Equity Bottom-Up

• Recruit Holdings (6098 JP)  reported 2QFY03/2024 results today. Revenues decreased YoY due to decline in HR Tech revenues, while operating profit for the quarter increased YoY. OP missed consensus marginally.
• As we expected, the new pricing model has negatively impacted HR Tech revenues, and the segment’s earnings are forecast to decline further going into the second half.
• There is further downside to earnings and the company’s share price has moved up during the last few days, and we are set to nicely gain on the Short side.

For our next Corporate Webinar, we are glad to welcome OUE Commercial REIT’s CEO and Executive Director, Han Khim Siew, and CFO, Lionel Chua.

In the upcoming webinar, Khim Siew and Lionel will share a short company presentation after which, they will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. Angus will also provide an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 28 November 2023, 19:00 SGT.

About OUE Commercial REIT

OUE Commercial Real Estate Investment Trust (“OUE C-REIT”) is one of the largest diversified Singapore REITs with total assets of S$6.0 billion as at 30 June 2023. With six assets in Singapore and one in Shanghai, the property portfolio comprises 1,643 upper upscale hotel rooms, as well as approximately 2.2 million square feet of prime office and retail space.

In Singapore, OUE C-REIT’s office assets – OUE Bayfront, One Raffles Place and OUE Downtown Office, are situated within the CBD where medium-term supply is limited. OUE C-REIT also owns two hotels, Hilton Singapore Orchard and Crowne Plaza Changi Airport, which are well-positioned to capture the continued rebound in tourism and MICE demand. Complementing Hilton Singapore Orchard is Mandarin Gallery, a choice location for international brands in the heart of Orchard Road.

On 30 October 2023, OUE C-REIT obtained a “BBB-” credit rating with a stable outlook from S&P Global Ratings.

• If Skylark Co Ltd (3197 JP)‘s pricing and footfall growth trend persists, it’s likely the company and consensus will revise annual revenue targets upward.
• The OP is also expected to exceed Q3 estimates with an OP of ¥7.9bn, prompting a necessary upgrade of annual guidance by ¥5.0-6.0bn.
• Yet, we’ll approach Skylark’s earnings trade cautiously, considering its current valuation.

• The read-across for Inner Mongolia Yili Industrial Group (A) (600887 CH)‘s 3Q23 results and briefing to China Mengniu Dairy Co (2319 HK) was overall positive.
• For 3Q23, Yili’s sales grew 3% yoy and net profit increased 59% yoy, mainly due to lower raw milk prices, better product mix, cost savings and low base.
• China Mengniu Dairy Co (2319 HK) continues to be a good value play, with reasonable valuation (15x 2024E PE), stable growth (above 10% net profit growth), and proactive shareholder returns.

• Cisarua Mountain Dairy (CMRY IJ) stands out from the overall FMCG space in Indonesia, with 21% revenue growth versus a flat to negative performance for the overall market.
• The company’s growth in 3Q2023 was predominantly driven by premium consumer foods at +46% YoY but dairy was also positive, with the company increasing promotional spending but maintaining margins.
• The outlook for 4Q2023 looks promising driven by increased distribution outlets, especially general trade plus the launch of new products for both consumer food and dairy. 

• Presenting a clear growth roadmap – following disclosure of the new medium-term business plan (‘MTBP2027’ covering FY3/2025 to FY3/2027) and long-term growth strategy (‘Vision1000’ depicting timing around 2030), we have revised our earnings estimates for FY3/2025 and FY3/2026.
• These reflect 1) acquisitive growth impact towards FY3/2027 as capital is allocated to the fast-growing Strategy/DX Consulting business, and 2) stronger margin growth driven by productivity enhancements and improving sales mix.
• We believe diversifying into new market sectors will open new growth opportunities and develop a more resilient business. 

• Shortage/Oversupply, price hike/cut, automotive/industrial demand and inventory corrections are still cyclical. Gross margin should double from 22-24% now once utilization returning to 100% and no more free wafer by 2025.
• LCD driver foundry is facing a structural competition as China panel customers are building a local supply chain.
• Attractive below NT$70 as: 1. inventory correction should be done by 2Q24; 2. global 8″ foundry sales y/y improvement began 3Q23; 3. closing to cyclical low P/BV of 2.5x.

• Q323 revenues of $1.85 billion, flat sequentially but down 11% YoY. Net income was $249 million, up 5% sequentially but down 26% YoY.
• At a midpoint of $1.85 billion, forward guidance is once again flat sequentially. Overall it was a solid report with guidance slightly better than UMC delivered last week.
• Despite the solid quarter, the company’s outlook for 2024 was bleak with a 50% CapEx cut, LTAs under mounting pressure & ominous-sounding LTA “True Up” on the horizon. 

