In today’s briefing:
- [PDD Holdings (PDD US, BUY, TP US$159) TP Change]: Bargain Valuation, Even if Temu Disappears
- Tencent Posts Weaker Quarterly Results Amid Gaming Challenges
- HKBN (1310 HK): Déjà Vu as Privatisation Rumours Resurface
- EQD | The Hang Seng Index’s Crucial Fork Is at the End of March
[PDD Holdings (PDD US, BUY, TP US$159) TP Change]: Bargain Valuation, Even if Temu Disappears
- PDD reported C4Q23 top-line, non-GAAP EBIT, and non-GAAP net income (2.4%), 12.4%, and 24% vs. our est., and 11.6%, 37.0%, and 50.3% vs. cons., respectively;
- We estimate the beat was driven by (1) improved take rate on the China platform following ad tool adjustments, and (2) Temu margin expansion;
- We remove Temu US from our model from 2025+, as restrictions seem more than likely following the TikTok ban and cut TP to US$ 159 to reflect this;
Tencent Posts Weaker Quarterly Results Amid Gaming Challenges
- Tencent Holdings Ltd. (腾讯) reported weaker-than-expected results in the fourth quarter of 2023, as the Chinese internet behemoth faced challenges growing its gaming business, particularly in China’s domestic market.
- During the three-month period, Hong Kong-listed Tencent generated 155.2 billion yuan ($21.9 billion) in revenue, up 7% from 2022, according to its earnings report released Wednesday. That missed the average estimate of 157.4 billion yuan by analysts surveyed by Bloomberg.
- Quarterly net profit also fell short of expectations, down 75% year-on-year at 27 billion yuan, compared to average analysts’ predictions of 33.3 billion yuan.
HKBN (1310 HK): Déjà Vu as Privatisation Rumours Resurface
- On 21 March, Bloomberg reported that TPG and MBK had restarted a strategic review to reduce their HKBN Ltd (1310 HK) shareholdings. Previous privatisation rumours have fizzled out.
- The options include going private, attracting new investors, or raising cash through some of HKBN’s assets. Infrastructure-focused funds and one Chinese telco (likely China Mobile (941 HK)) were approached.
- The probability of an offer is low as TPG and MBK will need to accept a material discount on their cost per share and financing challenges due to high leverage.
EQD | The Hang Seng Index’s Crucial Fork Is at the End of March
- The Hang Seng Index is at a turning point: investors want to know if the current rally can continue into April.
- Our MONTHLY seasonal matrix model indicates that to see the index rallying in April, usually we should have a negative close in March, so this week will be crucial.
- Buy between 16281 and 15924 to ride the continuation of the rally in April.
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