ASEAN (Indo) & China-focused. Ex-Deputy HoR UBS.

Johannes Salim, CFA

Event-Driven

<ul>
<li>Our stub valuation analysis reveals that <a href="https://www.smartkarma.com/entities/179" target="_blank" data-smartkarma-citation="entities:179:1">Baidu Inc (ADR) (BIDU US)</a> attractively trades at near 2 SD below its 3-yr average of NAV discount.</li>
<li>Fundamentally, BIDU's core business (Baidu Core) has grown healthily, with strong cash flows generation.</li>
<li>China consumption slowdown is likely to mean modest sales growth deceleration (not a "sales falling off the cliff" scenario) for BIDU in 2019E.</li>
<li>Implied in the current ADR price, the market is unjustifiably valuing Baidu Core (11.2x 2019E PE) as an "Old economy" company with little to no growth prospect, in our opinion.</li>
<li>Our PT for next 3-6 mo, assuming 10% holdco discount to NAV, works out to be US$224/ADR, representing a 27% upside potential.   </li>
</ul>


Our stub valuation analysis reveals that Baidu Inc (ADR) (BIDU US) attractively trades at near 2 SD below its 3-yr average of NAV discount.
Fundamentally, BIDU's core business (Baidu Core) has grown healthily, with strong cash flows generation.
China consumption slowdown is likely to mean modest sales growth deceleration (not a "sales falling off the cliff" scenario) for BIDU in 2019E.
Implied in the current ADR price, the market is unjustifiably valuing Baidu Core (11.2x 2019E PE) as an "Old economy" company with little to no growth prospect, in our opinion.
Our PT for next 3-6 mo, assuming 10% holdco discount to NAV, works out to be US$224/ADR, representing a 27% upside potential.   


Baidu: Time to Swoop In, with NAV Discount Widening Substantially