Equity Bottom-Up

• Alibaba’s revenue stopped growing for the first time on record.
• We still believe the revenue growth rate will recover in the December quarter.
• We believe the stock price will have at least an upside of 29% after a significant plunge.

• Softbank Corp (9434 JP) results were weak as expected as mobile price reductions carved into the consumer revenue base
• Management released some further details on PayPay including a revenue number that implies continued improvement in take rates and plans to carve out a new segment for financial services
• Both KDDI and Softbank net adds were weaker sequentially v Q4 which bodes well for NTT and possibly Rakuten

• Toyota’s Q1 operating profit was 28% below consensus estimates, while pretax profit only undershot by 4%. Support for 2nd & 3rd-tier suppliers was the main cause.
• While full-year operating profit target was maintained & EPS slightly raised, this was due to bigger forex tailwinds. Ex-forex, FY3/23 operating profit was lowered by 28%.  
• Much of FY3/23’s negatives are one-off, which paves the way for higher profits in FY3/24. But support for suppliers while rivals grow earnings is somewhat of a concern. 

• Bukalapak‘s recent 1Q2022 results provided further evidence that the company is moving along the road to profitability with growth in TPV being outpaced significantly by revenue growth.
• The company saw very significant improvements in take-rates for its marketplace and Mitra businesses plus a better contribution margin and we expect this to continue into the 3Q.
• Bukalapak (BUKA IJ) looks cheap, especially when considering its stake in Allo Bank Indonesia and its IDR20tn cash pile, which means you are paying only US$50m for its core businesses.

• Even though Q1 topped consensus through favourable FX movements, it seems inflationary pressure is starting to affect all business units of Yamaha Corp (7951 JP).
• The company raised revenue guidance due to favourable FX movements but maintained the OP at the previous level due to rising procurement and energy costs.
• However, with inflation starting to affect demand, these estimates are likely to be revised down over the next few quarters.

• The July 4 upward revision to FY Nov-22 sales and profit guidance appears to have been discounted, but the company’s long-term growth potential has not.
• Sales could more than double over the next several years as Nextage takes share in Japan’s highly fragmented and consolidating used car market. Margins also have room to expand.
• Prospective P/E ratio headed down from 18x this fiscal year to 12x and below on a medium-term view. 

• Moderna Inc (MRNA US) reported strong Q2 results, with both revenue and EPS surpassing consensus. Profitability was negatively impacted by one-off inventory write-down charge.
• Management has reiterated advance purchase agreements for expected delivery of ~$21 billion in 2022. Assuming an endemic situation, Moderna’s commercial infrastructure is prepared for a 2023 commercial market.
• The Board of Directors has approved a new share repurchase program for $3 billion in August 2022, with no expiry. Moderna shares have gained 27% in last three months.

• General Electric has started seeing a solid recovery in its aerospeace business which has become an important growth driver for the company.
• Macro pressures and supply chain have affected the revenue adversely by approximately 5%.
• The company has recently unveiled the innovative branding of its new companies, GE Vernova, GE Healthcare, and GE Aerospace.

• Opthea Ltd (OPT AU) is developing OPT-302, a first-in-class investigational drug. With improved efficacy, OPT-302 has the potential to be the next transformative step in the treatment of wet AMD.
• Pivotal phase 3 trials are ongoing for OPT-302, with topline data expected in mid-2024. OTP-302 is expected to be launched in 2025. OPT-302 represents a multi-billion-dollar peak sales opportunity.
• As of December 2021, Opthea had cash balance of A$88 million and no debt. Over the trailing 12 months, the company had cash burn of A$56 million.

• Coca-Cola has been implementing various growth initiatives off-late to continue expanding its top-line.
• The company had a good quarter and delivered an all-around beat and increased its volume and value share during the quarter.
• Coca-Cola continued its strong marketing efforts and launched end-to-end digital-first brand campaigns for smartwater and vitaminwater.

• After a disastrous April and May due to lockdowns resulting in >-50% SSSGs, the company is seeing the situation stabilize in June and July.
• We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.
• Expect a generous dividend with over a 100% payout. Since >50% of the market cap is in cash, a special dividend could also be expected. 

• AMTD Digital is the biggest bubble of 2022, which is ready to pop. AMTD Digital provides digital solutions platform in Asia.
• AMTD Digital currently has a market cap of US$371 billion (US$2,002 per ADS share) (as of 1:40PM NYC time). The company’s market cap is more than JPMorgan Chase & Co.
• No doubt, AMTD Digital is the biggest bubble in 2022 and the bursting of this huge bubble will also devastate (mostly) retail investors in the US. 

