In today’s briefing:
- Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
- Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
- Shopee Enters a New Era of Slower GMV Growth and Higher Fees for Sellers
- Sea Ltd: Free Fire’s Downfall, Shopee’s Struggles, Is Fintech the Next Challenge?
- Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
- [Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
- [Sea Limited (SE US, SELL, TP US$60) Target Price Change]: Cut Gaming Revenue and Margin Forecast
- Freee: User Acquisition Strategy Paying Off
- Arista Networks Inc.: Crushing Market Expectations But Is It Enough? – Key Drivers
- ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers
Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
- On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
- Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
- In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.
Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
- Canon has conducted 18 buybacks in the last 15 years. Every single one has been the same size. And the parameter-setting and how they are executed is… particular.
- For those with Canon to execute, using the information about patterns may be helpful.
- For those interested in a trade, there may be one here.
Shopee Enters a New Era of Slower GMV Growth and Higher Fees for Sellers
- Shopee, Southeast Asia’s largest e-commerce player, has been on a strict financial diet to reach profitability in the last year.
- That’s been welcome news for shareholders of its listed parent, Sea Ltd, but more challenging for sellers on the platform who have faced lower sales growth and higher selling costs after years of heavily subsidised operations.
- In this blog post we report on the most important figures from Shopee’s newly published Q1-2023 results (released 16 May) as well as the key implications for e-commerce sellers in Southeast Asia.
Sea Ltd: Free Fire’s Downfall, Shopee’s Struggles, Is Fintech the Next Challenge?
- Sea (SE US)‘s shares dropped by 18% as its operating profit fell short of consensus by around 60% at $125m, compared to the expected $311m.
- Shopee’s revenue shows improvement due to increased monetization, but there are no signs of exponential growth potential in operating profit.
- Projected decline in paying users poses further downside for Free Fire, while the previously positive fintech segment underperformed in Q1 with revenue and operating profit below expectations.
Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
- In 1Q23, the revenue growth rose significantly to 11% YoY.
- The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
- We set an upside of 28% and a price target of HK$440 for yearend 2023.
[Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
- Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%.
- We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC.
- Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.
[Sea Limited (SE US, SELL, TP US$60) Target Price Change]: Cut Gaming Revenue and Margin Forecast
- SE reported C1Q23 revenue/non-GAAP net income in-line/(37%) vs. cons., and (3.2%)/(31%) vs. our est. Profit miss is mainly due to the 53% YoY decline in game revenue
- We suggest that 1) game development and S&M cost cutting, as well as 2) disappointing game content updates during 1Q23, lead to the weak result;
- In the long run, we still expect Shopee growth to be SE’s major issue, as TikTok continues to grow rapidly. We maintain SELL and cut TP to US$ 60.
Freee: User Acquisition Strategy Paying Off
- freee (4478 JP) reported 3QFY06/2023 results. Revenue increased 39.5% YoY to ¥5.1bn (vs consensus ¥4.9bn) while adj. operating losses increased to ¥1.9bn (vs consensus ¥1.9bn) from ¥676m in 3QFY03/2022.
- Widened operating losses is no big surprise as freee had already guided for increased investments related to invoicing system and tax filing season which has helped increase paying user numbers.
- As we continue to emphasise, freee’s business model is superior to that of MF who has resorted to several mediocre businesses (non-BA SAAS) to pursue aggressive top line growth.
Arista Networks Inc.: Crushing Market Expectations But Is It Enough? – Key Drivers
- Arista Networks delivered strong results in the quarter, with $1.35 billion in revenue and $1.43 in non-GAAP earnings per share, crushing market expectations.
- Throughout this year, Arista anticipates seeing increases in its gross margins every quarter.
- We give Arista Networks a ‘Hold’ rating with a revised target price.
ZoomInfo Technologies Inc.: Investments In Improved Customer Experience – Key Drivers
- ZoomInfo Technologies achieved better-than-expected revenues and profitability in Q1 with an adjusted operating income margin of 40% and more than $121 million in unleveraged free cash flow.
- Moreover, ZoomInfo is investing resources in products to develop engaging customer experiences, enhance data leadership, and go upmarket.
- Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
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