In today’s briefing:
- Sea Ltd (SE US) – Turning Tides Present a Different Wave
- LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement
- Istyle High Conviction Update: Up 90% on Partnership With Amazon
- Tencent 2Q: Earnings Weaken Further
- NetEase (9999 HK): 2Q22, Grew Healthily in Spite of Headwind, 52% Upside
Sea Ltd (SE US) – Turning Tides Present a Different Wave
- Sea Ltd results were impressive on a number of levels, with profitability in its core e-commerce business improving considerably in core markets of South-East Asia and Taiwan a key positive.
- The decline in digital entertainment revenue was expected, with the stabilisation of quarterly active users a sign of some plateauing after recent declines but rankings continue to remain solid.
- Sea Ltd suspended revenue guidance but continued to stress confidence in the growth outlook, whilst keenly focusing on improving efficiencies and profitability. This underpins our positive long-term view.
LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement
- LX Semicon (108320 KS) is looking to transfer from the KOSDAQ market to the KOSPI market. Shareholder meeting is 23 September and the transfer will happen soon after if approved.
- LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index on the suspension date. There is zero chance of the stock being included in the Kospi 200 Index.
- Nextin (348210 KS) is a high probability inclusion to the KOSDAQ 150 Index in December but could be an early inclusion in September to replace LX Semicon (108320 KS).
Istyle High Conviction Update: Up 90% on Partnership With Amazon
- Istyle Inc (3660 JP)’s share price rose more than 90% over the last few days on the news that Amazon is becoming a strategic partner of the business.
- With Beauty Services’ margin expansion more than compensating for On Platform’s weaknesses, we are expecting this turnaround in price performance to last longer than a news cycle.
- We think istyle’s share price could break out to a new high as the company’s medium-term OP estimates are revised upwards.
Tencent 2Q: Earnings Weaken Further
- Tencent (700 HK) reported 2Q2022 results today. Revenue increased 3.1% YoY to RMB134.0bn (vs consensus RMB134.6bn) while reported OP for the quarter decreased 42.7% YoY to RMB30.bn (vs consensus RMB36.3bn).
- Excluding interest income and gains, adjusted OP decreased 21.2% YoY to RMB23.7bn driven by drop in GPM across all three business segments.
- Tencent also mentioned that news article regarding a possible stake sale of Meituan is inaccurate.
NetEase (9999 HK): 2Q22, Grew Healthily in Spite of Headwind, 52% Upside
- Revenue grew by 13% YoY in 2Q22 in spite of headwind.
- The company actively expanded outside China to bypass the domestic license shortage.
- We believe the stock has an upside of 52% for the end of 2023.
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