• Community group buying is starting to face multiple headwinds from funding shortages to excessive price competition.
• Even though Pinduoduo (PDD US) is yet to announce any job cuts or scaling back of operations, we think the operating environment shouldn’t be much different from competitors.
• With QoQ revenue growth at a standstill and sales and marketing cost cutting almost fully exhausted, we think the current consensus expectations are too optimistic and bound for a correction.

• China’s gaming regulator has granted publishing licenses to 69 online games, which excludes Tencent (700 HK) and NetEase (9999 HK) again for the fourth time.
• Though 9-month long game approval freeze was lifted in April, both Tencent and NetEase failed to make it into the approved list of more than 200 titles so far.
• Chinese gaming companies have been seeking for overseas expansion as domestic gaming market is struggling with ban on new approvals and new restrictions.

• Since publishing my bullish insight on Clinuvel Pharmaceuticals (CUV AU)  on April 29, the company reported ongoing positive financial performance and progress across its expanded clinical program.
• In Q4FY22, Clinuvel’s customer receipts surged 62% y/y to AUD24.05 million, mainly driven by rising clinical demand for Scenesse treatment.
• Clinuvel stands out amongst its domestic peers for being profitable and cash flow positive. The company has sufficient cash reserves to self-finance planned organic growth.

• Tesla had been in the process of carrying out upgrades which resulted in a lengthy shutdown of its Shanghai factory.
• The company faced its fair share of challenges but had a highly resilient quarter and managed to produce an all-around beat.
• The most significant accomplishment was setting production records in Shanghai and Fremont in June.

• Maintain BUY rating with target price of Bt2.66 based on 11.8xPE’2022E,implying its five-years trading average.We have positive view to its 2022 outlook backed by 6 projects launch in 2022worth Bt9.5bn(+66%YoY)
• Expect YoY drop in  2Q22 presales We expect 2Q22 presales at Bt2.1 bn (-4% YoY, +2% QoQ), representing (1) Low-rise presales value of Bt1.77bn (-10%YoY,-10%QoQ)        
• Meanwhile, we expect presales should remain strong in 2022 and inline with management guidance at Bt9.2bn (+23%YoY), backed by (1) 4 new projects launch in 2H22E worth Bt5.5bn 

• China Communications Construction (1800 HK) sealed Rmb371bn of new contract in 2Q22, or a 35.2% YoY growth, representing a sharp acceleration from just 4.9% in 1Q22. 
• We estimate backlog is now around Rmb3.5trn and this equals to 5.2x FY21 revenue. This should have improved from 4.6x at end-FY21 and provides CCCC a secured pipeline.
• CCCC is well positioned to gain more contracts in 2H22 as driven by the local government special purpose bonds issue. Such issue reached Rmb1.5trn, or a 166.1% growth, in Jun.

• As a legacy tech company, IBM may have seen a slowdown in its growth trajectory but its acquisition-led growth approach continues to work.
• With this performance, the company is maintaining its model of mid-single-digit revenue growth and a double-digit performance in IBM Consulting.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Fardaday Future (FF) announced it lined up at least $100m in funding from two investors but gave little detail. Deal is set to close on or before August 8th. 
• Given that it’s a senior secured convert deal, we doubt more than $100m-$200m can be raised, despite FF’s release saying the deal has capacity for $600m.
• FF only had $222m in cash in April after -$173m in FCF in Q1. They need $1bn to last through 2023. Anything less than $600m in funding would be negative.

• In this insight, we discuss a pair trade between E Mart Inc (long) and Coupang (short). At current valuations and business outlook, we like the risk/reward of this pair trade.
• The end of the mandatory shut down rules on major hypermarkets is likely to have a major positive impact on Emart and negative impact on Coupang and Kurly.
• Although this has not been made into law, we think there is relatively high probability that this will eventually be made into law sometime this year. 

• China just announced game approval for August batch. More games were approved in August compared to July and June.
• Pace of China game approval continued to pick up albeit at a much slower pace than pre-tightening.
• Both Tencent and Netease will be under increasing pressure as the duo continue to score zero in August, making it the fourth time with no games approved since resumption . 

• In the past several days, there have been numerous news accounts about the Indian government cracking down on Krafton’s Battlegrounds Mobile India (BGMI) game.
• We believe there are several reasons why Indian government is cracking down on BGMI including concerns about this game potentially leading to greater violence among children and ties to Tencent.
• At current valuation levels, we like a pair trade between Krafton (go short) and NCSOFT Corp (036570 KS) (go long).