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
• Post a sharp correction, stocks trade at appetizing valuations, and with results seasons around the corner, we will provide updates for all names. 

• ATEN reported third quarter results after having already warned there were order push outs towards the end of the period.
• ATEN has been trying to diversify the revenue stream to reduce the volatility order flow disruptions could have on the business
• ATEN managed to maintain gross margin above 80 percent, a feat that does not get much recognition from investors. ATEN should continue to achieve gross margin above 80 percent

• We believe the company is well positioned in China’s rapidly growing pizza market thanks to its strong brand and superior store economics. 
• Despite stock rally post 1H23 results, market still underestimates its earnings for both near and long term. We expect RMB250 million net profit for 2024 versus break-even by consensus.  
• History suggests DPC Dash has recipe for attractive stock return driven by its highly visible growth that can shield it from macro situations, which is desperately needed by China investors.  

• Nintendo’s Q2 results show solid performance but still fall short of expectations, with a conservative full-year profit outlook
• The impending release of “Switch 2” in 2H24 raises questions about the company’s ability to replicate the original Switch’s success
• We see the current 11x EV/EBIT as fair for the stock and do not anticipate a valuation breakout until the market can assess the credentials of “Switch 2”

• Ace Hardware Indonesia (ACES IJ) booked an impressive set of 3Q2023 results after registering a strong improvement in SSSG over the last few months as well as increasing store count.
• The company has booked particularly strong performance outside Java, where spending power has proved to be strong, with the company’s digital promotions boosting sales significantly and complementing offline sales. 
• Ace Hardware Indonesia (ACES IJ) has regained its lustre with a more coherent set of initiatives to drive future growth from promotions to new store formats. Valuations remain reasonable.

• In past 2 quarters OCBC (OCBC SP) saw its credit costs rise 150% YoY and then 250% YoY. For almost all of the preceding 8 quarters YoY growth was negative.
• It holds 3.8% of total loans in Greater China CRE, a sector that has seen visible deterioration in some banks, like Standard Chartered (STAN LN) and HSBC Holdings (HSBA LN).
• Great Eastern Holdings (GE SP) is seeing weakness in main revenue lines, with worsening policy claims. Its profit delta this year is distorted from the base effect.

• It’s likely that quarterly sales will return to normal seasonality in 2024F, and the Smartphone demand has shown some signs of recovery.
• Revenue/ GM/ OPM are declined 8.6%/ 2.7%/ 2.7% in 4Q23F, but we consider the end market might be recovery. 
• The OLED penetration rate in smartphones is 42.5% in 2023F , and it’s anticipated that Novatek Microelectronics Corp (3034 TT) will exceed the market in terms of OLED sales.

• While the earnings season continues, this will be the final dedicated earnings edition.
• For reference, the previous earnings editions are [Week 8] Namaste India 🙏 | Earnings Edition – Part I & [Week 9] Namaste India 🙏 | Earnings Edition – Part II 
• At the bottom, we provide a consolidated view of all earnings (~ 50) tracked so far and we would be happy to engage in discussions on any of them.

• Sumber Alfaria Trijaya (AMRT IJ) came through a slower 3Q2023 with much stronger growth than peers, with SSSG and rapid store expansion driving growth, and margins improving concurrently.
• The company added more than 1,300 new stores for 9M2023 and looks set to add a record 1,800 by year-end, with new Alfamidi and Lawson stores driving growth.
• AMRT will see an even stronger seasonally higher 4Q2023, with SSSG likely to pick up boosted by supplier rebates and news store contributions. FY2024 looks set to be equally strong.

• It remains cautiously optimistic for the 2024 outlook despite limited order visibility.  
• The Vanguard wafer shipment has decreased by 8-10% QoQ, with the ASP declining by 0-2% QoQ. The GM for 4Q23F is projected to be 22-24%. 
• The smartphone and computing/NB/TV sectors have returned to normal levels.

• Although RemeGen’s 23Q1-Q3 sales was better-than-expected, the Company is difficult to achieve management’s performance guidance for 2023. Since RemeGen’s commercialization logic has “undeniable flaws”, net loss would be further widened.
• Cash balance of RemeGen was just RMB600 million by 23Q3, which is not enough to cover its high R&D/SG&A expenses. If RemeGen cannot secure sufficient financing timely, risks are significant.
• The current valuation and investors’ expectations for RemeGen largely rely on the potential license-out deal of RC18. However, we remain caution until RC18 has sufficient evidence to win head-to-head trial.

• Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through its technology platform and a growing number of aligned transactional services.
• The company has reported Q1 FY24 revenue of $0.786m, with the search engine, Rent.com.au, returning to positive EBITDA of ~$0.05m.
• Separately the company has launched a fully-underwritten entitlement offer to raise $1.95m at $0.017/share to support the commercialisation of its fintech platform RentPay. 

• We believe advertising revenue will grow rapidly and game revenue will accelerate.
• We also believe EPS will decrease YoY due to high “other gains” in 3Q22.
• We expect the stock price will have an upside of 58% for year end 2024.

• DBS is now guiding for no profit growth during FY24. This may end up missing with negative growth more statistically likely, in a worsening world.
• Credit metrics are not particularly positive in today’s release with SGD215m of credit costs compared with SGD72m in the preceding quarter.
• If rate rises are done or nearly done, than the main positive delta of DBS earnings are also done or nearly done. Management guidance suggests as much too.

• All major Chinese e-commerce companies set up live broadcasting channels on Bilibili at the beginning of Singles’ Day sales.
• Kuaishou chairman’s resignation will not change the business strategy, as he stepped down from CEO two years ago.
• Baidu begins to sell ChatGPT-like service for CNY49.90 per month.

• MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.
• Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.
• The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.

• We believe the financial recovery from 1Q24 will continue in 2Q24.
• We expect the operating margin will improve to 15% in 2Q24 versus 12% in 2Q23.
• Alibaba has an upside of 69% and the target will be HK$143 for the year end 2024. Buy.

• Yue Yuen has a scalable business model with high dividend yield (6.4%). Its sales and net profit are expected to increase by 9.3% YoY and 55% YoY, respectively in 2024.
• The company is likely to enjoy higher sales and profits in 2024 due to improved footwear inventory destocking cycle, higher sales and profits at its subsidiary Pou Sheng.
• Yue Yuen Industrial is one of the largest footwear and athletic shoe manufacturers in the world. Its major customers include Nike, Adidas, Puma, and Reebok.

• Q323 revenues of NT$57 billion, up 1.4% QoQ but down 24.3% YoY. For 2023 YTD, revenues have amounted to NT$167,575 billion, down 20.5% YoY.
• Net income was NT$15.97, essentially flat QoQ. Gross margin came in at 35.9%, also flat QoQ. Utilisation for the quarter was 67%, down from 71% in the prior quarter.
• Utilization set to further decline to low 60% levels in Q423, the lowest since the downturn began.

• Last week global heavyweights AMD, Samsung, and Qualcomm delivered good news, including for the Memory, PC, and Smartphone industries. Taiwan company results supported their views as well.
• Looking ahead, Novatek, Asustek, and Himax are set to release in Taiwan. Combined with NXP abroad, this will provide color on display demand, automotive, and servers/PCs.
• A new Chinese memory chip maker just received major government investment, with an IPO of its related company planned.

• China Vanke (H) (2202 HK) saw a major drop in bond and stock prices recently, due to fear of default. 
• Yesterday, the company held a conference call, with representatives from Shenzhen SASAC and Shenzhen Metro (major shareholder of Vanke and owned by Shenzhen SASAC) participating in the call.
• The strong support shown by Shenzhen SASAC/Shenzhen Metro represents a good short-term buying opportunity, for both Vanke stock and bonds. 

• Ferrari N.V. (RACE US) had a stellar Q3 2023 with 23.5%/45% YoY overall revenue and profit growth, beating analyst estimates and conservatively upping guidance by 2-3%. 
• Despite volumes growing only 8.5% YoY, car revenues grew 26% YoY, highlighting strong trends in personalization (at 19%) and pricing, with the current order book full.
• Valuations are rich at 45x/39x FY23e/24e PE, but there seems to be a clear path to 20% YoY growth at over 25% ROCEs. 

• I continue to believe that Saizeriya is the best pick for gaining exposure to Asia/China restaurant space.
• Saizeriya has a very clear business strategy and focus:  price.  The founder Yasuhiko Shogaki made it clear that price always comes first, and everything else second. 
• Looking ahead, the runway for growth in China is huge.  The company is currently only in 3 cities for a total of 373 stores as of end-FY23 year ending August.

• The collapse in share price of Dongfang Electric (1072 HK) is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.
• Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.
• We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.

