In today’s briefing:
- Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
- Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
- Pinduoduo (PDD): 2Q23, Revenue Significantly Higher Than Consensus, Buy
- Oriental Land: Google Searches For Tokyo Disneyland Dips Double Digits in July & August 2023
- Chongqing Hongjiu Fruit Lockup Expiry – Price Has Come Back Down to Earth but Expect More Selling
- Ultrajaya Milk (ULTJ IJ) – Back on Track with Dairy and Tea
- Wuliangye (000858 CH): Classic Value Trap
- Genting Berhad: 2Q23 Results Show Early Positive Ramping in Early Post Covid Era
- YERB.U: Strong Q2 Financials; Increasing Target Price
Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
- Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
- What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
- Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
- The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
- There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
- Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.
Pinduoduo (PDD): 2Q23, Revenue Significantly Higher Than Consensus, Buy
- PDD’s revenue increased by 66% YoY to RMB52 bn, significantly higher than the market consensus RMB43 bn.
- The operating margin declined to 24% in 2Q23 from 28% in 2Q22 due to aggressive expansion outside China.
- We believe the stock still has an upside of 47% for year end 2023. Buy.
Oriental Land: Google Searches For Tokyo Disneyland Dips Double Digits in July & August 2023
- During the initial months of 2QFY24, both Tokyo Disneyland and Tokyo DisneySea experienced a significant double-digit QoQ drop in Google search interest.
- Using Google Search trends data for the first two months of 2QFY24, we anticipate a QoQ decline of about 17% in Oriental Land’s Theme Parks revenue, dropping below ¥100bn.
- 2QFY24 consensus OP is 2.5x above the company’s guidance, and both short and medium term consensus revenue and OP targets for Oriental Land (4661 JP) appear blatantly unachievable.
Chongqing Hongjiu Fruit Lockup Expiry – Price Has Come Back Down to Earth but Expect More Selling
- Chongqing Hongjiu Fruit (6689 HK) was listed on 5th Sep 2022, where it raised around US$71m in its Hong Kong IPO. Its one-year lockup will expire on 4th Sep 2023.
- Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. As per CIC, it was the largest fruit distributor by revenue in 2022.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Ultrajaya Milk (ULTJ IJ) – Back on Track with Dairy and Tea
- Ultrajaya Milk (ULTJ IJ) remains a core proxy for the under-penetration of dairy products in Indonesia, which stands at less than half of Thailand in terms of per capita consumption.
- Ultrajaya has seen a strong rebound in sales this year for its UHT milk sales but material pressure persisted in 1H2023 but will abate in 2H2023 improving margins.
- Its carton tea products are seeing a strong rebound and a new distribution warehouse in Cikarang will improve distribution. Ultrajaya‘s growth trajectory is resuming and valuations are attractive.
Wuliangye (000858 CH): Classic Value Trap
- Wuliangye Yibin Co Ltd A (000858 CH), the second largest Chinese liquor company in China, trades at one of the lowest PE multiples in the space.
- Kweichow Moutai (600519 CH), the largest Chinese liquor company trades at 26x 2024 expected earnings, and most other listed Chinese liquor names trade above 20x 2024 expected earnings.
- Upon closer look, Wuliangye is actually a classic case of value trap – slow growth with no change or slowly deteriorating PE multiples.
Genting Berhad: 2Q23 Results Show Early Positive Ramping in Early Post Covid Era
- The company is the most geographically diverse operator in the global gaming space. It has been something of a post-covid laggard relative to sector peers.
- Return to modern profit largely comes from Malaysia Highlands flagship.
- Big unnoticed catalyst could be its key position in the bidding wars for three new licenses to be awarded in metro New York. Genting active there since 2011.
YERB.U: Strong Q2 Financials; Increasing Target Price
- Yerbaé reported strong Q2 financials that were in line with our estimates on sales ($4.1M) and beat our expectations for gross margins (56%).
- Yesterday, Yerbaé Brands Corp. (YERB.U:TSXV, YERBF:OTC) reported Q2/23 financial results that were in line with our estimates for net revenue and beat our estimates for gross margin.
- Gross revenue came in at $4.3M vs. our estimate of $4.5M with the promotional rate at 4% compared to our estimate of 7%.
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