Equity Bottom-Up

In the next webinar, we welcome Smartkarma Insight Provider Gauri Anand , who will be sharing with us her Top indian Equity Picks and the investment philosophy behind each of her picks. Have any burning questions about companies like Indian Energy Exchange (IEX IN), VA Tech Wabag (VATW IN), or UPL Ltd (UPLL IN)? Get them answered in the live Q&A that will conclude the session.

The webinar will be hosted on Wednesday, 21 December 2022, 17:00 SGT/HKT.

Gauri Anand is a mid-small cap specialist based in India. With a focus on equities, Gauri combs top down and bottom up approaches to identify themes and value stocks at its inflexion point. Sector agnostic with a value oriented – Inflexion approach, Gauri dives into bottom Up ideas with a biased towards Sustainability and ESG. 

• Richard Liu came back to manage JD.com after he resigned half a year ago.
• Alibaba Health revenue increased 23% YoY in 1H23, which benefited from hospitals being closed.
• Pinduoduo revenue increased by 65% YoY and operating profit increased 388% YoY in 3Q22.

• The revenue growth rate accelerated to 28% YoY in 3Q22 versus 16% YoY in 2Q22.
• Operating Loss was close to zero in 3Q22 and we believe it will turn positive in 2023.
• According to price / sales history, we believe the company has an upside of 89% for year end 2023.

• Aneka Gas is an interesting concept in that its product literally comes out of thin air given its position as Indonesia’s leading Industrial gas player with a 45% market share.
• The company provides investors with wide-ranging exposure to the Indonesian economy from industry to infrastructure, consumer goods, healthcare, and SME amongst others, which also reduces risk through diversity.
• Aneka Gas 9M2022 numbers reflected a change in revenue mix and demand for medical gas reduces post-COVID and other areas such as industry, retail, and infrastructure started to recover.

• Bilibili Inc (BILI US) reported 3Q2022 results Tuesday. 3Q revenue increased 11.3% YoY to RMB5.8bn (vs consensus RMB5.7bn) while operating losses for the quarter dropped to RMB1.8bn vs consensus RMB2.1bn.
• Recovery in mobile games biz alongside aggressive cost cutting measures supported improvement in Bilibili’s profitability during the quarter.
• Pandaily reported that Bilibili is exploring expanding into the SEA region and increased R&D spending could be an indication that plans are underway.  

• Daifuku is a growth stock that has fallen by 26% YTD reflecting near term risks to growth and margins
• We believe that Daifuku is a major beneficiary of continued investment in automation, especially in e-commerce and logistics
• We analyse Daifuku’s core valuation drivers and see around 16% upside for the stock

• ATRenew (RERE US) is one of the stocks in China that is starting to look very attractive after a sharp decline in its share price since its IPO.
• ATRenew has achieved noticeable improvements in operations and profitability in the recent quarter.
• Our base case valuation analysis suggests an implied market cap of US$720 million, representing an implied price of US$3.15 per share, representing an upside of 43% from current price.

• The cash comes from a one-off asset sale. CEL hasn’t been building cash on the balance sheet for years. While management has no intention of paying out the cash at present, they plan to use it for acquisitions. It won’t stay on the balance sheet for ever.

• CEL’s operating business is not a great business, but it’s not terrible either. CEL earned an average of 15% pretax on capital employed over the last three years (FY20-FY22). The operating business earns above its cost of capital, is consistently profitable and ~40% of earnings are paid out as dividends.

• Management has a lot of skin in the game. CEL’s founder and president, Masatsugu Shinno, owns 60% of the company, which aligns his interests with shareholders.

