Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> recorded a banner year in 2020 with GMV and active buyer growths re-accelerating from the slower 2019 (see our results highlights). JD too has been a beneficiary of the online consumption burst in 2020.  The stock price more than doubled from 2019 but its valuations do not appear to be stretched unlike some of its peers.  We believe JD's margin expansion story is unwinding.      We are positive on JD’s operating improvements, and we forecast a continued – albeit slightly muted – operating momentum in 2021. Interestingly, <a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> IPO sucked up all the oxygen today. Given the similarity between the two business models, we believe Coupang’s rich valuations make a compelling argument for JD shares, in our view.  We favor JD.com even on growth-adjusted valuations.  In our previous report, <a href="https://www.smartkarma.com/insights/coupang-cpng-us-going-mano-e-mano-with-jd-com" target="_blank" data-smartkarma-citation="insights:49065" rel="noopener">Coupang (CPNG US): Going Mano E Mano with JD.com</a>, we compare JD’s historical valuations with Coupang.  Based on our estimates, JD trades at 0.3x ‘21e EV/GMV, 0.9x EV/Revenue, and only 6.1x Gross Profit as well as 23.2x ‘21e earnings (excluding net cash).  These are attractive valuations, in our view.

JD.com Inc (ADR) (JD US) recorded a banner year in 2020 with GMV and active buyer growths re-accelerating from the slower 2019 (see our results highlights). JD too has been a beneficiary of the online consumption burst in 2020.  The stock price more than doubled from 2019 but its valuations do not appear to be stretched unlike some of its peers.  We believe JD's margin expansion story is unwinding.      We are positive on JD’s operating improvements, and we forecast a continued – albeit slightly muted – operating momentum in 2021. Interestingly, Coupang (CPNG US) IPO sucked up all the oxygen today. Given the similarity between the two business models, we believe Coupang’s rich valuations make a compelling argument for JD shares, in our view.  We favor JD.com even on growth-adjusted valuations.  In our previous report, Coupang (CPNG US): Going Mano E Mano with JD.com, we compare JD’s historical valuations with Coupang.  Based on our estimates, JD trades at 0.3x ‘21e EV/GMV, 0.9x EV/Revenue, and only 6.1x Gross Profit as well as 23.2x ‘21e earnings (excluding net cash).  These are attractive valuations, in our view. 

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.

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>Kuaishou (1024 HK)’s vice president of community content was arrested for taking bribes.</li>
<li>Alibaba (BABA)’s public relation manager was rumored to jump off the office building in Beijing.</li>
<li>Suning Commerce (002024 CN)’s founder will sell his shareholdings.</li>
</ul>


Kuaishou (1024 HK)’s vice president of community content was arrested for taking bribes.
Alibaba (BABA)’s public relation manager was rumored to jump off the office building in Beijing.
Suning Commerce (002024 CN)’s founder will sell his shareholdings.


China Internet Weekly (Feb 22): Kuaishou VP Arrested, BABA Manager Dead “by Accident”, & Q4 Results

<a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo's (PDD US)</a> share price skyrocketed 6x in the last 12 months and 2.2x since the regulators released the anti-monopoly guidelines (AML) and opened an investigation on Alibaba on 10 November 2020. We believe investors flocked to PDD as they interpreted <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group's (BABA US)</a> loss as PDD's gain. The current price level implies a 54% Price to GMV premium to Alibaba.There are five reasons why I would consider cashing in the chips and look for better value in Alibaba: 1) Better operating metrics2) Cheaper valuations3) Greater operating efficiency4) PDD's execution risk5) Is PDD really immune from AML?

Pinduoduo's (PDD US) share price skyrocketed 6x in the last 12 months and 2.2x since the regulators released the anti-monopoly guidelines (AML) and opened an investigation on Alibaba on 10 November 2020. We believe investors flocked to PDD as they interpreted Alibaba Group's (BABA US) loss as PDD's gain. The current price level implies a 54% Price to GMV premium to Alibaba.There are five reasons why I would consider cashing in the chips and look for better value in Alibaba: 1) Better operating metrics2) Cheaper valuations3) Greater operating efficiency4) PDD's execution risk5) Is PDD really immune from AML?  

