In today’s briefing:
- BYD (1211 HK): Strong Revenue in 2023 and to Change Strategy in 2024
- HanaTour Management Sale: Minority Shareholder Tender Offer & Price Premium Assessment
- Anta Sports (2020 HK): 2024 High Conviction Update – Earnings Beat In 2H23
- Bukalapak.com (BUKA IJ) – On the Cusp of Breakeven
- Shareholder Returns Should Be Examined on a Cash Basis, Not on a Net Profit Basis
- BABA’s Babies: They Are All Grown Up! Ali Pictures: A Blockbuster Company
- [Meituan (3690 HK, SELL, TP HK$70) TP Change]: Margin Reflects Persistent Competitive Pressure
- Hana Tour Service: Major Shareholders Including IMM PE Likely to Sell Their Shares
- Preference for Deleveraging, Model Update
- Brunswick Corporation – Initiation Of Coverage – Does It Have A Sustainable Competitive Advantage? – Major Drivers
BYD (1211 HK): Strong Revenue in 2023 and to Change Strategy in 2024
- Total revenue increase by 42% and automobile revenue increased by 49% in 2023.
- The gross margin improved significantly in 2023, especially in 4Q23.
- We believe BYD will move its focus from ‘low price for sales volume’ to ‘development of new vehicle models’.
HanaTour Management Sale: Minority Shareholder Tender Offer & Price Premium Assessment
- HanaTour seeks new ownership after 4 years under IMM PE. Despite COVID-19 setbacks, successful restructuring attracts attention from online travel and investment giants.
- Market rumors hint at Yanolja and Hotels.com interest, possibly intensifying acquisition competition, leading to a higher price premium. IMM’s 16.68% stake may value at ₩250B, a 35% premium.
- Last year’s mandatory tender offer for 50%+1 share awaits legislation. Unlikely to affect HanaTour sale. Nonetheless, potential acquirers may buy additional shares, suggesting further premium formation in share price.
Anta Sports (2020 HK): 2024 High Conviction Update – Earnings Beat In 2H23
- At noon time today, Anta Sports Products (2020 HK) released strong 2023 results which beat expectations.
- Anta currently trades at a forward PE of 18x based on estimated 2024 earnings (assuming a conservative 15% yoy growth in 2024 earnings).
- I expect the company’s net profit to grow 15-20% CAGR in 2024-2026. Anta’s historical forward PE is around 24x since 2017.
Bukalapak.com (BUKA IJ) – On the Cusp of Breakeven
- Bukalapak.com (BUKA IJ) booked a slightly weaker finish to the year than expected with a slowdown in revenue growth in 4Q2023 and a miss on adjusted EBITDA breakeven.
- The key reason was a thinning out of non-performing specialty businesses which impacted short-term revenues but will improve revenues and adjusted EBITDA. as the focus shifts to higher take-rate businesses.
- Bukalapak.com PT Tbk (BUKA IJ) is guiding for +15-20% revenue growth and positive adjusted EBITDA in 2024 with execution on this being paramount. Valuations remain attractive.
Shareholder Returns Should Be Examined on a Cash Basis, Not on a Net Profit Basis
- The pace of share repurchases in 2023 (+1.4%, YoY) is not sufficient compared to the increase in corporate profits, and there is much room for reconsideration of cash allocations.
- In Japan, where many manufacturers keep CapEx within the depreciation, it’s more important to verify whether shareholder return is appropriate on a cash basis rather than a net income basis.
- Companies that fail to formulate measures to generate ROE that exceeds the cost of capital in accordance with TSE requests are not able to achieve an appropriate cash allocation.
BABA’s Babies: They Are All Grown Up! Ali Pictures: A Blockbuster Company
- Alibaba Pictures (1060 HK) is expanding rapidly into complimentary areas such as online ticketing of cinema and live events with the recent acquisition of Damai.cn from parent Alibaba.
- Alibaba Group Holding (9988 HK) is considering injecting other media platform assets like Youku to realize synergies among its portfolio of companies.
- Ali Pictures (Alipics) legacy film production business continues to expand globally with its American film production company, Amblin which is a partnership with Steven Spielberg.
[Meituan (3690 HK, SELL, TP HK$70) TP Change]: Margin Reflects Persistent Competitive Pressure
- Meituan reported C4Q23 revenue beat our estimate/consensus by 0.7%/1.4%; operating profit beat our estimate/consensus by 37.3%/48.6%, mainly due to order volume surprise, which is unsustainable in our view.
- However, we think Meituan’s near term pressures did not change: (1) core biz OPM drop due to rising low-price orders and subsidies; (2) resuming competition from Eleme/Douyin/PDD
- We maintain the stock as SELL rating but raise TP by HK$13 to HK$70 to factor in the loss cutting commitment in the community group buying biz.
Hana Tour Service: Major Shareholders Including IMM PE Likely to Sell Their Shares
- Hana Tour Service (039130 KS), the number one travel platform in Korea, announced that IMM PE (controlling shareholder of the company) is planning to sell its controlling stake.
- The total stake in the company that is up for sale could rise to 27.78%, including stakes held by Hana Tour founder Park Sang-hwan and co-founder Kwon Hee-seok.
- Potential buyers of the controlling stake in Hana Tour include Yanolja, Hotels.com, Booking.com, and Trip.com.
Preference for Deleveraging, Model Update
- Net debt improved by around €1 billion to c. €5.8 billion. Prioritising deleveraging and allocations to new venture investments over dividends seem to have a negative impact on valuation.
- Porsche SE is viewed as a holding company of Volkswagen Group, which should warrant a discount of 15%-25% on the stock, instead of the massive 44.6% discount to NAV.
- Assuming a typical company holding discount of 15-25% range, the current share price indicates Porsche SE is liable for the whole c. €6.5 billion legal claims.
Brunswick Corporation – Initiation Of Coverage – Does It Have A Sustainable Competitive Advantage? – Major Drivers
- This is our first report on recreation products manufacturer, Brunswick Corporation.
- Despite market headwinds, the company reports another successful year, claiming to have accomplished the second highest sales and adjusted earnings per share in its existence.
- In particular, Brunswick stresses the progress of its strategic initiatives, continued market share increases, cost control, the launch of new products, and an enhancement in operational efficiency.
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