Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<p>I have turned more positive on Tencent shares recently (please see <a href="https://www.smartkarma.com/insights/tencent-700-hk-when-to-catch-a-falling-knife" target="_blank" data-smartkarma-citation="insights:55148" rel="noopener">Tencent (700 HK): When to Catch a Falling Knife</a>) after the share price plummeted from the peak in March.  While we may still see some residual regulatory measures rumbling through the China tech industry after the September 1 adoption of the new Data Privacy Law, Tencent's more reasonable value should mitigate further downside risks, in my view. </p><p><em>Three reasons why I am able to exhale comfortably on Tencent: </em></p><ul>
<li>
<strong>Tencent's overall revenue grew 20% YoY. </strong> This growth would normally be mediocre by Tencent's standards, but in comparison to the extraordinary growth year 2020, this is solid.  </li>
<li>
<strong>Fintech business remains unencumbered. </strong> Fintech now makes up 30% of Tencent's total revenues and the segment gross margin was 32%, an increase of 3.1% points. </li>
<li>
<strong>Tencent shares trade at 23.5x FY21 consensus earnings.</strong> This is inexpensive and suggests that at least some of the regulatory risks are priced in.  </li>
</ul><p><strong>The key risk remains on whether Tencent would be required to transfer user data as part of the data privacy law measures.  I do not believe this is the case. </strong>        </p>

I have turned more positive on Tencent shares recently (please see Tencent (700 HK): When to Catch a Falling Knife) after the share price plummeted from the peak in March.  While we may still see some residual regulatory measures rumbling through the China tech industry after the September 1 adoption of the new Data Privacy Law, Tencent's more reasonable value should mitigate further downside risks, in my view. Three reasons why I am able to exhale comfortably on Tencent: 

Tencent's overall revenue grew 20% YoY.  This growth would normally be mediocre by Tencent's standards, but in comparison to the extraordinary growth year 2020, this is solid.  

Fintech business remains unencumbered.  Fintech now makes up 30% of Tencent's total revenues and the segment gross margin was 32%, an increase of 3.1% points. 

Tencent shares trade at 23.5x FY21 consensus earnings. This is inexpensive and suggests that at least some of the regulatory risks are priced in.  
The key risk remains on whether Tencent would be required to transfer user data as part of the data privacy law measures.  I do not believe this is the case.         

