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โ Dimitry Nakhla | Babylon Capitalยฎ
Alphabet $GOOG Reports a Strong Q3 ๐ฏ
โ Revenue: $84.74B vs $84.21B (est)
โ Adjusted EPS: $1.89 vs $1.85 (est)
โฌ๏ธ Guidance
GOOGLE CLOUD โ๏ธ +34.97% YoY
#stocks #investing $GOOGL https://t.co/JEujaOI8SZ
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Alphabet $GOOG Reports a Strong Q3 ๐ฏ
โ Revenue: $84.74B vs $84.21B (est)
โ Adjusted EPS: $1.89 vs $1.85 (est)
โฌ๏ธ Guidance
GOOGLE CLOUD โ๏ธ +34.97% YoY
#stocks #investing $GOOGL https://t.co/JEujaOI8SZ
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Offshore
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โ App Economy Insights
$GOOG Alphabet Q3 FY24:
โข Revenue +15% Y/Y to $88.3B ($2.0B beat).
โข Operating margin 32% (+4pp Y/Y).
โข EPS $2.12 ($0.27 beat).
โ๏ธ Google Cloud:
โข Revenue +35% Y/Y to $11.4B.
โข Operating margin 17% (+14pp Y/Y).
โถ๏ธ YouTube ads +12% to $8.9B. https://t.co/BvYKQ10kIu
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$GOOG Alphabet Q3 FY24:
โข Revenue +15% Y/Y to $88.3B ($2.0B beat).
โข Operating margin 32% (+4pp Y/Y).
โข EPS $2.12 ($0.27 beat).
โ๏ธ Google Cloud:
โข Revenue +35% Y/Y to $11.4B.
โข Operating margin 17% (+14pp Y/Y).
โถ๏ธ YouTube ads +12% to $8.9B. https://t.co/BvYKQ10kIu
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Offshore
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โ App Economy Insights
$AMD AMD Q3 FY24:
โข Revenue +18% Y/Y to $6.8B ($110M beat).
โข Gross margin 50% (+3pp Y/Y).
โข Operating margin 11% (+7pp Y/Y).
โข Non-GAAP EPS $0.92 (in-line).
โข Q4 rev. guidance ~$7.5B ($50M miss).
Dr. Lisa Su: "We see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute."
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$AMD AMD Q3 FY24:
โข Revenue +18% Y/Y to $6.8B ($110M beat).
โข Gross margin 50% (+3pp Y/Y).
โข Operating margin 11% (+7pp Y/Y).
โข Non-GAAP EPS $0.92 (in-line).
โข Q4 rev. guidance ~$7.5B ($50M miss).
Dr. Lisa Su: "We see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute."
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Offshore
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โ Stock Analysis Compilation
Kingdom Capital Advisors on ECC Capital $ECRO US
Thesis: Despite terminal value risks, ECRO presents a low-market-cap opportunity with strong cash flow from local power sales and local initiatives supporting margins
(Extract from their Q3 letter) https://t.co/X5LckUrdLq
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Kingdom Capital Advisors on ECC Capital $ECRO US
Thesis: Despite terminal value risks, ECRO presents a low-market-cap opportunity with strong cash flow from local power sales and local initiatives supporting margins
(Extract from their Q3 letter) https://t.co/X5LckUrdLq
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Offshore
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โ Stock Analysis Compilation
Platinium on Nice $NICE US
Thesis: Nice Ltd offers an essential SaaS solution for call centers, and despite concerns over AI, its strong position and discounted valuation make it a solid investment.
(Extract from their Q3 letter) https://t.co/cYlWpPVXCH
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Platinium on Nice $NICE US
Thesis: Nice Ltd offers an essential SaaS solution for call centers, and despite concerns over AI, its strong position and discounted valuation make it a solid investment.
(Extract from their Q3 letter) https://t.co/cYlWpPVXCH
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โ Capital Employed
Best Stock Pitches newsletter being sent to inbox's tomorrow.
