Equity Bottom-Up

• Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value). 
• The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value. 
• With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

• On May 22nd, Meituan launched its food delivery platform called KeeTa in Hong Kong SAR.
• KeeTa’s expansion stratgies include Collaboration with branded chain merchants,lower ASP, subsidy campaign, and launching “On-time Guarantee”.
• Sofar the initial results after launch seems to be in-line with expecation, while  there will still be a lot of challenges, like small market size and stabilized competition landscape.  

• CRISPR Therapeutics AG (CRSP US) completed regulatory submissions for exa-cel in the U.S., EU, and UK, positioning exa-cel to potentially become the first approved CRISPR-based therapy in the world.
• According to Evaluate Pharma, if approved, exa-cel’s revenue is expected to be $1B+ in 2028, with expected market share of 20% in sickle cell and 36% in beta thalassemia.
• As of March 31, 2023, CRISPR has cash, cash equivalents, and marketable securities of $1,889.5M, which is sufficient to fund its operating expenses for ~3 years.

• After reviewing Suzuki’s EV Strategy we turn Bearish on the outlook and see downside for the share price. 
• We believe that Street has missed the rising costs associated with the electrification strategy. We see a period of weaker margins. 
• Suzuki only targets 20% of sales to come from EVs in India, its largest market. It could be viewed as a laggard. 

• Alibaba Health Information Technology (241 HK) ’s 2HFY03/2023 revenues beat consensus by 1.4% while adjusted operating losses of RMB1.74m (0.01% of revenue) is significantly lower compared to 2HFY03/2022 and consensus.
• Improvement in profitability was driven by improved GPM coupled with decrease in SG&A costs which helped offset increase in fulfilment costs as a result of the Covid-19 outbreak.
• Our quantamental analysis suggests that Ali Health’s margins have very little room for improvement unless the company cuts down SG&A significantly while improving revenue % from non-direct pharmaceutical businesses.

• Industry and company reports show ASP declines gained momentum in April
• April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
• Our thesis: pricing is getting weaker, and this trend will soon impact margins

• Since the January 6th end of zero covid, all macro developments impacting the Asia casino sector are proving bullish despite a lingering concern about long term recovery.
• SCL’s strengths play to the rapidly growing mass segment player base.
• SCL’s dominant room capacity is a de facto moat when peers are not even a close second in terms of percentage of available rooms.

• Itochu, Familymart, PPI (Don Quijote) and their data analytics partners have come together in the first case of cross-retailer ad platform development.
• Itochu provides the central relationship that ties these companies together, and other deals are likely given the significant potential for retail media.
• The opportunity for brands to market to these retailers’ customers through highly targeted ads will become ever more compelling, delivering new revenue streams for Donki and Familymart.

• The odds are high for PDD to miss consensus for 1Q results this Friday due to high base and deflating domestic growth drivers, despite TEMU’s momentum.
• Among major China tech companies, PDD is likely to be the only one to register stagnant or even negative earnings growth for FY23, which has not been in the price.
• A down cycle for PDD’s earnings growth leads us to assign 12x P/E to an estimated non-GAAP net profit of RMB39 billion for FY23, implying 15% downside. 

• Despite solid outperformance, share price of Xinhua Winshare (811 HK) is more than 100% covered by net cash of Rmb7.6bn. DPS has also risen uninterruptedly in the last 3 years. 
• 1Q23 result demonstrated operating resilience as recurring profit soared 48.5%. Its franchise in textbook publication and distribution stayed well protected, securing profitability outlook.
• We like XW’s boring businesses in the current depressed market. It trades on 4.5x PER with secured 6.6% dividend yield. The HA discount has widened to 10pp deeper than average. 

• China just announced game approval for May batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game. We saw a pattern of approval rotation for the duo.

• Wistron Corp’s share price is up 96% in the past six months. Despite its outstanding results, a lot of the positives have already been reflected in its share price.  
• We think a more likely scenario for the stock is to undergo a period of share price consolidation in the next several months. 
• Its valuations also appear stretched, especially in terms of P/E and P/B valuation multiples as compared to their historical valuation multiples. 

• Delivered FY’23 net sales of ¥$211 billion, up 57.5% sequentially.
• FY’23 operating profit of ¥35 billion was up 63% sequentially
• Our favourite Japanese semi stock with a TTM P/E <5

• CCL Products India (CCLP IN) is a coffee manufacturing company and has presence in both India and abroad.
• The company has seen an appealing growth in its top-line, growing at a three year CAGR of 22% till F23.
• However, when it comes to the forensics, there are several concerns, especially with its treatment of investment in subsidiaries and disclosures in the financials.

• China bans Micron chips for critical information infrastructure — Taiwanese firms could benefit by straddling both sides of the trade tensions.
• TSMC rallies as U.S. and Japan advance incentives for TSMC and Taiwanese firms.
• Nvida earnings this week — We’ll see if the AI leader can keep the market excited about AI’s brave new world.