• The recovery of concentrated TCM granules business makes us optimistic about China TCM’s 2023 full-year performance growth. The resurgence of pandemic and privatization rumor always attract the attention of investors.
• Pientzehuang’s 23Q3 performance was disappointing. Consumption downgrade makes the strategy of raising prices no longer effective. There is downward pressure on valuation as performance will not turn around soon.
• The investment logic of rigid demand is more convincing than consumption upgrading. So, China TCM is more likely to outperform Pientzehuang. Our view is long China TCM, and short Pientzehuang.

• State Gas Limited (ASX:GAS) is a junior energy producer and explorer with assets concentrated in the Bowen Basin, Queensland.
• Having secured some $7mn in equity financing, the company is well progressed in the construction phase of the Rolleston West CNG Project (RW-CNG), with production set to commence in December.
• First gas is always a critical event driver in demonstrating the commercial potential of the assets and providing a platform from which growth strategies can emanate.

• Q323 revenues of KRW 67.4 trillion, up 12.3% QoQ but still down 7% YoY. 
• Operating profit KRW 2.4 trillion, a big improvement on the KRW 0.67 trillion in the second quarter but a far cry from the KRW 10.85 trillion in the year-ago quarter
• While Memory has turned the corner, yet further productions cuts are still required

• In this insight, we did a deep dive on Unibail, one of the biggest real estate companies in terms of developing and operating shopping malls in the world
• We think URW will continue to show superior operational performance than peers, we also think its leverage, which is one of market’s biggest concern, is manageable
• We see valuation upside for Unibail, we also recommend multiple trading strategies, subject to investors’ risk appetite, style and mandate

• KPIT raised its full-year FY24 revenue growth guidance to 37%+ from 27-30% earlier, led by a strong Q2FY24 performance. EBITDA margin guidance has been also raised to 20%+ from 19-20%.
• Despite wage hike impact of 250bp, EBITDA margin came in at 20%, at the upper end of the 19-20% FY24 guidance. Operating leverage and realization improvement helped offset the impact.
• With the strong Q2 performance, we are upgrading our FY24 PAT estimate to INR 580cr+ vs INR 550cr+ earlier and FY25 PAT of INR 730cr+ vs INR 700cr+ earlier.

• Astellas Pharma (4503 JP) reported just 0.6% YoY revenue growth to ¥767B in H1FY24, while operating profit plunged 57% YoY and net profit decreased 67% YoY.
• Generic competition in Lexiscan impacted topline. Increase in SG&A expenses related to new drug launch and higher amortization of intangible assets, pulled down the operating as well as net profit.
• Astellas has downwardly revised FY24 forecasts for profit items by more than 50% after taking into consideration the increases in higher expenses.

• Unibail-Rodamco-Westfield (URW AU), Europe’s largest listed commercial property company, recently reported solid 3Q23 financials (through to September 2023). 
• Covid played havoc on shopping mall players/developers – URW is still down 62% from its Covid cliff versus an average of 24% for a basket of peers.
• Investor concerns over URW’s strategy and leverage have been a drag on the stock; however its long-term plan is finding the right path. 

• Astra International’s results are a testament to both the company’s resilience in the face of declining commodity prices, with autos. motorcycles and finance take up the reins of driving growth.
• Astra continues to introduce new EV models with a focus on hybrid variants, which have been selling well. It is increasingly investing in sustainable businesses including geothermal and nickel assets.
• Astra International (ASII IJ) remains a well-managed core proxy for Indonesia’s key growth drivers, with new investments aligning the company with the country’s growth drivers. Valuations are attractive versus history.

• Our trading thesis is to go long JinkoSolar Holding (JKS US) and go short JA Solar Technology (002459 CH) in the next 3-6 months.
• The three major reasons include higher momentum for JinkoSolar post 3Q 2023 results, much higher EBITDA growth for JinkoSolar from 2022 to 2024, and relative valuations. 
• Some of the factors driving lower share price of Chinese solar stocks this year include higher US tariffs, excessive manufacturing capacity, and declining prices of solar wafers and panels.

• WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
• Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
• We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations

• During 9M2023, Otsuka Holdings (4578 JP) reported revenue growth of 17% YoY to ¥1,479B, driven by 21% YoY revenue growth in pharmaceutical segment due to 16% growth in global products.
• Despite the recording of impairment losses, operating profit increased 77% YoY to ¥203B, leading to a 460 bps expansion of margin to 13.7%. Net profit zoomed 46% YoY to ¥162B.
• The company has raised 2023 revenue guidance, second time this year. Otsuka now expects 2023 revenue to grow 14% YoY to ¥1,985B, 4% ahead of prior guidance of ¥1,905B.