Tencent (700 HK): No Longer Roaring, but the Price Is Right

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

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    <div class='content-caption'>Medtecs - CEO</div>
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<p class="gmail-p1">Engineer-by-training William Yang prefers the road less travelled. <br><br>
For the Chief Executive of Medtecs International Corporation, consciously choosing not to conform to prevailing norms or accept the status quo has made all the difference in his life, and to the fortunes of the SGX-listed personal protective equipment (PPE) manufacturer.<br><br>
“We need to challenge and re-assess the status quo from time to time, in order for the human race to progress in a meaningful way,” Yang pointed out. “The same goes for any business.”<br><br>
After graduating from the New York Institute of Technology with a degree in Electrical and Computer Engineering in 2005, Yang returned to Taiwan to join Medtecs, a company that his father - a textile industry veteran - had founded in 1989 to manufacture hospital garments.<br><br>
He learned the ropes by starting off as an Executive Assistant to his father - Medtecs Executive Chairman Clement Yang - before moving between roles, departments and companies within the Group over the next decade. A feather in his cap was his successful overhaul and turnaround of the Group’s then loss-making Shanghai subsidiary. <br><br>
Yang was appointed to succeed his father as Chief Executive Officer in 2018, and was named the Group’s Deputy Chairman in February this year.<br><br>
“My engineering background trained me to be analytical and inquisitive at the same time,” he recalled. “This honed my ability to look at problems from multiple angles in order to come up with the best solutions.”<br><br>
Today, Medtecs is a leading PPE and hospital services provider, with manufacturing facilities in the Philippines, Cambodia and China. The Group is a key supplier to global PPE companies, and exports to over 30 countries, including Europe, US, Southeast Asia, North Asia and Australia. <br><br>
As a hospital services provider, Medtecs provides hospitals in Taiwan and the Philippines with integrated services that include rental and laundry of linens, management of laundry facilities, hospital automation, as well as procurement solutions for PPE and medical devices needs.<br><br>
The Group was listed on the then Sesdaq board in 1999 and transitioned to SGX Catalist in 2010. Its Taiwan Depository Receipts (TDRs) have been listed on the Taiwan Stock Exchange (TWSE) since 2002.<br><br><strong>One-Stop Shop</strong><br><br>
Yang attributes Medtecs’ success to its “Source and Sell Globally” strategy that provides one-stop, bundled services to meet client demand by supplementing existing sources with those from third-party vendors in a variety of locations. <br><br>
“Medtecs had the foresight to expand its network of suppliers four years ago. As a result, when COVID-19 disrupted supply chains, we didn’t need to waste time and resources validating new suppliers, because we already had a long list of trustworthy names to meet the increased demand,” he explained.<br><br>
“When order volumes surged, we scaled up quickly and still managed to deliver on time during the peak of the global pandemic. This has spurred the Group’s transformation from a medical consumables manufacturer into an integrated multi-national PPE solutions provider with one-stop-shop capability.”<br><br>
As a testament to its achievements, Medtecs reported record revenue and net profit for its financial year ended 31 December 2020. Total revenue jumped nearly six-fold to US$400.3 million on the back of a global surge in demand for PPE following COVID-19, while net profit soared to US$131.7 million from US$1.2 million a year earlier. <br><br>
Looking ahead, Medtecs will continue to focus on rolling out proprietary products to meet customer needs. It already produces its own CoverU brand of PPE products. This year, it launched Medtecs Shield, a new line of antiviral offerings that includes masks, mobile phone cases and sprays, all of which are integrated with nanotechnologies that can kill viruses and bacteria.<br><br>
“We believe these products are essential for everyone, not just healthcare workers, in the current pandemic environment,” Yang added.<br><br>
Apart from offline channels like convenience shops and department stores, the Group also leverages major e-commerce sites such as Alibaba and Amazon to sell its PPE range. “We’re also looking to set up distribution channels across North America, Japan and Europe to extend the reach of our products.”<br><br><strong>Fortifying Its Position</strong><br><br>
While demand remains robust, challenges loom, not the least of which are the US-China trade spat and the ongoing pandemic, Yang pointed out.<br><br>
“US-China trade tensions continue to threaten a supply chain that is already weakened by COVID-19, and in order to mitigate the impact, Medtecs will continue to work with like-minded partners to tap synergies,” he added.<br><br>
