In today’s briefing:
- Taiwan Tech Weekly: TSMC Surge Leads Taiwan Stocks Higher; Advanced Chip Packaging in Focus
- Uni-President China (220 HK): 8% Dividend Yield Looks Sustainable
- Pinduoduo (PDD US): Pricing in an Imminent Slowdown
- Tencent (700 HK) 4Q23 Earnings Preview: Stable Growth and Margin Improvement Will Continue
- China Consumption Weekly (11 Mar 2024): JD.com, JD Logisitics, BYD, Alibaba, NIO
- China Healthcare Week (Mar.8) – GLP-1s, “Crowding Out Effect” in Healthcare, Microport’s Trouble
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – March 2024
- WuXi AppTec (2359.HK/603259.CH) – Updates About the BIOSECURE Act and the Outlook
- Asian Dividend Gems: Precision Tsugami China
- KS (1024 HK) 4Q23 Earnings Preview: Will See Historical Profit
Taiwan Tech Weekly: TSMC Surge Leads Taiwan Stocks Higher; Advanced Chip Packaging in Focus
- Massive TSMC Rises 13.8% in Just a Week; Mediatek a Top 10 Gainer for Second Week in a Row
- TSMC (2330.TT; TSM.US): Sales Should Be Gradually Increasing QoQ in 2024F; IPhone 16 Is on Schedule.
- PC Monitor: Long Dell Vs. Short Acer Update; Dell & HPQ Results Indicate Opportunity in Asus
Uni-President China (220 HK): 8% Dividend Yield Looks Sustainable
- Uni President China (220 HK), a F&B company in China, has an impressive track record of paying near 100% or over 100% of net profit in dividends since 2018.
- The company has two segments, food (mainly instant noodle), and beverage. Overall sales grew 1% yoy in 2023 while net profit jumped 36% yoy.
- Given the reasonable valuation (13x forward PE), a near 40% net cash position, and most importantly a stable 8% dividend yield, the stock looks attractive.
Pinduoduo (PDD US): Pricing in an Imminent Slowdown
- We see further upside to our previous above-consensus 4Q23 results estimates on low base, enhanced monetization, and faster TEMU expansion.
- That said, we believe market focus already shifted to outlook for 2024, in particular an imminent slowdown in 1Q24 and renewed concern around US curb on TEMU.
- 30% share price correction is pricing in the above scenario and valuation should gradually improve as PDD delivers back-loaded bottom line growth in 2024.
Tencent (700 HK) 4Q23 Earnings Preview: Stable Growth and Margin Improvement Will Continue
- We believe total revenue will grow by 11% in 4Q23 and 2024.
- We also believe the operating margin will improve slightly in 4Q23 and the following two years.
- Tencent sold weak business to China Literature in December 2024.
China Consumption Weekly (11 Mar 2024): JD.com, JD Logisitics, BYD, Alibaba, NIO
- JD.com stock price surged after its 4Q23 results and repurchase decision.
- It is not big issue that BYD sales decreased in the weak season.
- Alibaba began to close unprofitable Freshippo stores in February, but the company said it has expansion plan.
China Healthcare Week (Mar.8) – GLP-1s, “Crowding Out Effect” in Healthcare, Microport’s Trouble
- Since the domestic revenue scale of PD-1 has been much lower-than-expected, the market seems no longer willing to offer GLP-1 weight loss drug high expectations. However, that’s not right.
- For China healthcare, the emergence of negative domestic policies is a time for reassessment and seeking opportunities, rather than a time of blind pessimism.
- Issuing convertible bonds is clearly a bad decision for Microport, which chose to sacrifice the interests of minority shareholders. Together with weak fundamentals/cashflow pressure, the management needs to take responsibility.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – March 2024
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
- We also provide updates on released earnings for Uchi Technologies (UCHI MK), Plover Bay Technologies (1523 HK), UMP Healthcare (722 HK), and Sitoy Group Holdings (1023 HK).
WuXi AppTec (2359.HK/603259.CH) – Updates About the BIOSECURE Act and the Outlook
- A Senate committee moved the bill (S.3558) forward that would prohibit pharmaceutical companies from using foreign service providers like WuXi AppTec and its subsidiaries. However, rational voices are still expected.
- Seemingly conflicting proposals are mostly “noise” and disturbances to stock prices. This means in the future, we‘ll see stock prices move sharply again due to latest developments on these bills.
- WuXi AppTec should have “bottom-line thinking” and prepare some “backup solutions”.Investors don’t need to be overly pessimistic, because when global capital flows reverse, no one will mind these bills anymore.
Asian Dividend Gems: Precision Tsugami China
- Precision Tsugami China specializes in the production of precision machine tools. Precision Tsugami China is part of the broader Tsugami Corporation, a Japanese company founded in 1923.
- The company’s dividend yield increased from 4.3% in FY2021 to 8.9% in FY2022 and 10.1% in FY2023.
- We found Precision Tsugami China (1651 HK) using Smartkarma’s Smart Score Screener system.
KS (1024 HK) 4Q23 Earnings Preview: Will See Historical Profit
- We believe total revenue will increase by 17% YoY in 4Q23 and 15% in 2024.
- We also believe KS will see historical high operating profit in 4Q23 and the year 2023.
- We conclude that KS has an upside of 92% and a price target of HK$90. Buy.
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