• NTGR held its annual investor day reflecting on the challenges it has incurred within retail and highlighting how consumer demand has remained strong for high-end devices and its 5G hotspot
• NTGR’s stock has been trading at levels valuing the Company near its working capital on fears the business would continue to generate losses
• NTGR’s transition in becoming a super-premium brand started over a year ago, but only in recent quarters has it began to take a bigger role on the consumer 

• JD.com Inc. (9618 HK)-backed ATRenew (RERE US), one of the pioneers of China’s circular economy, registered its first non-GAAP net profit in the 3Q22.
• The improvement pivoted off core business stability (consumer electronic devices recycling and sales) and an increasing revenue stream from its multi-category recycling business, including luxury goods.
• This is all positive. However ATR, like all US-listed China plays, faces the prospect of a potential delisting under the HFCAA just 16 months away.

• Despite the plunge in share price after FY22 result, we think Hope Education Group Co Ltd (1765 HK) has not yet reached its bottom given the challenging outlook faced.
• We are concerned about stretched financial position with gearing surged 32.5pp in last year. Heavy capex and need to repay outstanding convertible bonds will strain its cash flow.  
• Market earnings expectations are still overly optimistic. New schools looks to drag on near-term margins while surge in staffing, primarily teacher, costs is an added pressure.

• As investors we are faced with a deluge of noisy breaking news, business media talking heads, and what has felt like non-stop Fed speakers offering their differing views on the economy and the path of rate hikes going in 2023.
• This week was no different. Fed Chair Jay Powell was front and center suggesting that interest rate hikes will likely be stepped down to 50bps in the upcoming December Fed meeting in a few weeks.
• This was already discounted and expected by the market and effectively didn’t offer much of anything Wall St. didn’t already know.

• Shakey’s Pizza (PIZZA PM)  is on the cusp of reporting a stellar Q4 2022. The stock trades at 16.2x FY22e/10.4x FY23e, with massive scope for upgrades from the street.
• With the addition of brands like Potato Corner, Peri-Peri, and R&B Tea, the company has sustainably solidified its scope for mid-teens CAGR growth from 2023 onwards.
• The company continues to lower its leverage, and net-debt equity was 0.75x in Q3 2022 as cash generation from its operations solidified the balance sheet. 

• KKBank is one of the only major internet banks in Asia-Pacific
• Operating metrics show increasing core income momentum and strong ALM
• Credit metrics have not yet proven to be a concern, as we near end of rising rates

• KPJ Healthcare (KPJ MK) is seeing a resurgence in elective medical procedures and recovery of the health tourism sector. In Q3, total revenue hit highest level in last two years.
• Growth was mainly driven by the improving hospital activities evidenced by the increase in patient visits and bed occupancy rate. Bed occupancy has reached pre-pandemic level.  
• KPJ Healthcare has opened new flagship quaternary level smart hospital, Damansara Specialist Hospital 2 in September. The new hospital will add value and accelerate further growth for the company.

• In this post I tracked my performance on stock mentioned in my blog, and I would like to officially close some ideas here.
• I will start doing that from now on. Something I did privately but not on the blog publicly.
• Either because they have worked out and upside is no more attractive, or because the facts have changed.

• The renewal results of coronary stent centralized procurement reflected that the government’s attitude towards the price reduction in VBP has changed, who tend to correct the excessively low price.
• Investors’d better not to have such a misconception that they only attach importance to R&D rather than commercialization. Only if sales ability is verified can enterprises have better valuation premium.
• Investors are advised to find the targets that are in “sector resonance” but also has “difference in expectations”. Ecology of innovative drug has changed, such as Remegen (688331 CH).

• Hisamitsu Pharmaceutical Co (4530 JP) reported revenue growth of 8% y/y and 26% q/q to ¥33B in Q2FY23, mainly driven by a 14% y/y 47% q/q increase in OTC business.
• This year, the company received FDA approval for Xelstrym transdermal system for ADHD. Xelstrym is the first-and-only FDA-approved transdermal amphetamine patch.  
• With the resumption of sporting/outdoor events in Japan, Salonpas is expected to continue its growth trajectory. For FY23, Hisamitsu is targeting Salonpas revenue of ¥32.5 billion (+4.5% y/y).

