In today’s briefing:
- Meituan (3690 HK): Out of the Woods and Light a Fire
- Alibaba: Our Take on 4QFY24
- Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – May 2024
- Lock & Lock: Second Tender Offer by Affinity Equity Partners
- Alibaba (BABA US): Taobao/Tmall Is Back
- Vipshop: Net Cash at 40% of Market Cap, Now Paying Dividends and Buying Back Shares
- What Happens to the Effectiveness of TSE Requests when They Become Effort Obligations?
- How an Indian SME Used Circular Transaction Tactics to Inflate Financial Performance?
- Booking Holdings Inc.: Expanding Beyond Traditional Accommodations & How AI Is Helping Them Change The Game! – Major Drivers
Meituan (3690 HK): Out of the Woods and Light a Fire
- We notice a pickup in consumer acceptance of instrashopping, as result of COVID-cultivated behavior. We notice similar business model worked outside of China (Coupang) for densely populated urban upper-middle-class customers;
- Meituan’s launch of membership is a wise step towards strengthening user stickiness and emphasizing transaction soundness over impulsive buying. Meituan’s portfolio in food, dining, hotel & travel offer unparalleled value;
- We see Meituan’s success in Hong Kong honed a replicable business model targeting single and low priced segment. Consolation on a global scale now seems a possibility.
Alibaba: Our Take on 4QFY24
- Alibaba Group Holding (BABA US)‘s FQ4 announcement portrays a resilient comeback to growth, suggesting the past four years’ challenges barely impacted its dominance in Chinese e-commerce.
- However, a closer look beyond the surface of Alibaba Group Holding (9988 HK)‘s FQ4 results announcement reveals that little has actually changed in recent months.
- Taobao and Tmall face challenges in a tough, stagnant market; AIDC’s growth largely covers for other Alibaba units’ failings, while AliExpress’s expansion cuts into margins.
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
- If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
- We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – May 2024
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
- After a massive recent correction for HK stocks, we are more constructive on the names, and yields there look very attractive.
Lock & Lock: Second Tender Offer by Affinity Equity Partners
- On 15 May, it was reported in the local media that Affinity Equity Partners (AEP) is expected to launch a second tender offer for Lock & Lock (115390 KS).
- The tender offer price in this second tender offer is 8,750 won (same as the first tender offer). The second tender offer will last from 16 May to 5 June.
- In the first tender offer, only about half of the target was reached. There was a strong backlash from investors due to low tender offer price.
Alibaba (BABA US): Taobao/Tmall Is Back
- Alibaba reported in-line revenue but disappointed adjusted net income for 4QFY24.
- Yet a closer look shows strong core Taobao/Tmall performance was offset by higher-than-expected losses incurred by peripheral businesses.
- We remain convinced BABA is on track to turn around and an earnings upgrade cycle is one or two quarters away. We are buyer at this price.
Vipshop: Net Cash at 40% of Market Cap, Now Paying Dividends and Buying Back Shares
- The slowdown in Chinese retail sales of apparel seems to have been factored into Vipshop Holdings (VIPS US) 1Q 2024 revenue growth expectations whilst bottom-line is supported by margin expansion.
- With net cash at ~40% of its market cap, the share price should be supported by the ongoing share repurchase program and its inaugural annual dividend policy.
- Its 6.6x NTM PE ratio (~4x ex-cash) seems extremely attractive for a highly cash-generative business set to (conservatively) grow earnings at high-single-digits whilst buying back shares and paying dividends.
What Happens to the Effectiveness of TSE Requests when They Become Effort Obligations?
- Code of Corporate Conduct lacks explanation of the role to be played by a listed company and the background. Consequently, there’re cases where the same companies have repeatedly committed misconduct.
- For companies that are good at pretending that they are trying, without any substance to their corporate governance, making the provisions of Corporate Governance Code mandatory effort won’t be effective.
- TSE’s request seems to be an effort obligation. It is good that the substance of the company’s improvement plan, which only made an effort to improve, will be improved.
How an Indian SME Used Circular Transaction Tactics to Inflate Financial Performance?
- SEBI observed White Organics and Add Shop Retail used circular transaction method to inflate financial performance of respective companies
- Promoter sell their holdings on the back of this inflated financial performance
- The forensic analysis delves into the modus operandi of these frauds
Booking Holdings Inc.: Expanding Beyond Traditional Accommodations & How AI Is Helping Them Change The Game! – Major Drivers
- Booking Holdings has made a robust start to 2024 by posting strong first quarter results.
- The company revealed that travelers booked nearly 300 million room nights across its platforms in Q1, exceeding its expectations and showing growth of 9% YoY. Moreover, revenue for Q1 stood at $4.4 billion, reflecting a growth of 17%, while adjusted EBITDA was approximately $900 million, climbing Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
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