• Raffles Medical (RFMD SP) reported strong H1 2022 results, with double-digit growth in revenue and net profit. With the resumption of international travel, the company is seeing increasing patients.
• While COVID-related revenue is declining, the company’s hospital business will benefit from the returning of foreign patients as well as resumption of elective surgeries for the domestic patients.
• Raffles Medical has received the approval to set up an IVF clinic in Hainan province of China.

• HSBC saw its net interest income rise substantially in the year, but it did not flow through
• The delta in credit costs was one major negator to the bank’s higher core income
• Tax expenses turned to tax income, is the ultimate distortion to net profit

• Profitability ready to kick in again as Amazon grows into the overbuilt warehouse capacity and headcount from the past few quarters. 3Q22’s guidance clearly conservative based on 2Q22’s outperformance.
• Revenue reacceleration beginning to play out. 2Q22’s 7% leading to 3Q22’s 15%, and back to the 20%s by 2023.
• AWS continues its indomitable run. $79B TTM revenues are growing 37% with 31% margins.

• It seems that Mr Market was not satisfactory with WuXi AppTec’s 2022H1 performance. If excluding COVID-19 projects (which are regarded as a one-time increment), the performance growth was not high.
• Considering that the CXO preliminary bid winning has declined largely in the US, domestic CXO would not begin to gradually reflect the slowdown of newly added orders until Q4.
• We are concerned about WuXi AppTec’s performance in 2023. As an old generation CXO, it’s hard to achieve V-shaped rebound. So, 2022 is a good time to offload the Company.

• Yaoko opened a discount supermarket last year and added a second in March, using knowhow acquired from the Ave chain it bought in 2017. 
• The new store is purpose built to save costs and offer lower prices, and should prove popular as inflation rises, while delivering higher margins than supermarkets typically achieve.
• The format stands in marked contrast to other discounters such as Kobe Bussan (3038 JP)’s Gyomu Super but both formats show that discounters can make more money than other supermarkets.

• Texas Instruments delivered its third consecutive all-around beat in the recent result with a reported revenue of $5.21 billion this quarter.
• Among major developments, Texas Instruments has recently broken the ground on the new semiconductor plants of 300-mm for water fabrication in Sherman, Texas.
• Texas Instruments has a strong balance sheet and the management continues investing in building capacity.

• We turn bullish on Daikin ahead of Q1 results as we become less concerned about growth risks in China and the US
• Peer results suggest that air conditioner demand is stronger than expected due to record high global temperatures
• Company management has a good track record of pushing through price hikes and cutting costs. We expect the company to beat guidance this year

• Several news media outlets reported that Meituan (3690 HK)  Ele.me and other food delivery platforms were summoned over food safety problems as well as price war among them.
• Food delivery platforms are ordered to strictly follow food safety management responsibilities and also prevent price wars that disrupt the market order.
• Though the anti-trust fine of RMB3.44bn was thought to be the end of an almost year long regulatory crackdown on Meituan, it seems that this is far from over.

• Tencent and Huawei launched beta tests for car-hailing platform almost simultaneously.
• Alibaba begins to disconnect Ant Group to avoid implicating each other.
• Missfresh dismissed almost all employees in its headquarters in Beijing.

• A “Long China Three Gorges Renewables (600905 CH), short Huaneng Power Intl Inc-A (600011 CH)” pair trade should generate good return in China’s utilities sector given the current industry dynamics.
• The key supporting factors are: CTGR has pure exposure to renewable, faster capacity growth and a stronger balance sheet. They should underpin better earnings quality and outlook relative to HPI.
• CTGR trades on higher PER and P/B multiples, but these should not be hurdles as they are just reflection of more promising prospects. We expect CTGR’s YTD outperformance to continue.

• Route Mobile operates as a cloud communication provider to enterprises, OTT players and mobile network operators. The company got listed on the bourse in September 2021.
• Route is a growing company, and derives a significant chunk of its business internationally.
• Route Mobile is a story centralized by grey areas, be it accounting or management’s stance on contingent liability, or impairment in investments.