• Chinese-founded fast-fashion retailer Shein acquired British online fashion brand Missguided from Frasers Group Plc, as the Singapore-based fashion giant continues to expand overseas.
• Under the deal, Shein and Missguided’s founder Nitin Passi have formed a joint venture to manage the brand and access its intellectual property under a licensing agreement.
• Shein will also manufacture Missguided’s products through its on-demand production model, and sell on both companies’ websites, Shein said in a statement.

• TPL Summary Texas Pacific Land (TPL) reported third quarter results where a decline in daily production led to lower than expected oil and gas royalties.
• The rate of production has always been the variable part of TPL’s results. In Q3 production levels were impacted by the summer heat in Texas causing abnormal electricity levels
• TPL reported third quarter revenue of $158.0 million compared to our estimate of $178.7 million

CLIQ Digital continues to deliver good progress as it focuses on conversions through its customer base through its bundled content offering. In 9M23, revenue and EBITDA grew by 25% year-on-year to €242m and €39m respectively, at a maintained margin of 15.9%. CLIQ’s focus on acquiring more profitable customers with a higher lifetime value is delivering progress against key performance indicators, including growth of 21% in the customer base value. Our estimates remain unchanged, while management has reiterated its FY23 and mid-term FY25 guidance. CLIQ continues to trade at a significant discount to our peer group across EV/sales and EV/EBITDA multiples. Our implied share price comes to €62, reflecting continuing upside to the current price on our estimates.

• HWKN reported fiscal second quarter (September) results with improved gross margin and continued reversal of last in first out (“LIFO”) reversals
• HWKN converted inventory to cash that was then used to reduce the debt balance allowing HWKN to acquire two more water treatment businesses
• The quarter included a sharper decline in industrial sales than expected. However, the higher gross margin in water treatment and health and nutrition segments were able to offset the impact

• ASRT has not had any news to rekindle investor interest since reporting second quarter results. ASRT is scheduled to report third quarter results on November 8, 2023
• Ahead of the news, we are readjusting our expectations for Indocin. We are minimizing the revenue potential from Indocin in our earnings model.
• Going forward, Rolvedon becomes the primary revenue generator. ASRT should generate positive net income with Rolvedon sales ramping

• Keisei Electric Railway Co (9009 JP)‘s FQ2 earnings, released on October-31st, surpassed revenue and OP expectations, yet the company revised down its revenue and OP guidance by ¥8.8bn and ¥200m.
• Despite this, the share price has surged over 10% in recent days, likely influenced by activist investor Palliser Capital’s interest and a significant 30% increase in annual dividend guidance.
• However, during earnings, the company remained silent about the activist investor’s proposal to reduce its Oriental Land (4661 JP) ownership below 15%.

• India’s rice export ban triggers global market chaos, leading to panic buying and uncertainty in rice supply, affecting both India and Thailand.
• El Niño’s drought threatens Thailand’s rice production, adding to the crisis. Other Asian nations impose export bans, raising inflation concerns.
• Global rice prices rise, impacting vulnerable nations and sparking fears of a repeat of the 2008 rice crisis due to protectionist policies.

• As highlighted in our prior notes, HDFC Bank (HDFCB IN) has been able to maintain its ROA and ROE despite NIM compression post merger.
• As the excess liquidity (related to the merger) recedes over the next 3-4 quarters, ROA and ROE should further normalize.
• HDFCB has been able to clock 5%ish QoQ growth across deposits and loans, allaying growth concerns on a larger base post merger.

• Tesla is facing a dilemma whether to aggressively cut price to boost shipment but lose margins or to keep price stable with a more moderated shipment growth like 10-20% y/y.
• Three challenges ahead: 1. Collapsing margin vs. rising margin for key competitors? 2. Cybertruck is selling at a loss, more margin downside? 3. Valuation reset for lower sales CAGR?
• Cautious on Tesla as its sales/earnings CAGR is falling below 20% with a rich valuation until we see cost cut on Cybertruck, FSD AI breakthrough, and low price model introduction.

• Mayora Indah (MYOR IJ) saw a significant positive surge in profitability from lower raw material prices and lower operating costs in 3Q2023, which suggests it will beat its FY2023 guidance.
• The company continues to launch new variants in both biscuits and beverages with a slant towards premiumisation and is also more aggressively attacking export markets, where its brands are strong.
• Mayora Indah (MYOR IJ) is expanding factory capacity to fuel growth in 2024 but should also benefit from pre-election spending from 4Q2023. Valuations look attractive versus historical comparisons.

