In today’s briefing:
- Sea Ltd: Mass Layoffs at Shopee, Tinkering Here and There Won’t Make Shopee A World-Class Business
- Softbank Group – Semiconductor Weakness Expands Discount
- Baidu: Can AI Cloud, Intelligent Driving Save the Day as Marketing Continues to Lose Market Share?
- Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong Recovery; Scale Expansion to Aid Growth
- The Puzzle of HDFC Bank’s Rapidly-Growing MSME Loans
- HYBE: Consensus to Slash Earning Estimates Due to BTS Going on A “Temporary Break” For Solo Projects
- WuXi AppTec (603259.CH/2359.HK) – Behind the Proposed Disposal of A Shares
- Cargo Truckers Strike, Post Office Couriers Strike, & More Strikes Likely in Korea in 2022
- ZTO Express (2057 HK/ZTO US): Growth at a Reasonable Price
- CBG : Promising Growth Outlook
Sea Ltd: Mass Layoffs at Shopee, Tinkering Here and There Won’t Make Shopee A World-Class Business
- Sea Ltd (SE US)’s share price fell 7.42% yesterday after a report broke out about mass layoffs across Shopee’s international operations.
- We think Shopee has a fundamentally flawed business model and tinkering here and there won’t be enough to make Shopee a world-class business.
- With Free Fire falling fast and Shopee starved of funds, we fear that there could be another leg down for Sea Ltd shares in the short term.
Softbank Group – Semiconductor Weakness Expands Discount
- Tech weakness has not only eroded the underlying asset value but raised concerns on leverage and the potential for an ARM IPO. The discount expanded by 4pp in one week
- The timing and pricing of an ARM IPO looks more precarious as the semiconductor sector fell 13% over two days and is now down 34% from all-time highs
- Currency tailwinds have provided some offset with an unprecedented dollar move mimiting downside in Softbank shares to 8% YTD versus a 24% decline for the $-based ADR
Baidu: Can AI Cloud, Intelligent Driving Save the Day as Marketing Continues to Lose Market Share?
- Chinese digital advertising revenue growth has slowed down considerably over the past 4 quarters and Baidu has continued to consistently lose market share to the broader industry.
- Non-Marketing revenue has led the growth for Baidu over the past 2 years and now contributes roughly 26% to Baidu Core (excludes iQiyi) revenue.
- On a PE basis, Baidu is trading at only a slight discount to global giant, Alphabet, which testifies to the negative impact on earnings expectations from Baidu’s growth engines.
Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong Recovery; Scale Expansion to Aid Growth
- Thomson Medical Group Limited (TMG SP) is a dual play on the re-opening of both Singapore and Malaysia. The company has a 70% stake in Tmc Life Sciences (TMCL MK).
- The company is seeing strong recovery across all its business segments and is cautiously optimistic of its business prospects in the current financial year.
- The recent pullback in the shares provides a good entry point for long-term investors.
The Puzzle of HDFC Bank’s Rapidly-Growing MSME Loans
- Issues with HDFC Bank’s Head-MSME statements which analysts and shareholders need to consider.
- In MSME lending based on cash credit system verfication of stock statement is extremely important but there is no mention of it in his speech
- HDFC Bank’s MSME loans growing at a rapid pace but asset quality remain sound. It appears HDFC Bank’s customers are very different as compared to the industry.
HYBE: Consensus to Slash Earning Estimates Due to BTS Going on A “Temporary Break” For Solo Projects
- HYBE announced a major news which was that the BTS group will go on a “temporary break” so that its members could pursue various solo projects.
- Rather, we believe the consensus sales and operating profit estimates will decline by 20-40% in 2023 and 2024.
- If P/E multiple is lowered to 20x (2024E), this would suggest an implied market cap of 4.8 trillion won or 117,138 won per share, representing a further 39% downside risk.
WuXi AppTec (603259.CH/2359.HK) – Behind the Proposed Disposal of A Shares
- Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
- A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
- The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.
Cargo Truckers Strike, Post Office Couriers Strike, & More Strikes Likely in Korea in 2022
- Amid the global markets chaos, there has been a huge truckers strike in South Korea, causing havoc across many industries.
- On 14 June, the Post Office Courier Labor Union (POCLU) also warned that it will strike soon.
- The labor union strikes by major industry groups in Korea could pose another big headache on the Korean equity markets in 2022.
ZTO Express (2057 HK/ZTO US): Growth at a Reasonable Price
- ZTO Express Cayman Inc (2057 HK) has outperformed industry volume growth in 1Q22 and such trend continues into 2Q22 with good ASP improvement and cost control.
- Its strong operating cash flow and declining capex will lead to an accumulation of cash over the next few years, adding to the 1Q22 net cash position of Rmb4.1bn.
- We think the stock’s underperformance against peers not warranted. With a below-sector earnings multiple, leadership position and successful business model, we consider ZTO a “Growth at a reasonable price”.
CBG : Promising Growth Outlook
- The medium to long-term outlook looks promising,thanks to high demand for energy drinks across Asia-Pacific owing to trend of urbanization and rising disposable income. Meanwhile, 2H22 earnings are confirmed recovery
- More room to expand in Asia-Pacific Mordor Intelligence projected the Asia-Pacific energy drinks market value, which is the CBG key market focus to increase 8.46%CAGR in 2022-2027
- China market (4% of total revenue in 2021) is one of the CBG’s key market given the largest size of energy drinks market in Asia-Pacific with plenty of opportunity
Related tickers: Sea Ltd (SE.N), Softbank Group (9984.T), Thomson Medical Group Limited (ROWS.SI), HDFC Bank (HDBK.NS), HYBE (352820.KS), WuXi AppTec Co Ltd (603259.SS), POSCO Holdings (005490.KS), Carabao Group (CBG.BK)
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