• We turn tactically bearish on Lasertec as we expect the stock to dip on weak order guidance
• After an exceptionally strong past year, we expect the order outlook to normalise
• Risks include weaker macro, Intel capex delays and restrictions on equipment sales in China

• Tim Horton China has bucked the recent trend of Chinese Companies, opting to list in the US through a SPAC rather than aiming for an IPO on shore.
• The company is looking to capitalize on the rapidly growing Chinese Coffee market by tapping into capital from US investors.
• However, growing geopolitical tensions and a regulatory crackdown from the SEC could dampen deal prospects.

• Leading water treatment company going through its crucible – negative sentiment, low expectation thus low valuation 
• Mean reversion a high possibility, tailwinds for the sector getting strong 
• Opportunities galore – new energy, general, PLI, non-PLI Capex, sewage water treatment, upgradation and desalination 

• In our previous insight on Kaveri Seed (KSCL IN) , Kaveri Seed: Wilting Sprouts we had predominantly highlighted the challenges faced by cotton seed players due to the external conditions.
• In this insight, we particularly dwell into the forensics checks of the company and present our takeaways.
• Key takeaways include concerns on investments, receivables, working capital cycle and some disclosures.

• Chinese banks are out of favour given the China GDP growth concerns and property sector headwinds; yet we see selective opportunities in the stronger, higher return banks
• Our core picks are unchanged, with the core holding being CCB, and also PSBC; both have healthy credit quality and coverage, double digit ROEs and are attractive on valuations
• We remain negative on China Minsheng due to its low ROE, poor delinquency and NPL coverage, and its relatively high exposures to real estate relative to its peers

• Orders, sales and profits increased substantially YoY in the three months to June (1Q), but new SPE orders declined sequentially (QoQ) for the first time in two years.
• Management has lowered 2Q sales and profit guidance in expectation of a weak 2Q. Full-year guidance remains unchanged. In our view, this reflects a wait-and-see attitude.
• Major customer Intel has cut capex. TSMC and memory makers see weak quarters ahead. The potential downside risk has probably not been fully discounted.

• This is our first report on legacy workspace technology major, Xerox Holdings Corporation.
• With increasing digitization in workplaces, the company is facing a challenging macro-economic landscape and has become a loss making company over the past few quarters.
• Among major acquisitions, Xerox has recently acquired Go Inspire for growing the presence of digital services in the UK.

• This is our first report on one of the leading players in integrated and automated cybersecurity solutions – Fortinet.
• The company has been performing well in 2022 so far with a reported increase in billing and product revenue growth.
• The company has also acquired a controlling stake in a Japan-based networking company ALAXALA Network for around $64 million.

• Activist hedge fund Jana Partners bought ~2.66M New Relic Inc (NEWR US)  shares in 2Q22 and upped its stake in the tech company to 5.3%.
• According to Reuters, New Relic may explore a potential sale following interest from private equity firms. Mr. Galligan, a partner of Jana Partners, joined the New Relic Board in June. 
• New Relic shares trade at ~4x EV/Rev on our FY23 revenue estimate, and we think Splunk may set a ceiling on the multiple at which New Relic may be acquired. 

• This is our first report on cloud content management platform provider, Box Inc.
• The company operates on a SaaS model and has achieved accelerating revenue growth, RPO growth, and operating margin since the start of 2022.
• The strong customer matrices are the main indicators of the success of the platform strategy and product as customers are turning to Box for securing content management.

• BFI Finance Indonesia continued to see rapid momentum behind its recovery with new bookings in 2Q2022 hitting all time highs and spreads improving to 13.5% with NPFs declining.
• The company’s growth is driven by the non-dealer used vehicle market with new bookings coming mainly through agents and repeat customers, and digital initiatives in place to improve origination.
• BFIN is the best quality multifinance player in Indonesia, with an ROE now above 21%. There will be more collaboration and synergies with Bank Jago going forward further driving growth.

• Amber Enterprises India (AMBER IN)  is one of the key ODM players in the RAC and related industry.
• However, there are couple of puzzling forensic takeaways, especially in F22 where company had reported high growth in numbers.
• These primarily include the rationale behind debt increase, puzzling subsidiary numbers, discrepancy in inventory verification, etc.

• Alibaba is under pressure again with a direct read-across to Softbank
• Worries on China regulation are bad news for another Softbank holding DIdi Global as it stands alongside Alibaba as a high-profile regulatory target
• Alibaba weakness could drive risk pricing (CDS) and the discount  to NAV higher. A silver lining is that discount makes Softbank attractive for investors looking for indirect China exposure

• Bajaj Finance Ltd (BAF IN) [“BAF”] reported Q1FY23 PAT of approx. INR 2600cr which puts it on track to post INR 11,000cr+ PAT in FY23, in line with our projections. 
• BAF is back on its pre-COVID growth trajectory as also highlighted in our prior note. Q1FY23 AUM growth came in at 6.2% QoQ and annualized ROE is back to 20%+.
• The strong Q1FY23 earnings is despite elevated competition in the marketplace which led BAF to forgo business where margin profile was not attractive.

