Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<ul>
<li>Whilst the Chinese online games market has struggled since 2023, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> has continued to gain revenue market share driven by the success of its mobile titles.</li>
<li>Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.</li>
<li>NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.</li>
</ul>


Whilst the Chinese online games market has struggled since 2023, NetEase (9999 HK) has continued to gain revenue market share driven by the success of its mobile titles.
Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.
NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.


NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio.</li><li>Net revenue for Q1 rose to RMB 26.9 billion, marking an accelerated YoY increase led by the company's diversified game offerings.</li><li>There was significant growth from established game franchises which have managed to maintain high popularity among their user bases, showcasing the sustainability of the company’s games.</li></ul>

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio.Net revenue for Q1 rose to RMB 26.9 billion, marking an accelerated YoY increase led by the company's diversified game offerings.There was significant growth from established game franchises which have managed to maintain high popularity among their user bases, showcasing the sustainability of the company’s games.

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last?  - Major Drivers

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income grew by 12% YoY to RMB8.5bn, 2% ahead of consensus estimate thanks to the better-than-expected performance of games and music business GPM.</li><li>We are positive on its game revenue growth reacceleration in 2H24E supported by the quality game pipeline, despite that certain games adjustment and competition may cause short-term volatility.</li><li>We raise FY24-26E non-GAAP net income forecast by 2-5% to reflect the better-than-expected GPM expansion.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income grew by 12% YoY to RMB8.5bn, 2% ahead of consensus estimate thanks to the better-than-expected performance of games and music business GPM.We are positive on its game revenue growth reacceleration in 2H24E supported by the quality game pipeline, despite that certain games adjustment and competition may cause short-term volatility.We raise FY24-26E non-GAAP net income forecast by 2-5% to reflect the better-than-expected GPM expansion.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

<ul><li>NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.</li><li>Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024.</li><li>NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024.NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Netease (NTES US) - Renewed Agreement with Blizzard

<ul>
<li>Despite a disappointing 4Q2023 earnings report, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> remains firmly amid an earnings upgrade cycle.</li>
<li>With NetEase touching on being oversold, near-term momentum indicators are displaying bullish signals.</li>
<li>NetEase currently trades more than one standard deviation below its rolling 5-year historic average PE ratio.</li>
</ul>


Despite a disappointing 4Q2023 earnings report, NetEase (9999 HK) remains firmly amid an earnings upgrade cycle.
With NetEase touching on being oversold, near-term momentum indicators are displaying bullish signals.
NetEase currently trades more than one standard deviation below its rolling 5-year historic average PE ratio.


NetEase: Positive Technical Analysis Signals

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

East Money Information Co., Ltd. operates online financial information platform.  The Company's products include internet advertising and financial data.

Hithink RoyalFlush Information Network Co Ltd provides online financial data, data analysis software, and other financial software system.

Hithink RoyalFlush Information Network (300033 CH)

People.cn Company Limited mainly engages in internet advertising, information services, mobile value-added and technical services. The Company's main products include original messages, government information services, public opinion research and consulting, mobile news, and ISP services.

Autohome Inc is an online destination for automobile consumers in China.  The Company delivers comprehensive, independent and interactive content to automobile buyers and owners.

JOYY Inc. operates a global social media platform. The Company offers platform which enables users to interact with each other in real time through online live media by creating, sharing, and enjoying a vast range of entertainment content and activities. JOYY serves customers in China.

Wangsu Science & Technology Co., Ltd. provides online business solutions in China. The Company also provides Content Delivery Network (CDN), and Internet Data Centers (IDC).

Shanghai Wangsu Science & Technology Co (300017 CH)

Beijing Sinnet Technology Company Limited provides customers with broadband access services, IDC and its value-added services, and other internet integrated services. The Company's core business are broadband access services, IDC and its value-added services.

GDS Holdings Limited operates as a holding company. The Company, through its subsidiaries, develops and operates data centers. GDS Holdings offers risk and security management, information technology planing, remote monitoring, cloud hosting, virtualization, disaster recovery, and remote data protection services.

INESA Intelligent Tech Inc. operates in the IT industry. The Company designs and manages cloud servers and big data applications for businesses. INESA Intelligent also manufactures electronic components.

eBay Inc. operates an online trading community.  The Company's service is used by buyers and sellers for the exchange of products and services such as coins, collectibles, computers, memorabilia, stamps and toys, as well as concert and sporting tickets.  eBay also offers, through a subsidiary, secure online payment services.

Akamai Technologies, Inc. provides services for accelerating and improving the delivery of content and applications over the Internet; ranging from live and on-demand streaming video capabilities to conventional content on websites, to tools that help people transact business and reach out to new and existing customers.

Zillow Group, Inc. provides e-commerce services. The Company provides information about homes, real estate listings, and mortgages through their website and mobile applications. Zillow serves homeowners, buyers, sellers, renters, and real estate professionals throughout the United States.

VeriSign Inc provides domain names and Internet security, enabling the world to connect online with reliability and confidence, anytime, anywhere. The Company ensures the security, stability and resiliency of key Internet infrastructure including the .com and .net top-level domains among others. VeriSign also offers intelligence-driven security services.

Kakao Corp. provides Internet portal services such as news, free e-mail, and leisure information.  The Company also offers cross-platform mobile messaging application that allows users to exchange messages.

GoDaddy, Inc. provides a cloud-based web platform for small businesses, web design professionals and individuals. The Company's platform provides applications that help them connect to their customers, manage their businesses and get found online.

Naver Corp. provides Internet site with web portal services, such as search engine, online game and content development.  The Company also offers marketing service through text and banner advertisement.

CoStar Group Inc. provides building-specific information to the United States commercial real estate industry and related industries. The Company's database details office and industrial space. The database provides digitized photographs and floor plan images on individual commercial buildings in the company's markets.

Nutanix, Inc. designs and develops enterprise cloud platforms. The Company provides enterprise cloud platform solutions that converge traditional silos of server, virtualization, and storage into one integrated solution. Nutanix serves customers worldwide.

Yandex NV operates an Internet website in Russia.  The Company's website offers an Internet search engine, news, shopping information, blogs, photographs and videos.  Yandex earns its revenues from online advertising.

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

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NetEase Inc (NTES US)

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last? - Major Drivers

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio. Net revenue for Q1 rose to...

Baptista Research

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income...

CMB International

Netease (NTES US) - Renewed Agreement with Blizzard

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.

CMB International

NetEase: Positive Technical Analysis Signals

In this insight, we perform a technical analysis of NetEase by looking at earnings forecast revision trends, momentum indicators, and current...

Wium Malan, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

In this insight we analyse the Chinese online games market, NetEase’s revenue growth outlook, current valuation level, and shareholder returns.

Wium Malan, CFA

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last? - Major Drivers

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio. Net revenue for Q1 rose to...

Baptista Research

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income...

CMB International

Netease (NTES US) - Renewed Agreement with Blizzard

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.

CMB International

NetEase: Positive Technical Analysis Signals

In this insight, we perform a technical analysis of NetEase by looking at earnings forecast revision trends, momentum indicators, and current...

Wium Malan, CFA