The Group has established a series of strategic partnerships in recent months to ensure its supply chains remain protected and undisrupted. <br><br>
To deliver sustainable business growth, Medtecs has doubled up on its engagements with group purchasing organisations, institutional clients and government agencies to offer its PPE stockpiling services. As a result, it has secured several supply contracts in the Philippines and Cambodia for the first quarter ended 31 March 2021. <br><br>
“We’ve started site selection for the construction of an additional PPE manufacturing facility to fortify our position as a leading PPE stockpiling provider,” Yang noted.<br><br>
“We’re also focused on expanding our retail business through our Medtecs-branded products, as well as leveraging e-commerce to widen our customer reach and build brand awareness.”<br><br>
According to a recently published report by Research Dive, the global PPE market was valued at US$43.9 billion in 2018 and is anticipated to surge to US$93.5 billion by 2026, expanding at a compound annual growth rate (CAGR) of 10%. Currently, the market is worth approximately US$51.8 billion, as demand continues to rise.<br><br>
Apart from adopting multiple countermeasures to ensure business continuity and boost sales, Medtecs has also identified new Environmental, Social and Corporate Governance (ESG) factors to manage. They include quality control, product labelling and responsibility, labour relations, employee training, as well as waste management.<br><br><strong>Reducing PPE Waste</strong><br><br>
“One of the challenges we faced recently in implementing our ESG strategy was how to strike the right balance between protecting people from COVID-19 and conserving the environment,” Yang noted.<br><br>
To minimise the environmental impact associated with high volumes of single-use PPE due to the on-going pandemic, Medtecs’s R&amp;D team began working with partners and experimenting with different materials to create solutions to reduce PPE waste. <br><br>
“As a result, we developed the Weekly Disposable Anti-Viral Masks as part of our Medtecs Shield Collection. These masks can be worn up to seven days, odour-free, which allows wearers to simultaneously protect themselves from pathogens while caring for the environment through reduced wastage.”<br><br>
Undoubtedly, there is much to keep Yang up till the wee hours. “To be honest, I have not slept well since the outbreak of COVID-19 in early 2020,” he admitted.<br><br>
“Back in April last year, when the pandemic was nearing its peak, there was a severe global shortage of PPE and we were inundated with thousands of requests for our products from all over the world,” he recalled.<br><br>
“I worked super long hours, but couldn’t fall asleep when it was time for bed because the images of frontline workers wearing makeshift PPE, or none at all, haunted me. I would lie in bed thinking of ways to mobilise our resources and manpower, to get as many of these critical protective gear into our customers’ hands in as short a time as possible.”<br><br>
To de-stress, the 39-year-old plays Go or weiqi - a Chinese abstract strategy board game - with his sons, aged six and eight.<br><br>
“I’ve been playing Go since I was six - it’s a life-long passion of mine. It’s like an exercise for the brain, but at the same time, it takes my mind off work, so I feel more relaxed,” he said with a laugh.<br><br>
For his children, he has this advice: “Dream big, dream bold, and never settle for less than what you deserve”. <br><br>
“I’m not what you might call a tiger or a helicopter parent. In fact, I’m hands off when it comes to their school work, and I don’t demand perfect scores,” he said.<br><br>
“But I always emphasise the importance of believing in yourself and giving your best in whatever you do. If you fail at something, but you’ve already given 100%, then you’re good in my book.”<br><br><strong>Medtecs International Corporation Ltd</strong><br><br>
Medtecs is a leading personal protective equipment (PPE) and hospital services provider, with manufacturing facilities in the Philippines, Cambodia and China. The Group is a key supplier to global PPE companies, and exports to over 30 countries, including Europe, US, Southeast Asia, North Asia and Australia. As a hospital services provider, Medtecs provides hospitals in Taiwan and the Philippines with integrated services that include rental and laundry of linens, management of laundry facilities, hospital automation, as well as procurement solutions for PPE and medical devices needs. The Group was listed on the then Sesdaq board in 1999 and transitioned to SGX Catalist in 2010. Its Taiwan Depository Receipts (TDRs) have been listed on the Taiwan Stock Exchange (TWSE) since 2002.<br><br>
The company website is: <a href="http://www.medtecs.com"><strong>www.medtecs.com</strong></a><br><br>
Click <a href="https://www.sgx.com/securities/equities/546"><strong>here</strong> </a>for the company's StockFacts page.<br><br>
For the six months ended 30 June 2021 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/P96QD4LJYAQVD438/678858_Medtecs%20-%201H2021%20NR%20Framework%20%2013%20August%202021.pdf"><strong>here</strong></a>.<br><br>
 </p>