• Results for the quarter were mixed with a slight miss for profitability despite one-time gains for financial services taken in the quarter
• Revenue erosion from a reduction in the Rakuten roaming service area was relatively modest whilst there are signs of improvement in erosion from mobile price cuts
• KDDI will reimburse users ¥7bn (v Redex forecast of ¥10bn) for its network outage earlier this month; the operational impact won’t be clear until Q2 churn is reported

• This is our first report on Dropbox, a major player within the cloud storage, file transfer, and e-signature domain.
• Dropbox is continuing to evolve its core FSS business to drive monetization and improve attention.
• This quarter, Dropbox has launched its newest version of Dropbox backup that has upgraded management settings and restoration flow.

• This is our first report on database major, MongoDB.
• The company delivered yet another all round beat in the previous result with a staggering 57% growth year over year.
• The revenue generated by Atlas alone increased by 82% year over year and accounted for 60% of MongoDB’s total revenue.

• Takeda Pharmaceutical (4502 JP)  reported 1QFY03/23 results yesterday. Reported revenue grew 2.4% YoY to JPY972.5bn (vs consensus JPY929.6bn) while OP decreased 39.4% YoY to JPY150.5bn (vs consensus JPY173.1bn).
• Decline in OP was due to one-time gain from the sale of Japan diabetes portfolio of JPY131.4bn in 1Q last year, however, excluding this, OP increased 28.4% YoY in 1QFY03/2023.
• Takeda’s share price dropped 1.5% at the end of today’s trading as investor sentiment has changed post earnings as some of the company’s key drugs have started experiencing generic erosion.

• This is our first report on Akamai Technologies, a renowned content delivery network and cloud service provider. the growth in security and computing has been the main driver of revenues for Akamai in the past years but it has been adversely impacted by the U.S. dollar’s sharp increase in value and the slowing of traffic growth in the company’s delivery business.
• The consistent double-digit growth in security revenue has been driven by Guardicore’s continued outstanding performance and rapid growth in their application security business.

• Samsung Biologics (207940 KS) achieved highest ever semi-annual revenue of KRW 1.62 trillion in H1 2022, with an operating profit of KRW346.1 billion, mainly driven by its contract manufacturing business.
• At the end of Q2, the company had an order book of $7.9 billion, entailing revenue visibility. Its new plant is on track to start operation in October.
• Samsung Bioepis has launched first ophthalogy biosimilar in the U.S. in June. Both the CDMO and biosimilar businesses are expected to clock solid annual revenue growth in 2022.

• Baijiu, the most popular liquor in China, is perhaps one of the most addictive and profitable alcoholic beverages in this planet.
• The focus of this insight is a pair trade (go long on Luzhou Laojiao and go short on Jiangsu Yanghe Brewery).
• The major reasons for this pair trade include higher sales growth rate and ROE for Luzhou Laojiao as well as capitalize on the recent share weakness of Luzhou vs Jiangsu.

• MonotaRo is well placed to monetise the shift of enterprise MRO spending as it moves increasingly online
• The company’s new distribution centre will enable the company to increase capacity, speed up deliveries, and offer improved services to enterprise clients
• Structural growth stories are few and far between in Japan. MonotaRo is one of them and appears expensive on most valuation metrics. Our LT DCF model suggests 30% upside

• We expect a strong 2Q22 and an upgrade to annual guidance from Japan Tobacco (2914 JP) through strong Domestic and International Tobacco performance.
• It also seems that investors are starting to move on from JT’s Russia exposure-related fears.  
• Based on Japan Tobacco’s earnings potential, we think that there’s around 50% further upside to shares in the short term.

• M3 Inc (2413 JP)  reported 1QFY03/2023 results yesterday. Revenue grew 22.8% YoY to JPY57.0bn (vs consensus JPY50.8bn) while OP decreased 24.2% YoY to JPY19.0bn (vs consensus JPY16.3bn).
• The decline in OP was due to decrease in profit from overseas business where 1QFY03/2022 benefited from the Medlive IPO.
• Though m3’s earnings have beaten consensus and the company’s core Medical Platform has seen some recovery in earnings, we would not be rushing to make an entry.

