Daily Brief Equity Bottom-Up: Sea Will Release Its Q4 2023 Earnings Report Soon and more

• Shopee – Sea’s largest business unit and Southeast Asia’s largest e-commerce platform – has reported negative EBITDA for most of the 8 or so years since its launch. 

• Investors now however appear to be looking for earnings growth. In 7 of the last 9 quarterly earnings reports, investors have rewarded the company every time it has reported earnings growth (its share price has gone up in the day after the release), and penalized when it has not.

• Based on our analysis (and subject to the disclaimer included below), we expect Shopee’s GMV and Revenue to improve in Q4 2023 (as compared to the previous quarter) along with its EBITDA, although earnings will likely remain in negative territory.

• The main businesses, hotel and air ticket bookings increased by 131% YoY and 86% YoY in 4Q23.
• The Chinese traveling market continued its recovery after the lift of the lockdown at the end of 2022.
• The stock price is close to our last price target – Downgrade to Hold.

• Nvidia’s blowout earnings number is another example of how grasping exponential growth trends is extremely difficult for human investors.
• Unlike what is often assumed, Nvidia, for now, qualifies as a quality stock, revealing relentless competitive power, low debt, and reasonable valuation.
• Nvidia’s weight with Quality ETFs is bigger than its weight in the MSCI World Index, adding to quality stock outperformance.

• Q423 revenues of ¥105.1 billion, about 5% better than forecasted, up 5% QoQ but down ~10% YoY.
• Q124 revenues forecasted to decline 17% QoQ to ¥87 billion. Not surprisingly, EBITDA will also decline 33% QoQ to ¥22.1 billion.
• On a brighter note, demand growth driven by generative AI will roughly double wafer demand for servers (AI+General) by 2027

• Trip.com Group (9961 HK) has a remarkable 4Q23 with adjusted net profit surged 437.1% YoY. Higher volume and better market efficiency have resulted in massive margin expansion.
• Net cash has ballooned to about 15% of its share price, and this has allowed it to carry out a massive US$300m Capital Return Program in 2024.
• Business has outperformed the industry in CNY, with domestic hotel and air business volume increased by 60% and 50% YoY. Its overseas platform also saw double-digit growth.

• We expect NetEase to report C4Q23 revenue, GAAP op. profit and GAAP net income 4.9%, 5.7% and 8.5% vs. consensus.
• The robust topline growth was mainly contributed by revenue recognition of <Justice Mobile> in the peak summer season.
• The grossing of legacy titles like <FWWJ> is also growing steadily due to the low-price strategy. We raise our TP to US$118 to reflect the rich and diversified pipeline…

• With 1H24 results, Qantas followed Singapore Airlines in highlighting fare weakness in international markets and we cut our pre-tax income by 13% to FY24.
• We expect FY24 pre-tax income to fall 16% yoy but also expect FY25 to fall another 5%, as our EBITDAR/ASK remains 10% above FY19 levels following 12% in 2H24.
• While international markets continue to normalise, Qantas’s domestic market structure positions it favourably to continue to invest in customer service and product.

• StandChart may need to take further impairment hit on China Bohai Bank
• VIU model is used to justify the higher carrying value compared to fair value of the holdings.  There is zero headroom between the VIU model and the carrying amount.
• We looked at VIU model assumptions for HSBC and StandChart. A declining NIM is likely put further pressure on the VIU model output for StandChart.  

• Boeing shares are down 20% since the start of the year, despite a booming global market for aviation
• Boeing’s focus on financial performance and stock price over safety and engineering has been a concern
• The current CEO David Calhoun dissolved the company’s strategy department, raising questions about Boeing’s future direction and decision-making strategies

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• In our latest South Korean banks screener; we add Woori Financial to existing buy KB Financial as our preferred Korean banks picks
• Delinquency ratios continued to worsen QoQ, with only Woori bucking the 4Q23 NPL trend; Woori has lagged in terms of returns, but we expect CoR control to support 2024 returns
• KB has a low PBV ratio relative to its ROE, it delivers rising post-provision returns,  it has a high CET1 ratio and it maintains a healthy LDR