• First of all, Nvidia is a great business with many applications and infrastructure across many industries and one can even say an AI hardware leader down the road. 
• Overall, a big business with a wide moat in a great secular sector, hence a name that very likely will be here 10-20-30 years down the road.
• Semiconductors in general have been a top sector lately given AI advancements like the ChatGPT breakthrough, and the overall combo of high demand & supply issues.

• Due to the surging cholera cases globally, demand for cholera vaccines for public market continues to grow. According to GAVI, shortage of cholera vaccine is likely to continue through 2025.
• To respond to surging vaccine demand, Eubiologics (206650 KS) plans to increase its production capacity from the current 33M doses per year to a maximum of 90M doses in 2027.
• Eubiologics, in partnership with TechInvention is launching Euvichol-Plus in India. India is among the top cholera-endemic countries, with an estimated incidence rate of 1.64 per 1,000 people.

• Guidance for 1H of FY Mar-24 should be easy to beat. The sharp rebound that management is forecasting for 2H is open to question. 
• TSMC and Micron plan long-term expansion in Japan and Rapidus will be a new customer. But exports to China – the company’s largest market – will be restricted.
• The share price has spiked, but uncertainty is high, visibility is low and valuations are not compelling.Management’s MAGIC medium-term targets look like … magic. 

• Qualcomm’s fiscal Q2 results were decent with revenues above expectations and earnings in line with the analyst consensus estimates.
• It is considered a fair result given the difficult macroeconomic climate and widespread decline in the semiconductor industry.
• During the quarter, there was significant use of Qualcomm’s Snapdragon digital chassis across major OEMs and Tier 1 clients in automotive.

In a strategic push of its US commercialisation strategy, Respiri has announced the proposed acquisition of Access Managed Services, its US remote patient monitoring (RPM) and chronic care management partner, for a cash consideration of up to US$3m (A$4.5m). We expect the acquisition to afford Respiri greater oversight of operations and sales and marketing efforts, potentially reducing sales cycles and expediting patient onboarding. The acquisition will also result in the RPM recurring revenue increasing to US$70–100 from US$10–20 per patient, although we note Respiri will cease to recognise revenue from device sales and operating expenses will likely trend higher. Management now guides for break-even to be achieved at 9,000 patients (by end CY24) vs 30,000–40,000 patients previously. The acquisition will be funded by a A$6.5m capital raise, including A$4.5m in convertible notes and a A$2m equity offer. We will update our model and estimates following the fund-raise and deal closure.

• Weaknesses of BABA stock and China tech sector in general post their strong earnings recovery for March quarter suggest market’s concerns centering around growth outlook.
• BABA fundamental has tracked well to our projection since last November. P/E multiple contraction – which priced in too much pessimism – prevented our bullish call from materializing, for now.
• We stick to our thesis that March quarter results set stage for BABA re-rating on sustained recovery, well-executed overhaul effectively unlocking value and investors’ renewed appetite for China assets.

• Grab‘s1Q2023 made for positive reading with rapid revenue growth and a quickening of progress towards profitability but the focus perplexingly seemed to be drawn to the ethereal measure of GMV. 
• The delivery segment saw the most significant GMV slowdown, impacted by a high base and seasonality but saw rapid revenue growth and record margins. Mobility remained the cash cow.
• Grab‘s profitability improved considerably in 1Q2023 across all segments, with management upgrading the outlook for FY2023 for adjusted EBITDA and maintaining its breakeven target for 4Q2023, which now looks conservative.

• The revenue growth rates of all business lines accelerated in 1Q23.
• Operating losses shrank to RMB1.3 bn in 1Q23, less than RMB3 bn in two previous quarters.
• We believe the stock has an upside of 66% for the yearend 2023.

• Lithium battery maker, EVE Energy (300014 CH), is expected to invest US$2.3bn in expanding its battery manufacturing capabilities in two new plants. 
• Both plants are expected to come online within 18-24 months, depending on market conditions and various approvals. 
• Eve is down 57% from its December 2021 high, and trading around its lowest level since November 2020, excluding a brief dip in April 2022. 

• Kuaishou Technology (1024 HK) ’s 1Q2023 earnings were above consensus estimates with the company reporting positive adj. EBITDA and adj. net profit during the quarter.
• Operating profit margin of the domestic business further improved while the company managed to significantly reduce operating losses of the overseas business during the quarter.
• Kuaishou also announced a small share buyback worth of HK$4bn which further affirms the company’s improving fundamentals and should help attract investors.