• CyberAgent Inc (4751 JP)  reported 3QFY09/22 financial results after the market closed on 27th. Revenue for the quarter decreased 10.4% YoY to JPY 172.2bn vs consensus revenue of JPY 173.2bn.
• OP declined 76.7% YoY to JPY 10.4bn vs consensus JPY 16.0bn (miss of 35%) due to decline in profits from gaming. OPM declined to 6.0% from 23.2% in 3QFY09/21.
• Though CA has proven in the past that it can turn around its business with just one hit title, it has not yet been able to launch another hit title

• The situation in West Bengal is improving/stable. While Assam is showing no signs of improvement
• Recent floods have impacted collections, however, as highlighted earlier they are not likely to slip into NPA.
• The asset quality downcycle could be on the verge of ending.  Additional provisioning requirements should be sharply lower from Q3. 

• Unilever Indonesia booked a strong rebound in 1H2022 profits despite rising commodity prices with aggressive cost savings and an improving product mix. 
• The company suffered during the pandemic given that personal care does have a discretionary element but that is now being reversed with great mobility and reflected in new product launches. 
• Unilever Indonesia has the potential for a re-rating as growth momentum returns, helped by a new management team. Valuations are still well-below its 5-year average of 40x forward PER.

• Optically weak earnings and guidance due to FX and macro headwinds aren’t as bad as it seems… Meta’s ad business grew faster QoQ than Google’s Search.
• Zuckerberg downplayed the social graph as core to Meta’s LT competitive advantage. AI is the future.
• At $160, we think Meta is preposterously undervalued. 2023 revenue acceleration and margin expansion means the stock is trading 9x forward P/E ex-cash. 

• Teladoc Health, Inc. (TDOC US) reported mixed Q2 results, with revenue and adjusted EBITDA coming in above the midpoint of guidance range. However, EPS came significantly below consensus and guidance.
• Teladoc has already took $9.8 billion hit from impairment charge in H1 2022. Moreover, the company now expects results to be toward the lower end of already reduced guidance range.
• Since publishing Q1 results in April, the stock plummeted 23% in three months. From its peak in February 2021, the stock is now down 85%. No immediate recovery is expected.  

• Microsoft Corporation is the most widely held stock among active US equity investors. Of the 297 active strategies in our analysis, 80.1% own Microsoft at an average weight of 5.10%
• There is a growing dispersion between Value and Growth managers in MSFT.  Growth managers are at record levels of ownership, whereas Value managers are running their largest underweight on record.
• US Growth managers are relying on Microsoft to deliver an increasing proportion of the Growth within their portfolios. The cost of that growth is coming under scrutiny by Value managers

• Alibaba Group (9988 HK) announced yesterday that it is seeking to change its listing status in Hong Kong to a primary listing before the end of 2022.
• With the risk of de-listing from the US, a dual-primary-listing in Hong Kong would allow Alibaba (ADR) (BABA US) to smoothly transition all its trading from the US to Hong Kong.
• In addition, the company could possibly use this opportunity to raise more money from capital markets as it is desperately seeking funding for its loss making ventures.

• Shopify Inc (SHOP US) ‘s share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends
• Mercari Inc (4385 JP) ‘s US business is highly correlated with its US peer, as is its stock price
• A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal 

• Softbank and Z Holdings have confirmed the conversion of PayPay preferred equity into common in-line with previous guidance for ownership levels and a revaluation gain
• Z Holdings will sell the credit card business to PayPay to align transactional fintech which makes distribution, product development and branding easier
• Our outlook has not changed but we are lowering our target price to reflect diminished expectations announced at Q4 results. We remain at Buy but prefer NTT/KDDI in telcos

• Bank Jago recently released its 2Q2022 results. It again registered a quarterly profit, down on 1Q2021, and a victim of its own success but preparing well for future growth.
• The bank continues to grow its KYC’d customers, which reached 3.3m in 2Q2022, with 300k-400k new customers a month as a result of improvements in the onboarding process. 
• Bank Jago‘s future is all about its ecosystem and it has only started to scratch the surface of synergies but investors need to look to the long term for returns.

• On 22nd June, China released a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.
• Alibaba Health’s share price is down more than 10% since the announcement of the draft rule, however, third-party e-commerce platforms accounts for about 10% of Ali Health’s revenues.
• Pharmaceutical direct sales business has been generating lower GPM compared to JD Health’s direct biz, and the company’s margins have continued to deteriorate during the last 2-years.

