In today’s briefing:
- NEC (6701) | Significantly Undervalued with Upcoming Catalyst
- Tencent (700 HK): Revenue Decreased for First Time, Margin Recovering, Price Overly Impacted
- Sea Ltd: Tough Times Ahead
- India Channel Insight #44 | Home First, Aavas, IIFL Home Finance, Capri Global
- JD.com (9618 HK): Pre-2Q22 Earnings, Will Slow Down and Then Recover from Lockdown
- GoTo (GOTO IJ) – Let the Synergistic Journey Begin
- Orion Corp – Record Results in 2Q 2022 Bolstered By Strong Sales in China, Russia, & Vietnam
- Bruush Oral Care: This Microcap Is Out To “Own Your Bathroom”
- Paradigm Biopharmaceuticals (PAR AU): Comfortable Funding Position Through 2024
- Amplitude: Cash Flow Positive Quarter, Management Raised CY22 Revenue and Profitability Guidance
NEC (6701) | Significantly Undervalued with Upcoming Catalyst
- NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025
- NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off
- NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced
Tencent (700 HK): Revenue Decreased for First Time, Margin Recovering, Price Overly Impacted
- In 2Q22, revenue decreased YoY for the first time on record.
- Unexpectedly, FinTech revenue stopped growing in 2Q22, as users are conservative in borrowing and investing money.
- However, we still believe Tencent’s stock price is overly impacted.
Sea Ltd: Tough Times Ahead
- Sea’s share price dropped 14% yesterday following its 2Q22 results as $2.9bn revenue ($3.0bn for consensus) and $659.4m operating loss excluding goodwill impairment ($594m for consensus) were weaker than expected.
- After lowering the e-commerce revenue guidance by $400m in 1Q22, Sea Ltd (SE US)’s decision to suspend 2022 e-commerce revenue guidance in 2Q22 is an early indication of difficulties ahead.
- Digital Entertainment’s gross bookings are down another 10% QoQ in 2Q22, which indicates that Free Fire’s revenue and profitability could continue to go down during the second half of 2022.
India Channel Insight #44 | Home First, Aavas, IIFL Home Finance, Capri Global
- Home First Finance (HOMEFIRS IN) is growing fast and has a low operating cost, there is a reason why.
- Aavas Financiers Ltd (AAVAS IN) operates in its own specific domain taking only risks that it is comfortable with.
- Competitive feedback is positive for IIFL Holdings (IIFL IN) ‘s HF subsidiary. Capri Global Capital (CGCL IN) seems to be following AU Bank’s footsteps, but hopefully only in underwriting.
JD.com (9618 HK): Pre-2Q22 Earnings, Will Slow Down and Then Recover from Lockdown
- Many consumers bought household freezers after the lift of lockdown.
- Strict rules on physical stores drive consumers to online e-commerce platform.
- Total express parcels increased by 8% YoY in China in July.
GoTo (GOTO IJ) – Let the Synergistic Journey Begin
- GoTo (GOTO IJ)‘s announcement last week of the integration of GoFood into the Tokopedia app is a further signal of continuing synergies taking place across the ecosystem.
- This latest move follows GoPay’s integration into Tokopedia, which exceeded expectations plus further integration with Bank Jago, and the introduction of GoPay coins common rewards all providing growing synergies.
- GoTo is a unique proxy to the Indonesian digital economy covering more verticals than any other player, with huge potential for ongoing synergies potentially throwing off higher returns.
Orion Corp – Record Results in 2Q 2022 Bolstered By Strong Sales in China, Russia, & Vietnam
- Despite unfavorable business environment such as global inflation, Orion was able to generate excellent progress in sales and profit growth in countries including China, Vietnam, and Russia in 2Q 2022.
- Orion had sales of 263.2 billion won (up 19.6% YoY) and operating profit of 35.7 billion won (up 170.3% YoY) in China.
- Due to a combination of attractive valuations and improving fundamentals along with restrictions of snacks imports from Taiwan to China, we continue to believe Orion’s shares could outperform the market.
Bruush Oral Care: This Microcap Is Out To “Own Your Bathroom”
- The emergence of new technological innovations has changed many aspects of the day-to-day life of consumers.
- While these kinds of toothbrushes have been in the market for many years, with Oral-B (Procter & Gamble) and Philips, dominating the market, consumer adoption has been limited given the premium pricing of these electric toothbrushes.
- It is a recently listed oral care company that is making highly advanced and sophisticated electric toothbrushes with sonic technology and making them available to the average American consumer at very reasonable prices.
Paradigm Biopharmaceuticals (PAR AU): Comfortable Funding Position Through 2024
- Paradigm Biopharmaceuticals (PAR AU) announced A$66 million capital raising, comprising A$45.7 million institutional placement and rights issue offer of A$20.3 million at A$1.30 per share.
- At the completion of the transaction, Paradigm will have a proforma cash position of $108.5 million, which funds the company into 2024.
- Paradigm is expected to announce data from one of its key trials related to knee OA pain in September, which will be a near-term catalyst for the company.
Amplitude: Cash Flow Positive Quarter, Management Raised CY22 Revenue and Profitability Guidance
- Amplitude reported 2QCY22 results and raised CY22 revenue and profitability guidance. The 2Q print was solid, with +48% y/y revenue growth.
- The company generated ~$8M of free cash flows in the quarter, driven by a few large renewals. Total revenue was $58.1M, which topped consensus estimates.
- Management was confident that the company’s dollar-based net retention rate would be above 120% in the long term.
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