27. May 2021 | 09:36 CET
Baidu, The Place Holdings, Tencent - China's economy is booming
China has achieved what many people long for, a return to normality. Despite the pandemic, the Chinese economy grew 2.3% in 2020, and 8.4% is forecast for this year. The tourism industry could report growth for the first time compared to 2019 due to the increase in domestic travel. In e-commerce, 63% more goods were sold abroad. Despite this, many tech stocks are trading at shallow levels. Today, we look at three stocks from the Middle Kingdom.
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ISIN: US0567521085 , SG1Q02920318 , KYG875721634
Baidu - Growing as usual
Baidu is Asia's search engine with a market share of about 70%. Its main business is online marketing. In addition, a video streaming service has been built up, its operating system has been developed and it has also been involved in autonomous driving. In artificial intelligence (AI), Baidu is very well positioned and is currently growing massively.
The figures for the first quarter prove this. 70% growth in this division already accounts for more than 20% of Baidu's total revenue.
Management expects that in 3-5 years the revenue could be higher than that of the core business. The Company plans to grow between 20% and 30% year-on-year in the second quarter. The group also wants to get involved in the semiconductor business and has brought investors on board.
The stock has fallen to USD 174.05 since its high of USD 354.82 on Feb. 22. Since then, the stock has been trending sideways and is currently at around USD 192. Most recently, the stock tested the 200 moving average several times but was able to establish itself above it. All signs are pointing to growth, and one can build a first position here. If you want a little more security, you can wait for a closing price above USD 198.
The Place Holdings - Exciting projects with potential
The Place Holdings has its home on the Singapore stock exchange and focuses on three business areas. The first is the media, advertising and entertainment sector, specifically digital outdoor advertising. Integrated media can be used to breathe new life into underutilized facilities.
The second mainstay is real estate development. The Company owns two major properties directly in Singapore. Tanjong Pagar was purchased in 2019 and they are now waiting for the change of use to be done as per the Central Business District Incentive Scheme. Once that is complete, they could build a 35-story high-rise there. The second property, Tanah Merah, was only purchased in November 2020. Located on the outskirts of Singapore, it is 8,880sqm and can accommodate up to 265 condominiums and 2,000sqm of commercial space.
The third business area is cultural tourism. To this end, The Place Holdings acquired an approximately 270,500sqm plot of land near Mount Yuntai, which is a cultural tourist destination. The mountain and surrounding area are listed as a UNESCO Global Geopark. In March, the commercial area became a residential area, which increased the property's value by over 320%.
Since then, planning has been underway to accommodate both tourism and the New Retail trend. New Retail is the complete integration of online, offline, logistics and technology for a single value chain.
There is an extraordinary general meeting at which a share reverse split with a factor of 1: 5 is to be decided. That makes sense since there are currently over 5.8 billion shares in circulation; it will likely make the share more tradable. Currently, one should only enter with strict limits.
Tencent - Penalty still pending
Tencent is many things - a large technology group, the largest video game provider in the world, a communication platform offering WeChat or QQ with 100s of millions of users, search engines, cashless payment via WeChat Pay or WeBank and is involved in many different large companies such as Tesla, Universal Music, Spotify and Snapchat. Especially in the video games market, the Company has many lucrative investments, such as Riot Games, Activision Blizzard, Supercell and Ubisoft.
First-quarter numbers were good, with revenue up 25% and profit up 65% year-on-year. The games division increased revenue by 17%. Particularly noteworthy are the two areas, Fintech and Cloud, with a growth of 47%. At the same time, the Company continues to invest heavily in the research and development of tech innovations across all business units.
The catch for Tencent continues to be the penalty by the Chinese government hanging in the air, and no one knows what it will be. China's political situation is a concern, as the government is bothered by the influence that big tech companies might have on popular opinion. Tencent is currently at around USD 78. One should wait for the penalty before investing in the stock.