In today’s briefing:
- Seven & I (3382) | Strategic Refocus and Acquisition Interest Signal Major Upside Potential
- Alibaba Group (9988-HK): Positive Technical Analysis Signals
- Pinduoduo: Anticipating Slower Growth And Potential Profit Dip
- Hyundai Motor Announces Its Corporate Value Up Policies
- Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)
- [Pinduoduo (PDD US, BUY, TP US$160) TP Change]: Investment Means Continued High Growth
- [Trip.com (TCOM US, BUY, TP US$50) Rating Change]: Beyond the Difficult Time…Upgrade to BUY
- Earnings Preview (Nvidia and Marvell)
- All Eyes on Nvidia
- IOS18 Unveils Major Updates, Delayed AI Features Paving Path for a Significant Upgrade Cycle
Seven & I (3382) | Strategic Refocus and Acquisition Interest Signal Major Upside Potential
- 7&I Holdings is reviewing a confidential acquisition proposal from $ATD, highlighting significant potential for value creation through strategic refocusing on its core convenience store business
- ValueAct Capital previously criticized 7&I as an “unfocused holding company,” urging a focus on core assets, estimating a potential value of ¥4,200 per share.
- Our valuation suggests 7&I could reach ¥3,700 per share, driven by the repricing of its overseas CVS business; $ATD will need a strong offer.
Alibaba Group (9988-HK): Positive Technical Analysis Signals
- Despite a negative share price reaction following its 1Q2025 earnings report, Alibaba Group Holding (9988 HK) seems to have entered an earnings upgrade cycle due to improved profitability expectations.
- Despite recent share price pressure, due to negative industry readthroughs from peers, Alibaba Group’s near-term momentum indicators are displaying bullish signals.
- Alibaba Group trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.
Pinduoduo: Anticipating Slower Growth And Potential Profit Dip
- PDD Holdings (PDD US) shares fell 28% on Monday after a 3% revenue miss, with shares dropping an additional 4% yesterday.
- The results themselves weren’t bad enough to justify such a sharp price reaction.
- However, management’s comments on slower growth and a potential drop in profits triggered a significant sell-off.
Hyundai Motor Announces Its Corporate Value Up Policies
- On 28 August, Hyundai Motor announced its Corporate Value Up policies, including a minimum dividend per share this year targeting 10,000 won per share for common shares.
- Hyundai Motor plans to implement a shareholder return policy based on a total shareholder return (TSR) of 35% or more from 2025 to 2027.
- Hyundai Motor’s Corporate Value Up plan of providing TSR of 35% or more from 2025 to 2027 is certainly better than what it provided in the past three years (26%).
Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)
- July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
- Domestic air travel demand also showed modest Y/Y improvement in July
- We still like Trip.com on improving profitability, BUY with US$55 target
[Pinduoduo (PDD US, BUY, TP US$160) TP Change]: Investment Means Continued High Growth
- PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus.
- We believe PDD’s upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas.
- Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China’s e-commerce sector.
[Trip.com (TCOM US, BUY, TP US$50) Rating Change]: Beyond the Difficult Time…Upgrade to BUY
- TCOM reported C2Q24 revenue in-line with our est./cons., non-GAAP operating income also in-line with our est./cons., and non-GAAP net income beat our est./cons. by 18%/40%,mainly due to rising equity income
- Robust int’l growth offset weakness in domestic. With services possibly included in the government consume subsidy in C2H24/1H25 and Rmb’s appreciation.
- We feel it is time to buy TCOM again, TP to US$50 from US$42.
Earnings Preview (Nvidia and Marvell)
- It’s about to be primetime for the AI semiconductor trade, and for the first time in a long time (maybe ever), I wanted to write an earnings preview. It might be the first time (ever) and hopefully the last time.
- Two critical companies report this week. I’ll start with Marvell, the less important but the one I like, and then talk about some exciting dynamics at Nvidia that could lead to volatility and why it might not even matter.
- Marvell has always been a favorite of this newsletter. I won’t lie; I root for the hometown on this one. Inphi was my first paid post, and it worked out with a buyout by Marvell only two weeks later.
All Eyes on Nvidia
- This Wednesday, after the Wall Street close, NVIDIA Corp (NVDA US) will release its second-quarter figures, concluding the current earnings season. The stock has returned 155% YTD.
- Nvidia’s results will be crucial in determining whether its stock recovery continues (+25% since its August 5 low and 11.8% below its all-time high of $140.76 on June 20).
- Historically, when Nvidia’s earnings and guidance have been strong, its stock has rebounded by c. 30% and over in four occasions.
IOS18 Unveils Major Updates, Delayed AI Features Paving Path for a Significant Upgrade Cycle
- IOS 18 beta offers new Home Screen and Control Centre customization; AI features like Advanced Siri Capabilities delayed until iOS 18.1, set to arrive later this year.
- Morgan Stanley forecasts Apple will ship five hundred million iPhones over two years, driven by the AI-powered Apple Intelligence, with a 4%-5% growth in iPhone average selling prices.
- Only 15% of current Apple devices support new AI features, pushing a significant upgrade cycle; 24% of iPads are compatible, suggesting a mini-upgrade cycle in the tablet market.
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