In today’s briefing:
- China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue
- Link Net’s MTO of IDR4,800 from Axiata Open from 30 August
- China Internet Weekly (29Aug2022): Tencent, JD, JD Health, KE, Dada, Kanzhun
- Meituan: Earnings Beat Estimates but Sudden Change in Segmental Disclosure Is Dubious
- Duolingo. User Growth And Cash Flow Metrics Remain Robust. Management Raised FY22 Guidance
- Earnings in Review: DLocal and Snowflake
China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
- On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
- In this note, we’ll talk about the latest developments and its implications.
Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue
- The revenue growth rate decelerated, but operating loss shrank in 2Q22.
- We believe the the revenue reclassification is unnecessary and suspicious.
- We set a downside of 19% and a price target of HK$148.
Link Net’s MTO of IDR4,800 from Axiata Open from 30 August
- On 22 June, Axiata Group (AXIATA MK) and XL Axiata (EXCL IJ) completed the acquisition of a combined 63.45% interest in Link Net (LINK IJ) for approximately RM2.63 billion (IDR8.72 trillion).
- Today, Axiata announced that the mandatory tender offer (MTO) runs from 30 August to 28 September. The MTO price is IDR4,800 with no minimum acceptance condition.
- At the current price of IDR4,740 per share, the gross and annualised spread for a mid-October payment is 1.3% and 9.1%, respectively.
China Internet Weekly (29Aug2022): Tencent, JD, JD Health, KE, Dada, Kanzhun
- Tencent invested in Samsung Insurance China Co. Ltd. and is the second largest shareholder.
- JD Health’s revenue increased by 48% YoY, but the stock plunged.
- KE revenue shrank by 45% YoY due to the weak property market.
Meituan: Earnings Beat Estimates but Sudden Change in Segmental Disclosure Is Dubious
- Meituan (3690 HK) reported 2Q2022 results on Friday. Revenue grew 16.4% YoY to RMB50.9bn (vs consensus RMB49.2bn) while operating losses dropped to 1.0% of revenue to RMB493m (vs consensus RMB3.3bn).
- The company has changed its segmental reporting to a new reporting structure; Core Local Commerce, New Initiatives and Unallocated items.
- Disclosures on key operating matrices such as GTV and no. of hotel room nights have not been provided and difficult to assess the performance of core businesses.
Duolingo. User Growth And Cash Flow Metrics Remain Robust. Management Raised FY22 Guidance
- Duolingo (DUOL US) reported solid 2QFY22 results and hosted annual Duocon 2022 event in August. Management raised full-year revenue guidance, but the stock remained range bound.
- We model total revenues growing +45% y/y to $365M in FY22 and +42% y/y to $517M in FY23, up vs. our prior estimates and projections.
- 2QFY22 results beat all key estimates, driven by accelerating user growth and strength across the entire business. Duolingo (DUOL US) remains our top mid-cap pick in the EdTech industry.
Earnings in Review: DLocal and Snowflake
- In my opinion, DLocal is an expensive stock. Typically when you see very expensive businesses not outperform on every metric, or at least a majority of them, you see their stock price struggle.
- On a valuation perspective, DLocal finds itself priced in line with the most expensive stocks on the stock market.
- The thing that makes DLocal unique is its profitability compared to many of the other software stocks as they run 35%+ EBITDA margins on a consistent basis.
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