<p><strong>About kopi-C: the Company brew</strong></p>

<p><strong>Text: Jennifer Tan-Stanisic</strong><br><strong>Photo: Company file</strong><br><br><em>kopi-C </em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>
For previous editions of <em>kopi-C: the Company brew,</em> please click <a href="https://www.sgx.com/research-education/market-dialogues">here</a>.  <br><br>
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="https://www.sgx.com/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.</p>
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    Medtecs - CEO


Engineer-by-training William Yang prefers the road less travelled.   
For the Chief Executive of Medtecs International Corporation, consciously choosing not to conform to prevailing norms or accept the status quo has made all the difference in his life, and to the fortunes of the SGX-listed personal protective equipment (PPE) manufacturer.  
“We need to challenge and re-assess the status quo from time to time, in order for the human race to progress in a meaningful way,” Yang pointed out. “The same goes for any business.”  
After graduating from the New York Institute of Technology with a degree in Electrical and Computer Engineering in 2005, Yang returned to Taiwan to join Medtecs, a company that his father - a textile industry veteran - had founded in 1989 to manufacture hospital garments.  
He learned the ropes by starting off as an Executive Assistant to his father - Medtecs Executive Chairman Clement Yang - before moving between roles, departments and companies within the Group over the next decade. A feather in his cap was his successful overhaul and turnaround of the Group’s then loss-making Shanghai subsidiary.   
Yang was appointed to succeed his father as Chief Executive Officer in 2018, and was named the Group’s Deputy Chairman in February this year.  
“My engineering background trained me to be analytical and inquisitive at the same time,” he recalled. “This honed my ability to look at problems from multiple angles in order to come up with the best solutions.”  
Today, Medtecs is a leading PPE and hospital services provider, with manufacturing facilities in the Philippines, Cambodia and China. The Group is a key supplier to global PPE companies, and exports to over 30 countries, including Europe, US, Southeast Asia, North Asia and Australia.   
As a hospital services provider, Medtecs provides hospitals in Taiwan and the Philippines with integrated services that include rental and laundry of linens, management of laundry facilities, hospital automation, as well as procurement solutions for PPE and medical devices needs.  
The Group was listed on the then Sesdaq board in 1999 and transitioned to SGX Catalist in 2010. Its Taiwan Depository Receipts (TDRs) have been listed on the Taiwan Stock Exchange (TWSE) since 2002.  One-Stop Shop  
Yang attributes Medtecs’ success to its “Source and Sell Globally” strategy that provides one-stop, bundled services to meet client demand by supplementing existing sources with those from third-party vendors in a variety of locations.   
“Medtecs had the foresight to expand its network of suppliers four years ago. As a result, when COVID-19 disrupted supply chains, we didn’t need to waste time and resources validating new suppliers, because we already had a long list of trustworthy names to meet the increased demand,” he explained.  
“When order volumes surged, we scaled up quickly and still managed to deliver on time during the peak of the global pandemic. This has spurred the Group’s transformation from a medical consumables manufacturer into an integrated multi-national PPE solutions provider with one-stop-shop capability.”  
As a testament to its achievements, Medtecs reported record revenue and net profit for its financial year ended 31 December 2020. Total revenue jumped nearly six-fold to US$400.3 million on the back of a global surge in demand for PPE following COVID-19, while net profit soared to US$131.7 million from US$1.2 million a year earlier.   
Looking ahead, Medtecs will continue to focus on rolling out proprietary products to meet customer needs. It already produces its own CoverU brand of PPE products. This year, it launched Medtecs Shield, a new line of antiviral offerings that includes masks, mobile phone cases and sprays, all of which are integrated with nanotechnologies that can kill viruses and bacteria.  
“We believe these products are essential for everyone, not just healthcare workers, in the current pandemic environment,” Yang added.  
Apart from offline channels like convenience shops and department stores, the Group also leverages major e-commerce sites such as Alibaba and Amazon to sell its PPE range. “We’re also looking to set up distribution channels across North America, Japan and Europe to extend the reach of our products.”  Fortifying Its Position  
While demand remains robust, challenges loom, not the least of which are the US-China trade spat and the ongoing pandemic, Yang pointed out.  
“US-China trade tensions continue to threaten a supply chain that is already weakened by COVID-19, and in order to mitigate the impact, Medtecs will continue to work with like-minded partners to tap synergies,” he added.  
The Group has established a series of strategic partnerships in recent months to ensure its supply chains remain protected and undisrupted.   
To deliver sustainable business growth, Medtecs has doubled up on its engagements with group purchasing organisations, institutional clients and government agencies to offer its PPE stockpiling services. As a result, it has secured several supply contracts in the Philippines and Cambodia for the first quarter ended 31 March 2021.   
“We’ve started site selection for the construction of an additional PPE manufacturing facility to fortify our position as a leading PPE stockpiling provider,” Yang noted.  
“We’re also focused on expanding our retail business through our Medtecs-branded products, as well as leveraging e-commerce to widen our customer reach and build brand awareness.”  
According to a recently published report by Research Dive, the global PPE market was valued at US$43.9 billion in 2018 and is anticipated to surge to US$93.5 billion by 2026, expanding at a compound annual growth rate (CAGR) of 10%. Currently, the market is worth approximately US$51.8 billion, as demand continues to rise.  
Apart from adopting multiple countermeasures to ensure business continuity and boost sales, Medtecs has also identified new Environmental, Social and Corporate Governance (ESG) factors to manage. They include quality control, product labelling and responsibility, labour relations, employee training, as well as waste management.  Reducing PPE Waste  
“One of the challenges we faced recently in implementing our ESG strategy was how to strike the right balance between protecting people from COVID-19 and conserving the environment,” Yang noted.  
To minimise the environmental impact associated with high volumes of single-use PPE due to the on-going pandemic, Medtecs’s R&amp;D team began working with partners and experimenting with different materials to create solutions to reduce PPE waste.   
“As a result, we developed the Weekly Disposable Anti-Viral Masks as part of our Medtecs Shield Collection. These masks can be worn up to seven days, odour-free, which allows wearers to simultaneously protect themselves from pathogens while caring for the environment through reduced wastage.”  
Undoubtedly, there is much to keep Yang up till the wee hours. “To be honest, I have not slept well since the outbreak of COVID-19 in early 2020,” he admitted.  
“Back in April last year, when the pandemic was nearing its peak, there was a severe global shortage of PPE and we were inundated with thousands of requests for our products from all over the world,” he recalled.  
“I worked super long hours, but couldn’t fall asleep when it was time for bed because the images of frontline workers wearing makeshift PPE, or none at all, haunted me. I would lie in bed thinking of ways to mobilise our resources and manpower, to get as many of these critical protective gear into our customers’ hands in as short a time as possible.”  
To de-stress, the 39-year-old plays Go or weiqi - a Chinese abstract strategy board game - with his sons, aged six and eight.  
“I’ve been playing Go since I was six - it’s a life-long passion of mine. It’s like an exercise for the brain, but at the same time, it takes my mind off work, so I feel more relaxed,” he said with a laugh.  
For his children, he has this advice: “Dream big, dream bold, and never settle for less than what you deserve”.   
“I’m not what you might call a tiger or a helicopter parent. In fact, I’m hands off when it comes to their school work, and I don’t demand perfect scores,” he said.  
“But I always emphasise the importance of believing in yourself and giving your best in whatever you do. If you fail at something, but you’ve already given 100%, then you’re good in my book.”  Medtecs International Corporation Ltd  
Medtecs is a leading personal protective equipment (PPE) and hospital services provider, with manufacturing facilities in the Philippines, Cambodia and China. The Group is a key supplier to global PPE companies, and exports to over 30 countries, including Europe, US, Southeast Asia, North Asia and Australia. As a hospital services provider, Medtecs provides hospitals in Taiwan and the Philippines with integrated services that include rental and laundry of linens, management of laundry facilities, hospital automation, as well as procurement solutions for PPE and medical devices needs. The Group was listed on the then Sesdaq board in 1999 and transitioned to SGX Catalist in 2010. Its Taiwan Depository Receipts (TDRs) have been listed on the Taiwan Stock Exchange (TWSE) since 2002.  
The company website is: www.medtecs.com  
Click here for the company's StockFacts page.  
For the six months ended 30 June 2021 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Medtecs Builds Resilience for Sustainable Growth

