17 Nov 2021: OxPay Financial (OPFL SP), BAIDU, INC. (9888 HK)

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SINGAPORE

OxPay Financial (OPFL SP): Cash is no longer king

BUY Entry – 0.305 (BUY STOP) Target –0.42 Stop Loss – 0.27
OxPay is an online-to-offline (O2O) financial services technology provider with a fully integrated platform that allows both online and offline merchants to run and grow their business easily.
High entry barriers and growing market. The payment sector is highly regulated, serving as high entry barriers to the digital payment space. OxPay is one of the 19 non-bank companies in Singapore to be awarded the merchant acquisition license as of September this year. OxPay’s target market of SMEs, coupled with its highly accredited license, gives it an edge over other competitors in the SME space, with adequate market share for penetration.
Initiate with Outperform and S$0.42 TP. OxPay is well-positioned to benefit from the growing e-commerce trend and the explosive use of e-money with its recent integration of GrabPay and Shopee Pay. The appointment of OxPay as exclusive payment provider for F&B Hive Ventures, which has over 4000 restaurants in Thailand, is expected to be a significant revenue contributor from FY22 onwards.
Read our full initiation report here.

UMS Holdings (UMSH SP): Record after record

RE-ITERATE BUY Entry – 1.43 Target –1.60 Stop Loss – 1.30
UMS engages in manufacturing of high precision components, complex assembly and final testing for semiconductor equipment manufacturers. Its key customer is US-listed Applied Materials (AMAT US). UMS Is headquartered in Singapore and has production facilities in Singapore, Malaysia and China, as well as offices in the US.
Record breaking 9M2021 performance. Last Friday(12 Nov), UMS reported a stellar set of 3Q2021 results. UMS 3Q2021 revenue surged 50% YoY to S$67.6mn while net profit rose 25% YoY to S$16.1mn. It has proposed a higher dividend of 1.0 Sing cents vs 0.5 Sing cents in the prior quarter. The strong performance was on the back of strong growth in the global semiconductor industry and from the consolidation of JEP Holdings.
A potentially another record year ahead. Global equipment investments for front end fabs in 2022 are expected to reach nearly US$100bn, after topping a projected US$90bn of investments in 2021. Riding on this strong trend, UMS will be increasing its production capacity by doubling its capex in FY2022. UMS’ new Penang factory is scheduled for completion in 3QFY2022.
Positive street outlook. Consensus has 6 BUYS / 1 HOLD and a 12m TP of S$1.62, an implied 17% upside potential from the last close price. UMS currently trades at 15x and 13x FY2021 and FY2022 P/E.

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HONG KONG

BAIDU, INC. (9888 HK): Step into the Metaverse

Buy Entry – 160 Target – 180 Stop Loss – 150
Baidu Inc is a Chinese language Internet search provider. The Company offers a Chinese language search platform on its Baidu.com Website that enables users to find information online, including Webpages, news, images, documents and multimedia files, through links provided on its Website. The Company operates through two segments, Baidu Core segment and iQIYI segment. Baidu Core mainly provides search-based, feed-based, and other online marketing services, as well as products and services from the Company’s new artificial intelligence (AI) initiatives. Within Baidu Core, the Company’s product and services offerings are categorized as Mobile Ecosystem, Baidu AI Cloud and Intelligent Driving & Other Growth Initiatives. iQIYI is an online entertainment service provider that offers original, professionally produced and partner-generated content on its platform.
First metaverse product. The company recently launched a social app called “Xirang” (“land of hope)” to step forward along the path of the metaverse. The app aims to create a metaverse enabling people to interact with each other in a virtual world featuring identity recognition, extending from virtual to reality.
China-US tension mitigated. Chinese leader Xi Jinping and US President Joe Biden had a video conference on 16th November. Although there were no major breakthroughs from both sides, avoiding further conflicts is the common goal. Both sides showed some kindness towards each other. China-US relationships are the bellwether for Chinese technology stocks. With the temporary easing of tensions, sentiments on the sector could turn positive.
3Q21 results on Wednesday. Baidu will be announcing 3Q21 results on 17th November. EPS estimate is US$1.98, down 33.8% YoY from US$2.99 in 3Q20.
Positive consensus forecast. Updated market consensus of the estimated EPS growth in FY22/23 are 20.6%/23.2% respectively, which translates to 17x/13x forward PE. The current PE is 20x. Bloomberg consensus average 12-month target price is HK$236.5.