Pinduoduo (PDD US): Know When to Fold, Know When to Run

In this report, we summarize the potential impact of the Internet consumer lending guidelines announced by CBIRC on Ant Group and why its value remains intact, which bodes well for the underperformed Alibaba shares.  We provide a more in-depth look at the following: <ul>
<li>Ant’s revised valuation and sensitivity analyses focusing on consumer loan growth assumption and various valuation multiples.</li>
<li>The argument for why <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> shares were excessively penalized when <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> remains unscathed.</li>
<li>Our own Ant Group’s financial forecasts.</li>
<li>A closer look at each of Ant's business segments and their monetization rates.</li>
<li>Ant’s market share by segment. </li>
</ul>

In this report, we summarize the potential impact of the Internet consumer lending guidelines announced by CBIRC on Ant Group and why its value remains intact, which bodes well for the underperformed Alibaba shares.  We provide a more in-depth look at the following: 
Ant’s revised valuation and sensitivity analyses focusing on consumer loan growth assumption and various valuation multiples.
The argument for why Alibaba Group (BABA US) shares were excessively penalized when Tencent Holdings (700 HK) remains unscathed.
Our own Ant Group’s financial forecasts.
A closer look at each of Ant's business segments and their monetization rates.
Ant’s market share by segment. 


Alibaba (BABA US): Ant Group Woes Overly Priced-In

As one of the rare comeback stories among the Asian Internet platforms, <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> share price rose 3x in the last 12 months (Figure 1). While the skeptics questioned whether the WeChat synergy would be sustainable, VIPS has answered the critics with robust results in the last three quarters, including the impressive 4Q20 results (Figure 3). There is no argument about the fundamental argument thus far for VIPS shares’ resurgence considering the strong customer acquisitions partly due to the power of the WeChat and margin improvement as the management refocused on its core strength in apparel and shed the margin dragging logistics unit. However, chasing the stock at this price level is not for the faint-hearted. We noted that the stock is now trading at the highest forward P/E multiple based on FY2021 GAAP EPS since July 2018 (Figure 2).       Having said that positive sentiment on the stock will likely persist in the near-term.  The management’s guidance of 45-50% revenue growth for 1Q21 (the guidance implies 19% YoY growth normalized) should provide the momentum and revenue growth will continue to be compared against the COVID-19 lockdown quarters.  The real growth test will come in 3Q21 when VIPS’ growth will be compared with the high customer growth which started in 3Q20. Decelerating growth could trigger a potential pullback, in our view.

As one of the rare comeback stories among the Asian Internet platforms, Vipshop Holdings' (VIPS US) share price rose 3x in the last 12 months (Figure 1). While the skeptics questioned whether the WeChat synergy would be sustainable, VIPS has answered the critics with robust results in the last three quarters, including the impressive 4Q20 results (Figure 3). There is no argument about the fundamental argument thus far for VIPS shares’ resurgence considering the strong customer acquisitions partly due to the power of the WeChat and margin improvement as the management refocused on its core strength in apparel and shed the margin dragging logistics unit. However, chasing the stock at this price level is not for the faint-hearted. We noted that the stock is now trading at the highest forward P/E multiple based on FY2021 GAAP EPS since July 2018 (Figure 2).       Having said that positive sentiment on the stock will likely persist in the near-term.  The management’s guidance of 45-50% revenue growth for 1Q21 (the guidance implies 19% YoY growth normalized) should provide the momentum and revenue growth will continue to be compared against the COVID-19 lockdown quarters.  The real growth test will come in 3Q21 when VIPS’ growth will be compared with the high customer growth which started in 3Q20. Decelerating growth could trigger a potential pullback, in our view.

VIPS US: 4Q20: Commendable Reincarnation but Fully Priced

China

Vipshop Holdings Ltd. retails branded products at discount over the Internet. The Company retails through flash sales, in which limited quantities of an item are sold at deep discount for a specified period of time.

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Vipshop Holdings (VIPS US)

JD.com (JD US): The Better-Looking Twin?

We remain positive on JD's accelerating growth and its margin expansion story. In this report, we make a compelling argument for JD's value by...

Mitchell Kim

China Internet Weekly (Feb 22): Kuaishou VP Arrested, BABA Manager Dead “by Accident”, & Q4 Results

Kuaishou’s vice president was arrested for taking bribes. Alibaba’s manager was rumored to jump off the office building. Suning Commerce’s founder...

Ming Lu

Pinduoduo (PDD US): Know When to Fold, Know When to Run

Pinduoduo's (PDD US) share price jumped 2.2x since last November. The company will have a tough time meeting lofty consensus expectations. Rotate...

Mitchell Kim

Alibaba (BABA US): Ant Group Woes Overly Priced-In

In this report, we summarize the potential impact of the recently announced regulation by CBIRC on Ant Group and why its value remains intact,...

Mitchell Kim

VIPS US: 4Q20: Commendable Reincarnation but Fully Priced

4Q20 results proved VIPS' rejuvenated growth is more sustainable than we thought. But the expected growth deceleration in 2H21 and expensive...

Mitchell Kim

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