• Yili is the largest dairy company in China with established entry barriers of brand and products.
• Yili aims to join the world’s top three dairy enterprises by 2025 and strives to seize first place by 2030.
• Management announced the plan of a revenue CAGR of ~10% y/y between 2021 and 2025 and margin improvement of 50bps each year.

• Perfect Medical Health (1830 HK) showed a resilient set of numbers for H1 2023, with profits down only 30% despite losing a month in HK and more in China.
• With over 700 mn HKD in cash (18% of market capitalization), PE of 12.4x FY23e/8.5x FY24e, and dividend yields of 8.5%FY23e/12.4%FY24e it trades on an exciting yield/valuation.
• Catalysts for the company include the reopening of China (>20% of revenue), the recovery of HK(70% of revenue), and expansion into newer business lines and geographies.

• PDD’s spectacular 3Q results will prove unsustainable based on our assessments of its core markets and deep-dive benchmark analysis of growth trajectory of PDD and Alibaba, using GMV as scale.
• We see earnings risk going into 2023 due to well-penetrated wallet share of core user base, deflating growth drivers and ramp-up of investments.
• In the long term, inevitable multiple compression also renders the risk-return payoff of this US$100bn company mediocre, even under blue-sky growth forecasts. Prefer Alibaba over PDD.

• This insight covers 68 ASEAN utilities, each boasting a market cap greater than US$500mn. 
• Countries covered include Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
• Intouch Holdings (INTUCH TB) remains highly elevated, and is a short against Advanced Info Service (ADVANC TB), and perhaps with some Singtel (ST SP).

• Bumrungrad Hospital Pub Co (BH TB) is seeing continued business recovery. Robust inflows of international business and solid Thai and expat revenue lifted hospital revenue 20% higher than pre-COVID level.
• Sustained high volumes of inquiries and appointment requests remain a strong forward indicator. Bed availability is expected to increase in 4Q after the completion of latest phase of renovations.
• Net profit margin reached to a record high of 26.2% in 3Q. Favorable payor mix, cost management, continued discount reduction, and economies of scale should further drive margin gains.    

• Included in bank earnings is a provision for loan losses.
• In a perfect world, management would know exactly which loans would go bad and how much money they would lose on those loans.
• In reality, estimates are required. Like insurance companies, banks typically apply a statistical model based on the risk rating classification of their loan book plus any specific reserves.

• Mandi, OTC alopecia drug of 3SBio Inc (1530 HK), reported revenue growth of 42% y/y in 1H22 and gained 70bps market share over the last six months.
• With the resurgence of COVID-19 in China interrupting the regular operations of outpatient services at medical institutions, 3SBio’s performance is expected to be affected in near-term.
• 3SBio is preparing to launch its new drug nalfuraphine hydrochloride orally disintegrating tablets for liver and kidney disease pruritus in China.

• The operator of Chinese recruitment app Boss Zhipin reported drops in third-quarter revenue and profit after restarting new user registrations following a nearly one-year suspension as part of a national security probe. 
• During the three months through September, Nasdaq-listed Kanzhun Ltd.logged a net profit of 211.7 million yuan ($29.8 million), representing a year-on-year drop of 26%
• The firm generated about 99% of its revenue, or 1.16 billion yuan, from sales of recruitment services to corporate clients — a 2.7% year-on-year decrease.

• Liquidity shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements. 
• Liquidity shorts have built-in catalysts, have moderate to higher betas,  and can have strong down moves if a crisis develops.  They can go bankrupt, pushing the stock price near zero.
• Today we are flagging Luminar Tech, Asana, Appian, Oak Street Health

• Snowflake guided below consensus for 4Q2023 revenue growth on a mix of macro conservatism and a quirky point that more vacation travel will reduce the amount of workloads run.
• Margins continue to beat to the upside and management is guiding FY2024 FCF marginst to 23%, just 2pts below the LT guidance.
• Very conservative management team also guided for a stabilization in revenue growth for FY2024 at 47%, a bit below consensus, but better than feared given the earnings reports recently.