• In the evening of May 20th, NetEase held an online conference where it announced release dates for games…
• …that It has Previously Announced, and Unveiled New Titles that Will Be Launched in the Future.
• Overall, June Will Be the Peak Month for Newly Launched Titles from NetEase, with One Big Game (Justice Mobile) And Two Smaller Games (Badlanders and Racing Mobile)

• In our latest South Korean banks screener; we stick with quality play Hana Financial and deep value Industrial Bank of Korea, despite rising credit quality headwinds
• We introduce delinquency ratio charts that show that NPLs and other poor quality credits are on a rising trend, yet most banks have healthy NPL provisions coverage
• Hana has a low PBV ratio relative to its premium ROE and an undemanding PEG; Industrial Bank of Korea has attractive multiples, PEG ratio and near top returns versus peers

• On 22 May, it was announced that Sambu Construction was invited to the Ukraine Global Reconstruction Forum held in Warsaw and Krakow, Poland from 22 to 25 May. 
• Sambu Construction is likely to be one of the Korean construction companies to be involved in the Ukraine reconstruction projects. 
• The total cost of reconstruction of Ukraine has been estimated from about $0.4 trillion to $1.1 trillion.

• First of all, let’s see how the Nasdaq-100 (QQQ) did in 2023 along with the S&P 500 (SPY) and the Dow Jones (DIA): QQQ with a big 21.64% return in 2023 & outperforming by a big margin the other 2 main indices.
• For an even broader perspective, US indices 2023 performance shown in this order: Nasdaq 100 (NDX) > S&P 500 (SPX) > S&P Midcap 400 MID > Russel 2000 (RTY) > Russell Microcap (RMICRO).

• In short, from Megacaps > to Microcaps: Nasdaq 100 (NDX) leading by a big margin.

• 3M Company is a diversified technology company.
• The Company is a manufacturer and marketer of a variety of products and services.
• It operates through four segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. Its Safety and Industrial segment include abrasives, auto- motive aftermarket, closure and masking systems, electrical markets, personal safety, roofing granules, and industrial adhesives and tapes.

• Olympus Corp (7733 JP) announced mixed FY23 result. While revenue was slightly ahead of forecast, both operating and net profits missed guidance. Excluding Fx, revenue increased just 4.5% in FY23.
• Operating profit increased 28% YoY to ¥187 billion, below forecast of ¥198 billion, mainly due to high-than-expected SG&A expenses, which accounted for 47.7% of revenue versus forecast of 47.2%.
• Due to continuing macroeconomic uncertainties and waning Fx benefit, Olympus expects FY24 revenue to be ¥914B (+4% YoY) and operating profit to be ¥163B (-13% YoY).

• TSMC’s ADR premium has enjoyed a significant rally perhaps due to increased international attention driven by positive U.S. and Japan news flow.
• ASE’s ADR premium has dropped to one of the lower values in its most recent range since the start of 2023, representing a gradual decline in this persistent premium.
• Chunghwa Telecom’s ADR is trading at a discount that likely represents a decent set-up level for this tightly trading spread.

• Five sell side analysts have recently upped their PT’s on Wynn Resorts Ltf.
• Our own tracking of this company goes as far back as the ’80s to the 2000s, when we competed head to head for market share of the upscale segment.
• At US$110 it sustains its long history of trading at a premium to peers.

• The weak share price performance of Haier Smart Home Co Ltd (6690 HK) is unwarranted given the healthy earnings trend, solid net cash position and undemanding valuations.
• The 15.9% 1Q23 recurring earnings growth showed its low correlation with the property market while demonstrated the achievement in cost control and rising premium product contribution.
• It is set to benefit from government’s push for higher penetration of household appliances in rural areas. Meanwhile, recent Rmb depreciation may bring exchange gain for 1H23.

• Declines in carrier revenues and pricing continued to moderate in April
• Inbound to N. America container volume declines also eased in April
• Lower fuel prices a tailwind in ’23, shares cheap, we retain our +ive sector view 

• Delta Thailand has rallied 22.7% from its recent low, despite the local Thai market declining while the Taiwan market rose.
• Latest Delta Thailand surge unlikely due to Thai market fund flows or company developments. Delta Taiwan generates 2.5x the net profit with similar growth, yet has a smaller market cap.
• Over time, relative pricing should trend in Delta Taiwan’s favor as valuations are likely to drive longer-term performance — Also, should the SET50 Index be fixed? Seems broken.

• TAVR was once envisioned with infinite optimism as a “hundred billion yuan market”, attracting massive amounts of capital/companies to enter. However, the commercialization status of TAVR companies is much bleak.
• High cost of TAVR surgery without medical insurance reimbursement and limited number of qualified hospitals to carry out such complicated surgery are the major reasons for the unsatisfactory sales growth. 
• Venus Medtech’s market share would continue to be challenged. MicroPort CardioFlow’s low gross margin and slow product iteration are the problems. Peijia could be “dark horse” if positive momentum continues. 

