In today’s briefing:
- Denso – Thoughts On The Cross-Holdings Sell-Down
- BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China
- Altman Allure at OpenAI: Where the Hunter Gets Hunted
- Pinduoduo (PDD US): TEMU at Center Stage
- 2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge
- Memory Monitor: Micron Expects 2025E to Be Best-Ever for Memory; But Valuations Have Run Up a Lot
- TSMC: Defensive AI Play in Long Upward Re-Rating Trend?
- [Futu Holdings(FUTU US, SELL, TP US$46)Rating Change]: Run Out of Growth Momentum, Downgrade to SELL
- OCBC – Market Capitalization Rising, Unlike Peers | Insurance Is Lack Luster | Credit Costs Seem Low
- 2024 High Conviction – CyberAgent: Worst Seems to Be Over
Denso – Thoughts On The Cross-Holdings Sell-Down
- The trend of governance reform in Japan continues with Toyota, Toyota Industries and Aisin selling shares of Denso.
- Denso is buffering some of the flow impact by repurchasing roughly half of the shares to be sold.
- While the size of these moves is relatively large we believe their impact could be disproportionately large for the market as a whole.
BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China
- We recently visited a BYD (1211 HK) showroom in Ahmedabad, with the objective of understanding the preference for Electric Vehicles in India.
- Pitched as the “Tata” of China, BYD offers 2 models ATTO 3 and e6 in India.
- Considering Tesla Motors (TSLA US) India interest, and Mahindra & Mahindra (MM IN) big bet on EV, BYD’s current operations in India seem to be minuscule and may find little success.
Altman Allure at OpenAI: Where the Hunter Gets Hunted
- Sam returned as the CEO of OpenAI days after his surprise removal. Its board was overhauled with new members – Larry Summers and Bret Taylor.
- The surprise removal of Sam was driven by philosophical differences over AI safety. Fears of employee exodus to Microsoft is the primary driver of his return to OpenAI leadership.
- Recent events have solidified Microsoft’s partnership with OpenAI and Sam. Outcome from fallout suggests Microsoft will have a larger role in shaping OpenAI’s future.
Pinduoduo (PDD US): TEMU at Center Stage
- Stock rally on strong revenue growth suggests TEMU will be at center stage of the investment thesis for PDD down the road.
- Besides soaring GMV, TEMU achieved blowout performance likely due to much higher-than-expected take-rate and disciplined marketing, resulting in narrower-than-expected losses.
- We expect the company’s growth will even accelerate in 4Q23 and generate adjusted net profit of US$12 bn for FY24, with a target market cap of US$240 bn (20xPE).
2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge
- The stock has been declining for about three years and plummeted after the 3Q23 results.
- However, we believe MT and its corporate clients have been recovering and MT’s profits will rise by 129% in 2024.
- We set an upside of 132% and a price target of HK$209 for 2024. Buy.
Memory Monitor: Micron Expects 2025E to Be Best-Ever for Memory; But Valuations Have Run Up a Lot
- Memory names have rallied strongly, with Nanya Tech outperforming since the start of November.
- DRAM bottomed and NAND flash prices have jumped. Micron says that 2025E could be a record year for the Memory industry.
- High valuations make near-term upside for Memory names uncertain. For Long/Shorts one can consider Long Micron vs. Short SK Hynix or Long Micron vs. Short Nanya Tech.
TSMC: Defensive AI Play in Long Upward Re-Rating Trend?
- We believe TSMC represents defensive exposure to AI for investors concerned that many other AI-related stocks’ valuations may be too high.
- While one may think TSMC seems too obvious as a play, we note that the stock is up only 4.5% over the last six months.
- We view TSMC as trading at an inexpensive valuation; even a cheap valuation should our hypothesis that the stock is structurally re-rating upwards turn out to be true.
[Futu Holdings(FUTU US, SELL, TP US$46)Rating Change]: Run Out of Growth Momentum, Downgrade to SELL
- We think FUTU is stepping into a stagnant phase in 2024. Japan is not a game changer.
- Client asset inflow from overseas is not meaningful, and growth from mainland is frozen by regulation.
- We downgrade the stock into SELL rating and cut TP to US$46/ADS, mainly due to slow progress in overseas expansion and difficulty in monetization.
OCBC – Market Capitalization Rising, Unlike Peers | Insurance Is Lack Luster | Credit Costs Seem Low
- OCBC has seen its mkt cap RISE by ~4% YTD. This is stark contrast to the ~6.5% lower mkt cap at DBS and around 10% lower mkt cap at UOB.
- Net interest income had been strong, and this likely slows, a lot. Other areas are far from strong. Credit costs are up 103% YoY at 9M23.
- Profit from insurance is down 12% YoY and down 16% QoQ, in 3Q23 (Great Eastern). Profit from associates is -1% YoY in the quarter and only +1% YoY
2024 High Conviction – CyberAgent: Worst Seems to Be Over
- CyberAgent Inc (4751 JP) (CA) is a Japan-based media and entertainment company offering media, internet advertising, smart games and investment development businesses in Japan.
- The gaming business of the company has collapsed with the slowdown of hit title UMA MUSUME while titles released after UMA MUSUME have failed to perform satisfactorily.
- Profitability of Internet advertising and media are expected recover and seems that worst is over for the games business as several titles are slated for release in the near future.
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