• Zoom Video Communications delivered a decent quarter and managed an all-around beat.
• From a product perspective, the company had robust growth in Zoom Phone, along with contributions from Zoom Rooms and other products.
• Zoom Video Communications has recently announced a wide range of updates in different business units like Zoom IQ for sales, Zoom Events, Zoom Spaces, Zoom Contact Centre, and Zoom One.

• After announcing a weak outlook in the last quarter and causing its stock price to plummet, Dell has shown a decent recovery.
• Its stock price has continued to recover after the company delivered an all-around beat in a challenging demand environment.
• Overall, we remain neutral on Dell and give it a ‘Hold’ rating with a revised target price.

• Despite operating in a turbulent market, including inflationary pressure on the consumer around the world, Foot Locker generated better-than-expected results and managed to surpass Wall Street expectations on all fronts.
• Due to strong brand consistency across the board and successful back-to-school marketing initiatives, Kids Foot Locker had mid-single-digit growth.
• Additionally, Foot Locker extended its partnership with Puma to connect with next-generation consumers through exclusive basketball and other high-end partnerships.

• Agilent performed well in the fourth quarter and its revenues as well as earnings were vastly exceeding its forecasts as well as market expectations.
• Revenue for the Agilent CrossLab Group in the fourth quarter was $381 million.
• With each of their three business areas expanding by double digits for the year, Agilent have shown a broad-based strength.

• Macy’s delivered a strong set of results surpassing Wall Street expectations in terms of revenues as well as earnings.
• Besides, they created permanent Toys “R” Us shop-in-shops within every Macy’s site, offering a unique experience not offered nationally anywhere else.
• Macy’s also has a flexible pricing plan to change discounts and markdowns if demand materializes slowly.

• Applied Materials delivered a strong quarterly performance and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
• Demand remains very high in cutting-edge foundry/logic, with customers vying for leadership and driving significant technological inflections that decide their respective competitive positions.
• AMAT should have a strong resilience because of their substantial backlog, expanding service business, and strong customer demand for their leading technologies that support significant technological inflection points.

• Masayoshi’s debt with Softbank group is big, and due to the poor performance of SoftBank Vision Fund 2, Masa’s equity interest as a co-investor is now zero
• Internal hedge fund Northstar, in which Masa has a 33.3% stake, is in liquidation leaving Masa’s share of his Northstar debt to SoftBank at USD1.2bn
• SoftBank’s collateral on Masa debt includes the Vision Fund 2 equity, as well as SoftBank shares and other personal assets; we expect SoftBank’s NAV discount of c 25% to widen

• First ever ARR miss, and big initial guide down on FY2024 ARR growth: low 30s vs. 37% into the Q. Pretty shocking given Crowdstrike’s track record.
• Macro Macro Macro – deal close times pushed out for SMBs and Enterprise customers reworking timing of deal starts to match opex budgets.
• Stock is overly punished down 20% and trading at 9x forward sales for a platform consolidator with 30% FCF margins.

• We try to stay away from the fool’s errand of forecasting the economy;
• But often, we notice that high-quality businesses actually benefit from harsh economic conditions in terms of (long-term) shareholder value;
• We provided an example of a company that we own to illustrate how.

• Driven by continued strong performance of Viltepso and other partnered drugs, Nippon Shinyaku (4516 JP)  is expected to report accelerated revenue growth momentum.
• Viltepso is expected to be the top selling drug of Nippon Shinyaku in FY23. For FY23, the drug is expected to report revenue of ¥14.7 billion (+90% y/y).
• In November, Nippon Shinyaku launched Fintepla (fenfluramine) for the treatment of seizures in patients with Dravet syndrome (DS) as an add-on therapy to other anti-epileptic medicines in Japan.

• Rakuten’s successful junk bond sale means the Rakuten Bank IPO will happen next year and not in December as some had feared
• More detail on mobile shows that network costs including D&A are 4x that of service revenue and slightly higher QoQ. Roaming alone is higher than service revenue 
• And that means Rakuten can’t aggressively go after new subscribers unless it wants operating losses to accelerate. Bad for Rakuten but good news for incumbents KDDI, NTT and Softbank. 

