In today’s briefing:
- Suzuki (7269 JT) | Ex-Maruti Valuation Now NEGATIVE
- 2023 High Conviction: China Tourism Duty Free – All Ready for the Next Travel Wave
- Shiseido: International Cosmetics Brands Sent Packing by Chinese Rivals
- 2023 High Conviction: JD.com to Benefit from Discretionary Spend Recovery, Margin Progress on Track
- China Ecommerce- Still Can Chase
- Top Tencent Investor Naspers Considers Selling Meituan Shares
- Iqiyi (IQ US): Compelling Asymmetrical Payoff
- The Stocks to Own in Thailand – Vol. 39
- 2023 High Conviction: AviChina Industry (2357 HK) – The Sky Is the Limit
- 2023 High Conviction: Revolution Medicines – Cracking The KRAS In Cancer
Suzuki (7269 JT) | Ex-Maruti Valuation Now NEGATIVE
- Suzuki is our top pick in the auto sector in Japan as a key beneficiary of strong demand for autos in India
- Suzuki reported better-than-expected 2Q earnings – but the stock price has not reacted
- Suzuki remains mispriced. Suzuki’s market cap is negative if we strip out the value of Maruti
2023 High Conviction: China Tourism Duty Free – All Ready for the Next Travel Wave
- China Tourism Duty Free (CDF) is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers.
- As per Frost & Sullivan (F&S), it had 86.0% market share by retail sales revenue in China duty-free merchandise sales in 2021.
- With signs emerging of China finally looking to relax its COVID restrictions over the coming months, this will lead to a sales revival at its airports.
Shiseido: International Cosmetics Brands Sent Packing by Chinese Rivals
- The success of domestic brands in the low-cost cosmetics segment seems to be cascading into mid and high-price segments within the Chinese cosmetics market.
- This could be bad news for Shiseido Company (4911 JP), whose investors are expecting the company to maintain its historical superiority in the Chinese cosmetics market.
- We think that there’s a good chance for FY+2 EV/OP to return to the 12-20x range once the market price-in Shiseido’s weakening competitive position in the mainland China market.
2023 High Conviction: JD.com to Benefit from Discretionary Spend Recovery, Margin Progress on Track
- JD.com should have an outsized benefit from a recovery in Chinese retail sales as further macro stimulus and a gradual easing of China’s covid-zero policy stimulates demand throughout 2023.
- Following a return to margin expansion this year, due to economies of scale and curbing operating expenses during a challenging macro environment, the longer-term margin expansion trend remains on track.
- JD.com Inc. (9618 HK) trades on extremely attractive valuation multiples (PE, PEG, FCF yield) with net cash on its balance sheet equal to 32% of its market cap.
China Ecommerce- Still Can Chase
- Alibaba and JD stock prices have rallied around 20-30% in the past month, which was the low-hanging fruit for the investors.
- With the full re-opening in 2023 in China, there is still upside for the sector.
- Ecommerce players will enjoy GMV growth acceleration and margin improvement next year.
Top Tencent Investor Naspers Considers Selling Meituan Shares
- Prosus NV, the Dutch unit of Tencent Holdings Ltd.’s largest shareholder Naspers Ltd., said it will consider selling the $4.6 billion of Meituan shares it will receive from Tencent as a special dividend.
- South African media giant Naspers owns about 28% of the Chinese internet giant indirectly via Prosus.
- On Nov. 16, Tencent announced a special distribution of 958 million Meituan shares to shareholders.
Iqiyi (IQ US): Compelling Asymmetrical Payoff
- Iqiyi’s 3Q results released on Tuesday disappointed markets due to dim growth despite sustained profitability for the third quarter in a row.
- “Iconic” turnaround actually put IQ on firmer footing almost on all counts compared to one year ago.
- Stabilizing cost base, strong operating leverage potential and troughs in business and macro cycle spell for compelling asymmetrical payoff – limited downside VS. multi-fold upside.
The Stocks to Own in Thailand – Vol. 39
- We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology
- Portfolio changes: Nine stocks remain, and five new join the fray
- Since inception, it has gained 105% versus the SET 100 Index’s return of 38%
2023 High Conviction: AviChina Industry (2357 HK) – The Sky Is the Limit
- AviChina Industry & Technology H (2357 HK) offers unique exposure to China’s aerospace and defense sector and it will ride on China’s ambition to solidify its military strengths.
- We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.
- The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.
2023 High Conviction: Revolution Medicines – Cracking The KRAS In Cancer
- Revolution Medicines (RVMD US) is focused on therapies to inhibit frontier targets in RAS-addicted cancers. The company’s pipeline is among the strongest in small-cap biotech.
- We expect Revolution Medicines shares to outperform the market over the next 12 months as solid performance from the RAS(ON) inhibitor pipeline and oral inhibitor of SHP2 continues.
- Investors gain confidence in the rest of the RAS(ON) inhibitor pipeline, including RMC-6291, RMC-6236, and RMC-5552. Management will provide topline data from RMC-4630-03 in 2H 2023.
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