• S-Reit acquisitions continue with Clar’s S$218 million buy Earlier last week, CapitaLand Ascendas Reit (Clar) announced the proposed acquisition of an integrated high-specification research and development (R&D) facility and business park property from Seagate Singapore International Headquarters for a purchase consideration of S$218.2 million.
• In April, MLT announced the acquisition of six logistics assets located in Japan, and one logistics property in Sydney, Australia.

• Despite a challenging operating environment, Sandvik delivered a strong set of results in FY 2022.
• New financial targets were presented, with the ambition to grow 7% on average over a business cycle, whilst delivering adjusted EBITA margins between 20–22% on a group level.
• Sandvik enables important shifts in the industry as it offers customers cutting-edge technology. Therefore, customers have equipment and tools that warrant higher productivity, lower costs, and a higher sustainability impact.  

• Q1’23 revenues of ¥558.2 billion, up 19% sequentially and up 1% YoY
• FY24 outlook down 23% YoY with H2 showing a modest improvement compared to H1
• R&D & CapEx investment increasing significantly while YoY revenue set to decline by 23%

• KPIT reported a strong Q4FY23 with 8.5% QoQ growth in CC (Constant Currency) terms. Q4FY23 EBITDA margin at 19.1% came in higher than 18.5%+ expected.
• Deal TCV came in highest ever helped by a mega deal of INR $250mm. Even excluding the mega deal, the deal TCV was healthy at $173mm vs $150mm+ typically.
• KPIT has guided for an upbeat FY24. FY24 revenue growth is guided to be 27-30% in CC terms. FY24 EBITDA margin is guided at 19-20% vs 18.9% in FY23.

• The Kazakh government silently allowed Russia to buy 49% stake in JV Budenovskoye sometime in 2021-H2.
• Kazatomprom owned 51% in the JV, but the deal was not properly disclosed in Kazatomprom reports.
• Many company officials resigned since the deal fearing breach of legal duty on disclosure.

• There is a high likelihood of the Indian authorities fully approving the BGMI game after three months of trial. Plus, it has a solid pipeline of new games under development. 
• Krafton is improving its shareholder return policy. In addition, the consensus is likely to raise the company’s earnings estimates post its excellent results in 1Q 2023. 
• We maintain our Positive view of Krafton and its shares are likely to continue to outperform the market this year. 

• The Beijing Medical Insurance Bureau issued a notice soliciting opinions on the linkage program of DRG payment and VBP policy in the city, involving sports medicine, neuro-intervention, and electrophysiology.
• The basic logic of CXO is that there should be no significant fluctuations with the success or failure of a specific drug, unless this drug significantly increases total medical expenditure.
• Zylox-Tonbridge Medical Technology (2190 HK) achieved high performance growth in 2022, and is a beneficiary of centralized procurement policy at the current stage.However, it still has to face some challenges.

• Grab Holdings (GRAB US) ’s share price dropped by about 15% despite reported revenue and adjusted EBITDA losses beating consensus estimates.
• Deliveries’ growth has started falling as more people preferring to dine-out. Grab’s incentive optimisation also has contributed to the fall in growth rates.
• Grab’s aggressive ambitions to turn around profitability is a significant downside risk as it will impact growth going forward and force the company to invest back on growth.

• BEKE (Beike) reported 1Q23 revenue 10.4%/12.2% vs our est./cons. non-GAAP net income 65.6%/60.9% higher than our est./cons.
• Although Beike has stated no intention to lower existing home (EH) commission rate, we still expect EH commission rate to slightly trend down in 2023. 
• We maintain BUY rating and raise the TP by US$1 to US$22 to reflect 1) steady recovery of property sales in China; 2) better outlook on profitability.

• Q1’23 revenues of $6.63 billion, up 6 % YoY, down 2% QoQ
• Q2’23 revenues of $6.15 billion at the midpoint, down 7.2% QoQ.
• Tool push outs and cancellations are spreading to leading logic customers. That’s not a good sign

• We estimate that the re-approval of PUBG Mobile in the India will contribute to a 5% increase in Krafton’s annual revenue/profit.
• Despite being banned in India for several times, PUBG Mobile is expected to receive a warm welcome from local players due to its high quality gameplay and good device compatibility.
• We upgraded our rating to “Buy” in Feb.2023, citing reasons such as PUBG Mobile stabilizing in key markets and Bluehole’s new product schedule. Currently, we remain optimistic view about Krafton

• Zydus Lifesciences Ltd (ZYDUSLIF IN) recorded 32% growth in revenue to INR50B in Q4FY23, driven by 58% YoY growth in US formulation business. India business revenue grew 11% YoY.
• US business growth was driven by volume expansion in existing products and new launches. The company has launched eight new products in the US during the quarter.
• Going ahead, growth is expected to moderate, due to high base effect. The company expects single-digit growth in the US business in FY24, slower than 28% growth recorded in FY23.