Over 40 quality pitches. Lots of great ideas out there at the moment.
https://t.co/jEccgMyfbM
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Best Stock Pitches newsletter being sent to inbox's tomorrow.
Over 40 quality pitches. Lots of great ideas out there at the moment.
https://t.co/jEccgMyfbM
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Offshore
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โ Stock Analysis Compilation
Ariel Investments on Tesco $TSCO LN
Thesis: Tescoโs strengthened market position and diversification into new revenue streams position it as a resilient growth story in the UK retail sector.
(Extract from their Q3 letter) https://t.co/Z4HOTlJfcJ
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Ariel Investments on Tesco $TSCO LN
Thesis: Tescoโs strengthened market position and diversification into new revenue streams position it as a resilient growth story in the UK retail sector.
(Extract from their Q3 letter) https://t.co/Z4HOTlJfcJ
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Offshore
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โ Startup Archive
Sam Altman: โThis is probably the best time - maybe ever - to be starting your careerโ
When asked how startup founders should handle a failed venture or pivot, Sam responds:
โFirst of all, I think this is probably the best time โ maybe ever โ to be starting out your career because you will get to surf the greatest technological wave, maybe ever. And what that means is you can change course many times because you will have this unbelievable tailwind.โ
He advises founders to not get too hung up on any particular setback or failure โ or even just changing your mind if you find something more exciting to go after:
โI think this is going to be an unusual time in how much it rewards adaptability and decisive and quick movement. And I would trust thatโฆ And not get hung up on the fact that you decided to pivot or something didnโt work because you are just going to be flooded with opportunities for the next few years.โ
He concludes:
โItโs still hard. It still always feels like a setback. But take the time you need to go on vacation, go for a hike, or just stew over it for a little while. But when you get back up, get back up with vigor.โ
Video source: @HarvardHBS (2024)
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Sam Altman: โThis is probably the best time - maybe ever - to be starting your careerโ
When asked how startup founders should handle a failed venture or pivot, Sam responds:
โFirst of all, I think this is probably the best time โ maybe ever โ to be starting out your career because you will get to surf the greatest technological wave, maybe ever. And what that means is you can change course many times because you will have this unbelievable tailwind.โ
He advises founders to not get too hung up on any particular setback or failure โ or even just changing your mind if you find something more exciting to go after:
โI think this is going to be an unusual time in how much it rewards adaptability and decisive and quick movement. And I would trust thatโฆ And not get hung up on the fact that you decided to pivot or something didnโt work because you are just going to be flooded with opportunities for the next few years.โ
He concludes:
โItโs still hard. It still always feels like a setback. But take the time you need to go on vacation, go for a hike, or just stew over it for a little while. But when you get back up, get back up with vigor.โ
Video source: @HarvardHBS (2024)
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $META ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.11x
โข5-Year Mean: 22.49x
โขNTM FCF Yield: 3.05%
โข5-Year Mean: 3.67%
As you can see, $META appears to be slightly overvalued
Going forward, investors can expect to receive ~14% LESS in earnings per share & ~16% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $META is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $65.40B
โขLong-Term Debt: $18.39B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 159x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 26.0%
โข2020: 23.5%
โข2021: 33.7%
โข2022: 22.0%
โข2023: 26.3%
โขLTM: 31.7%
RETURN ON EQUITYโ
โข2019: 20.0%
โข2020: 25.4%
โข2021: 31.1%
โข2022: 18.5%
โข2023: 28.0%
โขLTM: 35.4%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2018: $55.84B
โข2023: $134.90B
โขCAGR: 19.29%
FREE CASH FLOWโ
โข2018: $15.36B
โข2023: $43.85B
โขCAGR: 23.34%
NORMALIZED EPSโ
โข2018: $7.57
