Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> shares dropped 1.35% yesterday despite an OP beat of 17.6% as 1QFY22 wasn’t the blowout results that were needed to overturn Alibaba’s recent weaknesses due to regulatory crackdowns focusing on the Chinese tech sector.

Alibaba Group (9988 HK) shares dropped 1.35% yesterday despite an OP beat of 17.6% as 1QFY22 wasn’t the blowout results that were needed to overturn Alibaba’s recent weaknesses due to regulatory crackdowns focusing on the Chinese tech sector.

Core-Commerce Grows at The Expense of Margins, Cloud Profitability Goes Down the Drain

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<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> reported underwhelming June quarter results (FY22Q1), even if we account for the unfavorable comps against the COVID boosted June 2020 quarter.  With the regulatory share overhang continuing to linger, is this the right time to press the stop-loss button? Four reasons why I am staying constructive: <ol>
<li>
Downside support with cheap valuations: BABA trades at 16.5x FY23 consensus earnings on 23% earnings growth in FY23 (consensus estimates are likely to decline).  (Figure 1) The stock's operating profit grew 25% per year for the last two fiscal years (despite the flat operating profit growth in FY21) (Figure 2.)</li>
<li>
Revenue growth was soft but for a good reason. Revenue growth in the June quarter looked weak because of the unfavorable comparison to the COVID boosted quarter and because BABA is in a transitional stage.  From 2014 to late 2015, BABA's share price fell close to 40%, only to fully recover in the following 12 months as revenue growth accelerated from new ad load and increase in customer demand.  (See Figure 3.)  In my view, short-term investors will miss out on the upside once the new revenue engines rev up.  </li>
<li>
Earnings margins were compressed due to investments in growth but the core earnings remain strong. Earnings growth fell because of the company's investments in strategic businesses.  While these investments still recorded losses, they generated 48% of the company's revenue growth.  Profits will follow, but not in 2021. Keep in mind that the Marketplace EBITA margin has rebounded to 73% from 70% in the March quarter. </li>
</ol>

Alibaba Group (BABA US) reported underwhelming June quarter results (FY22Q1), even if we account for the unfavorable comps against the COVID boosted June 2020 quarter.  With the regulatory share overhang continuing to linger, is this the right time to press the stop-loss button? Four reasons why I am staying constructive: 

Downside support with cheap valuations: BABA trades at 16.5x FY23 consensus earnings on 23% earnings growth in FY23 (consensus estimates are likely to decline).  (Figure 1) The stock's operating profit grew 25% per year for the last two fiscal years (despite the flat operating profit growth in FY21) (Figure 2.)

Revenue growth was soft but for a good reason. Revenue growth in the June quarter looked weak because of the unfavorable comparison to the COVID boosted quarter and because BABA is in a transitional stage.  From 2014 to late 2015, BABA's share price fell close to 40%, only to fully recover in the following 12 months as revenue growth accelerated from new ad load and increase in customer demand.  (See Figure 3.)  In my view, short-term investors will miss out on the upside once the new revenue engines rev up.  

Earnings margins were compressed due to investments in growth but the core earnings remain strong. Earnings growth fell because of the company's investments in strategic businesses.  While these investments still recorded losses, they generated 48% of the company's revenue growth.  Profits will follow, but not in 2021. Keep in mind that the Marketplace EBITA margin has rebounded to 73% from 70% in the March quarter. 


Alibaba (BABA US): Why I Remain Constructive

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

US markets inched higher with the S&amp;P and Nasdaq up 0.8% and 0.6% respectively. Energy, Health Care, Industrials, Financials and Materials were up 1-2%. Alibaba posted better than expected EPS though it missed revenue expectations (details below). European markets looked for direction –  CAC was up 0.7%, FTSE was broadly flat and DAX was down up 0.1%. StanChart and SocGen also reported strong earnings (details below). Saudi’s TASI and UAE’s ADX were up 0.5% and 0.4% respectively. Brazil’s Bovespa gained 0.9%. Asia Pacific stocks opened in the red – Nikkei, HSI and Shanghai were down ~0.4%. Singapore’s STI was up 0.1%. US 10Y yields were flat at 1.18%.

Summit Digitel Launches $ Bond; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and...

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Alibaba’s group EBIT fell by 11% YoY in 1Q21 yet we might get consensus EPS upgrades. We have written extensively about the significant dislocation in consensus estimates which in our view are too high on the EBIT line and too low on the EPS line. We dig into the numbers and our thoughts.

Alibaba’s group EBIT fell by 11% YoY in 1Q21 yet we might get consensus EPS upgrades. We have written extensively about the significant dislocation in consensus estimates which in our view are too high on the EBIT line and too low on the EPS line. We dig into the numbers and our thoughts.

Alibaba 1Q21/22 Results – Another EBIT Whiff yet We Might Get Upgrades.

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>Revenue from physical store chains grew by 80% YoY in 1Q22.</li>
<li>The margin decline is partly due to temporary changes.</li>
<li>Generally, we believe EPS will decline by 11% in FY2022, but grow by 13% in FY2023.</li>
<li>We believe the stock has an upside of 30% for the end of March 2022.</li>
</ul>


Revenue from physical store chains grew by 80% YoY in 1Q22.
The margin decline is partly due to temporary changes.
Generally, we believe EPS will decline by 11% in FY2022, but grow by 13% in FY2023.
We believe the stock has an upside of 30% for the end of March 2022.


Alibaba (BABA): FY1Q22, Physical Stores Growing Strongly, Margin Lower but Controllable, 30% Upside

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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Alibaba Group Holding (9988 HK)

Core-Commerce Grows at The Expense of Margins, Cloud Profitability Goes Down the Drain

Alibaba shares dropped 1.35% yesterday despite an OP beat of 17.6% as 1QFY22 wasn’t the blowout results that were needed to overturn Alibaba’s...

Oshadhi Kumarasiri

Alibaba (BABA US): Why I Remain Constructive

Baba reported underwhelming results, but I offer three reasons to remain constructive: cheap valuation, solid revenue growth, strong core...

Mitchell Kim

Summit Digitel Launches $ Bond; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and...

US markets inched higher with the S&P and Nasdaq up 0.8% and 0.6% respectively. Energy, Health Care, Industrials, Financials and Materials were...

BondEvalue

Alibaba 1Q21/22 Results – Another EBIT Whiff yet We Might Get Upgrades.

Alibaba’s group EBIT fell by 11% YoY in 1Q21 yet we might get EPS upgrades. We have written extensively about the dislocation in forecasts which in...

Rickin Thakrar

Alibaba (BABA): FY1Q22, Physical Stores Growing Strongly, Margin Lower but Controllable, 30% Upside

Revenue from physical store chains grew by 80% YoY in 1Q22. The margin decline is partly due to temporary changes. Generally, we believe EPS will...

Ming Lu

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