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> announced yet another record set of quarterly results last night, with +159% growth in total GAAP revenues to US$2,280.6m. This marks the 12th consecutive quarter of triple-digit growth in revenues, which deserves a standing ovation</p>
<p>The company's digital entertainment business continued to thrive, with quarterly active users (QAU) increasing by +45% YoY and importantly quarterly paying users increasing +85% YoY in 2Q2021, and generating positive EBITDA of US$740.9m.</p>
<p>The quarterly paying users represented a higher portion of users in 2Q2021 and Adjusted EBITDA as a portion of bookings improved to 62.8% for 2Q2021 versus 60.9% in 2Q2020.</p>
<p>Garena's self-developed global hit game <em>Free Fire </em>reached over 1bn downloads on Google Play, with the game ranking number three globally by average monthly users for mobile games in 2Q2021, according to App Annie, with record peak daily users.</p>
<section class="figure"></section>
<p>The company's e-commerce business continued to see rapid growth with gross orders up by +127% YoY to 1.4bn orders and gross merchandise value up by +87.5% YoY to US$15bn whilst the adjusted EBITDA loss per order decreased by -19.6% YoY.</p>
<p>Shopee was the second most downloaded app on Google Play and the second most downloaded app across Google Play and iOS app stores combined forte shopping category globally in 2Q2021, according to App Annie.</p>
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<p>In Brazil, where Shopee was launched in late 2019, it ranked first in the shopping category by downloads, and total time spent in-app, as well as ranking second in terms of monthly active users (MAU) for 2Q2021.</p>
<p> In Brazil, it has already made good progress with more monthly active users than <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and stands in the number two position after <a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a> in terms of active users.</p>
<p><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> also continued to make significant progress in digital financial services through the adoption of SeaMoney and ShopeePay, with US$4.1bn in total payment volume in its mobile wallet in 2Q2021, up nearly +150% YoY. It also saw an increase of +109% in quarterly paying users in 2Q2021. </p>
<p>The company continues to grow its ShopeeFood business in Indonesia and Vietnam and has seen a very strong performance and positive reception from users as well as driver communities in both markets in 2Q2021, with a strong focus on the quality of services to users.</p>
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<p>The company booked an overall gross profit increase of +364% YoY. From a non-GAAP EBITDA perspective, the company booked an EBITDA loss of (US$24.1m) versus an EBITDA profit of US$7.7m.</p>
<p>From a segmental point of view, <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> booked a positive EBITDA of US$740.9m for its digital entertainment segment in 2Q2021 versus US436.2m last year in the same period, an increase of +69.8% YoY. </p>
<p>The e-commerce segment booked an EBITDA loss of (US$579.8m) in 2Q2021 versus a loss of (US$313.7m) last year, an increase in loss of +84.8% YoY.</p>
</section>
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<section class="figure">These look like yet another blow away set of numbers for <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>, despite the company booking a marginally higher loss. It is all too easy to take a negative view on a high-growth company such as <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> but most negative arguments from analysts tinker with the quarterly minutiae and are somehow blind to the longer-term positive story and the company's growth model.</section>
</section>
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<section class="figure">Management has also raised its full-year guidance, which is now well above analyst expectations. The stock reacted positively to the results breaking out above US$300 to close at a new record close. We remain positive on <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>, which now trades on 10.5x FY22E EV/Sales and 8x FY23E EV/sales, which may look rich but is justified by superior growth to its peers, with e-commerce and digital finance fuelled by the company's gaming business. </section>
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Sea Ltd (SE US) announced yet another record set of quarterly results last night, with +159% growth in total GAAP revenues to US$2,280.6m. This marks the 12th consecutive quarter of triple-digit growth in revenues, which deserves a standing ovation
The company's digital entertainment business continued to thrive, with quarterly active users (QAU) increasing by +45% YoY and importantly quarterly paying users increasing +85% YoY in 2Q2021, and generating positive EBITDA of US$740.9m.
The quarterly paying users represented a higher portion of users in 2Q2021 and Adjusted EBITDA as a portion of bookings improved to 62.8% for 2Q2021 versus 60.9% in 2Q2020.
Garena's self-developed global hit game Free Fire reached over 1bn downloads on Google Play, with the game ranking number three globally by average monthly users for mobile games in 2Q2021, according to App Annie, with record peak daily users.