• Balrampur Chini Mills (BRCM IN) is one of the major integrated sugar manufacturing companies in India. Besides sugar, the company also engages in the business of ethanol and power generation.
• Balrampur has managed to turnaround its free cash flows and earnings quality. Additionally, it has also stabilized working capital on the back of declining debt. 
• While there are not many red flags, care must be given to inventory reconciliation with bank statement.

• BLS International Services (BLSIN IN) is engaged in business of providing outsourcing and administrative task of Visa, Passport and Consular services to various Diplomatic Missions across the world.
• BLS is troubled with several forensic discomforts. One should take into account the discomforts on the subsidiaries end and other linked entities like DSS Gulf Realtors.
• Other forensic setbacks include alarming bad debts, misstatement of operating cash flows and several grey areas pertaining to disclosure norms followed by the company.

• Mahindra & Mahindra (MM IN) ‘s production data provides more questions than answers.
• The drop in production for Thar and XUV 700 in October in spite of the high order backlog is surprising. 
• Considering the industry outlook and the existing sales and production for these two models, we believe this demand forecast may not materialise

• Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
• Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
• Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.

• Saratoga Investama Sedaya (SRTG IJ) is the leading listed investment company with stakes in a number of leading companies across sectors in Indonesia with some of the highest growth potential.
• Investments include stakes in Adaro Energy, Merdeka Copper Gold, Tower Bersama Infrastructure, Mitra Pinasthika Mustika, and Aneka Gas (AGII IJ), and a number of tech companies providing unique thematic exposure.
• Saratoga Investama Sedaya (SRTG IJ) provides a one-stop shop to get well-rounded exposure to high-growth areas of the Indonesian economy and to early-stage growth companies in the digital space.

• The next six months will be critical for the future of the global gaming industry as Regulators carry out further investigations into the Microsoft acquisition of Activision
• This is particularly important for SONY, where games account for around one third of consolidated revenue and profits
• This is a battle for the future of subscription services and cloud streaming – Call of Duty yields unprecedented power over the industry. Regulators need to do their Duty. 

• Pinduoduo (PDD US)’s 3Q22 mirrored its strong previous quarter with revenue of RMB 35.5bn (consensus: RMB 30.8bn) and OP of RMB 10.4bn (consensus: RMB 6.7bn).
• CCP’s anti-monopoly drive and common prosperity measures are helping Pinduoduo to outperform the competition.
• Nonetheless, we refrain from being outright positive on any of the Chinese e-commerce names with the economy heading into a slowdown and the lowest sector-multiple at above 12x FY+1 OP.

• TSMC — Trading near parity, decent setup opportunity at the current level.
• UMC — Trading at a discount, another decent setup opportunity.
• Chunghwa Telecom — Rare opportunity here, trading at a steep discount compared to the tight historical range.

• China Education Group (839 HK)‘s 27.8% growth in net profit affirmed its solid fundamentals and minimal exposure to regulatory risks. We also welcome its resumption of dividends.
• Management expects profitability will be driven by the 48% new student enrollment growth, potential for tuition increase and global education segment recovery. Consensus forecasts are currently too conservative.
• Weaker 2H FY22 profit is due to higher depreciation and finance costs but will be absorbed with higher enrollment. Capex will be light and we also like its deleveraging move. 

• Commodities trader Theme International Holdings (990 HK) is up 670% since the inset of Covid, and that is after declining 52% from the July 2021 peak.
• A sharp increase in iron ore prices since 2020 resulted in FY21 net income of HK$1bn against HK$146mn in FY19. Net cash is currently HK$4.2bn, 38% of Theme’s market cap. 
• You Zhenhua is Theme’s largest shareholder. Theme recently acquired a 6.6% stake in You Zhenhua-controlled Esteel, which in turn holds a 61% stake in BRC Asia Ltd (BRC SP). 

