Daily Brief Equity Bottom-Up: High Conviction 2024 – CyberAgent: Strong Recovery Across All Three Business Segments and more

• CyberAgent Inc (4751 JP)  reported 3QFY09/24 results yesterday. Both revenue and OP grew YoY, while revenue beat consensus marginally, OP beat consensus by a huge margin.
• All three business segments showed strong recovery with notable improvement in gaming business as newly released titles perform well including the newly released UMA MUSUME: Pretty Derby movie.
• Media business reported OP for the second consecutive quarter and the company has plans to further strengthen monetisation around AbemaTV.

• Budweiser Brewing APAC (1876 HK)‘s  performance could improve from 2H2024, driven by a likely recovery in China’s premium beer market and favourable commodity prices.
• Stock’s upside potential from current price levels seem to outweigh downside risk.
• With a high dividend payout and strong free cash flow generation, Budweiser trades at a 5% dividend yield and an 11% FCF yield.

• Amazon anticipates a 13% YoY rise in Q2 2024 revenue to $148.67 billion and a 58% YoY jump in EPS to $1.03, highlighting robust earnings.
• AWS is expected to see a $1 billion increase in quarterly revenue, reflecting an 18% year-over-year growth, driven by custom AI chips and model training services.
• Analysts have reaffirmed buy ratings for Amazon, with an average target price of $228, reflecting strong confidence in the company’s growth prospects.

• Company issued 1H24 profit alert after market yesterday which significantly beat even the high-end sell-side expectations. 
• Impressive SSSG and store-level unit economics imply sizable potential for operating leverage and earnings growth in the mid to long term.
• The profit alert, along with 2Q operating data released earlier, reinforced our confidence in earnings estimates of RMB130 million/RMB300 million for FY24/25 respectively. 

• ExxonMobil anticipates a USD 1.1 billion to USD 1.5 billion dent on its Q2 earnings due to the industry-wide contraction in refining margins.
• Exxon Mobil anticipates the USD 300 million to USD 700 million negative impact on earnings from lower gas prices to be offset by gains from higher oil prices.
• Since acquiring Pioneer, Exxon more than doubled production to 1.3 mboepd from 2023. Full merger effects are expected in Q3.

• Meta’s Q2 revenue of $39.1B surpassed expectations, up 22% YoY. EPS jumped 73% YoY to $5.16, beating estimates.
• Ad revenue within the Family of Apps rose 22% YoY, driven by online commerce and strong performance in Europe and the Rest of the World.
• Q3 revenue forecasted between $38.5B and $41B. Meta’s AI investments are set to enhance ad delivery and support long-term growth, despite increasing CapEx.

• E Ink and Himax introduce new color e-paper controller to enhance display technology, offering improved visual experience.
• Taiwan’s Economic Minister outlines plans to boost global competitiveness, focusing on strategic initiatives to strengthen economy.
• Shanghai commits $13.7 billion investment in IC, AI, and biopharma industries, driving growth in technology sectors.

• DigiPlus Interactive (PLUS PM) is the Philippines platform for Bingo Plus and other e-casino games, trading at 7x in the midst of >100% growth in revenue/profitability in 2024. 
• The company is net cash with a >50% ROE and is in an industry forecast by PAGCOR (regulator) to grow at least 15% CAGR in the future years.
• We expect explosive Q2 revenue/profit growth of 226%/298% YoY which would act as a share price catalyst. We calculate a dividend of 0.80-1 peso/share (30-40% payout ratio), equating to a 4-5% yield.

Freelancer reported a mixed performance in H124, with Escrow.com volumes down significantly after a very strong Q123, while the Freelancer platform benefited from growth in the Loadshift business. There are several promising opportunities in the enterprise business, including providing AI model training services and integration into new verticals within Escrow.com, that could reinvigorate growth from H224. Management is focused on making incremental improvements to the core marketplace platform with the aim of encouraging clients to become regular users of the platform and expanding the size of projects.

• Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.
• We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.
• We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.