In today’s briefing:
- China Catering Sector: In Search of Alpha
- India Channel Insight #46 | Bata India, Campus Activewear
- TMT Left for Dead Long Ideas: Adobe
- TMT Left for Dead Long Ideas: Match
- Netflix AVOD Not Chill
- ClouDr Group (9955.HK) – Positive Profit Alert for 2022, Thoughts on Business Model and the Concerns
- Korea Biotech & Healthcare: A Pair Trade Between Hanmi Science and Hanmi Pharm
China Catering Sector: In Search of Alpha
- Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
- Our proprietary store expansion framework suggests divergent growth outlook for major players – stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
- Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.
India Channel Insight #46 | Bata India, Campus Activewear
- Consumer sentiment is soft, but competition is limited for both Bata India Ltd (BATA IN) and Campus Activewear (CAMPUS IN)
- Bata enjoys good relationships with its distributors and franchisees, traction for offline sales channels is strong.
- Campus is in an aggressive expansion mode, with leadership in the sports shoe segment driving sales.
TMT Left for Dead Long Ideas: Adobe
- Adobe is down 42% in 2022, and down 22% relative to the S&P.
- Valuation has been cut in half, and investors have voiced concerns and skepticism about its (incredibly) expensive acquisition of Figma in September.
- Adobe remains better positioned than most large cap software peers as it maintained its guidance from October Analyst Day, highlighting the secular tide behind digital transformation efforts remains strong.
TMT Left for Dead Long Ideas: Match
- Match is down 70% in 2022, and down 50% relative to the S&P.
- Despite impressive new CEO and a self help story, shares have continued to underperform rival Bumble and the market by wide margin on macro concerns.
- 13x Forward EBITDA for a company forecast to grow EBITDA at a 16% CAGR through 2025 (we think closer to 20%), has 35% EBITDA margins and $1B in annual FCF
Netflix AVOD Not Chill
- Multiple negative data points have come out reflecting limited initial uptake for Netflix’s ad-based tier.
- (We think) Netflix lack of AVOD uptake is due to it being fully saturated in its major markets wheras competing services starting from scratch have higher AVOD uptake.
- Lack of incremental subs from AVOD points towards a weaker than expected 4Q22 and downside to guidance…not good for a stock that has ripped since 2Q22 earnings.
ClouDr Group (9955.HK) – Positive Profit Alert for 2022, Thoughts on Business Model and the Concerns
- ClouDr released positive profit alert for 2022. We think ClouDr is in a virtuous circle based on its solid business model. It’s a matter of time before ClouDr achieves breakeven.
- As the number of hospitals/pharmacies newly deploying SaaS modules increases, and the existing B-end users continue to receive new patients,ClouDr is able to absorb new C-end users at low cost.
- When more powerful competitors come in and carve up B-end market, ClouDr’s long-term prospects may be uncertain, but its valuation shouldn’t be much lower than Ping An Good Doctor.
Korea Biotech & Healthcare: A Pair Trade Between Hanmi Science and Hanmi Pharm
- In this insight, we discuss a pair trade between Hanmi Science (long) and Hanmi Pharm (short). There are three major reasons we like this pair trade.
- First, the gap between these two stocks have widened too much in the past year. Second, Hanmi Science may pay higher cash dividends due to inheritance tax issue.
- Third, Hanmi Pharm’s valuations remain lofty and Hanmi Science’s valuation discount relative to its historical valuation has become more compelling.
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