• Intel has eked out a small outperformance vs. TSMC most recently, and we believe there is more to come.
• Events appear to be in Intel’s favor in the near-term.
• TSMC has outperformed by a historically extreme amount in just three weeks.

• Sentiment switch for Singtel after surge in buying among Asia Ex-Japan funds
• New positions from Fullerton Asia Focus, Jupiter Asian Fund and Fullerton Asia Growth & Income head a total of 14 funds opening exposure between 01/31/2022 and 10/31/2022.
• Follows broader rotation in to key Singapore names despite heavy selling in Sea Ltd.

• We interact with Home First Finance (HOMEFIRS IN)  branch managers to understand the reason behind the increase in bounce rates.
• The overall NACH data also shows a high rejection rate in October despite being a festive month, which is surprising.
• With 92% of Home First Finance (HOMEFIRS IN) loans being disbursed in less than 48 hours, this focus on TAT could lead to higher than industry-average asset quality issues. 

• The revenue growth rate rose for the first time in one year and a half.
• Also, operating loss shrank for the first time in one year and a half.
• We believe the stock has an upside of 38% for year end 2023.

• Nanya Tech shares have dropped, but there’s still a 10% trading sell from these levels.
• The company had dramatically outperformed the Taiwan market and Memory chip peers, yet is heading into weakening end-demand with inventory levels at multi-year highs.
• We see the potential for inventory write-downs and a negative operating margin in the coming quarters. Meanwhile, opportunities for near-term good news appear limited.

• Short video companies are taking users’ time from other kinds of apps.
• Kuaishou has a lot of promising data, such as active users, paying users, and time spent.
• The operating losses significantly shrank in the past four quarters.

• Across the major economies in East Asia (China, Japan, Korea), Korea is the only country that follows the global trend of rising interest rates and yields.
• Investing in the country’s life insurers could be a good way to play out the thesis of rising yield environment in 2023.
• Samsung Life is a better bet for this among the country’s two largest public life insurance companies.

• Jinxin Fertility is a leading IVF service provider in China. It has done a series of M&A in the past two years.
• We examine the thesis of the company for a trade into 2023.
• We believe the company has big potential to realize its synergy post acquisition and ramp up post expansion. More favorable policy to come.

In this webinar, we will be hosting Mr Lee Sanghyun, the CEO of Flashlight Capital Partners (FCP), who will discuss their case for Corporate Activism at KT&G Corporation (033780 KS). Interviewing Mr Lee, will be Smartkarma’s Co-Head of Research, Pranav Rao. The focus of the interview would be FCP’s shareholder return plan which aims to drive significantly higher returns (3x) versus the plan currently proposed by the company.

For further detail, please refer to prior insights by Smartkarma Insight Provider Douglas Kim, as well as relevant sections of FCP’s website.

The webinar will be hosted on Wednesday, 14 December 2022, 17:00 SGT/HKT.

Lee Sanghyun is the CEO of Flashlight Capital Partners. Previously, he was the head of The Carlyle Group Korea, and has spent time at Affinity Capital Partners in Hong Kong, as well as McKinsey & Co. in Seoul. Mr Lee Sanghyun is also a graduate of Seoul National University and Harvard Business School.

Pranav Rao is the Co-Head of Research at Smartkarma. 

• With three food deliveries a day, convenience stores need to optimise stocks to sell unsold items, most of which have only been on shelves for a few hours.
• Most chains deal with this problem manually by offloading the burden of optimal ordering and the cost of unsold stock onto franchisees,
• Lawson has a new AI system that can automatically apply markdowns on any item without the need for skilled labour in the store. Gross margins rose 1% in test stores.

• Integra Indocabinet recently reported 9M2022 results, which painted a less rosy picture than at the mid-year stage, with sales growth of +10.6% versus +46% YoY for 1H2022.
• A key change has been the drop off in demand for components for US housing given inflationary pressure and rising rates, which led to higher inventories with distributors. 
• Integra recently downgraded guidance for FY2022 to reflect the less optimistic outlook though remains upbeat on a recovery in 2023, as inventories clear and it goes direct to retailers.

