2026-01-20 01:50Summary of Key Points from the Conference Call Industry Overview - Industry: Internet sector in Asia Pacific - Outlook for 2026: Stable fundamentals with reasonable valuations, driven by steady competition, improving regulatory clarity, and a focus on balancing revenue growth with profitability [1][2] Core Themes and Insights - AI Adoption: Transition from hype to real-world adoption of Generative AI (Gen AI) is a key theme, with companies leveraging AI expected to outperform [2][38] - Competition: Stable competition across most sectors, with notable exceptions in quick commerce in China and India, and pressure from ByteDance across various sub-sectors [4][9] - Regulatory Environment: Key regulations to monitor include the enforcement of the Mobile Software Competition Act in Japan and gig-economy regulations in India [4][10] Preferred Companies and Investment Picks - Tencent: Leading in AI-driven growth with stable competition and attractive valuation [3][13] - Baidu: Unlocking value through fast-growing cloud services and AI applications [3][13] - Eternal: Positioned well in the quick commerce sector in India, with potential for market share increase [3][13] - Recruit: Expected rise in average revenue per user (ARPU) due to AI-driven recommendations [3][13] - Naver: Anticipated growth in search and commerce business through AI implementation [3][13] Market Dynamics - China: Focus on AI deployment, with Tencent, Alibaba, and ByteDance leading the charge. E-commerce remains competitive, but online gaming is preferred for investment [32][38] - India: Strong fundamentals but high valuations. Quick commerce expected to rationalize in 2026, with potential consolidation [56][60] - Australia: Classifieds sector under pressure from Gen AI narratives, but seen as undervalued with significant moats [21][23] Financial Metrics and Projections - Valuations: Most companies in the sector are trading at reasonable multiples, with Tencent and Baidu highlighted for their growth potential [3][13] - Earnings Growth: Expected double-digit EPS growth for classifieds in Australia, with SEK projected to deliver the fastest growth [26][29] Risks and Challenges - Competition from ByteDance: Increasing pressure on incumbents across various sectors, particularly in e-commerce and online services [39] - Regulatory Risks: Potential for stricter regulations impacting profitability and operational flexibility [10][40] - Market Sentiment: Concerns over AI's impact on traditional business models, particularly in classifieds and online travel [21][60] Conclusion - The Asia Pacific internet sector is poised for stable growth in 2026, driven by AI adoption and a rationalization of competition in key markets. Investors are encouraged to focus on companies with strong fundamentals and growth potential, while remaining cautious of regulatory changes and competitive pressures.