• US banks tightening standards for loans, as well as the downturn in loan demand, provides a silver lining for banks by reducing funding pressures as well as the increasing spreads
• Among the regional banks, Western Alliance is seeing deposit inflows in 2Q23; more generally, the usage of the Fed’s BTFP and issuance by the FHLB seem well controlled
• We stick with our picks M&T Bank and Western Alliance, adding First Horizon to the buy list, where valuations stand out along with solid capital ratios and above average returns

• BABA reported 1Q23 revenue/non-GAAP net income in-line/17.7% vs. cons. International commerce and local services revenues beat our est., while Cloud missed.
• We expect there is still room for margin improvement in FY24. Although Taobao/Tmall will increase spending, the cost savings of other business groups will lead to an overall improvement; 
• We maintain BUY and US$ 109 TP as (1) Douyin’s impact is becoming less significant; (2) International business is growing quickly; and (3) Positive on the effect of separate listing.  

• HWKN reported Q4 (April 2) results at first read suggesting beating estimates. However, demand has been declining and EPS beat our forecast due to one-time gain on an asset sale
• The competitive environment has intensified in recent quarters where imports are being offered at lower prices while HWKN faces higher costs
• We have changed our fiscal 2024 estimates to incorporate reduced sales from the asset sale, longer timeline in gross margin improvement, and the industrial segment facing competition

• Atour reported its 1Q23 revenue 2.8%/4.3% higher than our est./cons., and non-GAAP NI 22.7%/38.8% higher than our est./cons. The bottom-line beat is driven by strong sales growth from Occ. 
• We expect 2Q23/2023 rev. to grow 75%/65% YoY, implying 115%/112% of RevPAR recovery rate vs. 2019 and 85/291 net new hotels. 
• We maintain the BUY rating, and raise TP by US$1 to US$35 to factor in the higher gross margin expectation at 40% in 2023.

• TME reported 1Q23 results with topline beat our est. by 5.0% and bottom line beat our est. by 25.2%, due to cost-saving measures. 
• As more offline entertainment activities resume after reopening, it would adversely impact both its online music and social entertainment segments. 
• Maintain SELL and cut TP to US$ 6.0 to reflect concert impact and limited catalysts, which implies 12.5X PE in 2023.

• Sea Ltd’s 1Q2023 results showed its ability to sustain profitable growth with a vibrant performance from e-commerce and fintech, offset by slower digital entertainment but with visible stabilisation.
• E-Commerce showed strong performance in Asia, with Brazil making significant progress towards profitability, whilst digital financial services were boosted by a sizable loan book and more diversified funding costs. 
• Sea Ltd continues to demonstrate its cost leadership and ability to expand its total addressable market while sustaining profitability through better infrastructure and user experience rather than pure promotional spending. 

• Alibaba’s revenue from physical stores decreased year over year for the first time.
• The operating margin declined despite that Alibaba cut losses in minor businesses.
• We conclude an upside of 15% and a price target at HK$101. Downgrade to Hold.

• Alibaba (ADR) (BABA US)‘s 4QFY23 OP beat consensus by around RMB 2.5bn (20% beat) through cost cutting, but YoY revenue growth remained sluggish at 2.0%.
• Consensus expectations of Alibaba achieving an OP of RMB 150bn by FY25 may be overly optimistic due to declining dominance of Taobao and Tmall, and lack of profitable alternative businesses.
• Alibaba Group (9988 HK) would need to excel to reach RMB100bn OP, resulting in a high FY+2 EV/OP of 14.0x. This seems steep for a company with minimal earnings growth.

• Tencent’s latest financial results are in line with expectations, with revenue and non-IFRS profit of 2.5%/(2.1%) vs cons. While we anticipate weak growth in the gaming sector,
• We suggest that advertising presents several catalysts for Tencent, including the recovery of Ecommerce and gaming, WeChat Video Account’s growth, and inter-connections with Baba and Mihoyo. 
• We maintain a BUY rating with an unchanged target price of HK$433, implying 34X PE in 2023.

• After a multi-year drop in ownership, UK fund exposure in HSBC Holdings is on the rise. 
• Over the last 6-months, average fund weights have increased by +0.33% as new positions outnumbered closing positions by a factor of 2.
• With increasing active fund ownership and rising benchmark weights, UK Equity funds need higher conviction to omit HSBC from their portfolio.

• The Keepers Holdings (KEEPR PM) reported solid revenue growth of 33% YoY for Q1 2023, but profitability disappointed our expectations coming in a 26.5% YoY(vs. >50% our expectation).
• The primary reason for the disappointment was Bodegas W&H coming in with a 6mn peso profit in Q1 due to seasonality, one-offs, and cost increases (Vs. 100mn peso Q42022 profit).
• While trends remain strong on the core business, with the stock trading at 8.3x/7.1x FY23e/24e, with a 4.7/5.5% dividend yield, Bodega’s performance is an eyesore that we will monitor. 