JD.com (9618 HK): Booster from “Double 11”

REITERATE BUY Entry – 316 Target – 350 Stop Loss – 300
JD.com Inc is a holding company mainly engaged in e-commerce business. The Company operates two segments. JD Retail segment consists of online retail, online marketplace and marketing services in China. The Company offers electronics products, home appliances and other general merchandise categories. The Company has its own online platform, which third-party merchants offer products on it. The Company provides marketing and display advertising services to third-party merchants, suppliers and other business partners on its website channels. New Businesses segment includes logistics services provided to third parties, overseas business, technology initiatives, as well as asset management services to logistics property investors and sale of development properties. It offers comprehensive supply chain solutions to third parties through JD Logistics, including warehousing, transportation, delivery and after-sales service. The Company mainly conducts its businesses in the China market.
New “Double 11” sales record. The annual sales festival in China started in November, during which e-commerce companies’ shares benefit from this seasonal booster. The household appliance sales jumped by 50% YoY to more than RMB349bn on 11th November. More than 50mn customers placed orders on JD.
Arduous recovery. Both market sentiment and confidence in Chinese tech giants have been negatively impacted since July when authorities initiated rounds of clampdown. It is likely that regulations will never be over. Investors should recognise that this is the new normal for Chinese tech firms. Fundamentals such as the operating environment and domestic economic prospects have been transformed. Tech companies’ valuations are being re-rated based on decent growth instead of high growth. JD is relatively less vulnerable from policies and regulations as it is more concentrated on its core business, e-commerce and logistics, instead of diversification. From the share price performance, it is likely waking out of the woods.
Eye on the upcoming results. JD will be announcing 3Q21 results on 18th November. EPS estimate is US$0.32, down 36% YoY from US$0.5 in 3Q20. The fall in earnings may already be priced in the last quarter.
Positive consensus forecast. Updated market consensus of the estimated EPS growth in FY22/23 are 40.8%/64.0% respectively, which translates to 39.2x/23.9x forward PE. The current PE is 55.2x. Bloomberg consensus average 12-month target price is HK$387.91.

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Market Movers

United States

Top Sector Gainers

Sector	Gain	Related News
Home improvement	+5.3%	Home Depot earnings top estimates fueled by 9.8% jump in sales as consumers fix up homes
Motor Vehicles	+4.3%	Rivian has $0 in revenue and is now the third most valuable carmaker on the planet
Consumer discretionary	+2.5%	U.S. retail sales surge as holiday shopping starts, brightening economic outlook

Top Sector Losers

Sector	Loss	Related News
Aluminum	-3.3%	Aluminum prices dragged by slowing China real estate market
Food retail	-2.5%	Walmart stock tumbles as supply chain snarls hit margins ahead of holidays
Shipping	-1.9%	Container Shipping Rates May Take Two Years to Fall to Normal