• 3Q22E earnings came in mostly ahead of expectations, however, if one looks at margin and inventory performance, the latest earnings season doesn’t look so good.
• Semiconductor margins fell and inventory days rose multi-year highs, Hardware margins fell further and inventory days look worse than ever.
• Conclusion: 4Q22E end-demand could disappoint significantly and then companies will be slashing prices/writing off inventory into 1Q23E.

• PT Surya Citra Media Tbk (SCMA IJ) released solid 9M2022 results with revenues rising 12.8% YoY but profits were impacted but higher programming costs and switch to FTA digital.
• SCMA continues to gain audience share in FTA, especially through Indosiar as new drama series and sports attract eyeballs, with Vidio taking the lead on digital with 4m paying subs.
• The company looks attractive at these levels trading below its 5-year average forward PER plus its stake in Vidio alone is worth US$756m versus a Market Cap of US$1bn. 

• An unprecedented pace of expansion is underway at Trent Ltd (a TATA group company) with the rapid roll-out of Zudio, a youth-fashion retail store chain across India, beyond big cities.
• STAR Bazaar, its 50:50 JV with Tesco PLC (TSCO LN), in grocery retail, has the potential to drive long term growth given the segment’s immense size and scope. 
• Trent could emerge as one of the leading players in India’s fast-growing organized retail sector as it rapidly expands its pan-India network in apparel and plans to grow in grocery. 

• Shift offers outsourced software testing services and is the market leader in Japan. Software testing market is estimated at JPY5.5trn in Japan but only 1% of the market is outsourced.
• The company has been rebranding itself from software testing provider to digital transformation (DX) and business services provider and this expansion has further potential to drive growth in the long-term.
• Though Shift’s valuation multiples look expensive, we think there is further upside given the strong growth in top line alongside further improvement in margins.

• A “valuation system with Chinese characteristics” has the media, ostensibly, discussing whether this implies a premium for SOEs and companies aligned with national goals.
• In early 2020, SOE-backed clean energy play CGN New Energy Holdings (1811 HK) was subject to a potential privatisation from its parent; but it failed to materialise. 
• During the 14th and 15th Five-Year Plans (2021-30) period, China’s installed capacity for wind and solar power is expected double.

• Meituan reported 3Q2022 results. Revenue increased 28.2% YoY to RMB62.6bn (vs consensus RMB62.3bn) while reported an OP of RMB988m (consensus OP loss of RMB935m) for the first time since 3Q2019.
• However, on adjusted basis, Meituan made an adjusted operating loss of RMB1.1bn (1.7% of revenue) of revenues compared to an adjusted operating loss of RMB7.7bn (15.1% of revenue) in 3Q2022.
• Tencent announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends and Naspers is expected to sell the Meituan Shares it receives from Tencent.

• Kakaku.com Inc. can be a rare species among listed companies in Japan;
• We had multiple email exchanges and meetings with the management team for a deep-dive view covering corporate cultural, management style, capital allocation, business model, and competitive strength.
• We would wait for a 20%-30% pullback in the share price before looking to add to our position but would certainly remain reluctant to sell any share that we own.

• Operating under the brand name J-Power, Electric Power Development C (9513 JP) is leading Japan’s efforts to make carbon dioxide-free electricity by 2050.
• The company’s investments in gasification and carbon dioxide separation technology and carbon dioxide-free hydrogen generation from coal are close to commercialisation.
• With the technology to serve other power producers to develop their own environmentally-friendly power projects, J-Power could turn into a global-leader in the power generation space in the next decade.

• Our forecast of the total peak sales of BRUKINSA, tislelizumab and the rest commercialized products is about RMB10 billion, which is not enough for BeiGene to turn losses into profits. 
• BeiGene has the highest R&D/academic ability among domestic pharmaceutical enterprises,but BeiGene cannot be assessed according to the standards of Chinese pharmaceutical enterprises due to its fundamentally different cost structure/breakeven point.
• The current market value has already priced in the success of TIGIT project to some extent. In other words, the upward elasticity may be limited. But BeiGene deserves long-term follow.

