In today’s briefing:
- Ant Buyback, a Painful Reality for Its Investors or Not, Depending When You Enter
- Seven & I Merger of FMCG Arms Signals Focus on Food – And Its All Good News
- Fast Retailing (9983) | Exceptional Quarter
- Memory Monitor: Nanya Management Provides More Color on DRAM Cycle Bottom; Elan a Long W/ More Edge
- Fast Retailing: Strong Performance in China & Korea, But Valuation Could Weigh on Price Performance
- JAL Aims for ¥12 Billion from New Online Mall
- [Baidu, Inc. (BIDU US, BUY, TP US$162) TP Change]: Cut TP Due to Weaker Outlook in Ads and Cloud
- Fenbi (2469 HK): Strong Positive Profit Alert for 1H2023
- Short Note: HK RE – Supportive Mortgage Policy, Resi Developers Are Trading at Trough Valuation
- Levi Strauss & Co.: Driving Growth with DTC
Ant Buyback, a Painful Reality for Its Investors or Not, Depending When You Enter
- Ant’s buyback valuation of $79bn is in line with market expectation
- While 40% loss is deep for the latest round investors, earlier investors are still in the money
- Alibaba is expected to record a profit of $18bn if it decided to join the buyback
Seven & I Merger of FMCG Arms Signals Focus on Food – And Its All Good News
- It will take a couple of years to see financial improvement but recent reforms suggest criticism of Seven & I’s inability to change may be increasingly unfair.
- The latest in-group merger further demonstrates Seven & I’s desire to refocus on food and FMCG.It also suggests that Seven & I may double down on divestment from non-food retailing.
- The share price may fluctuate but the outlook for domestic fundamentals are better than they have been for years.
Fast Retailing (9983) | Exceptional Quarter
- Another blow out quarter for Fast Retailing – beat and raise
- Fears (well, mine) of a miss in China were unfounded
- Still, Q3 results do nothing to change the view that this is one expensive stock
Memory Monitor: Nanya Management Provides More Color on DRAM Cycle Bottom; Elan a Long W/ More Edge
- Nanya Tech management extrapolated on their recent results call that they believe 2Q23 was the bottom for the DRAM cycle.
- We’ve updated our Nanya Tech financial model and estimates; we still see a short-term trade back to Nanya Tech’s mid-June high. However, Elan Microelectronics is a Long with more edge.
- While Nanya’s comments indicated a more delayed recovery for Memory than Micron’s recent guidance, overall the industry for Micron, SK Hynix, and Samsung appears to be turning a corner.
Fast Retailing: Strong Performance in China & Korea, But Valuation Could Weigh on Price Performance
- Fast Retailing (9983 JP) announced its 3QFY23 results today, surpassing the consensus OP estimate by approximately 10%.
- Notably, there was strong revenue growth for Uniqlo, including in recently underperforming markets such as mainland China and South Korea.
- Despite the strong set of results, it appears that Fast Retailing is overvalued as the stock is currently trading at a valuation of over 20.0x its medium-term FY27 OP target.
JAL Aims for ¥12 Billion from New Online Mall
- Shopping may be a tiny fraction of Japan Airlines (9201 JP) business but every little helps.
- JAL has long offered a popular mail order catalogue selling premium products but has now converted its catalogues into an online mall.
- This means it can offer many more and new types of merchant and product, and create more connection with its customers.
[Baidu, Inc. (BIDU US, BUY, TP US$162) TP Change]: Cut TP Due to Weaker Outlook in Ads and Cloud
- We estimate Baidu’s ads revenue growth in 2Q23 will be 10.8% YoY. We largely cut our forecast of 3Q23’s ads revenue growth from 14.7% to 7.1%.
- We lower Baidu’s core other revenue growth in 2Q23 from 18.0% to 9.0% YoY. Baidu’s smart transportation AI cloud business has been affected by the contraction in local government expenses.
- We expect Baidu’s 2Q23’s rev./non-GAAP net income to be (2.3%)/ (1.9%) vs cons, also cut the TP to $162, which implies 16.5X PE in 2023.
Fenbi (2469 HK): Strong Positive Profit Alert for 1H2023
- Fenbi Ltd (2469 HK) announced after market today a very strong positive profit alert for 1H2023, with adjusted net profit up not less than 182% yoy.
- As a reminder, share price was heavily sold off in June due to pre-IPO shareholders selling, as well as weak market sentiment, niche sector, and new stock (under researched).
- Even with the recent bounce back in share price with heavy volume, Fenbi is still very undervalued.
Short Note: HK RE – Supportive Mortgage Policy, Resi Developers Are Trading at Trough Valuation
- On July 7, HKMA announced measures to ease property based lending. The major changes involve relaxation of LTVs, according to property values
- We see these policies target the up-graders and will support the residential market. Housing price has been on a decline trend since early 2022
- Residential developers are trading at attractive valuation. In particular, we see a lot of upside for 17 HK NWD and 101 HK HLP
Levi Strauss & Co.: Driving Growth with DTC
- Levi Strauss managed to exceed analyst expectations in terms of revenue as well as earnings.
- Starting with Levi’s brand, they increased market share this quarter, establishing share leadership in the United States among the important 18- to 30-year-old target consumer group, and they continue to increase share in women’s denim bottoms.
- The Levi’s brand increased by 9% in the quarter, with their men’s bottoms business reaching a significant level in Q1 and women’s bottoms generating its highest revenue of any quarter.
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