Equity Bottom-Up: Grab, Snap Inc, Taiwan Semiconductor Sp Adr, Rakuten Inc, Kuaishou Technology, Samsung Electronics, ARTERIA Networks Corp, Faraday Future Intelligent Electric, Ibiden Co Ltd and more

• Grab‘s latest results sent a mixed message and if looked at YoY the picture looks gloomy but there is a strong sequential recovery with declining incentives for deliveries.
• Mobility is seeing recovery with higher incentives to bring on drivers and consumers but these should start to decline in 2H2022, with company guidance for revenues reflecting this. 
• Grab continues to build its financial services offering through digital payments coupled with BNPL, and growing a digital banking footprint. Valuations are attractive and it has US$8.2bn in cash liquidity.

• Snapchat’s guidedown resulting in a 30% drawdown is fantastical.  6x sales is now 4x sales, near alltime lows.
• Was guide down worth 30% drawdown given already valuation compression and  volatility of Snap guidance? Sour grapes here.
• Of course macro deteriorated. Who is doing Snap’s forecasting? We think forecasting easier to fix than LT competitive moat. We’d buy SNAP…but buy FB first!

In our next Webinar, we welcome Analyst Patrick Liao, who will go over his picks among Greater China semiconductor companies, exploring the outlook for the rest of 2022 and beyond.

The webinar will be hosted on Wednesday, 1 June 2022, 17:00 SGT/HKT.

• The end of Rakuten free plans is unlikely to have a major industry read across although the end of loyalty point chasing should help save on promotional costs
• Mobile erosion has likely peaked but full-year losses for FY22 will be higher than last year. We expect the progression to profitability to be modest
• Listing the securities business is a positive as it surfaces fintech value but allocating proceeds from valuable asset sales to funding mobile is not

• Kuaishou reported 1Q2022 results on Tuesday. Revenue grew 23.8% YoY to RMB21.1bn while reported operating losses declined to RMB5.6bn (27% of revenue) from RMB7.3bn (43% of revenues) in 1Q2021.
• Adjusted operating losses for the quarter further dropped to 24% of revenues from 48% of revenues in 1Q2021 despite drop in livestreaming ARPPU in 1Q2022.
• Kuaishou’s shares have lost almost 80% since its IPO in February last year due to the regulatory crackdown.

• Revenue increased by 24% YoY with online marketing, the main business, up 33% YoY.
• KS operating loss decreased to RMB5.1 bn in 1Q22 from RMB8.2 bn.
• We set an upside of 19% and a price target of HK$75.00. Buy.

• One of the curious share price movements this year has been the outperformance of Samsung Electronics versus other global tech peers including Apple, TSMC, Intel, and Xiaomi.
• Three reasons why Samsung is outperforming global peers such as Apple and TSMC may due to a potential war in Taiwan, COVID lockdown in Shanghai, and new pro-business Korean President.
• Caution is warranted on playing long/short on Samsung, Apple, and TSMC in the coming months as their tides appear to be driven too much by the whims of global politics. 

• Q4 results and FY22 guidance largely in-line with consensus and Redex expectations
• Shares trade at a discount to peers but should command a premium on potential mid-term growth prospects and lack of mobile exposure
• That may reflect relative size as Arteria lacks the scale and liquidity to attract interest from investors in search of defensive names

• EV start-up Faraday Future released their delayed Q1 2022 results & had some hair-raising disclosures on their first-ever earnings call. 
• Cash halved in the 3 months since Q4 2021 & dropped another 20% as of April 30th. Faraday didn’t deny that they have roughly a quarter’s worth of cash left. 
• We can’t see how Faraday raises cash in the current risk-adverse markets. And we don’t see any assets worth buying them out for. Faraday is in need of a miracle. 

• Share price down 35% since last December,  probably because FY Mar-23 guidance seems over-optimistic. Gearing to falling demand and rising costs is high.
• Sales and profits should eventually rebound as 5G smart phone and data center related demand continue to grow, and after new capacity comes on line in 2024.
• First rate IC substrate and printed wiring board technology, and sound finances, make the company a candidate for long-term investment.