In today’s briefing:
- Grab (GRAB US) – Moving Towards Steady State
- [Alibaba (BABA US) Target Price Change]: Cut TP for Intensified Competition in ECommerce
- Raffles Medical: Consensus Too Conservative and Warrants an Upgrade
- Softbank (9984 JP): Focus on Vision Fund II (SVF2) And Masa’s Massive IOUs
- Kalbe Farma (KLBF IJ) – More Innovation and Digitalization in 2023
- Pinduoduo: Entering the Big League
- [Baidu (BIDU US) Target Price Change]: Margin Improvement Offsets R&D Increase
- Edelweiss: Wealth Management Arm Demerger Is Nearing
- Raffles Medical (RFMD SP): 2022 Result Tops Expectation; Medical Tourism Resumption to Drive Growth
- Chinese Regulators Question Auto Supplier Over Next-Generation Battery Claims
Grab (GRAB US) – Moving Towards Steady State
- Grab Holdings (GRAB US) 4Q2022 numbers late last week made encouraging reading with revenues exceeding expectations significantly despite slow GMV growth in the quarter, as it maintained regional category leadership.
- The company saw continued improvement in segment-adjusted EBITDA margins in 4Q2022 versus 3Q2022 for both mobility and deliveries, with the latter making significant progress towards steady-state margins.
- Grab‘s relatively high regional cost remains a drag but should stabilise here and outside this, it looks to be firmly on track to accelerate profitably.
[Alibaba (BABA US) Target Price Change]: Cut TP for Intensified Competition in ECommerce
- BABA reported F3Q23 (C4Q22) total revenue largely in line with our est. and cons. Non-GAAP net profit beat our est. and cons. by 5% and 13% YoY.
- Taobao will face pricing pressure against JD and PDD. We expect BABA to focus on user content, which leads to improvement in app time spent and advertising.
- We cut TP from US$130 to US$110 to reflect intensified competition in eCommerce. Maintain BUY rating due to recovery in CMR and international retail, and rebound in cloud business.
Raffles Medical: Consensus Too Conservative and Warrants an Upgrade
- Raffles Medical reported 2H2022 and full-year 2022 results today. Full-year revenue increased 5.9% YoY to SG$766.5m (vs consensus $774.7m) and OP increased 61.4% YoY to $195.8m (vs consensus $170m).
- Despite Covid-19 related revenues tapering off and China under lockdown during 2H2022, Raffles’ earnings saw a boost from Singapore reopening borders and recovery in foreign patient volume.
- Consensus forecasts are too conservative and does not reflect the recovery in demand for Raffles’ healthcare services in Singapore and China (post reversing of zero-Covid policy).
Softbank (9984 JP): Focus on Vision Fund II (SVF2) And Masa’s Massive IOUs
- Vision Fund II private companies accounted for 87% of the fund’s 3QFY22 fair value; versus investment cost, private companies’ downward valuation revisions have been more modest than the public companies
- Vision Fund II accounted for 22% of the group’s 3QFY22 equity value of holdings, so any further downward valuation revisions would hurt group NAV and add to Masa’s Softbank liabilities
- Softbank currently trades at a 42% discount to its stated NAV; we believe that the stated NAV is likely to be overstated, with private company valuations needing further scrutiny
Kalbe Farma (KLBF IJ) – More Innovation and Digitalization in 2023
- Kalbe Farma (KLBF IJ) revealed an indicative set of 2022 numbers, which fell slightly short of estimates due to product mix changes and inflationary pressure from higher input costs.
- Management guidance for 2023 looks more positive and implies stable margins in the coming year, with strong momentum across prescription drugs, consumer health, nutritionals, and logistics and less inflationary pressure.
- Kalbe Farma looks interesting with more positive expectations for earnings growth in 2023, coupled with valuations below its 5-year average forward PER.
Pinduoduo: Entering the Big League
- Investor interest in Pinduoduo (PDD US) has surged, hitting record-high levels of fund ownership this month.
- Over the period from the recent lows in March 2022 to today, Pinduoduo’s +20% increase in the percentage of funds invested was the highest across all stocks in China.
- New positions from JSS All China (+7.49%) and Tamaq China Champions (+4.99%) were complemented by increased weights from China Fund (+5.35%) and GAM China Evolution (+5.26%).
[Baidu (BIDU US) Target Price Change]: Margin Improvement Offsets R&D Increase
- Baidu delivered 4Q22 results with top line beating cons. by 3.2% and non-GAAP net income beating cons. by 13.4%.
- We expect both its ads and AI cloud businesses to recover with accelerated pace, which could partially offset the increase of R&D investment in AI related technologies.
- Reiterate BUY rating and slightly raise TP to US$ 172 to reflect the on-track recovery and AIGC synergy. Our TP implies 17.9x PE in 2023.
Edelweiss: Wealth Management Arm Demerger Is Nearing
- A key re-rating trigger for Edelweiss’ stock is nearing as its wealth management (WM) arm gets close to demerge and list over the next couple of months.
- Edelweiss’ WM business could list at a market cap of around INR 8750cr, suggesting that Edelweiss’ 44% stake in it alone could be valued at INR 3850cr.
- Edelweiss also reported strong Q3FY23 earnings with 31% YoY growth in ex-insurance PAT. Edelweiss has significant potential to re-rate over the next couple of years as the credit business normalizes.
Raffles Medical (RFMD SP): 2022 Result Tops Expectation; Medical Tourism Resumption to Drive Growth
- Raffles Medical (RFMD SP) reported strong 2022 results, with 6% growth in revenue and 71% increase in net profit. Growth was driven by healthcare services, which contributed 58% of revenue.
- With the reopening of borders and easing of COVID-19 related protocols in H2 2022, RMG saw a return of foreign patients seeking medical treatment in Singapore.
- In view of the company’s strong performance, the Board recommended a dividend of 3.8 cents/share for 2022, representing an increase of 36% as compared to the previous year.
Chinese Regulators Question Auto Supplier Over Next-Generation Battery Claims
- China’s securities regulator is investigating auto component supplier Nanjing Aolian AE&EA Co. Ltd. (300585.SZ -3.76%) after its stock price fell more than 30% this week when questions arose about its expertise in a key solar panel technology.
- The China Securities Regulatory Commission (CSRC) has started scrutinizing the firm on suspicion of providing false information to the public about its new business, according to a note that Nanjing Aolian received Thursday night.
- The investigation added to doubts about the company’s expertise in perovskite batteries at a time when it is defending itself from a separate regulatory inquiry into whether it took advantage of market interest in the technology to inflate its stock price.
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