In today’s briefing:
- Why HBM is the Hottest Thing in Memory
- China Consumption Weekly (4 Mar 2024): Alibaba, Sun Art, Li Auto, Nayuki, NetEase, Vipshop
- [NetEase, Inc. (NTES US, BUY, TP US$122) TP Change]: Strong Games Pipelines Offering More Potentials
- Portfolio Update: February 2024
- BeiGene (6160.HK/BGNE.US/688235.CH) – Pain Points Behind the High Growth
- Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth
- [Vipshop (VIPS US, BUY, TP US$20.4)TP Change]: Will Live for the Moment Consumption Persist in 2024?
- Director filings and buyback momentum return
- China Travel Intl Inv (308 HK): A Laggard that Sets to Catch Up
- ITMG IJ: Q4 2023 Inline, Deep Value, 45% of the Mkt Cash and ~11% Dividend Yield on Spot
Why HBM is the Hottest Thing in Memory
Investing in semiconductors can be pretty simple if you let it be.
At a high level, I believe you want to invest in the secular at a decent price or invest in places where there are unwarranted dislocations.
Sometimes the entire ecosystem says one thing and the stocks say another. Usually, the ecosystem is right.
China Consumption Weekly (4 Mar 2024): Alibaba, Sun Art, Li Auto, Nayuki, NetEase, Vipshop
- Alibaba closed four more supermarkets at the end of February.
- Alibaba is moving retailers from the discount app back to Taobao.
- Li Auto’s deliveries increased by 62% YoY in the first two months of 2024.
[NetEase, Inc. (NTES US, BUY, TP US$122) TP Change]: Strong Games Pipelines Offering More Potentials
- NetEase reported C4Q23 top line, GAAP operating profit and GAAP net income (4.8%), (16%) and (9.0%) vs. our estimates, and (3.6%), (12%) and (6.8%) vs. consensus， mainly due to..
- The positive, however, is the acceleration of launch of <Naraka Mobile> by 1-2 quarters. Our estimate of the gross billing remains the same;
- We remain optimistic about the upcoming pipeline, and we raise our TP to US$122. Our new TP implies 15.4X PE, which is 12% above current price.
Portfolio Update: February 2024
- Recently, a friend of mine asked me why I own positions in Markel and Brookfield, as they do not align with my typical investment style of small niche companies trading at attractive free cash flow yields.
- I consider both companies as alternatives to index funds, benefiting from the expertise of two exceptional capital allocators, Tom Gayner and Bruce Flatt, at no additional cost.
- Over time, if my investment process proves itself as sound, the positions in Markel and Brookfield should naturally decrease in size.
BeiGene (6160.HK/BGNE.US/688235.CH) – Pain Points Behind the High Growth
- Although people acknowledged BeiGene’s performance, it still makes us uneasy about a long-standing question: When will BeiGene be profitable?With current cost structure, there’s at least two years left until breakeven.
- BeiGene’s internationalization only proves decent increase in revenue, but it doesn’t yet verify its profitability.SG&A expense ratio completely deviates from the normal state of Biotech with over US$2 billion sales.
- If BeiGene indeed has a plan to turn loss into profits, besides maintaining a high growth rate in sales, reasonable optimization in cost and expenses is the most basic “sincerity”.
Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth
- Adjusting for impact of LNY timing, January numbers still seem firm
- Headline February / LNY 2024 traffic growth also appears solid
- Our thesis remains that tourism recovery takes longer, strongest in H124
[Vipshop (VIPS US, BUY, TP US$20.4)TP Change]: Will Live for the Moment Consumption Persist in 2024?
- Vipshop reported C4Q23 top-line, non-GAAP EBIT, and GAAP net profit in-line, 6.3% and 7.0% vs. our estimate, and 4.5%, 20.5%, and 23.9%, vs. consensus, respectively;
- We expect the two themes of “live for the moment” consumption and consumption downgrade to persist in 2024. The former drives apparel spending, while the latter drives consumers to Vipshop
- We maintain BUY and raise the TP to US$ 20.4, implying 7.7x CY24 non-GAAP P/E, and 4.9x CY24 EV/Earnings.
Director filings and buyback momentum return
- Director filings and buyback momentum return Singapore Technologies Engineering (ST Engg) led the buyback consideration tally, repurchasing 500,000 shares at an average price of S$3.97 each on Feb 29.
- On Feb 26, LHT Holdings managing director Yap Mui Kee acquired 61,000 shares at an average price of S$1.05 per share.
China Travel Intl Inv (308 HK): A Laggard that Sets to Catch Up
- China Travel International Investment Hong Kong (308 HK) has an impressive 2024 CNY with the volume and revenue of its tourist attractions increased by 46% to 123% YoY.
- Relative to 2019 CNY, most businesses have fully recovered. 1H23 earnings is the highest since 1H20 and the market may have underestimated 2H23, providing upside surprise potential.
- The share price is still some 30% below the peak in late-2021 when earnings have yet to recover. Also, its net cash now equals 19% of the share price.
ITMG IJ: Q4 2023 Inline, Deep Value, 45% of the Mkt Cash and ~11% Dividend Yield on Spot
- Indo Tambangraya Megah (ITMG IJ) reported its Q4 2023/FY23 numbers with revenues down 46%/35% YoY and profits down 58%/69% YoY on declining coal prices (113 USD/ton Vs 192 USD/ton) .
- We expect spot coal prices to remain range-bound between 130-150 USD/ton, resulting in company profits ranging between 350-500 mn USD (4x-6x PE range) with dividend yield ranging from 11%-15%.
- The company also has a cash buffer of 850 million USD, roughly 45% of the current market capitalization.
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