Daily Brief Equity Bottom-Up: Alibaba: Our Take on 2QFY24 and more

• While Alibaba (ADR) (BABA US)‘s 2Q24 revenue and OP closely matched consensus expectations, the company experienced a significant sell-off, resulting in shares plummeting by over 9% yesterday.
• Yesterday’s weak performance may be linked to a 10% pre-earnings price surge, anticipating robust results. The postponement of the Cloud Spin-off could also have contributed to the decline.
• We maintain a bearish stance on Alibaba Group Holding (9988 HK) as we identify other fundamental and structural downside catalysts might become increasingly important and price-sensitive as time progresses.

• Shakey’s Pizza (PIZZA PM) reported a 28% YoY/26% YoY sales/net profit increase for Q3 FY23 due to a sales softening in September. 
• Sales are expected to strengthen into Q4 as there is a seasonal uplift, although the QoQ increase is not expected to be in line with previous years.
• The stock trades at 12.9x/9.9x PE FY23e/24e and will continue to see double-digit CAGR sales momentum.  The management retained its >30% YoY growth target for FY23e. 

• Based in Hong Kong, Dream International is one of the largest toy manufacturers in the world. It specializes on plush stuffed toys and plastic figures. 
• Despite the global toys markets going into destocking cycle, the company has generated significant growth in operating profit in the past year driven by strong demand for plush stuffed toys.
• If we assume a moderate 20% YoY increase in dividends in 2023, this would imply DPS of HKD 0.48 and this would suggest a dividend yield of 12.7% current prices. 

• Rakuten Bank shares have experienced something of a re-rating, but we believe it has further to go, with attractive fundamentals and relatively undemanding valuations compared to its digital peers
• Rakuten Bank is well positioned to benefit from the tailwind of the steepening yield curve in Japan, with its low LDR, growing loan book and healthy capital ratio
• It is leveraging off the Rakuten Group eco-system; not only is it growing its client base, but also nearly a third of clients use Rakuten Bank as their primary bank

• Huawei Technologies Co. Ltd. on Thursday began taking preorders for the first electric vehicle (EV) it co-developed with auto partner Chery Automobile Co. Ltd., upping the ante in its push into China’s highly competitive EV market.
• Equipped with a digital cockpit powered by Huawei’s HarmonyOS 4.0 and an advanced assisted driving system, the Luxeed S7 is the first electric sedan marketed under Huawei’s Smart Selection business model. The previous releases with other auto partners were SUVs.
• The Luxeed S7 is available for pre-order in four versions with a starting price of 258,000 yuan ($35,417), according to Huawei’s Vmall website.

• In 1H23, Hygeia Healthcare Group (6078 HK) reported revenue growth of 15% YoY to RMB1,760 million, mainly driven by a 16% YoY growth in hospital business.
• Hygeia’s gross profit margin contracted 20bps YoY to 32.4%. Riding on 5.6x increase in government grant, operating profit jumped 33% YoY to RMB420M, leading to 320bps margin expansion to 23.9%.
• In July, Hygeia acquired Chang’an Hospital for RMB1,660 million. The acquisition will provide Hygeia with greater room to expand its business in the northwest region of the PRC.  

Throughout Q323, Immix shared encouraging updates for the clinical development of lead CAR-T asset NXC-201, including the announcement of orphan drug designation (ODD) in both multiple myeloma (MM) and amyloid light chain amyloidosis (ALA). In October 2023, the company shared positive efficacy and safety updates and we believe the data so far could support NXC-201 as the first outpatient CAR-T therapy, subject to regulatory approval, addressing the myriad of challenges associated with current CAR-Ts. In the quarter, Immix also shared positive interim data for its lead TSTx asset, IMX-110, and we anticipate further updates across Q423 to FY24. Net cash at the end of the period stood at $19.6m, which we estimate should provide an operating cash runway into Q424. As we adjust for our expense estimates based on year-to-date results, update net cash and roll our model forward, our valuation for Immix adjusts to $86.6m or $4.0 per share (from $90.7m or $4.2/share previously).

• GEVO completed the previously announced expansion of renewable natural gas to 400,000 MMBtu from 355,000 MMBtu.
• On the Verity front, an agreement was signed with a third ethanol producer customer in the US Southwest, taking total planned volume of ethanol tracked to more than 300 million gallons per year or 2% of the US ethanol market.
• Additionally, GEVO also signed, finalized, and executed the previously announced US Department of Agriculture (USDA) grant of up to $30 million for the Climate-Smart Farm-to-Flight Program.

• Sam Altman – one of OpenAI’s founders and its CEO – has been ousted from the firm citing lack of consistent communication with the board. 
• OpenAI has garnered significant spotlight around Gen AI. Surely it is generating revenues at a rapid clip but far from making profits. What will this leadership transition mean?
• Sam’s ousting was totally not expected. On 6th November, OpenAI held its first ever developer conference which was led by him. Earlier this week, he spoke at APEC conference. 

Foresight Solar Fund (FSFL) achieved record cash generation of £87.8m from its underlying assets to 30 September 2023, driven by favourable fixed prices, despite production being below budget. As a result, FSFL paid down £10m of its revolving credit facility (RCF) during the period. After the Q3 period, FSFL sold 50% of its 99MW Lorca portfolio in Spain for €26.9m, at a 21% premium to its Q3 holding value. The proceeds from this transaction will be used to further reduce the RCF. Global revenues are 85% contracted for 2024, ensuring forecast net dividend cover of 1.5x until at least 2025. FSFL remains on target to pay its full year dividend.