In today’s briefing:
- Alibaba (9988 HK): 2Q23, Better Growth, Better Margin, 38% Upside
- Taste Gourmet: Cash Generation Par Excellence
- Grab: Almost No Price Reaction to a So-Called Strong Set of Results as There Is Much to Prove
- Appier (4180) | Why Has the Stock Outperformed?
- Taiwan Dual-Listings: TSMC Premium Reverts, Rare Hon Hai & UMC Discounts
- Shimamura Set for Another Record
- Anhui Conch Cement (914 HK): The Trough Looks to Be Behind Us
- Buy Meituan on Tencent’s Distribution Announcement of Meituan Shares
- Delta Taiwan Vs. Thailand Monitor: China Concerns Easing, EV in 2023 Favor Delta Taiwan
- China’s Top Rare Earth Mining Company and Top Refiner Fight Over Prices
Alibaba (9988 HK): 2Q23, Better Growth, Better Margin, 38% Upside
- Revenue began to grow in 2Q23 after the zero growth in 1Q23.
- The operating margin improved to 12.1% in 2Q23 versus 7.5% in 2Q22.
- We believe the stock has an upside of 38% and a price target of HK$108.
Taste Gourmet: Cash Generation Par Excellence
- Taste Gourmet Group (8371 HK) reported its H1 2023 result with profit of 32 mn HKD up 28% YoY, backed by subsidies due to restrictions earlier in the year.
- Net cash rose by 52 mn HKD (almost 12.4% of market capitalization) to 117 mn HKD HoH (28% of market cap). Nine mn HKD in subsidies are outstanding.
- The company declared 4.8 cents of dividend (9.1% annualized yield), in addition to repurchasing and canceling >2% of the shares outstanding recently.
Grab: Almost No Price Reaction to a So-Called Strong Set of Results as There Is Much to Prove
- Grab (GRAB US) reported 3Q2022 results yesterday. 3Q revenue increased 143% YoY to $382m (vs consensus $348m) while reported an adjusted EBITDA (negative) of $161m (vs consensus $202m).
- The highlight of 3Q2022 earnings was the break-even of deliveries business as well as improvement in Mobilities financials driven by reduction in incentives (as % of GMV).
- Though the company called it a strong set of results, Grab’s share price moved up by 0.64% could be an indication that the profitability may not be sustainable.
Appier (4180) | Why Has the Stock Outperformed?
- Appier has been by far the best performing small-cap growth stock in Japan this year
- The company is gaining market share overseas, massively augmenting the Total Addressable Market
- It’s high growth, rising margins, and growing TAM makes this a top stock for SaaS investors
Taiwan Dual-Listings: TSMC Premium Reverts, Rare Hon Hai & UMC Discounts
- TSMC ADR’s premium has reverted after going as high as 10.9%.
- Hon Hai’s London-listed GDRs are trading at a historically rare discount.
- UMC ADRs also look interesting relative to the Taiwan shares given their rare discount.
Shimamura Set for Another Record
- Like Workman Co Ltd (7564 JP) and Honeys Holdings Co., Ltd. (2792 JP), Shimamura (8227 JP) has been a beneficiary of both household budget worries during Covid and inflation concerns since.
- The apparel retailer has also worked hard to develop better cost performance ranges and more exciting marketing through collaborations with influencers, helping regain footfall levels.
- Shimamura has clearly regained momentum and looks set to continue to benefit from consumer fears over inflation and ongoing shifts in spending towards low-price retailers.
Anhui Conch Cement (914 HK): The Trough Looks to Be Behind Us
- 3Q22 is probably the worst quarter for Anhui Conch Cement (914 HK) in this cycle. Demand has picked up sequentially, with 4Q22 average cement price up 7% QoQ.
- It expects the spending of special purpose bond proceeds and possibly push forward of 2023 quotas to benefit infrastructure demand. The stabilisation of property market also helps.
- Cost management efforts will soon pay off, providing room for recovery in margin. Solid financial position with net cash equals to 34.5% of share price is an added strength.
Buy Meituan on Tencent’s Distribution Announcement of Meituan Shares
- Tencent announced to transfer 958 million shares of Meituan as a special dividend
- This distribution is similar to the previous JD distribution in Dec 2021
- The transfer of Meituan shares can provide potential two entry points of the stock.
Delta Taiwan Vs. Thailand Monitor: China Concerns Easing, EV in 2023 Favor Delta Taiwan
- Delta Taiwan has outperformed Delta Thailand, but remains at a historically low relative valuation.
- China concerns, which may have impacted Delta Taiwan on a relative basis, appear to be incrementally improving.
- We continue to favor Delta Taiwan vs. Delta Thailand, historical data implies Delta Taiwan is more likely to outperform Delta Thailand than vice-versa.
China’s Top Rare Earth Mining Company and Top Refiner Fight Over Prices
- Inner Mongolia Baotou Steel Union Co. Ltd., the world’s largest rare earth mining company, is still pressing for a significant price increase from its only customer even though the buyer’s shareholders rejected two previous proposals.
- Higher prices for Baotou Steel Union’s output of the key materials for green technologies could lead to a broader price increase for the minerals.
- China has the world’s largest deposits of the 17 closely related rare earth metals.
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