• Tencent (700 HK) reported 1Q2023 results. Revenue grew 10.7% YoY and beat consensus estimate by 2.3% while reported operating profit was 2.25 below consensus estimates.
• Key highlight was the YoY growth in domestic game revenue (+6%) which was mainly driven by strong performance of newly launched titles.
• There has been strong recovery across all business segments during the quarter and current valuations are still at a discount to historical trading multiples and offer a good entry point.

• Medipal Holdings (7459 JP) announced strong FY23 result, with year-over-year improvement in sales and profit. While sales were just 1% ahead of forecast, net profit exceeded the guidance by 16%.
• Outperformance was mainly driven by PALTAC business. Revenue from PALTAC increased 6% YoY to ¥1,104B, 2% ahead of forecast of ¥1,080B, fueled by 14% growth in OTC pharmaceutical products.
• Medipal has guided for accelerated revenue growth of 3% YoY for its pharmaceutical wholesale business in FY24. In FY23, the business recorded revenue growth of 0.6% YoY.

• ZTO reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income (3.1%), 30%, and 30% vs. our est. ZTO raised volume est. to 20-24% YoY; 
• Margin beat as parcel cost was (8%) vs. our est., but we suggest also due to (1) parcel mix improvements, (2) output-based pay, and (3) lower % of KA customers; 
• Maintain BUY and raise TP to US$ 38 due improving gross profit per parcel and an end in-sight for CAPEX spending. Our TP implies 24x P/2023E.

Dentsu Group had demanding Q123 on Q122 comparisons and, with the acquisition contributions, we are not too concerned about the read-across for the rest of FY23, with performance skewed to H2. Progress in Customer Transformation and Technology (CT&T), up 6.7% in Q123 and now 35% of group net revenue, should buoy medium-term growth. Tag, the acquisition announced in March and expected to complete in early Q323 (subject to regulatory clearances), is another step towards the 50% CT&T target. We anticipate a return to margin expansion in FY24 as one-off factors retreat, the transition progresses and cost benefits from the ‘One dentsu’ initiative start to flow. The valuation remains at a marked discount to global peers.

• Shopee, Southeast Asia’s largest e-commerce player, has been on a strict financial diet to reach profitability in the last year.
• That’s been welcome news for shareholders of its listed parent, Sea Ltd, but more challenging for sellers on the platform who have faced lower sales growth and higher selling costs after years of heavily subsidised operations. 
• In this blog post we report on the most important figures from Shopee’s newly published Q1-2023 results (released 16 May) as well as the key implications for e-commerce sellers in Southeast Asia.

• Sea (SE US)‘s shares dropped by 18% as its operating profit fell short of consensus by around 60% at $125m, compared to the expected $311m.
• Shopee’s revenue shows improvement due to increased monetization, but there are no signs of exponential growth potential in operating profit.
• Projected decline in paying users poses further downside for Free Fire, while the previously positive fintech segment underperformed in Q1 with revenue and operating profit below expectations.

• In 1Q23, the revenue growth rose significantly to 11% YoY.
• The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
• We set an upside of 28% and a price target of HK$440 for yearend 2023.

• In this insight, we discuss recent insiders buying in five Korean companies including Dongsuh, Green Cross Holdings, Megastudy, Yuanta Securities, and YG Entertainment. 
• With the exception of YG Entertainment, the share prices of the four other companies are trading at nearly 50% since their peak levels in the past several years. 
• Of these five companies, three of them (YG Entertainment, Yuanta Securities, and Dongsuh Co) generated positive operating profit on a YoY basis.

• Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%. 
• We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC. 
• Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.

• Zozo managed a 7% gain in GTVs last year which meant it grew its share of the fashion market. 
• It now has more than 10 million active users and has laid down plans to reach ¥800 billion in GTVs in the medium term.
• Zozo’s momentum is clear and its targets look realistic. Shame about the performance of Z Holdings.

• Rio Tinto Ltd (RIO AU) last year started the long-awaited simplification of its Oyu Tolgoi ownership via the $3.1 billion purchase of Turquoise Hill Resources (TRQ CN). 
• With Oyu Tolgoi having an 80-year mine life and ramping up to become the world’s fourth-largest copper mine the ultimate consolidation of its last remaining minority investment is upon us.
• Entree Resources (ETG CN), where Rio already owns 16%, is the final M&A target to consolidate ownership.  With arbitration set for April 2024, the clock is ticking.