• CA reported 4Q and full-year FY09/2023 results today. 4Q revenue increased 5% YoY while OP dropped more than 50% during the quarter. Revenues beat consensus while OP fell behind.
• Games revenues further decreased YoY during the quarter (improved QoQ) while it managed to report an OP which was possible due to UMA MUSUME’s game anniversary.
• Though CA released a new game in September and few lined-up for release, until the company releases a hit title like UMA MUSUME, we expect the recovery to be slow.

• Lf Corp (093050 KS) is the 26th company in our Korea Small Cap Gems series. 
• LF Corp is one of the leading apparel companies in Korea which has a market cap of 411 billion won. LF Corp is trading at 0.3x P/B and 4x P/E.
• A key near-term catalyst is better than expected sales of the Reebok branded apparel that are promoted by the pop icon Lee Hyori. 

• Revenue was up 14.5% QoQ and down 31% YoY in 3Q23, but it could see an increase of about 17% QoQ and 3% YoY in 4Q23F. 
• Silergy Corp (6415 TT) needs to increase another place to its Foundry source out of China and Taiwan.
• The Automotive segment is expected to show significant growth and is likely to reach double digits by the end of 2024F.

• Duolingo shares have outperformed in 2023, with shares up ~115% over the year versus ~26% gain on the Nasdaq. The company priced its IPO at $102 a share in 2021.
• EdTech unicorn achieved the highest-ever MAUs and DAUs in 2QFY23, while paid subscribers reached 5.2M, ~7% of MAUs. Management raised top-line and profitability guidance for FY23. 
• With a market cap of ~$7.4B on a fully diluted basis, Duolingo shares trade at ~13x and ~10x EV/Rev on my FY23/FY24 estimates, a significant premium to comparable companies.

• The sickness in Silicon Carbide started at On semi.
• Let’s look through the results and see the drivers, the big deal, and what we should do about it.
• The market freaked out about Silicon Carbide, specifically On semiconductor, saying that automotive demand for the year will be weaker.

• Late last night (near mid-night), Kweichow Moutai (600519 CH) shocked the market by announcing a direct price hike on its main Feitian 53 degree product by an average of 20%. 
• The market had no expectation of such price hike as it was widely perceived that Moutai could not directly increase the ex-factory price due to regulatory pressures. 
• Moutai’s Feitian ex-factory price is the key price leader for pretty much all other major Baijiu brand, directly benefiting ZJLD Group (6979 HK).

• AEM (AEM SP) will report 3Q23 results on 10/11/23. This will be the first loss-making quarter since 4Q14.
• We expect a loss as AEM will have to recognize the 26.7M SGD arbitration expense to settle with Advantest Corp (6857 JP). 
• Investors will be looking for an early read on the FY24 outlook to determine if AEM’s stock has bottomed.

• Q323 revenues of $5.8 billion, $100 million above midpoint, up 7.5% QoQ and up 4% YoY. Net income of $299 million, significantly up from $27 million in the second quarter.
• Forecasted Q423 revenues of $6.1 billion at the midpoint, up ~5% QoQ
• MI300 forecasted to hit > $2 billion in 2024 making it the fastest product ramp to $1 billion in the company’s history

• The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it
• 10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures
• We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure

• GoTo Gojek Tokopedia’s 3Q2023 results were far more illuminating and encouraging than the last 2Qs, with more progress towards adjusted EBITDA breakeven, with much more colour on its new initiatives.
• The company’s focus on budget consumers and more affordable product offerings are already expanding its TAM and improving product density and productivity, speeding progress towards productivity. 
• GoTo will continue to invest in growth, which may mean it misses its 4Q adjusted EBITDA breakeven target but it has reduced cash burn significantly giving it more breathing space.

• Our focus is not on the decimation of earnings at Standard Chartered (STAN LN) but rather the granular detail of stage 2 and stage 3 loans
• There is tremendous growth in stage 2 loans in the quarter, which means the bank enters the quarter with a far higher pool that can migrate to stage 3
• Stage 3 remains markedly higher provisions, and the bank’s rise in credit costs is still fairly low, it can rise another 50% before hitting average rates

• The MAS is not at all happy with the frequent digital banking services outages at DBS (DBS SP). There will be fines and higher required capital. 
• The outlook for the home market lending is already poor, with negative loan growth in recent months. Probes of money laundering will likely make lending even more sparse.
• UOB (UOB SP) , Standard Chartered (STAN LN) , HSBC Holdings (HSBA LN) results are all illustrative of risks facing DBS (DBS SP) before results come out, especially credit costs.

