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In today’s briefing:
- Tencent 331 Support Pressure
- Kuaishou (1024 HK) 4Q22 Earnings Preview: Weak Growth, But Loss to Shrink Significantly
- Tencent (700 HK): 4Q22, Stop Decreasing WeChat Ad Recovered Earlier
- LG CNS: Aggressive Expansion of AI Capabilities in B2B IT Consulting Services
- StubWorld: Impairments Weigh Down Kingsoft Solid Results
- Tencent: Gradual Recovery in Earnings; Domestic Gaming to Resume Growth
- Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities’ Growth
- Small Cap Idea: Rover (ROVR)
- Carly Holdings Limited – Finance Facility Quadruples Potential Fleet Size
- Boku – Helping merchants navigate payments complexity
Tencent 331 Support Pressure
- Our Tencent sell from 385 has formed a flat range with a bias to pressure the 331 pivot support to reach our 300-305 buy (cover) target.
- The descending wedge or channel is the dominant chart pattern that will drive the medium term trend. Global and HK bear pressure will influence Tencent near term.
- From the 300 support zone we see a better macro set up that will see the bull wedge mature and break higher once summer turbulence subsides.
Kuaishou (1024 HK) 4Q22 Earnings Preview: Weak Growth, But Loss to Shrink Significantly
- We believe both 4Q22 and 1Q23 can be weak quarters.
- However, we believe operating losses will shrink significantly in 4Q22 and 2023.
- We believe the stock has an upside of 77% for year end 2023.
Tencent (700 HK): 4Q22, Stop Decreasing WeChat Ad Recovered Earlier
- As we expected in the preview, total revenue stopped decreasing in 4Q22.
- WeChat advertising recovered in 4Q22 earlier than we expected in the preview.
- We believe game-related revenues will grow by 8% in 2023 and 19% in 2024.
LG CNS: Aggressive Expansion of AI Capabilities in B2B IT Consulting Services
- LG CNS provides various IT consulting services in the key digital growth areas including cloud, artificial intelligence (AI), big data, smart factory, and smart logistics.
- LG CNS’s core strength in the AI sector is to capitalize on all the major AI based technologies and providing consulting services to business customers to improve their operations.
- LG Corp (003550 KS) owns 49.95% stake in LG CNS, which is expected to complete its IPO sometime in 2023/2024.
StubWorld: Impairments Weigh Down Kingsoft Solid Results
- Despite the topline growth of 20%, Kingsoft Corp (3888 HK) recorded a loss in FY22 after a large impairment for its holding in Kingsoft Cloud (KC US).
- Preceding my comments on Kingsoft are the weekly setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Tencent: Gradual Recovery in Earnings; Domestic Gaming to Resume Growth
- Tencent (700 HK) reported 4Q2022 results yesterday. Revenue increased 0.5% YoY to RMB145bn (vs consensus RMB)143.5bn while adjusted OP increased 30.1% YoY to RMB28.4bn (vs consensus RMB37.2bn).
- Online advertising revenues saw a 14.8% YoY increase during 4Q2022 after 4-consecutive quarters of decline with January and February showing sustained recovery.
- Though Domestic gaming revenues declined in 4Q2022, with new gaming licenses and international expansion, we expect gaming revenues to start growing from 1Q2023.
Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities’ Growth
- While adjusted net profit of Tongcheng Travel Holdings Ltd (780 HK) plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.
- Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.
- Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength.
Small Cap Idea: Rover (ROVR)
- Rover is the world’s largest network of pet sitters and dog walkers.
- Rover connects pet parents with pet care providers who offer overnight services, including boarding and in-home pet sitting, as well as daytime services, including doggy daycare, dog walking, and drop-in visits.
- The marketplace has more than 500,000 pet care providers across North America and Europe.
Carly Holdings Limited – Finance Facility Quadruples Potential Fleet Size
- Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019.
- Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
- Carly has attracted larger automotive industry businesses as shareholders, with a model that facilitates sales volumes of new vehicles and delivers a new recurring revenue stream for automotive manufacturers and dealers.
Boku – Helping merchants navigate payments complexity
Boku’s FY22 results reflect a return to pre-COVID customer behaviour and company spending, investment in its platform to support local payment methods (LPMs) and the negative effect of the strong dollar on reported results. Growth in LPM users accelerated in the year and is likely to be boosted further as the Amazon relationship develops. With plans to double revenue and grow EBITDA margins by c 18pp in the medium term, Boku looks well positioned for earnings growth over the forecast period.
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