The company's e-commerce business continued to see rapid growth with gross orders up by +127% YoY to 1.4bn orders and gross merchandise value up by +87.5% YoY to US$15bn whilst the adjusted EBITDA loss per order decreased by -19.6% YoY.
Shopee was the second most downloaded app on Google Play and the second most downloaded app across Google Play and iOS app stores combined forte shopping category globally in 2Q2021, according to App Annie.

In Brazil, where Shopee was launched in late 2019, it ranked first in the shopping category by downloads, and total time spent in-app, as well as ranking second in terms of monthly active users (MAU) for 2Q2021.
 In Brazil, it has already made good progress with more monthly active users than Amazon.com Inc (AMZN US) and Alibaba Group (BABA US) and stands in the number two position after MercadoLibre Inc (MELI US) in terms of active users.
Sea Ltd (SE US) also continued to make significant progress in digital financial services through the adoption of SeaMoney and ShopeePay, with US$4.1bn in total payment volume in its mobile wallet in 2Q2021, up nearly +150% YoY. It also saw an increase of +109% in quarterly paying users in 2Q2021. 
The company continues to grow its ShopeeFood business in Indonesia and Vietnam and has seen a very strong performance and positive reception from users as well as driver communities in both markets in 2Q2021, with a strong focus on the quality of services to users.