• Matahari Department Store (LPPF IJ) reports another positive set of results confirming the success of its ongoing transformation with the promise of an even stronger quarter ahead.
• Footwear and menswear continued to lead but womenswear, cosmetics, and babywear were also strong, with private labels Nevada Sports, Nevada Denim, Coles, and New Connections booking vibrant sales.
• Matahari Department Stores omnichannel initiatives are bearing fruit with another marketplace soon to come on stream whilst store opening and renovations will accelerate 2H2022, helping to drive growth.

• Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
• However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
• Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.

• Online game sales decreased for the first time in 1H22.
• The main problem is the unstable policy of the new game license.
• Big companies like Tencent and NetEase are seeking overseas markets.

• The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.
• Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.
• However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.

• This is our first report on IPG Photonics, one of the leading manufacturers of lasers and amplifiers catering to materials processing across the globe.
• The company was off to a strong start in 2022 profiting from increased demand in Europe, North America, and Japan.
• IPG Photonics also saw the expansion of medium-power and pulsed lasers, mainly fueled by increased demand for new applications.

PT Metrodata Electronics, Tbk (MTDL:IJ), publicly listed company on Indonesia Stock Exchange since 1990, is a Digital Solution Provider and Technology Innovator in Indonesia that leads and enables the digital economy hub. MTDL builds strategic alliances with world-class ICT companies. The Company has two main business units, including Distribution Business (providing World-Class ICT Hardware and Software) that handles distribution through Omnichannel to partnered dealers (both offline and online) and ICT solution companies, as well as runs an e-commerce business (e-catalogue for Government/B2G). Its Distribution network covers more than 150 cities in Indonesia and has more than 5,200 channel partners and more than 100 world-class IT products and service brands. The second business unit, Solution & Consulting Business, is a digital solution provider that provides a complete range of ICT solutions based on Metrodata’s 8 Pillars of Digital Solutions, which consist of Cloud Services, Big Data & Analytics, Hybrid IT Infrastructure, Security, Business Application, Digital Business Platform, Consulting & Advisory Services, and Managed Services to support digital business transformation, for Enterprise, Corporate, SME, and Public Sector segment.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• While HDFC Bank (“HDFCB”) is doing all the right things (distribution expansion, digital infrastructure revamp) from a long-term perspective, it also has near-term growth triggers led by its retail book.  
• Excluding auto sector and two-wheeler loans, HDFCB’s retail book grew 25% YoY in Q1FY23. As the supply chain disruptions recede, HDFCB’s retail book growth could surprise on the upside.
• HDFC Bank (HDFCB IN) is also making decent progress in its digitization upgrades which should further bolster the growth and productivity.

• Shimano’s stock price has declined by 25% year to date on expectations that bike sales will soon start going downhill
• We model a GFC-style recession and find that Shimano’s valuation has already reflected the worst case scenario
• If we are heading for a collapse, then Ferrari N.V. (RACE US) should be acting more like Shimano. The valuation discount between the two is as wide as ever

• 1H22 was a story of two halves: 1Q22 still showed record profits but 2Q22 got progressively worse. 3Q22 started weak with inventory clearance and Nvidia new GPU launch awaited.
• Even after paying a fantastic final dividend in June 2022, it is now trading below net cash on the balance sheet.  
• We estimate net cash on the balance sheet is now 9 HKD vs 7 HKD share price.

• Revised guidance with 17.6% higher sales that caused a 40% increase in operating profit and an increase in EPS by 344% by 1H 2022.
• Spin off its Korean subsidiary by this August for up to KRW 900 bn or USD 692 million or almost as big as W Scope Corp (6619 JP)currently. 
• The company is trading at a 65% PBR discount to its Chinese peers which are bigger but less growth catalysts. Don’t sell too early. 

• Terumo Corp (4543 JP) earns 56% revenue from cardiac and vascular segment, which is the fastest growing segment of the company. The segment is seeing continued recovery from COVID impact.
• For FY23, Terumo guided for cardiac and vascular segment revenue of ¥445.5B (+12% y/y) and adjusted operating profit of ¥113.4B (+22% y/y), leading to operating margin of 25.5% (+200bps y/y).
• Over the next five years, Terumo aims for high single-digit revenue growth from the segment, through new product launches and expanding adoption of existing products across disease areas.

