In today’s briefing:
- Sea (SE US) – Into the Looking Glass
- How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- [Tencent (700 HK, BUY, TP HK$433) Earnings Review]: Ads Growth Will Accelerate, Maintain BUY
- PhilEnergy IPO Preview
- Tencent: Domestic Gaming Returns to Growth
- ANSYS Inc.: Investments In AI & HPC
- Full-Year Results for Alibaba’s CaiNiao: Reduced Losses, Slower Growth, and A (Likely) 2024 IPO
- Cognizant Technology Solutions: Launch of Cognizant Neuro AI Platform & Other Drivers
- [iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After
- Paycom Software Inc.: Launch of Global HCM & Other Drivers
Sea (SE US) – Into the Looking Glass
- Sea Ltd’s 1Q2023 results showed its ability to sustain profitable growth with a vibrant performance from e-commerce and fintech, offset by slower digital entertainment but with visible stabilisation.
- E-Commerce showed strong performance in Asia, with Brazil making significant progress towards profitability, whilst digital financial services were boosted by a sizable loan book and more diversified funding costs.
- Sea Ltd continues to demonstrate its cost leadership and ability to expand its total addressable market while sustaining profitability through better infrastructure and user experience rather than pure promotional spending.
How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- The main challenge is the construction of new production facilities in the US. The investment amount is estimated to be around ₩1T, achieving an annual production capacity of 100,000 tons.
- The government’s approval is the most significant factor to monitor. It will likely be granted between late June or early July, which is when we should start building positions.
- Due to the local market’s expectation of L&F’s upcoming fundraising event, some traders may start building their positions early on. It’s important to consider this possibility and act preemptively.
[Tencent (700 HK, BUY, TP HK$433) Earnings Review]: Ads Growth Will Accelerate, Maintain BUY
- Tencent’s latest financial results are in line with expectations, with revenue and non-IFRS profit of 2.5%/(2.1%) vs cons. While we anticipate weak growth in the gaming sector,
- We suggest that advertising presents several catalysts for Tencent, including the recovery of Ecommerce and gaming, WeChat Video Account’s growth, and inter-connections with Baba and Mihoyo.
- We maintain a BUY rating with an unchanged target price of HK$433, implying 34X PE in 2023.
PhilEnergy IPO Preview
- PhilEnergy is offering 2.8 million shares in the IPO and expected market cap range of the IPO is from 279 billion won to 318 billion won.
- The IPO price range is from 26,300 won to 30,000 won and the total offering amount is 74 billion to 84.4 billion won.
- The company’s core products include stacking and laser notching equipment used in the rechargeable batteries manufacturing process.
Tencent: Domestic Gaming Returns to Growth
- Tencent (700 HK) reported 1Q2023 results. Revenue grew 10.7% YoY and beat consensus estimate by 2.3% while reported operating profit was 2.25 below consensus estimates.
- Key highlight was the YoY growth in domestic game revenue (+6%) which was mainly driven by strong performance of newly launched titles.
- There has been strong recovery across all business segments during the quarter and current valuations are still at a discount to historical trading multiples and offer a good entry point.
ANSYS Inc.: Investments In AI & HPC
- Ansys managed an all-around beat in Q1 and its results exceeded expectations across all key metrics.
- ANSYS invests in five technology pillars: numerics, high-performance computing (HPC), artificial intelligence (AI), 3D design, and system-level simulation.
- In addition to its investment in numerics, HPC, AI, 3D design, and system-level simulation, ANSYS has been working with key partners to develop new technologies to enhance its capabilities further and bring value to its customers.
Full-Year Results for Alibaba’s CaiNiao: Reduced Losses, Slower Growth, and A (Likely) 2024 IPO
- Cainiao Smart Logistics (1437124D HK) ‘s March 2023 quarterly and full-year results can be found within Alibaba’s full-year earnings report, which was released on Thursday May 18
- In both the March quarter and its fiscal year, CaiNiao showed improved Adjusted EBITDA results, though in both periods the tech-centric logistics network still reported losses
- Revenue growth slowed to 18% Y/Y in the March quarter, and parent Alibaba (ADR) (BABA US) indicated CaiNiao will target an IPO in 2024, a bit later than some expected
Cognizant Technology Solutions: Launch of Cognizant Neuro AI Platform & Other Drivers
- It was a successful first quarter for Cognizant Technology Solutions.
- The adjusted operating margin for the first quarter was 14.6%, and the company had quarterly solid bookings growth of 28% YoY.
- We give Cognizant Technology Solutions Corporation a ‘Hold’ rating with a revised target price.
[iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After
- IQIYI’s 1Q23 top line beat our est. by 8.5%, while its non-GAAP net income beat our est./cons by 95%/82%, largely due to its blockbuster <Knockout>.
- However, we expect its content pipeline is weaker compared with other key competitors in Q2.
- Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due to the fierce competition. Maintain SELL and cut TP to US$ 5.0, implying 16.7X PE in 2023.
Paycom Software Inc.: Launch of Global HCM & Other Drivers
- Paycom Software had impressive results in the first quarter and managed an all-round beat with revenues of $452 million, up 28% year over year.
- Employee self-service payroll continues to create significant client acquisitions for Beti, which remains a critical difference in the industry.
- We give Paycom Software a ‘Buy’ rating with a revised target price.
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