• SE reported C1Q23 revenue/non-GAAP net income in-line/(37%) vs. cons., and (3.2%)/(31%) vs. our est. Profit miss is mainly due to the 53% YoY decline in game revenue
• We suggest that 1) game development and S&M cost cutting, as well as 2) disappointing game content updates during 1Q23, lead to the weak result; 
• In the long run, we still expect Shopee growth to be SE’s major issue, as TikTok continues to grow rapidly. We maintain SELL and cut TP to US$ 60.

• freee (4478 JP) reported 3QFY06/2023 results. Revenue increased 39.5% YoY to ¥5.1bn (vs consensus ¥4.9bn) while adj. operating losses increased to ¥1.9bn (vs consensus ¥1.9bn) from ¥676m in 3QFY03/2022.
• Widened operating losses is no big surprise as freee had already guided for increased investments related to invoicing system and tax filing season which has helped increase paying user numbers.
• As we continue to emphasise, freee’s business model is superior to that of MF who has resorted to several mediocre businesses (non-BA SAAS) to pursue aggressive top line growth.

• China Travel International Investment Hong Kong (308 HK) should have more upside from here given the sharp earnings recovery over FY23-25. But the market seems to have overlooked this.
• Its FY18 net profit reached HK$687m; but dipped to HK$356m loss in FY22. With its businesses now behind issues like HK social unrest and border closure, there is immense upside. 
• All of CTII’s business segments have experienced recovery in FY23, especially following the resumption of HK-mainland China traffic. Its 0.54x P/B is still 52% down from the peak. 

• We believe BABA’s upcoming 4QFY23 results will surprise the market to the upside by a wide margin in terms of recovery in bottomline, catalyzing trading opportunity for short-term investors.
• We also expect that the results will usher in a period of sustained re-rating for the stock due to China’s continued yet slow consumption recovery and Alibaba’s well-executed restructuring plan.
• Geo-Political risks will not go away, but have been very much reflected in current pricing in our view. Buy ahead of results on Thursday.

• AEM reported weak 1Q23 showing significant revenue and margin pressure across the board
• The company mentioned it was an indirect beneficiary of AI and ChatGPT hype going forward
• AEM could achieve 0.40 EPS in FY24 once the semiconductor industry rebounds. Fair Value of 6 SGD is unchanged.

• Edelweiss’ stock was down over -5% yesterday. The reason for downfall seems to be a media article which states that three large brokers are being investigated for money laundering activities.
• We think Edelweiss is not one of them as the article mentions that these brokers are being investigated since their involvement in the NSEL scam, where Edelweiss had no involvement.
• In fact, Edelweiss was among the few brokers that had come out unscathed in the NSEL scam, as it detected early on that there was some wrongdoing happening at NSEL.

• In this insight, we discuss 10 small cap cosmetic stocks in Korea, which are up on average 26.6% YTD, outperforming KOSPI which is up 10.9% YTD. 
• The drivers of their strong share price performances include reopening after the COVID-19 pandemic and ending of nearly all pandemic related restrictions (including wearing of face masks).
• Among the 10 companies, we would focus on the top five small cap cosmetics stocks with the highest growth in operating profit in 1Q 2023 including Cosmecca Korea and Clio.

• It has taken three years to build and set up but Aeon will finally open its first automated warehouse for online food sales in Chiba this summer. 
• The warehouse will run on technology from Ocado and act as the backend for a completely new online supermarket called Green Beans.
• A second warehouse is due to come online in 2026, expanding sales to all of Tokyo and into Kanagawa. This is the most advanced food e-commerce operation in Japan.

• TAV Airports is the #1 airport terminal operator in Turkey with a 31% passenger market share and 28% market share in commercial flights.
• TAV has one of the best growth profile among peer group with expected 3 yr revenue CAGR of 10%-14% and EBITDA CAGR of 12%-18%.
• Potential upside of over 50% in one year and over 200% in 4-5 years.

• IN Q4FY23, Cipla Ltd (CIPLA IN) reported highest ever US business revenue of $204M, up 27% YoY and 5% QoQ, driven by expansion in market share of key launches.
• Lead peptide asset Lanreotide injection, launched in Q4FY22, is consistently gaining market share. The product currently has market share of 17%, up from 14.1% in Q3FY23 and 9.6% in Q2FY23.
• Ex-COVID, India business revenue increased 16% YoY, driven by chronic branded prescription portfolio. FY23 marks the second consecutive year of market beating growth of Cipla’s chronic portfolio.

CentralNic’s Q123 results showed robust revenue and profit growth, as well as a further deleveraging of its balance sheet. Its product comparison business VGL’s entry into France provides a strong organic growth opportunity, with potential to expand into other regions. The group continues to showcase its commitment to shareholder returns with its latest share buyback programme.

• We expect Futu to report 1Q23 revenue in-line with consensus, while net income beat consensus by 4.2%, mainly due to less operating expenses.  
• The next catalysts in 2023 could be 1) gradual market share gain in HK region, 2) potential new markets in Japan and Southeast Asia. 
• We maintain BUY rating on FUTU and maintain TP at US$51.  