The company booked an overall gross profit increase of +364% YoY. From a non-GAAP EBITDA perspective, the company booked an EBITDA loss of (US$24.1m) versus an EBITDA profit of US$7.7m.
From a segmental point of view, Sea Ltd (SE US) booked a positive EBITDA of US$740.9m for its digital entertainment segment in 2Q2021 versus US436.2m last year in the same period, an increase of +69.8% YoY. 
The e-commerce segment booked an EBITDA loss of (US$579.8m) in 2Q2021 versus a loss of (US$313.7m) last year, an increase in loss of +84.8% YoY.


These look like yet another blow away set of numbers for Sea Ltd (SE US), despite the company booking a marginally higher loss. It is all too easy to take a negative view on a high-growth company such as Sea Ltd (SE US) but most negative arguments from analysts tinker with the quarterly minutiae and are somehow blind to the longer-term positive story and the company's growth model.




Management has also raised its full-year guidance, which is now well above analyst expectations. The stock reacted positively to the results breaking out above US$300 to close at a new record close. We remain positive on Sea Ltd (SE US), which now trades on 10.5x FY22E EV/Sales and 8x FY23E EV/sales, which may look rich but is justified by superior growth to its peers, with e-commerce and digital finance fuelled by the company's gaming business. 














<p>In June, I turned more constructive on <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> as a rare value play among the online shopping platforms after the stock price fell more than 50% from the peak in March.  Since then, the stock price fell another 26% as the Chinese tech selloff continued even though VIPS faces relatively lower regulatory risk. Considering the continued operational improvements (even though the profits missed consensus expectations, margins remained stable). I believe the stock offers an attractive risk-return proposition.   </p><p><strong>I find VIPS more attractive at this point because of the following three reasons:</strong></p><ol>
<li>
<strong>Vipshop is subject to relatively lower regulatory risk.</strong>  VIPS was penalized just a small fine thus far. VIPS is relatively immune from the new Data Security Law (DSL) to be adopted on 1 September.    </li>
<li>
<strong>Vipshop is trading near historic low valuations.</strong> VIPS shares trade at 8.6x FY21 and 7.4x FY22 consensus earnings and at the historic low P/E band.  This level is similar to when the company recorded 9% revenue growth and a 3.5% operating margin.  This is a whole new company with substantially higher revenue and profit growth. </li>
<li>
<strong>Weak 2Q21 results provide a better entry point.</strong> VIPS' 2Q21 showed resilient top-line growth but margins took a hit, indicating the higher cost of acquisitions.  But VIPS is a different company than the weaker 2018-2019 self.      </li>
</ol>

In June, I turned more constructive on Vipshop Holdings (VIPS US) as a rare value play among the online shopping platforms after the stock price fell more than 50% from the peak in March.  Since then, the stock price fell another 26% as the Chinese tech selloff continued even though VIPS faces relatively lower regulatory risk. Considering the continued operational improvements (even though the profits missed consensus expectations, margins remained stable). I believe the stock offers an attractive risk-return proposition.   I find VIPS more attractive at this point because of the following three reasons:

Vipshop is subject to relatively lower regulatory risk.  VIPS was penalized just a small fine thus far. VIPS is relatively immune from the new Data Security Law (DSL) to be adopted on 1 September.    

Vipshop is trading near historic low valuations. VIPS shares trade at 8.6x FY21 and 7.4x FY22 consensus earnings and at the historic low P/E band.  This level is similar to when the company recorded 9% revenue growth and a 3.5% operating margin.  This is a whole new company with substantially higher revenue and profit growth. 

Weak 2Q21 results provide a better entry point. VIPS' 2Q21 showed resilient top-line growth but margins took a hit, indicating the higher cost of acquisitions.  But VIPS is a different company than the weaker 2018-2019 self.      


Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>WeChat Pay still grew strongly, taking advantage of AliPay’s mess.</li>
<li>Mobile game slowed down because of high comparison base, but the pandemic came back and might lead to another round of lockdown.</li>
<li>The only problem is the stagnancy of the online TV market.</li>
<li>We believe the stock has an upside of 42% for the end of June 2022. Buy.</li>
</ul>


WeChat Pay still grew strongly, taking advantage of AliPay’s mess.
Mobile game slowed down because of high comparison base, but the pandemic came back and might lead to another round of lockdown.
The only problem is the stagnancy of the online TV market.
We believe the stock has an upside of 42% for the end of June 2022. Buy.


Tencent (700 HK): 2Q21, Generally Healthy Quarter and Overly Impacted Price

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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