Tesla Inc (TSLA US) shares gained 4.1% yesterday, recovering some of the stock’s decline last week. Shares previously tumbled after Elon Musk asked his followers on a Twitter poll whether he should sell some of his shares in the company, followed by news of him unloading stock worth about US$ 7bn after.
Lucid Group (LCID US) shares surged 23.7% on Tuesday. The electric vehicle maker reported more than 17,000 reservations for its “Air” sedan, up from 13,000 in the prior quarter, leading to the stock rising 5.8% in premarket trading. Additionally, the company confirmed its 2022 production targets.
Qualcomm (QCOM US) shares jumped 7.9% on Tuesday, following the company’s investor day presentation. Qualcomm said that it believes it will supply only 20% of the modem chips to connect Apple Inc’s iPhone wireless data networks by the device’s 2023 launch. However, the company believes that, excluding Apple sales, its revenue growth in handsets will grow faster than the overall market, thanks primarily to its traction with higher-end smartphone makers such as Xiaomi Corp, Oppo and Vivo. “We’re no longer defined by a single end market and a single customer relationship,” Chief Executive Cristiano Amon said during the event.
Rivian Automotive (RIVN US) shares continued to rally less than a week after the company went public. The stock rose another 15% on Tuesday, signaling that investors are still bullish on the company backed by Amazon and Ford.
Peloton (PTON US) shares popped 15.5% on Tuesday after the company announced its plans to sell 23.9 million shares of its Class A common stock at a public offering price of $46, netting the company about $1.07 billion. The decision to raise money comes as Peloton is seeing slowing momentum for its products. Peloton’s market value has plunged this year. Its stock price is down about 66% year to date. Peloton expects the stock offering to close Thursday.

Singapore

Creative Technology Ltd (CREAF SP). Shares surged 18.8% yesterday after the company announced the appointment of former foreign minister George Yeo as an independent non-executive director. Chief Executive Sim Wong Hoo said on Monday that with Mr Yeo’s extensive knowledge and experience in international affairs and leadership roles, he will be a valuable addition to the Creative board and his guidance and support will be invaluable to Creative.
ISDN Holdings Ltd (ISDN SP) Shares gained 5.7% yesterday. ISDN announced stellar third quarter results last week, posting a 56.8% rise in net profit to S$8.6mn for 3Q ended Sep 30, 2021. The company also commented that this was the most profitable quarter in history, with profit margins for the quarter improving to 11.3% from 7.1% a year earlier. In addition, on Monday, CGS-CIMB Research analyst William Tng maintained his BUY call and increased his TP on ISDN from 85 Sing cents to S$1. He highlighted that the improvement in gross profit margin could be due to a tapering off of construction-related revenue for its mini-hydropower plants in Indonesia and an incremental increase in revenue from higher-margin Industry 4.0 software and cloud solutions.
OxPay Financial Ltd (OPFL SP) Shares rose 5.2% yesterday. We initiated OxPay yesterday with an OUTPERFORM recommendation and a TP of 42 Sing Cents based on FY22 EPS. OxPay is well-positioned to benefit from the growing e-commerce trend and the explosive use of e-money with its recent integration of GrabPay and Shopee Pay. Moving forward into FY22, OxPay’s appointment as the exclusive payment provider for HIVE Ventures, Thailand’s first integrated food ecosystem, is expected to be a significant revenue contributor. OxPay’s target market of SMEs, coupled with its highly accredited license, gives it an edge over other competitors in the SME space, with adequate market share for penetration. Read here for the full report.
UMS Holdings Ltd (UMSH SP) Shares rose 5% yesterday, extending its rally after announcing stellar third quarter results last week. Revenue for the third quarter grew 50% to S$67.6mn, up from S$45.2mn the year before, while net profit rose to S$15.1mn, up 17% from S$12.9mn posted last year. This was largely attributable to the strong growth in the global semiconductor industry. The company has proposed an interim dividend of S$0.01 cent per share for Q321, up from $0.005 per share paid in the same period last year in view of its “exceptional” performance. UMS shareholders have received YTD S$0.03 in dividends and 1 bonus share for every 4 existing ordinary shares.
The Hour Glass (THG SP). Shares rose 3.9% yesterday, extending its rally after announcing stellar first half results last week (YE 31 March). For the half year ended 30 September, revenue was up 62% YoY to S$477.5mn, while earnings was up 110% YoY to S$ 62.6mn. The company was also able to achieve much better gross margins of 29.3% for the period, versus 26.2% in 1H21. Management commented that even though the COVID-19 pandemic continues to cause periodic disruptions to social and business activities, consumer sentiment within the watch industry remains positive. With the present momentum, the group expects to continue to be profitable in 2H22, and for the full financial year.
Trading Dashboard Update: Add Singtel (ST SP) at S$2.55. Remove OCBC (OCBC SP) at S$11.85 and Yangzijiang (YZJSGD SP) at S$1.27.