โข2023: $14.87
โขCAGR: 14.45%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 2.92B
โขLTM Shares Outstanding: 2.64B
By reducing its shares outstanding ~9.5%, $META increased its EPS by ~10.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 81.5%
โขLTM Operating Margins: 41.2%
โขLTM Net Income Margins: 34.3%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~14% MORE in EPS & ~16% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $META has to grow earnings at a 13.06% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (13.06%) required growth rate:
2024E: $21.42 (44.9% YoY) *FY Dec
2025E: $24.62 (14.9% YoY)
2026E: $28.35 (15.2% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so letโs assume $META ends 2026 with $28.35 in EPS & see its CAGR potential assuming different multiples
26x P/E: $639.84๐ต โฆ ~10.9% CAGR
25x P/E: $639.84๐ต โฆ ~8.9% CAGR
24x P/E: $639.84๐ต โฆ ~6.9% CAGR
23x P/E: $613.18๐ต โฆ ~4.8% CAGR
22x P/E: $586.52๐ต โฆ ~2.7% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >26x earnings, a multiple above its 5-year average (22.49x), however 26x is a multiple thatโs justified given its mid-teens earnings growth rate, balance sheet, visionary CEO & investments in AI & LLMs
As Iโve mentioned before: โโฆ the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish oneโ โ (which can lead to a sustainable re-rating over the next few years)
Mark Zuckerberg continues to execute exceptionally well, as he has always done
Today at $593๐ต $META appears to be fairly valued, those buying today wonโt have a margin of safety and will be relying heavily on estimates being met & revised upwards
#stocks #investing
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๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $META ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.11x
โข5-Year Mean: 22.49x
โขNTM FCF Yield: 3.05%
โข5-Year Mean: 3.67%
As you can see, $META appears to be slightly overvalued
Going forward, investors can expect to receive ~14% LESS in earnings per share & ~16% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $META is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $65.40B
โขLong-Term Debt: $18.39B
$META has an excellent balance sheet, an AA- S&P Credit Rating & 159x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 26.0%
โข2020: 23.5%
โข2021: 33.7%
โข2022: 22.0%
โข2023: 26.3%
โขLTM: 31.7%
RETURN ON EQUITYโ
โข2019: 20.0%
โข2020: 25.4%
โข2021: 31.1%
โข2022: 18.5%
โข2023: 28.0%
โขLTM: 35.4%
$META has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2018: $55.84B
โข2023: $134.90B
โขCAGR: 19.29%
FREE CASH FLOWโ
โข2018: $15.36B
โข2023: $43.85B
โขCAGR: 23.34%
NORMALIZED EPSโ
โข2018: $7.57
โข2023: $14.87
โขCAGR: 14.45%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 2.92B
โขLTM Shares Outstanding: 2.64B
By reducing its shares outstanding ~9.5%, $META increased its EPS by ~10.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 81.5%
โขLTM Operating Margins: 41.2%
โขLTM Net Income Margins: 34.3%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~14% MORE in EPS & ~16% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $META has to grow earnings at a 13.06% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (13.06%) required growth rate:
2024E: $21.42 (44.9% YoY) *FY Dec
2025E: $24.62 (14.9% YoY)
2026E: $28.35 (15.2% YoY)
$META has a decent track record of meeting analyst estimates ~2 years out, so letโs assume $META ends 2026 with $28.35 in EPS & see its CAGR potential assuming different multiples
26x P/E: $639.84๐ต โฆ ~10.9% CAGR
25x P/E: $639.84๐ต โฆ ~8.9% CAGR
24x P/E: $639.84๐ต โฆ ~6.9% CAGR
23x P/E: $613.18๐ต โฆ ~4.8% CAGR
22x P/E: $586.52๐ต โฆ ~2.7% CAGR
As you can see, $META appears to have double-digit CAGR potential if we assume >26x earnings, a multiple above its 5-year average (22.49x), however 26x is a multiple thatโs justified given its mid-teens earnings growth rate, balance sheet, visionary CEO & investments in AI & LLMs
As Iโve mentioned before: โโฆ the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish oneโ โ (which can lead to a sustainable re-rating over the next few years)
Mark Zuckerberg continues to execute exceptionally well, as he has always done
Today at $593๐ต $META appears to be fairly valued, those buying today wonโt have a margin of safety and will be relying heavily on estimates being met & revised upwards
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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