In today’s briefing:
- Adoption of Digital Textbooks (Korea in 2025 & Japan in 2024)
- STMicroelectronics: Building Positions Ahead of the Next Upcycle
- IQIYI (IQ US): Taking a Break
- KTC – The Quiet
- NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance
- Carnival: Its Recovery Program Is Already Priced In
- Where Is TLT ETF Headed In 2023 And Why Inflation Won’t Be An Issue
- MasterCraft: Significantly Undervalued With Secular Growth Prospects
Adoption of Digital Textbooks (Korea in 2025 & Japan in 2024)
- The Korean Department of Education announced on 5 January that Korea will start to adopt customized digital school textbooks starting 2025.
- These 11 Korean stocks that are well positioned to capitalize on the digital textbooks are up on average 5.3% YTD, strongly outperforming KOSPI which is up 2.4% YTD.
- Japan is implementing the adoption of digital textbooks in elementary, junior, and high schools starting in 2024, ahead of Korea.
STMicroelectronics: Building Positions Ahead of the Next Upcycle
- New technologies such as 5G, 3D, Time of Flight and new materials such as silicon carbide and gallium nitride have paved the way for the Company’s long-term growth
- The semis market should reach trough in H1 2023; the low point in share prices is generally a few months before the semis market itself reaches the bottom
- Valuation is appealing at these levels. Discount to peers. Upside potential is over 50%
IQIYI (IQ US): Taking a Break
- Since we highlighted the compelling asymmetrical risk-return payoff of IQ last November, the stock has surged 200%, compared to 45% gain for KWEB which tracks China ADRs.
- We believe the outperformance was driven by more concrete progress in fundamental turnaround including multiple blockbuster drama released, increase in subscription fee and removal of debt overhang.
- With $7 billion market cap (on diluted basis), IQ already trades at 35 times 2023 earnings, pricing in fair degree of positive prospects. We advise investors to lock in profits.
KTC – The Quiet
- Quietly KTC has seen its bad loans and credit costs rise
- During last year it saw a final surge in credit costs in the last quarter
- Market share losses and regulatory risk may continue to pressure its 5x PB
NetEase(NTES.US) 4Q22 Preview: Enter a Period of Lukewarm Performance
- We estimate that NetEase’s 4Q22 revenue/non-GAAP net income will be in line/12% vs cons. Our 2023’s revenue/non-GAAP net income are in line/12% vs cons.
- In 4Q22, several of NetEase’s mid-tier games saw declines in ranking. We expect that NetEase will have a period of single digit growth in revenue.
- We still rate NetEase BUY and raise TP to US$ 87. But NetEase is not our top pick within China internet space.
Carnival: Its Recovery Program Is Already Priced In
- The company’s year-over-year revenue has surged by more than 1.98x.
- Carnival remains far adrift from its midpoint profit margins and has a sizeable corporate bond to service.
- A residual income valuation model places a fair value of $9.91 on the stock, placing it in fair value territory.
Where Is TLT ETF Headed In 2023 And Why Inflation Won’t Be An Issue
- The one-sided downward movement in both equity and bond prices in 2022 was both unusual and expected.
- The set-up for the next 12 to 18 months is favourable for bonds, both on the short and the long-end of the curve.
- The one- sided downward movement was both unexpected and expected.
MasterCraft: Significantly Undervalued With Secular Growth Prospects
- Are you interested in consumer cyclical and industrial stocks while being worried about the macroeconomic outlook? Well, if you are, then MasterCraft (NASDAQ:MCFT) should be on your watchlist.
- MasterCraft could part itself from the rest of the consumer cyclical segment during a trying macroeconomic environment.
- The company’s Veblen good status and low debt burden could protect one’s portfolio against macro headwinds.
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