• We provide an updated NAV analysis of Hanwha Corporation which is a holding company of the Hanwha Group. We argue that Hanwha Corp’s shares are trading excessively below its NAV. 
• Hanwha Corp is down 10.5% YTD, underperforming Hanwha Aerospace (up 54.2% YTD). Hanwha Corp’s stake in Hanwha Aerospace is worth 1.9 trillion won (14% higher than Hanwha Corp’s market cap). 
• Our NAV analysis of Hanwha Corporation (000880 KS) suggests NAV of 2.3 trillion won or NAV per share of 30,203 won which is 33% higher than current price.

• Shenzhen International (152 HK) has reached agreement with the government on the South China Logistics Park Phase I transformation and it will receive Rmb1.058bn compensation.
• The sum equals a significant 9% of SZI’s market capitalisation. The agreement also kick-started the project’s long-term contribution, which may provide an income stream lasting 3-5 years.
• The deal showcased SZI’s ability to realise the underlying value of its assets. The stock should not be valued on its earnings, and its 0.3x P/B is deeply undervalued.

• NII decline has slowed but the overall profitability is lacklustre
• Asset quality stabilized for now, real estate exposure remains a concern
• We believe the turnaround of the bank is still pretty far off. 

• SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
• Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
• While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

• After a spike higher in fund ownership in 2021, active Asia Ex-Japan funds are beginning to close out positions.
• Funds including T.Rowe Price, LO Funds and Nikko AM have closed out exposure this year.
• JD.com remains a very well owned stock among institutional investors, at a time when performance is anything but stellar so far this year.

• We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
• We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
• We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.

• This update builds upon our initial report on the APAC Luxury Industry, in which we expressed our belief that potential opportunities lie within the small niches of the luxury sector.
• While the share price performance hasn’t met our expectations, the broader trend we highlighted, Luxury Travel and Tourism, has shown robust growth.
• Even though travel flows have returned to pre-pandemic levels, Shiseido has not yet regained its pre-pandemic performance, however the two hotels are already operating at levels close to 2019 levels.

• GoTo reported 3Q2023 results on Monday. Gross revenues increased 1.4% YoY to IDR5.98trn while adj. EBITDA losses further narrowed down to IDR1.84trn vs IDR3.71trn in 3Q2022.
• GoTo Gojek Tokopedia Tbk PT (GOTO IJ) continues to see huge reduction in losses but growth rates have fallen further with cutdown on incentives and promotional spending.
• It seems that GoTo has stopped exploring growth opportunities in pursuit of profits, however, this may not be sustainable in the long-term with falling growth rates.

• Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.
• Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns
• We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns

• The A-share subsidiaries of AviChina Industry & Technology (2357 HK) have mostly posted solid 3Q23 results – aggregate earnings growth has accelerated to 50.2%, from 26.8% in 1Q23.
• Their 9M23 result reached 64% of FY23 consensus forecast earnings for AviChina, vs. just 61% a year ago. This indicates the market is too conservative and suggests room for upgrade.
• Valuations are cheap at 8.7x and 7.0x PERs for FY23 and FY24. Its market capitalisation equals just 46% of the total attributable market capitalisation of these subsidiaries.

• Alfresa Holdings (2784 JP)‘s H1FY24 revenue, operating profit, and net profit are expected to exceed the previous expectations due to greater-than-expected growth in the ethical pharmaceuticals business.  
• Encouraged by the growth in the pharmaceutical market and better-than-expected H1FY24 performance, the company has raised FY24 revenue, operating profit, and net profit guidance by 4%, 30%, and 36%, respectively.
• New FY24 guidance implies, H2FY24 revenue run-rate will be similar to H1F24, while H2FY24 operating profit will accelerate to ¥20.1 billion from ¥15.9 billion in H1FY24.

• Midea Group Co Ltd A (000333 CH) has officially filed for Hong Kong listing last week. 
• A common pushback against owning the stock is the perception of strong correlation to China property, which is not true in terms of business fundamentals.
• The stock is currently trading at 10x 2024E PE compared to an average of 13x over the last 10 years. 

• In our view, the key takeaway from the recent 3Q trading statement is how ABG is progressing strategically towards its “Future State 2” plan.
• In particular, we note specialist SME finance divisions generating the ambitious balance sheet growth in the plan, optimising the core relationship banking franchise, which, in this period, saw 7% deposit growth ‒ given the level of base rates, this is a profitable product for a relationship bank, and continued investment, which, at times, requires a step change in cost rather than a gentle evolution.
• To meet expected multi-year demand, ABG is increasing its central London HQ office space by 45% at an annual increase in cost of ca.£5m (with further dual running costs until October 2024 as it is refitted).