Hong Kong

Top Sector Gainers

Sector	Gain	Related News
Gambling	+2.80%	Ho Iat Seng Pushes Legal, Orderly, Sound Gaming Sector Buildout as World Tourism & Leisure Center
Biotechnology	+2.58%	Shanghai continues to invest in pharmaceutical industry and technology
IT Hardware	+2.22%	NA

Top Sector Losers

Sector	Loss	Related News
Precious Metal	-2.41%	NA
Alcoholic Drinks & Tobacco	-2.17%	NA
Warehousing & Logistic Services	-1.96%	Ocean Shipping Rates Fall but Ports Are Still Jammed

L’Occitane International S.A. (973 HK). Shares rose 12.7% yesterday on optimism from a couple of brokers. Recently, L’Occitane announced that it had acquired 83% indirect equity of Sol de Janeiro, a high-end care brand in the US. Management expects that the brand’s sales growth will reach 30-40% in the next 3-5 years, and believes that through scale, channel combination, and realization of synergies with the group, its EBITDA margin has room for improvement. Jefferies released a research report yesterday, reiterating its BUY rating on L’Occitane with a TP of HK$ 34.74. Daiwa Securities has also released a research report yesterday, with a BUY rating on the company and a TP of HK$ 32.
Razer Inc (1337 HK). Shares rose 11.5% yesterday after Razer executives plan to value the firm at up to HK$ 35bn in a take-private deal. Chairman Min-Liang Tan and non-executive director Kaling Lim, with a combined stake of nearly 60% in Razer, are leading a group to offer up to HK$ 4 per share for the deal, which is almost double Razer’s average share price of HK$2.10 over the past month. The move comes as the consortium believes that Razer has been undervalued in Hong Kong where investors typically pay more attention to tech firms from mainland China.
XD Inc (2400 HK). Shares rose 10.9% yesterday. Recently, the company held an investor exchange meeting where a number of games were introduced, such as “Flash Party”, “Torch Light”, “Sword of the Lily of the Valley”. The games have been submitted for review and are awaiting approval by the regulatory authorities. Next year, the company also plans to release 3-4 new games.
JS Global Lifestyle Co Ltd (1691 HK). Shares rose 9.8% yesterday. Recently, the company announced that the third quarter gross revenue of its overseas subsidiary, SharkNinja, increased 19.3% YoY. During the previous roadshow, management revealed that overseas demand was strong, and sales remained above 20% in August-September. Management is also confident that revenue will maintain a double-digit growth in the fourth quarter. Zhongtai International gave JS Global Life a BUY rating with a TP of HK$ 24.5, while Shenwan Hongyuan maintained its BUY rating.
Jinxin Fertility Group Ltd (1951 HK). Shares rose 8.4% yesterday. Xu Qingfeng, deputy director of the Guangdong Provincial Health Commission, said on Monday that with the implementation of the three-child policy, Guangdong Province plans to achieve fully funded pre-marital and pre-pregnancy health checks by the end of 2022. Jinxin Fertility is the largest private assisted reproduction (ARS) supplier in China and is focusing on the Guangdong-Hong Kong-Macao Greater Bay Area as its business strategy. In September this year, the company acquired the Hong Kong Reproductive Health Center and the Hong Kong Assisted Reproductive Center to officially provide ARS and fertility services in Hong Kong, China.

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