Asia tech’s next challenge is resetting the bar
The instinct is to sell. Asia technology companies from Singapore to China are making the right noises on cost cutting and are mostly moving in the right direction but can’t do enough to please investors. The market’s high expectations are a sticky problem for a sector on the mend.
“Stocks in this part of the world fall on a miss and fall on a beat as well”, Venugopal Garre, a senior analyst at Bernstein wrote to clients after shares of Singapore’s Grab crashed 15% on Thursday despite the ridehailing to deliveries company raising its guidance.
Grab is at one pointy end of the scepticism. Investors in the $11 billion Softbank-backed company are focusing on its tepid 3% growth in its gross merchandise value in the first quarter and looking past its narrowing of losses for the fifth straight quarter.
CEO Anthony Tan is more sanguine. The return of tourists to Southeast Asia, he says, bodes well for the group’s core mobility business in the second half.
Earlier in the week, shares of compatriot Sea plunged 18% after slightly disappointing earnings, which overshadowed the games-to-shopping company recording its second consecutive quarter of profit.
Others are feeling a similar heat. Chinese video-games and social media giant Tencent on
Wednesday delivered a betterthan-expected 11% year-onyear jump in quarterly revenue, thanks to double-digit percent increases in its advertising, payments and cloud computing units.
Despite the return to growth, its Hong Kong stock still slumped the following day.
Investors were also spooked when e-commerce group Alibaba, reported sales that missed analyst forecasts on Refinitiv by 1%, wiping out $13 billion in market value overnight in New York. Even the company’s plan to return shares of its cloud computing division to shareholders — part of a radical breakup aimed at unlocking value — failed to enthuse markets.
Some caution is warranted but the $220 billion Alibaba, for example, trades on just 10 times its forecast next 12-month earnings, not that far from stateowned utilities like China Mobile and China Unicom, which fetch roughly 9 times. At 2.5 times sales, Sea trades at nearly half of Tencent’s multiple.
Grab meanwhile is handicapped by the excessive $40 billion valuation at which it went public through a merger with a blank-cheque firm in 2021. At 4 times sales, it still commands a multiple twice
Uber’s, suggesting investors are at least giving it some credit for its high potential businesses including in fintech. The next challenge is resetting investor expectations so that beats can shine through.