In today’s briefing:
- Tencent Second Rejection – 305 Buy Zone
- Meituan (3690 HK): Delivery Workers on Strike
- Silver Lake/Software AG: Agreed Offer
- Kujiale: 3D Design Platform for Home Décor
- Taiwan Tech Weekly: This Is a Major Earnings Week; Are We Entering a 2-Track Semiconductor Recovery?
- PICO: Leader in Chinese XR Market
- [Xiaomi (1810 HK, SELL, TP HK$8.2) Company Update]: EV Expense Acceleration at the Starting Line
- Sabre Corp: Leveraging The Global Travel Recovery? – Key Drivers
- [Kuaishou (1024 HK, SELL, TP HK$45) Target Price Change]: Competition Intensifies from Major Players
- Marvell Technologies Inc: 5G & ASICs Saving The Day – Key Growth Drivers
Tencent Second Rejection – 305 Buy Zone
- Tencent’s rally back to the 285 resistance saw a second rejection confirming a b-wave top and our base case call for a C wave slide to the 305 buy support.
- Corrective structure to align with RSI low just under 30 as the buy zone. Sell volumes are on the backfoot.
- Macro long zone remains at 305/280 to challenge the 385 bull/bear divide. Near resistance at 370.
Meituan (3690 HK): Delivery Workers on Strike
- Meituan’s delivery workers started a strike in Shanwei City of Guangdong Province.
- Meituan called many of its delivery workers from other cities nearby as substitutes.
- We believe the hard job market pushes Meituan to the very font line of industrial relation.
Silver Lake/Software AG: Agreed Offer
- Silver Lake has announced its intention to launch a cash offer to delist Software AG at €30/share (53% premium, 12.7x EV/NTM EBITDA, 20.5x Fwd P/E), targeting 37% of the float.
- The Board is suportive and Silver Lake does not seek a domination agreement. The offer price will not be adjusted by the next dividend (€0.05, ex-date 19 May).
- My fair value estimate (EV/EBITDA based) is €26.54/share, the offer price seems adequate. The offer targets 37.6% of the float, feasible. Gross spread (incl. divi) is 0.97%, not terribly exciting.
Kujiale: 3D Design Platform for Home Décor
- Founded in 2011, Kujiale (1716974D CH) is a Chinese technology company that provides a 3D design and visualization platform for home decoration and furniture.
- The company’s AR/VR tech platform allows users to generate design sketches to decorate and furnish their homes, as well as providing information and networking services on home design.
- The company’s parent Manycore is the largest residential interior DDC cloud-based software provider (Kujiale is the flagship product offered by Manycore) with a market share of 56.5% in 2020.
Taiwan Tech Weekly: This Is a Major Earnings Week; Are We Entering a 2-Track Semiconductor Recovery?
- This week will have some major earnings data points released. In Taiwan, UMC, Delta, Mediatek, ASE will report among other local names in our coverage.
- Samsung & SK Hynix will report this week, providing major insight into the Memory chip space for companies such as Nanya Technology and Micron.
- TSMC & ASML results last week indicate that the cycle could be bottoming in 2Q23E for these leading firms… But are we entering a two-track industry recovery?
PICO: Leader in Chinese XR Market
- Pico Technology (1870309D CH) is a Virtual Reality (VR) / Extended reality (XR) technology company that develops and sells VR glasses and comprehensive XR solutions.
- The company is the market leader in the XR market in China and has a global presence. It was acquired by ByteDance in 2021.
- PICO is a company to watch for in the VR/XR segment given it operates in a growing market and has already established itself as a prominent player in this space.
[Xiaomi (1810 HK, SELL, TP HK$8.2) Company Update]: EV Expense Acceleration at the Starting Line
- Per Tmall tracking data, in 1Q23 we expect Xiaomi’s (1) phone unit sales fell 18% YoY to 31.7mn (2) phone ASP rose 2% YoY, (3) IoT revenue fell 10% YoY
- We estimate 1Q23/FY23 operating profit is (16%)/(13%) vs. the street. We expect Xiaomi to spend more on OPEX to support its EV investment;
- We maintain SELL and HK$8.2 TP given rising costs despite lack of growth.
Sabre Corp: Leveraging The Global Travel Recovery? – Key Drivers
- Sabre had a challenging Q3 and failed to meet the revenue expectations of Wall Street while delivering wider-than-expected losses.
- Sabre generated total revenue of $441 million in the quarter, a substantial improvement compared to $278 million in Q3 2020.
- The distribution revenue of Sabre increased by $140 million year-on-year, and the IT Solutions revenue increased to $145 million in Q3.
[Kuaishou (1024 HK, SELL, TP HK$45) Target Price Change]: Competition Intensifies from Major Players
- We expect that Kuaishou’s 1Q23/2023 top line would be basically in line vs cons, as major business lines are recovering as macro rebounds.
- However, we estimate that its 1Q23/2023 bottom line would still largely miss cons by (36%)/(39%), due to our concerns of increasing competition from WeChat Video Account and Douyin.
- Maintain SELL rating and cut TP to HK$ 45 to reflect intensifying competition landscape. Our TP implies 1.8X PS/221X PE in 2023.
Marvell Technologies Inc: 5G & ASICs Saving The Day – Key Growth Drivers
- Marvell Technologies had a challenging Q4 but it did manage to surpass the revenue expectations of Wall Street.
- However, the company expects strong growth in revenue from 5G and custom ASICs in Q1, although with gross margins lower than Marvell’s average.
- In terms of the end markets, data center revenue declined 13% YoY and 21% sequentially, while the rest of the end markets held up relatively well.
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