In today’s briefing:
- NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change
- Pinduoduo (PDD US): Don’t Fight with PDD
- Telkom Indonesia (TLKM IJ) – Ring My Digital Bell
- PT Avia Avian (AVIA IJ) – Painting by Numbers
- Taiwan Tech Weekly: New Huawei Phone Works Around U.S. Restrictions?; Taiwan AI Stocks Surging Again
- Taiwan Dual Listings Monitor: TSMC, ASE Technology, and ChipMOS Opportunities
- Yageo: Company Visit — Improving Revenue Quality & Cashed-Up Actively Looking For Acquisitions
- Ping An Insurance – Weak Results, Net Asset Growth 5% From 9%, Profit Delta -Ve In Many Divisions
- Greentown China (3900 HK): Disciplined Market Share Gainer Amid Chaos
- Keep (3650): Mixed H123 and Slow Post-Pandemic Recovery. Will Growth Story Come To an End?
NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change
- As part of our Narrative and Numbers themed Annual Report insights, we shift our focus to FSN E-Commerce Ventures (Nykaa) (NYKAA IN).
- We focus on Nykaa Fashion due to its financial significance in spite of not being a material subsidiary warranting the need for board review on materiality policy.
- Notable issues demanding scrutiny include (1) Declining Financials, (2) Inconsistent Reporting, (3) Misleading Narrative, and (4) Elevated Executive Compensation.
Pinduoduo (PDD US): Don’t Fight with PDD
- PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
- 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
- We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.
Telkom Indonesia (TLKM IJ) – Ring My Digital Bell
- Telkom Indonesia (TLKM IJ)‘s 1H2023 results looked solid but drilling down 2Q2023 looked a lot more encouraging in terms of growth and higher ARPUs for Telkomsel.
- Ongoing digital initiatives are yielding positive results and Indihome continues to register positive results, with its merger with Telkomsel underlining convergence strategy. Data centre consolidation looks like a future spin-off.
- Telkom continues to enrich its digital ecosystem with services and make it more accessible to less affluent subscribers. Valuations remain attractive at less than 5.0x forward EV/EBITDA
PT Avia Avian (AVIA IJ) – Painting by Numbers
- PT Avia Avian is Indonesia’s leading integrated paint manufacturing company with around 20% market share. It is undergoing a strong recovery in margins as raw material inputs have stabilised.
- The company continues to expand both its distribution centres and the range of products it offers, with a strong emphasis on below-the-line marketing, reaching 54,000 retail outlets.
- PT Avia Avian (AVIA IJ) is an interesting proxy for the strong recovery in Indonesia’s economy and property market, with the added tailwind of lower input costs. Valuations are attractive.
Taiwan Tech Weekly: New Huawei Phone Works Around U.S. Restrictions?; Taiwan AI Stocks Surging Again
- Huawei’s new Mate 60 Pro phone has made many wonder if it has worked around U.S. technology restrictions to produce a 5G-capable chip domestically.
- Nvidia hits new all-time highs… Taiwan AI-supply chain stocks are surging again.
- Dell will report earnings — Look for PC upgrade cycle color and AI PC comments. SEMICON Taiwan is coming soon, we will attend.
Taiwan Dual Listings Monitor: TSMC, ASE Technology, and ChipMOS Opportunities
- TSMC: 9.2% premium — Trending down, can consider shorting the ADR vs. the local.
- ASE: 10.5% premium is historically high — Short the ADR vs. the local.
- ChipMOS: -0.4% discount, ADRs have lagged Taiwan shares — Long ADR vs. local.
Yageo: Company Visit — Improving Revenue Quality & Cashed-Up Actively Looking For Acquisitions
- We visited Yageo’s headquarters to learn more about the business and strategy. We expect revenue quality to improve, margins to rise through 2025E, and possible accretive acquisitions.
- The company is a heavily shorted stock based on our short model — This implies short squeeze potential we believe. The company has over US$1.5bn of dry powder for acquisitions.
- We rate Yageo as a Structural Long with a NT$690 target price. Potential upside catalysts outnumber downside catalysts in our view.
Ping An Insurance – Weak Results, Net Asset Growth 5% From 9%, Profit Delta -Ve In Many Divisions
- Weak results at Ping An Insurance across many divisions, with banking most important
- Life and Health negative insurance revenue delta, not offset by insurance cost delta
- Net asset growth is now at 5% YoY, from 9% YoY last year, from ~29% avg for years
Greentown China (3900 HK): Disciplined Market Share Gainer Amid Chaos
- Greentown China (3900 HK) is a high quality China property developer that is unfairly suppressed given the extreme pessimism of the sector.
- Even though the overall sales of China property industry will likely continue to decline, the market is large enough that some developers could stand to gain massive market share.
- The company trades at 2.5x 2024E PE, and 71% discount to NAV, with expected growth in net profit in 2023 and 2024.
Keep (3650): Mixed H123 and Slow Post-Pandemic Recovery. Will Growth Story Come To an End?
- Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down.
- The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
- Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story.
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