• AKR Corporindo (AKRA IJ) 1H2022 results were impressive, with sales up +107% YoY and profit by +74% YoY driven by strong demand for both petroleum products and chemicals.
• Land sales for its JIIPE industrial estate were slow at 3.5 hectares in 1H2022 but expect FY2022 sales to hit over 40 hectares, with a 37-hectare plot due in 3Q2022.
• AKR Corporindo (AKRA IJ) gives high-quality exposure to Indonesia’s economy across its major sectors and especially to the rapid growth in smelters which require chemicals in abundance.

• With a dominant presence on the Las Vegas strip as recovery revenue ballast, MGM is seeing recovery in its US regional properties, growth in digital and news flow from Asia.
• The company’s BetMGM sports betting partnership with UK giant Entain is thriving. It ambitions to buy out its partner, or its partner’s parent are clear.
• As Macau slowly reopens its long awaited recovery arc will be positive news flow in Q3 and Q4 for MGM due to its two property footprint there.

• China Education Group (839 HK) has retreated 23% from recent high with no regulatory and company news. Given its secured earnings growth outlook, we see an opportunity. 
• We believe drivers are higher enrollment and tuition, further capacity growth, good progress in overseas education and light capex. There are positive developments in these aspects recently. 
• CEG may return unused share buyback funds to shareholders via dividend, suggesting a potential resumption of payout. At just 5.7x PER for FY23F, its growth prospect is undervalued.

• Faraday Future (FF) announced that it has delayed the Q3 2022 launch of its first EV and is “continuing to engage” in fundraising talks. 
• FF says it needs $325m to last through the year or 47% of its market cap. A PIPE deal could be underway, albeit the 8-K filing was cautiously worded. 
• Depending on the agreement, it may pave the way for the recently deposed founder to place a crony on the Board, which could be negative for future funding. 

• Pop Mart’s share price has lost more than 50% YTD as resurgence of Covid in China has severely impacted the company’s operations including closure of physical stores and robo shops.
• The company also issued a profit warning last week for 1H2022 that was severely impacted by the spread of Covid-19 as well as business expansion related costs.
• We expect the company’s aggressive overseas expansion strategy to continue to impact the company’s profitability and there is further downside.

• Duolingo (DUOL US)  will announce its 2Q22 quarterly results on August 4, 2022. The leading U.S. EdTech unicorn raised FY22 guidance and reported strong operating metrics in 1Q22.
• Duolingo app is back in Apple App Store and Android stores in China after the app was removed from some app stores 1 year ago due to Beijing’s EdTech crackdown. 
• Durable Capital Partners acquired ~$158M worth of Duolingo (DUOL US)  shares this year. General Atlantic and Durable Capital Partners led the most recent Series H private round in November 2020. 

• Pharmaron’s share price plunged after the release of the estimate for 2022 interim results, even dragging down the entire CXO sector, which reflected the attitude of Mr Market.
• One important reason for low net profit growth is related to the development strategy – Even if Pharmaron achieves  “integration”, its advantage/profit margin could largely shrink due to overcapacity/fierce competition.  
• Pharmaron can only achieve V-shaped rebound by making breakthroughs in CGT CXO to boost valuations and expectations on outlook rather than pursue the strategy of “integration” as in the past.

• We believe Alibaba’s revenue growth rate will reach historical low in 1Q23, but it will recover two quarters later.
• Alibaba’s stock price fell from HK$300 in October 2020 to HK$100 today.
• We believe Alibaba has at least an upside of 43%.

• There have been more news flow about several major Korean defense companies that could receive as much as 28 trillion won in new orders from three major European countries.
• The Poland government could purchase jets, tanks, and howitzers from major Korean defense companies such as Hyundai Rotem (K2 tanks), KAI (FA50 fighter jets), and Hanwha Defense (K9 howitzers).
• There is a good probability that the Korean defense contractors may be able to secure a large percentage of the 28 trillion won in new arms exports contracts.

• The following names are “on the workbench”, ie., names we are working on that look interesting from the short side. They are discussed, with charts, in the PDF attached below.
• We like to be as transparent as possible in our short idea generation process.  
• Today, we are flagging: Scotts Miracle-Gro, Corsair Gaming, CF Indus, Gap Inc, Hub Group.

• IPAR continues to demonstrate the strength of the consumer’s willingness to purchase fragrances the Company develops
• IPAR announced Q2 sales of $244.7M compared to our forecast of $198.0M. The strength in the quarter was notable in the USA while the European segment had a small lift
• IPAR taking over the Donna Karan and DKNY brands should lead to greater sales performance in the second half of the year