Equity Bottom-Up: Trendlines Group Ltd, Meituan, Hoya Corp, BYD, XL Axiata, Edelweiss Financial Services, KPIT Technologies, WuXi AppTec Co. Ltd., China Energy Engineering, Coupang and more

For our next Corporate Webinar we are glad to welcome Trendlines Group Ltd (TTGL SP) Chairman & CEO, Steve Rhodes.

In the upcoming webinar, Steve will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Sameer Taneja. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 1 March 2022, 17:00 SGT.

Trendlines invent, discover, invest in, and incubate innovation-based medical and agricultural technologies. They invest principally through their incubators: 

• Israeli government-franchised incubators – Trendlines Medical and Trendlines Agtech

• Singapore incubators – Trendlines Medical Singapore and AFIC (agrifood incubator)

• In-house innovation center – Trendlines Labs

• Funds – Trendlines Agrifood Fund and Bayer Trendlines Ag Innovation Fund. 

 As intensely hands-on investors, they are involved in all aspects of their portfolio companies from technology development to business building.  Simply stated, Trendlines create and develop companies to improve the human condition.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Meituan (3690 HK) share price is down more than 20.0% from Thursday’s close following announcement on new regulations for food delivery platforms.
• New regulation states that food delivery platforms should further reduce the service fee charged from restaurants to lower operating costs for food and beverage businesses.
• Meituan’s food delivery business makes about 88% of its revenues from commissions while the remainder comes from online marketing services.

• We spoke to Hoya today to understand market trends in both the semi and healthcare areas. 
• Overall, business conditions remain strong although momentum appears stronger for the Life Care segment. 
• More pertinently, we interpret some of the commentary on the semi capex side as suggesting some downside risk to overall spend.

• Subsidy removal spooked investors but as proven, January 2022 sales number is even higher than last year. 
• The main concern is the expensive valuation among the other Hang Seng Index Constituents rather than anything else.
• In the medium term, and upon the cessation of the Ukraine-Russia tension, BYD (1211 HK)could be an interesting name to have in the portfolio, especially at a lower valuation.

• XL Axiata (EXCL IJ) continues to see strong growth in data revenues and traffic with data -pricing improving in 4Q2021 and consumers taking more.
• The company continues to stress its aim to be the number one convergent operator and the successful completion of the Link Net (LINK IJ) acquisition accelerates this move.
• XL Axiata continues to raise data prices and will start to see synergies from Link Net from 3Q2022, including potential cost and revenue benefits. Valuations are attractive. 

• Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.
• However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability. 
• There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.

• Despite the elevated valuation, KPIT remains a high conviction idea for us as we see potential for 21%+ earnings CAGR over the next decade. 
• Given the strong growth visibility, KPIT can sustain its current elevated valuation of 12x P/B and thus an investment in it can offer 21%+ CAGR over the next decade.
• Even if its exit valuations were to decline by 1/3rd at the end of the decade, it can still offer 16%+ CAGR.

• WuXi AppTec Co. Ltd. (2359 HK) released the preliminary financial data for 2021. It is not surprising that the Company could maintain its outstanding performance.
• We listed some interesting points to ponder, such as projected declining performance of WuXi DDSU and related chain reaction, the change in fair value of financial assets, overseas anticipation, etc..
• It’s understandable if investors choose to start making layout at this point due to attractive valuation and longer “reflection arc”,but need to be patient for WuXi AppTec to achieve reversal.

• China Energy Engineering (3996 HK) and Power Construction Corporation Of China (601669 CH) are the two giants in power construction industry in China; but there are significant differences between them.
• Power China has better business and generation mix while Energy China won in terms of margin and profitability, leverage and financial position, new order momentum and hydrogen energy expansion. 
• We like Energy China “H” for cheap valuation, secured earnings and deep discount to Energy China “A”. For just the A-shares, we prefer Power China “A” to Energy China “A”.

• We are outright negative on regional e-commerce names leading into earnings as a small miss could spark a significant sell-off in the current market conditions.
• Even though most regional EC names including Coupang (CPNG US) are down by around 65%, we fear that there’s further downside risk in a rising interest rate environment.
• In the meantime, we expect Coupang to miss 4Q21 revenue when they report on Thursday. In addition, Coupang has the biggest downside potential as it is expensive compared to peers.