• MSCI China Funds are starting to engage with New Oriental Education & Technology after a big exodus in 2021 following China’s Tech Crackdown.
• Since the lows of 2022, New Oriental Education has been one of the key beneficiaries of active fund rotation.
• Previous holders such as HSBC, Mirae and BlackRock have bought back in after closing out in 2021, but there is still a long way to go to reach previous highs.

• Panasonic’s Q2 results showed flat consolidated sales of Y2,090 billion, with a 24% YoY increase in adjusted operating profit.
• FY3/24 outlook was revised down with sales and operating profit reductions across segments, notably in Lifestyle and Energy
• Our concerns include the company’s complex structure, low overall profitability, uncertainties about valuing IRA credits, and challenges stemming from economic conditions, leading to pessimism about Panasonic’s stock price

• Intel’s results last week beat expectations by a wide margin, with margins recovering better than expected by the Street and guided to keep improving through 4Q23E.
• New Meteor Lake chips for PCs, branded as ‘Intel Core Ultra’ will officially launch December 14th and are expected to drive demand for new AI-optimized PCs in 2024E.
• Intel said that the PC industry completed its inventory digestion in 1H23, drove sequential demand growth in 3Q23, and this is expected to continue into 4Q23E.

• TSMC’s manufacturing value only accounts for 1/4 of H100 HGX bill of materials but HBM3 accounts for more than half;
• ABF substrate, SXM5 module, UBB and CCL vendors should be benefited, especially for Ibiden Co Ltd (4062 JP) on ABF substrate/OAM and Elite Material (2383 TT) on OAM/UBB CCL;
• Nvidia AI GPU likely doubling each year in next two years; Our estimates on Nvidia 2025 AI GPU EPS contribution are exceeding Bloomberg consensus earnings estimates, suggesting room to raise.

• Key Results This Week: Delta, Elan, ChipMOS, Nuvoton, AU Optronics in Taiwan… Plus Samsung, AMD, and Qualcomm.
• Positive signs for the PC & mobile space have come from recent Intel, UMC, Mediatek results.
• Top Losers: Macronix Slumps on Weak Results and Outlook, Hon Hai Slumps on China Tax & Land Probe

• Our earnings coverage continues for the second edition and is expected to continue for one more week.
• At the bottom, we provide a consolidated view of all earnings tracked so far (Bullish / Bearish) and would be happy to engage on any of them.
• We also highlight the earnings of some of the global companies that have significant operations or growth in India.

• Bukalapak (BUKA IJ) 3Q2023 results confirmed that it is on track to achieving EBITDA breakeven in 4Q2023, with strong revenue growth and a significant improvement in its contribution margin.
• The was a slight slowdown in marketplace revenue QoQ due to a high Lebaran base, mainly due to slower gaming. 4Q2023 should see a strong recovery and higher take rates. 
• Bukalapak looks to be pressing all the right buttons but more granularity on what is driving higher take rates would be well-received . Valuations look attractive relative to peers.

• Travelsky Technology Ltd H (696 HK) share price was unjustly sold off due to flows rather than operational performance.
• The key business is processing flights for domestic tourism, with a lesser correlation to geopolitical issues.
• Due to the strong earnings growth, PER is adjusted from 60x to 25x. 

• Nihon M&A Center (2127 JP) ’s 2Q revenues decreased YoY while OP remained flat. However, both revenue and OP beat consensus estimates driven by improvement in revenue per M&A transaction.
• There was strong improvement in revenue per transaction driven by enhanced efforts and growth in no. of large deals, however, M&A revenues declined due to drop in no. of deals.
• Nihon has so far achieved only 36% of its OP target and it seems unlikely for the company to reach its full-year OP guidance, suggesting there is further downside.  

• Global generics revenue increased 9% YoY to INR61 billion, mainly driven by double-digit growth in North America and Europe generic businesses, partly offset by muted growth in domestic market.
• Revenue from North America generics increased 13% y/y to INR31.7 billion, driven by growing momentum in core portfolio, Mayne integration, and favorable Fx. Pricing environment remains stable.
• Despite increase in SG&A and R&D expenses, EBITDA grew 13% YoY to INR 21.8 billion. Net profit increased 33% YoY to INR14.8 billion. Both EBITDA and net profit topped estimates.