• Sea (SE US) may achieve around $3.0 billion in 1Q23 revenue, in line with consensus, but is likely to miss the consensus OP estimate of $309 million by approximately 10%.
• Shopee’s profitability is at risk without sustained revenue growth. If the cost-cutting strategy persists, losses are expected by 3Q23 or possibly sooner with a strategy shift.
• Amid Free Fire’s decline and Shopee’s potential losses, the fintech business stands as the sole bright spot.

For our next Corporate Webinar, we are glad to welcome China Shenshan’s Executive Director, David Zhao.

In the upcoming webinar, David will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. The Corporate Webinar will include a live Q&A session

The webinar will be hosted on Tuesday, 23 May 2023, 17:00 SGT/HKT.

About China Shenshan Orchard

China Shenshan Orchard Holdings Co. Ltd. is a horticultural marketing company in the business of planting, cultivating and sale of kiwifruits in the People’s Republic of China (“PRC”). The Group holds forest use rights for 8 strategically located orchards, spanning a total land area of 9,805 mu (approximately 6.5 million sqm), which is believed to be one of the largest domestic kiwifruit orchards concentrated in the Chibi City, Hubei, the PRC.

• Appier achieved 32% revenue growth and 50.1% gross margin in Q1 FY23, exceeding company expectations
• We expect the pace of growth to accelerate, driven by stronger momentum in Digital Content in Q2 and Q3
• We remain bullish following the recent pullback in the share price. Stock is attractive at 5x EV/Rev

• In this insight, we discuss the recent Korean stock portfolio allocation changes by the NPS.
• The data suggests that NPS has been increasing its holdings into more defensive sectors such as insurance, convenience stores, and industrials. 
• On the other hand, it has been decreasing capital allocation in consumer discretionary related stocks.

• We discuss about the likely exclusion of SD Biosensor from KOSPI 200 in 2024, a big earnings miss in 1Q 2023, and higher probability of further share price decline. 
• SD Biosensor reported terrible earnings in 1Q 2023. It had sales of 182.4 billion won (down 86.9% YoY and 48% lower than consensus) in 1Q 2023. 
• Our core bearish case of SD Biosensor is that in most countries around the world, there is no longer any need to test millions of people for COVID-19.

• Recruit Holdings (6098 JP) reported FQ4 and full-year FY03/2023 results. FQ4 revenue increased 9.0% YoY to ¥827.7bn (vs consensus ¥846.7bn) while OP decreased 57.1% YoY to ¥19.4bn (vs consensus ¥40.0bn).
• Excluding restructuring charges and one-time charge on impairment losses on right-of-use assets, OP increased 12.4% YoY to ¥50.9bn resulting in an OPM of 6.1% vs 6.0% in 4QFY03/2023.
• Recruit’s FY03/2024E guidance is in line with our expectation where the company expects earnings to weaken as labour markets have begun to slowdown.

• Q1 CY23 watch and jewelry sales for HK were up 88% YoY. HK sales for Oriental Watch (30% of revenues but less volatile) will benefit from the recovery in HK.
• We estimate China sales will continue to remain resilient as cross-border travel is yet to pick up in a big way. 
• Trading at 7.5x FY23e and a 14.2% dividend yield, with more than 50% of the market capitalization in cash, the company can pay solid future dividends despite weaker earnings.

• The previously stockpiled drugs/medical devices require a long cycle of digestion. As the industry beta brought by COVID-19 dividend would fade away, JD Health’s performance growth could slow down accordingly.
• Although JD Health divides its buiness into product revenue and service revenue, drug/product sales are still the underlying logic and business model, which is difficult to maintain high growth expectations.
• Current valuation is in reasonable range. Since JD Health will be added to HSI INDEX, it could help boost share price. However, if business transformation fails, high valuation is unsustainable. 

• Q1’23 revenues of US$630.8 million, up 6.1% YoY and flat sequentially.
• Gross margin was 32.1%, up 5.2 points YoY but down 6.1 points sequentially.
• HH is playing a blinder through the downturn and likely beyond…

• Celltrion Inc (068270 KS) recorded double-digit revenue and operating profit growth in Q1. Biosimilars reported first-ever KRW400B+ quarterly revenue. Operating margin reached to 30.5% in 1Q23 from 24.3% in 1Q22.
• Remsima SC sales (27% of revenue) resumed at full scale and rebounded to KRW100B quarterly revenue after a gap of ~2.5 years, driven by increasing market share in EU.
• This year, Celltrion is expected to launch three products in the U.S.: Vegzelma (biosimilar bevacizumab), Yuflyma (biosimilar adalimumab), and a novel subcutaneous formulation of infliximab.