Autohome Inc.

ATHM Details

Autohome Inc. (NYSE: ATHM) is a Chinese automotive online platform that provides buyers, manufacturers, and dealers with interactive material and tools. Its operating segments are 1) Media Services, which offers targeted-marketing solutions for brand and sales promotion; 2) Leads Generation Services, which enables dealers to create their online stores, list pricing and promotional information, place advertisements, and manage customer relationships; and 3) Online Marketplace & Others, which provides facilitation services and other platform-based services for new and used car transactions. As of January 10, 2022, it had 127.35 million American Depositary Shares (ADS) listed and outstanding (each ADS representing four Class A ordinary shares). 

Latest News:

• Share Repurchase Program: On November 18, 2021, ATHM announced a share repurchase program in which the company will buy up to USD 200 million in American depositary shares (ADS) over the next twelve months. From time to time, the company's proposed repurchases may be made on the open market at current market prices. It needs to make repurchases with its existing cash balance.

Q3FY21 Results:

• Decrease in Topline: ATHM reported a YoY decline of 23.83% in total revenue to RMB 1.76 billion in Q3FY21 (ended September 30, 2021) from RMB 32 billion in Q3FY20, due to a 53.19% YoY reduction in revenue from the Media services segment.
• Contraction in Profitability: Net income (attributable to common shareholders) for Q3FY21 was RMB 511.04 million vs. RMB 846.67 million in Q3FY20.
• Strong Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of RMB 19.18 billion and no outstanding debt.

Risks:

• Voting Concentration Risk: Yun Chen Capital Caymen, a subsidiary of Ping An Group, owned 49.0% of ATHM's common shares as of December 31, 2020, providing significant control over its activities and limiting the capacity of other shareholders to influence corporate decisions.
• Regulatory and Political Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ATHM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ATHM's stock price has declined 63.29% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 26.10 to USD 147.67. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 59.86. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 42.24.

Considering the significant correction in the stock price in the past nine months, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 33.86, up 1.77% as of January 10, 2022, 10:11 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

 

Hello Group Inc.

MOMO Details

Hello Group Inc. (NASDAQ: MOMO) is a Chinese social media and entertainment company. MOMO's platform products, such as Momo, Tantan, and others, allow people to explore new relationships, expand their social connections, and develop meaningful conversations. Live streaming, value-added, mobile marketing, online gaming, and other services are the company's key revenue streams. As of January 10, 2022, the company had 196.95 million American Depository Shares (ADS) listed and outstanding (each ADS representing two Class A ordinary shares).

Latest News:

• Foraying into Hollywood: On September 22, 2022, MOMO announced its expansion into Hollywood with the launch of Hello Studios and Hello Pictures. Hello Studio, is a state-of-the-art 360 production facility with sound stages, recording studios, editing bays, and production suites in a 25,000 square foot Burbank facility. It also hired top executives from Marvel Television, Warner Bros. Records, Virgin Records, EMI North America, Talpa North America, LD Entertainment, and APA to develop and produce family, young adult, and music-centric original content.

Q3FY21 Results:

• Flat Topline: The company witnessed a YoY decline of 0.20% in total net revenue to RMB 3.76 billion in Q3FY21 (ended September 30, 2021) compared to RMB 3.77 billion in Q3FY20, attributable to the structural reform on the company's core live video business and decline in the Tantan's live as a result of alteration in the strategic focus.
• Surge in Profitability: Net income for Q3FY21 decreased 11.72% YoY and stood at RMB 403.19 million vs. RMB 456.73 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company's cash balance stood at RMB 9.29 billion, with a total debt of RMB 4.61 billion.

Key Risks:

• Political and Regulatory Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.
• Customer Concentration Risk: One of the third-party application shops accounted for 26% of the company's total accounts receivable in FY20 and FY19. As a result, its operations and cash flow may suffer due to its greater reliance on such third-party outlets.

Outlook:

• Q4FY21 Outlook: As of the Q3FY21 press release, MOMO expects to generate RMB 3.60 - 3.75 billion, representing a YoY decline of 5.1 to 1.2%. This prediction, which is subject to change, includes the company's current and preliminary opinions on the market and operating conditions.

 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MOMO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

MOMO share price has fallen 39.41% in the past nine months and currently leaning towards the lower-band of the 52-week range of USD 8.17 to USD 20.14. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 42.68. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 11.48.

Considering the significant correction in the stock price in the past nine months, strong balance sheet, high profitability margins, and current valuation, we recommend a "Speculative Buy" rating on the stock at the current price of USD 8.985, down 2.23% as of January 10, 2022, 12:49 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

 

U.S. Xpress Enterprises, Inc.

USX Details

U.S. Xpress Enterprises, Inc. (NYSE: USX) is one of the largest asset-based freight carriers in the United States, offering various services through its truckload fleet. Through its non-asset-based truck brokerage system, the company oversees third-party carriers. Its operating segment is 1) Truckload, which provides transportation services via Over-The-Road (OTR) and dedicated type contracts, and 2) Brokerage, which generates revenue by brokering freight to third-party operators.

Q3FY21 Results:

• Double-Digit Growth in Topline: The company witnessed YoY growth of 13.83% in total operating revenue to USD 491.14 million in Q3FY21 (ended September 30, 2021) compared to USD 431.47 million in Q3FY20, driven by growth in Fuel Surcharge and Brokerage.
• Decline in Profitability: Net loss attributable to shareholders was USD 5.48 million in Q3FY21, compared to a net income of USD 10.70 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company's cash balance stood at USD 6.00 million, with a total debt of USD 364.99 million.

Key Risks:

• Voting Concentration Risk: Each share of Class B common stock in USX has five votes, whereas each share of Class A common stock has just one vote. Fuller and Quinn family members (Max Fuller and Patrick Quinn founded the company in 1985) who own class B shares have disproportionate voting power, limiting the capacity of other shareholders to influence corporate choices.

Outlook:

• Capex Guidance: For FY21, the company anticipates USD 130 to 150 million net capital expenditures.
• Q4FY21 Guidance: In Q4FY21, USX expects robust fright demand given the overall economic recovery and tailwinds that it is seeing due to the Federal Government's stimulus package. It also anticipates 2-4% sequential growth in Truckload prices, thus exceeding the inflation cost.

Valuation Methodology: E.V./Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

USX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

USX share price has fallen 56.13% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 4.60 to USD 12.33. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.84. We have valued the stock using the E.V./EBITDA-based relative valuation methodology and arrived at a target price of USD 6.44.

Considering the significant correction in the stock price in the past nine months, positive outlook, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 5.15, down 2.09% as of January 10, 2022, 03:45 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.