Wins
- International Business Machines (IBM): The Databand Acquisition & Other Drivers
- Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague
Oriental Watch Update: June and July Improve, Cautious H1 FY23
- After a disastrous April and May due to lockdowns resulting in >-50% SSSGs, the company is seeing the situation stabilize in June and July.
- We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.
- Expect a generous dividend with over a 100% payout. Since >50% of the market cap is in cash, a special dividend could also be expected.
AMTD Digital: The Biggest Bubble in 2022
- AMTD Digital is the biggest bubble of 2022, which is ready to pop. AMTD Digital provides digital solutions platform in Asia.
- AMTD Digital currently has a market cap of US$371 billion (US$2,002 per ADS share) (as of 1:40PM NYC time). The company’s market cap is more than JPMorgan Chase & Co.
- No doubt, AMTD Digital is the biggest bubble in 2022 and the bursting of this huge bubble will also devastate (mostly) retail investors in the US.
Pinduoduo: Community Group Buying Is Facing Multiple Challenges
- Community group buying is starting to face multiple headwinds from funding shortages to excessive price competition.
- Even though Pinduoduo (PDD US) is yet to announce any job cuts or scaling back of operations, we think the operating environment shouldn’t be much different from competitors.
- With QoQ revenue growth at a standstill and sales and marketing cost cutting almost fully exhausted, we think the current consensus expectations are too optimistic and bound for a correction.
Tencent: Excluded from 4th Batch of Game Approvals; Domestic Game Revenue to Drop Further
- China’s gaming regulator has granted publishing licenses to 69 online games, which excludes Tencent (700 HK) and NetEase (9999 HK) again for the fourth time.
- Though 9-month long game approval freeze was lifted in April, both Tencent and NetEase failed to make it into the approved list of more than 200 titles so far.
- Chinese gaming companies have been seeking for overseas expansion as domestic gaming market is struggling with ban on new approvals and new restrictions.
Clinuvel Pharmaceuticals (CUV AU): Great Marketed Product; Strong Financials; Rich Pipeline
- Since publishing my bullish insight on Clinuvel Pharmaceuticals (CUV AU) on April 29, the company reported ongoing positive financial performance and progress across its expanded clinical program.
- In Q4FY22, Clinuvel’s customer receipts surged 62% y/y to AUD24.05 million, mainly driven by rising clinical demand for Scenesse treatment.
- Clinuvel stands out amongst its domestic peers for being profitable and cash flow positive. The company has sufficient cash reserves to self-finance planned organic growth.
Tesla Inc.: Capacity Expansion
- Tesla had been in the process of carrying out upgrades which resulted in a lengthy shutdown of its Shanghai factory.
- The company faced its fair share of challenges but had a highly resilient quarter and managed to produce an all-around beat.
- The most significant accomplishment was setting production records in Shanghai and Fremont in June.
QH : 2Q22 Results Will Expand YoY
- Maintain BUY rating with target price of Bt2.66 based on 11.8xPE’2022E,implying its five-years trading average.We have positive view to its 2022 outlook backed by 6 projects launch in 2022worth Bt9.5bn(+66%YoY)
- Expect YoY drop in 2Q22 presales We expect 2Q22 presales at Bt2.1 bn (-4% YoY, +2% QoQ), representing (1) Low-rise presales value of Bt1.77bn (-10%YoY,-10%QoQ)
- Meanwhile, we expect presales should remain strong in 2022 and inline with management guidance at Bt9.2bn (+23%YoY), backed by (1) 4 new projects launch in 2H22E worth Bt5.5bn
China Comm Const (1800 HK): Accelerating New Contract Wins
- China Communications Construction (1800 HK) sealed Rmb371bn of new contract in 2Q22, or a 35.2% YoY growth, representing a sharp acceleration from just 4.9% in 1Q22.
- We estimate backlog is now around Rmb3.5trn and this equals to 5.2x FY21 revenue. This should have improved from 4.6x at end-FY21 and provides CCCC a secured pipeline.
- CCCC is well positioned to gain more contracts in 2H22 as driven by the local government special purpose bonds issue. Such issue reached Rmb1.5trn, or a 166.1% growth, in Jun.
International Business Machines (IBM): The Databand Acquisition & Other Drivers
- As a legacy tech company, IBM may have seen a slowdown in its growth trajectory but its acquisition-led growth approach continues to work.
- With this performance, the company is maintaining its model of mid-single-digit revenue growth and a double-digit performance in IBM Consulting.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague
- Fardaday Future (FF) announced it lined up at least $100m in funding from two investors but gave little detail. Deal is set to close on or before August 8th.
- Given that it’s a senior secured convert deal, we doubt more than $100m-$200m can be raised, despite FF’s release saying the deal has capacity for $600m.
- FF only had $222m in cash in April after -$173m in FCF in Q1. They need $1bn to last through 2023. Anything less than $600m in funding would be negative.
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