11 September 2025 | 9:44AM HKT Kingdee (0268.HK): Asia Leaders Conference 2025 - Key Takeaways: Migration to subscription model with higher margin; Agentic AI We hosted Kingdee's (0268.HK, Buy) management on Sep 10 at our Asia Leaders Conference 2025. Key discussions were around 2H25 outlook, profitability trend, AI offerings and monetization. Overall, management is positive on the Gen-AI adoption to drive cloud platform migration and rising clients' spending, and the company continues to see margin improve ...

Group 1 - The core strategy of the company involves transitioning from transactional sales to subscription models as part of its value creation plan [1][2] - The company is on track with its plan, which was initially presented in February, focusing on changes in A&G and Life Science sectors [2] - In the A&G sector, the company is phasing out print books and transactional e-books by June 2026, along with one-time digital collection sales [3]

Core Insights - Spotify's streaming music, audiobooks, and podcast offerings continue to attract users despite global economic challenges, with high engagement and strong retention rates [1] - The company is confident in its long-term strategy, with a clearer direction moving forward [2] User Engagement and Growth - Users are spending 44% more time on video content, and Spotify has paid out over $100 million to podcast creators in Q1 2023 [3] - The subscriber base increased by 12% year-over-year, reaching 268 million, while monthly active users rose by 10% to 678 million [3] - Revenues grew by 15% to €4.2 billion ($4.7 billion) [3] Monetization Strategies - Spotify's Partner Program for video podcasters has expanded to nine new markets since its launch in January [2] - The company acknowledges the competitive landscape where 46% of consumers are "deal chasers," indicating a potential risk to customer loyalty [4] - The possibility of introducing a lower-cost subscription model is acknowledged, but the company believes it may not significantly enhance overall revenue [5]

Core Viewpoint - The technology sector is experiencing a sell-off due to concerns over new tariffs announced by U.S. President Donald Trump, with the Nasdaq-100 index dropping by 11% since April 2. However, Costco is highlighted as a potential investment opportunity amidst these concerns due to its unique business model and financial profile [1][2]. Company Financials - For the quarter ended February 16, Costco reported net sales of $62.5 billion and total revenue of $63.7 billion, with merchandise costs at $55.7 billion and operating income of $2.3 billion. Membership fees contributed $1.2 billion to total revenue, indicating a significant recurring revenue stream [4][5]. - Costco's operating expenses totaled $61.4 billion, suggesting a thin margin on merchandise sales, which is typical for brick-and-mortar retailers [4]. Membership Model - The subscription model of Costco, which generates high profit margins, is expected to help the company withstand the impact of tariffs. This model differentiates Costco from other retailers like Walmart and Target [6][5]. - CEO Ron Vachris indicated that about one-third of Costco's U.S. sales are imported, with less than half of those from countries directly targeted by tariffs, providing some reassurance regarding the company's exposure to tariff impacts [8]. Market Positioning - Costco's bulk-buying model and competitive pricing may attract cost-conscious consumers, potentially increasing foot traffic and membership volume as tariffs affect the retail economy [9][10]. - Compared to traditional retailers, Costco may be better positioned to navigate the tariff environment, as consumers may seek alternatives that offer better value [10]. Valuation Insights - Costco's forward price-to-earnings (P/E) ratio is currently at 50, significantly higher than the average of 20 for the S&P 500, indicating that while the stock is not cheap, it has normalized from a peak of nearly 60 earlier in the year [11][13]. - Despite near-term uncertainties, Costco is seen as well-prepared to manage the effects of tariffs, particularly on its high-margin subscription business, suggesting a potential buying opportunity for long-term investors [14].