In today’s briefing:
- [Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL
- [Tencent(700 HK, BUY, TP HK$432)Target Price Change]: More Sustained Growth Doesn’t Mean Slow Growth
- [Blue Lotus Multi-Platform Sector Update]: Key JD Categories Will Grow Again in 2024
- Furuya Metal (7826 JP) TOPIX Inclusion: Big Impact but Even Bigger Overhang
- SK Square: Two Remaining Credible Options for 11 Street
- HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn
[Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL
- BABA reported C3Q23 revenue, non-GAAP operating profit and GAAP net income in-line, 6% and (7%) vs. our est., and in-line, in-line and (14%);
- Instead of appointing capable management to oversee key subsidiaries, BABA backpedalled to call off its spin-off plans;
- We cut TP from US$ 127 to US$ 72, and downgrade to SELL.
[Tencent(700 HK, BUY, TP HK$432)Target Price Change]: More Sustained Growth Doesn’t Mean Slow Growth
- Tencent reported C3Q23 revenue, non-IFRS operating profit and IFRS net income (2.4%), 8.9% and 17% versus our estimates. The bottom-line beat was mainly due to the growth of high-margin businesses;
- We view commercialization of Video Accounts and expansion of overseas gaming are still at early stage.
- Progression of these high-margin, high-quality business will persist into 2024; We maintain BUY but raise target price to HK$ 432.
[Blue Lotus Multi-Platform Sector Update]: Key JD Categories Will Grow Again in 2024
- JD.com reported in-line revenue and a non-GAAP net profit beat of 12% vs. consensus, mainly due to the 145% beat by subsidiary JD Logistics (JDL).
- 3Q GMV grew low-single digit and growth could remain similar in 4Q given the high-COVID related FMCG base. JDs GMV may reaccelerate in 2024 as smartphone and FMCG growth returns.
- Meanwhile, JD lowered the minimum spend required for free shipping, which we expect to lead to accelerate parcel volume growth for JD Logistic.
Furuya Metal (7826 JP) TOPIX Inclusion: Big Impact but Even Bigger Overhang
- On 16th November 2023, Tokyo-based Industrial-use precious metal products manufacturer Furuya Metal (7826 JP) announced they would be moving from TSE Standard to TSE Prime on 6th December 2023.
- This move would trigger a TOPIX Index Inclusion event at the end of January 2024 which would require all the TOPIX-tracking passive funds to buy shares in the company.
- The company also launched an offering in conjunction with the TSE Prime announcement. In this insight, we take a look at the flow dynamics of the upcoming TOPIX Inclusion event.
SK Square: Two Remaining Credible Options for 11 Street
- We discuss the two remaining options for 11 Street post the cancellation of its sale to Qoo10 Pte.
- As these strategic sale of 11 Street to Qoo10 Pte. has failed, the possibility of a forced sale of 11 Street by the financial investors has increased.
- The higher probability event is for the Nile Holdings consortium to try to sell 11 Street to other financial investors.
HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn
- As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December. However, there are float and capping changes for a lot of stocks.
- Estimated one-way turnover is 4.8% leading to a one-way trade of HK$5.29bn (US$679m). There are 4 stocks with over 1 day of ADV to trade.
- The largest selling will be on Xiaomi Corp (1810 HK) offset by buying in Meituan (3690 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK).
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