In today’s briefing:
- Pinduoduo (PDD): High-Performing Financials, But Low-Profile Management, 23% Downside
- Shiseido: Outperforms With Relaxation Of China’s COVID Restrictions, Long Term We Are a Bit Cautious
- Weilong Delicious IPO: Peer Comparison and Valuation
- CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All
- DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News
- Failed Breakouts, Banks Crumbling — Get Defensive; Buy Ideas Within Consumer Staples
- JD.com Inc ADR: Initiation of Coverage – Business Strategy & Other Drivers
Pinduoduo (PDD): High-Performing Financials, But Low-Profile Management, 23% Downside
- The revenue growth accelerated and the operating margin improved in 3Q22.
- However, management said the performance may not continue and profit is not their target.
- We believe the stock has a downside of 23% for year end 2023.
Shiseido: Outperforms With Relaxation Of China’s COVID Restrictions, Long Term We Are a Bit Cautious
- The indication that China is prepared to scrap its strict Zero-COVID policy has gotten Shiseido Company (4911 JP) going again after an earnings beat in Q3 saw shares climb almost 20%.
- Given that the shares have been range bound throughout the COVID crisis, we think Shiseido could reach near the upper limit of the COVID-range in the near-term to around ¥8,000.
- Nevertheless, we would approach this trade with caution and only with a short time horizon as we see a lot of downside risks in the medium to long term.
Weilong Delicious IPO: Peer Comparison and Valuation
- Weilong Delicious has downsized its IPO to raise around HK$942m (US$121.3m). The company also has the flexibility to set its IPO price at a 10% discount to the bottom.
- The company’s top line growth has slowed down in 1H2022 and margins have been under pressure with increased S&M spending to further penetrate into online channels.
- Weilong’s IPO is priced at a significant premium to domestic as well as multinational peers which do not justify the growth prospects.
CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All
- In the near-term, China’s relaxation of COVID-combating measures will boost consumption and demand for cross-province travel. China Tourism Group Duty Free Corp Ltd (1880 HK) is a beneficiary.
- Hotel bookings in Sanya have surged over the last two days, reflecting positive demand reaction. However, China’s full border opening likely in 2023 is a challenge to CDFC.
- Low base in FY22 will drive 45% earnings growth for FY23. However, valuations are not cheap at 33.8x PER for FY23, a significant premium to consumption sector and international peers.
DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News
- The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).
- Porsche AG (P911 GR)‘s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices.
- In this insight, we take a closer look at our expectations for index flows and potential trading ideas.
Failed Breakouts, Banks Crumbling — Get Defensive; Buy Ideas Within Consumer Staples
- Charts have not changed much from the prior week, with there actually being some deterioration within banks (KRE, KBE).
- The $SPX has been unable to sustain a breakout above its 200-day MA/YTD downtrend, the $IWM remains below $190 resistance, and the DJIA could not sustain a breakout above 34,280
- As long as these indexes are below these levels, we continue to see this as a good time to shift to more defensive areas and/or take profits.
JD.com Inc ADR: Initiation of Coverage – Business Strategy & Other Drivers
- This is our first report on Chinese e-commerce giant, JD.com.
- Although 2022 has been a difficult year, JD achieved a number of encouraging milestones and improved metrics in its financial and business operations, especially during the third quarter.
- We initiate coverage on the stock of JD.com Inc. with a ‘Hold’ rating.
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