In today’s briefing:
- Tencent (700 HK) 3Q23 Earnings Preview: No Concern on EPS Decline, 58% Upside
- DBS – 0% Growth Guidance for FY24 | Quarterly Credit Costs Surging | As Good as It Gets
- China Consumption Weekly (6 Nov 2023): Kuaishou, Bilibili, Midea, Baidu, Yum China
- MHI (7011) | Rockets and Renewables
- Alibaba (9988 HK) 3Q24 Earnings Preview: Recovery to Continue, 67% Upside
- Asian Dividend Gems: Yue Yuen Industrial
- UMC. Automotive Weakness Prolongs Downturn
- Taiwan Tech Weekly: Positive Signs for Memory, PC, Smartphones; Key Autos & Display Color This Week
- China Vanke (2202 HK): Short Term Trading Opportunity Post Conference Call
- Ferrari (RACE US) The Classic Fisher Stock Q3 2023: Stellar, No Slowdown Here
Tencent (700 HK) 3Q23 Earnings Preview: No Concern on EPS Decline, 58% Upside
- We believe advertising revenue will grow rapidly and game revenue will accelerate.
- We also believe EPS will decrease YoY due to high “other gains” in 3Q22.
- We expect the stock price will have an upside of 58% for year end 2024.
DBS – 0% Growth Guidance for FY24 | Quarterly Credit Costs Surging | As Good as It Gets
- DBS is now guiding for no profit growth during FY24. This may end up missing with negative growth more statistically likely, in a worsening world.
- Credit metrics are not particularly positive in today’s release with SGD215m of credit costs compared with SGD72m in the preceding quarter.
- If rate rises are done or nearly done, than the main positive delta of DBS earnings are also done or nearly done. Management guidance suggests as much too.
China Consumption Weekly (6 Nov 2023): Kuaishou, Bilibili, Midea, Baidu, Yum China
- All major Chinese e-commerce companies set up live broadcasting channels on Bilibili at the beginning of Singles’ Day sales.
- Kuaishou chairman’s resignation will not change the business strategy, as he stepped down from CEO two years ago.
- Baidu begins to sell ChatGPT-like service for CNY49.90 per month.
MHI (7011) | Rockets and Renewables
- MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.
- Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.
- The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.
Alibaba (9988 HK) 3Q24 Earnings Preview: Recovery to Continue, 67% Upside
- We believe the financial recovery from 1Q24 will continue in 2Q24.
- We expect the operating margin will improve to 15% in 2Q24 versus 12% in 2Q23.
- Alibaba has an upside of 69% and the target will be HK$143 for the year end 2024. Buy.
Asian Dividend Gems: Yue Yuen Industrial
- Yue Yuen has a scalable business model with high dividend yield (6.4%). Its sales and net profit are expected to increase by 9.3% YoY and 55% YoY, respectively in 2024.
- The company is likely to enjoy higher sales and profits in 2024 due to improved footwear inventory destocking cycle, higher sales and profits at its subsidiary Pou Sheng.
- Yue Yuen Industrial is one of the largest footwear and athletic shoe manufacturers in the world. Its major customers include Nike, Adidas, Puma, and Reebok.
UMC. Automotive Weakness Prolongs Downturn
- Q323 revenues of NT$57 billion, up 1.4% QoQ but down 24.3% YoY. For 2023 YTD, revenues have amounted to NT$167,575 billion, down 20.5% YoY.
- Net income was NT$15.97, essentially flat QoQ. Gross margin came in at 35.9%, also flat QoQ. Utilisation for the quarter was 67%, down from 71% in the prior quarter.
- Utilization set to further decline to low 60% levels in Q423, the lowest since the downturn began.
Taiwan Tech Weekly: Positive Signs for Memory, PC, Smartphones; Key Autos & Display Color This Week
- Last week global heavyweights AMD, Samsung, and Qualcomm delivered good news, including for the Memory, PC, and Smartphone industries. Taiwan company results supported their views as well.
- Looking ahead, Novatek, Asustek, and Himax are set to release in Taiwan. Combined with NXP abroad, this will provide color on display demand, automotive, and servers/PCs.
- A new Chinese memory chip maker just received major government investment, with an IPO of its related company planned.
China Vanke (2202 HK): Short Term Trading Opportunity Post Conference Call
- China Vanke (H) (2202 HK) saw a major drop in bond and stock prices recently, due to fear of default.
- Yesterday, the company held a conference call, with representatives from Shenzhen SASAC and Shenzhen Metro (major shareholder of Vanke and owned by Shenzhen SASAC) participating in the call.
- The strong support shown by Shenzhen SASAC/Shenzhen Metro represents a good short-term buying opportunity, for both Vanke stock and bonds.
Ferrari (RACE US) The Classic Fisher Stock Q3 2023: Stellar, No Slowdown Here
- Ferrari N.V. (RACE US) had a stellar Q3 2023 with 23.5%/45% YoY overall revenue and profit growth, beating analyst estimates and conservatively upping guidance by 2-3%.
- Despite volumes growing only 8.5% YoY, car revenues grew 26% YoY, highlighting strong trends in personalization (at 19%) and pricing, with the current order book full.
- Valuations are rich at 45x/39x FY23e/24e PE, but there seems to be a clear path to 20% YoY growth at over 25% ROCEs.
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