Daily Brief Equity Bottom-Up: Money Forward (3394) | A Growth Stock for 2024 and more

• Money Forward’s stock price has declined by 2% YTD versus a 23% gain for the overall market. Technically, the stock is approaching oversold levels
• We see 38% upside for Money Forward’s stock price. At 5.5x EV/revenue, the stock is trading at a 50% discount to global peer, Intuit
• We believe that investors are under pricing the size of the Japanese market for cloud accounting and operating leverage from penetration into mid-cap corporate market

• Revenue for November 2023 was NT$206.03 billion, a decrease of 15.3% MoM, and down 7.5% compared to the year ago period.
• Based on the guided midpoint, December revenue will show a further 20% MoM decline
• We estimate FY2023 revenues of $68.8 billion, down 9.4% YoY. 

• China announced game approval for November batch. The number of games approved is in-line with the pace of approval in recent months.
• The Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Netease scored one approval while Tencent has been zeroed for five rounds.

• The WiFi technology was dominated by Broadcom Corp Cl A (BRCM US), but Mediatek Inc (2454 TT) has to break into the PC and smartphone markets in 2024F.
• There are speculations that Apple might use MediaTek’s WiFi 7 solution in 2024F or consider MediaTek as a potential chip provider.
• MediaTek will be using 6nm technology for WiFi 7, replacing the current 28nm technology used for WiFi 6.

• CPMC Holdings (906 HK) may potentially receive another takeover proposal from ORG Technology Co., Ltd. A (002701 CH) which has a 22% market share in the industry.
• ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.
• CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player Sunrise Group (002752 CH) will now become interesting.

• OUE Commercial REIT (OUECT SP) is one of Singapore’s best-quality commercial REITs, with a well-diversified and high-quality portfolio of assets across office, hospitality, and retail.
• A recent Smartkarma webinar with the management revealed a positive outlook for the company’s portfolio across the office, retail, and especially hospitality with some well-times asset enhancement initiatives bearing fruit.
• OUE Commercial REIT has strong sustainability credentials, both through its green-certified buildings, and an increasing portion of sustainable finance, with some well-timed recent financing. 

• KT&G is a high conviction pick in 2024.We believe KT&G Corporation (033780 KS) is likely to announce cigarette price hikes in 2H 2024.
• Three major reasons include a) no cigarette price hikes in nearly 9 years, b) Korean legislative election will be in April 2024, and c) reduce government tax revenue shortfall.
• We believe that the Korean government could raise cigarette prices to about 7,000 won to 8,000 won per pack from current price of 4,500 won. 

• RPSGV’s BPO business, Firstsource Solutions, is stabilizing and reported flattish QoQ revenue growth. EBIT margin has also bottomed out and is now at around 11%, an expansion of 300bp YoY.
• FMCG Business continues to maintain an annualized revenue run-rate of INR 400cr+. The Sports business generated revenues of INR 50cr+ vs INR 15cr YoY. 
• The FMCG and the Sports businesses hold tremendous scalability potential going forward. The IPL Lucknow franchise also owns a team named Durban in the South Africa T20 league.

Baillie Gifford China Growth Trust (BGCG) invests in China, focusing on innovative, rapidly growing companies best positioned to benefit from China’s still favourable long-term economic outlook and the structural trends that should drive equity markets for years to come. Key portfolio themes include e-commerce, food delivery, domestic brands, semiconductors, robotics and automation, and renewable energy. The trust’s relaunch in September 2020 coincided with a series of challenges for the Chinese economy, investor confidence and the growth companies BGCG favours, so performance has lagged the benchmark. However, the operational performance of most of BGCG’s holdings is strong, their prospects are very positive, and the trust’s managers believe that it is only a matter of time until confidence returns and share prices more accurately reflect these robust fundamentals.

• Alkem Laboratories Ltd (ALKEM IN) is flying high on strong Q2 numbers. The shares rallied 23% since the company announced Q2FY24 result in early November, widely outperforming Nifty Pharma index.
• In Q2FY24, revenue grew 12% YoY, and gross margin expanded 380bps to 61.4% backed by lower raw material cost and lower intensity of price erosion in US market.
• For the U.S. business, Alkem is looking at high-single-digit growth in dollar terms for FY24. The company has reiterated FY24 gross margin guidance at 59.0–59.5%.