• While China Gas Holdings (384 HK) expects better gas dollar margin HoH, there are still high profit uncertainties and its full-year operational guidance does not look exciting.
• The expectation of flat to 10% YoY decline in new residential household connections is not encouraging. With 1H FY23 profit only amounted to 42% of consensus, we see downgrade risks.
• Despite achieving positive free cash flow, its high gearing of 69.9% (+4pp HoH) is still very stretched relative to peers. We prefer Kunlun Energy (135 HK).

• Amid the challenging market, Bosideng International Holdings (3998 HK)‘s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.
• It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.
• With 32% increase in online branded apparel sales, the channel will be Bosideng’s key growth impetus. For “double-11”, sales have outperformed peers significantly, showcasing its product strengths.

• Companies that went public through SPACs in 2020 and 2021 have struggled this year due to inflation and, most recently, a weakening economy.
• SPACs have gotten a bad reputation for making unproven, unprofitable companies public, ultimately leading to a majority underperforming the broader market and a few even going out of business soon after their debut.
• However, SPACs have also taken established companies public, like convenience store chain operator Arko, which has relatively fared better.

• Cisarua Mountain Dairy (CMRY IJ) remains one of Indonesia’s most interesting high-quality consumer staples companies, with strong brands in both premium dairy products and premium packaged foods. 
• The company grew total sales by 76% YoY for 9M2022, with dairy products growing 51% YoY and packaged foods by 125% YoY driven by increasing capacity to serve burgeoning demand. 
• Margins have been impacted by rising raw material prices but powdered milk prices have been falling which should mean margins recover but all the same 9M2022 net profit rose 1.5x.

• We calculated the intrinsic value of the stocks is ~30% undervalued at US$6.79 a share.
• The strong Manila market recovery and planned on time opening of Cyprus property does not seem to be baked into the price at writing.
• Macau travel bans will keep MLCO dead pooled, but value lies in its assets still at work

• NRDL negotiation has completely changed the pricing method/valuation logic of innovative drugs. Even if price reduction could be milder this year, it’s hard to reverse the shrinking market size/slowing growth.
• Wuxi Biologics (2269 HK) has successively acquired several factories/production facilities built by domestic biotech companies at low cost. However, we have several concerns.
• The industry is in the process of understanding and adapting to various changes. The model capital envisioned for biotech to both develop and then commercialize drugs successfully doesn’t work anymore.

• Nitori is one of few Japanese retailers to brave the US market. The US has beaten Nitori for now and it will instead focus on Japan and Asia. 
• Nitori’s ability to leverage its efficient supply chains to lower prices will likely lead it to further dominance at home and allow it to invest in the rest of Asia.
• The company expects pressures on costs to ease in 2023 as the Yen rises but is working on reducing the cost of goods and operations.

• During H1 2022, Yichang HEC Changjiang Pharma (1558 HK) recorded revenue of RMB1.3 billion, representing 540% y/y growth, driven by 1,776% y/y revenue growth from its core product Kewei.
• With gradual recovery of patient traffic in medical institutions and increasing number of flu cases, Kewei showed a trend of recovery in its sales volume leveraging on its market leadership.
• HEC Pharma has a comprehensive insulin portfolio, which covers both second and third generations of insulin. With 116 million diabetes patients, China has significant market opportunity for insulin.

• On November 22, Shionogi & Co (4507 JP) received emergency regulatory approval for Xocova  in Japan for COVID-19. It is Japan’s first homegrown oral antiviral for SARS-CoV-2 infection.
• On November 24, Shionogi has filed for manufacturing and sales approval of S-268019, a recombinant protein-based preventive vaccine, for use in priming and booster (third) doses, against COVID-19.
• Although Shionogi continues to expect ¥110 billion revenue from COVID-19-related products in FY23, the company has raised overall revenue guidance to ¥410 billion from ¥400 billion.