Daily Brief Equity Bottom-Up: Tencent Music (TME and more

• TME’s revenue continued to grow in 4Q24, as shrinking game business became insignificant.
• The operating margin reached its historical high, which means music’s margin is high than game’s.
• We believe the stock price will be double at the end of 2025.

• TSMC: +19.4% Premium; Consider Shorting if Spread Rises Above 20%
• ASE: +0.5% Premium; Ideally Wait for Lower Level But Near-Zero Still a Long Opportunity
• ChipMOS: -0.8% Discount; Wait for More Extreme Levels; Short Interest Spiking in Local Shares

• In 4Q24, all business lines grew even faster than we expected in the preview note.
• We are confident in its revenue growth and operating margin in 2025.
• We however still believe the market overvalues its electric vehicle business.

• Change in earnings estimate directions, especially when estimates start increasing after a long period of decline, are what we call “inflections”. These, we believe, are the strongest share price catalysts. 
• We identify nine market-sectors across Asia ex Japan exhibiting upward earnings inflections. Four are from financials, two from telecoms and one each from utilities, consumer durables and industrials.
• These market-sectors are from HK/China (3), Korea (1), ASEAN (5). Financials’ domination indicates that a broader Asian macroeconomic recovery could be under way. Eight companies are primarily driving the upgrades.

• While Vesync (2148 HK)‘s net profit grew 20.1% in FY24, there is a marked slowdown in 2H24 (+7.4%) vs. 1H24 (+37.5%), suggesting increased operating pressure. 
• North American sales slowed to 10.7% growth in 2H24, from 13% in 1H24. The deteriorating financial and operating performance affirmed that privatisation is an exit opportunity.
• Its PER discount (on privatiation price) to peers has widened to 35-38%, compared with 25-30% in Dec. Its US exposure makes it unable to reap benefits from China market stimulus.

• Palantir,  the secretive US tech giant, has dropped 30% in the past month, but with a PER of over 150 times, it could well have much, much further to fall.
• In the past year, no company executives have bought shares in this firm. Plenty have sold, though. In fact, as a group, they’ve dumped $3 billion worth of the stock.
• Here’s what Palantir does, what it should earn, its current valuation – and what all of that should tell you as an investor.

• Ramelius and Spartan announce a transformational combination deal
• Deal includes 25 cents cash kicker and 0.6957 Ramelius shares for Spartan shareholders
• Top three Spartan shareholders, excluding Ramelius, support deal with combined 19% ownership stake

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• Li Auto (LI) reported C4Q24 revenue 2.1%/in-line vs. estimate/consensus, and non-GAAP net income is 8.4%/10.3% vs. our estimate/consensus, thanks to OPEX savings which we believe may not be sustainable
• We cut 2025 vehicle delivery estimates by 7% and slashed net income forecasts by 33% due to delayed model launches and intensified competition
• We cut LI’s TP from US$25 to US$20 and keep at SELL.

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