Smartkarma Daily Briefs

• Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn’t huge. The stock is up 80% in 6+ months since.
• Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell. 
• Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.

• The company announced a settlement with its subsidiary of 18 mn HKD. This is material as we estimate that core profit for FY24 (June-end) would be 30-35 mn HKD. 
• This settlement will be paid in cash (tranches) as it involves making the company whole on a vendor’s profit guarantee shortfall. It boosts cash and investments >340 mn HKD. 
• The stock is cheap, with net cash almost equal to the market capitalization, an 11x PE (on core profit), and a 9% dividend yield. 

• AI advancements will increase data center power demand by 160% by 2030, consuming 8% of U.S. electricity.
• A single ChatGPT query uses 2.9 watt-hours of electricity, compared to 0.3 watt-hours for a Google search.
• 2 of the 5 top performing stocks year-to-date in the S&P 500 are utility companies Vistra Corp and Constellation Energy. Utility sector has gained 6.7% in 2024. 

• HDFC Bank is the largest private sector bank in India known for its strong track record of compounding book value and EPS
• The recent merger with Housing Development Finance Company initially received positive market reaction but has since caused a decline in HDFC Bank’s stock price
• Despite the stock underperformance, the merger offers potential cross-selling opportunities and a bright future for HDFC Bank

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Schlumberger’s revenue is expected to rise 12.1% YoY and net profit by 15.3% YoY in Q2 2024. Management sees sequential margin growth across divisions.
• Q2 growth is expected to be driven by SLB’s International segment, offsetting North American weakness. The International segment contributed 82% of Q1 revenue.
• SLB announced plans to increase shareholder returns from USD 2.5 billion to USD 3 billion in 2024 and to USD 4 billion in 2025.

• Mercari’s US operations, responsible for major losses, saw a workforce reduction by 45%, potentially preceding a market exit to improve overall margins.
• Fintech growth is strong, with Mercari issuing over 3 million credit cards, achieving a 67% YoY credit balance increase, despite current operational losses
• Mercari Hallo, an on-demand work platform, has rapidly gained users and business partners, positioning it to capitalize on Japan’s growing gig economy.

• Micron Technology recently provided insights into their fiscal third quarter 2024 performance, shedding light on various strategic and operational aspects that investors may find critical in shaping their investment thesis.
• Amid a challenging global semiconductor landscape characterized by rapid technological advancements and fluctuating demand cycles, Micron appears cautiously optimistic about the future, driven by strategic investments and a focus on high-margin products.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• EC Healthcare (2138 HK) reported muted FY24 result. While revenue increased 9% YoY to a record high of HK$4.2B, EBITDA and net profit declined 10% and 85%, YoY, respectively.
• The reopening of borders saw a slower-than-anticipated recovery in revenue from Chinese Mainland medical tourism. The prevailing high interest rate, inflationary pressure, and economic uncertainties have made the operations challenging.
• EC Healthcare shares plunged ~70% over the last one year. Although the company has long-term growth drivers and margin levers, there is short-term uncertainties over financial performance improvement.

• CarMax has reported its fiscal 2025 first quarter results, revealing a mixed financial scenario.
• This analysis aims to objectively evaluate the performance by weighing the key positives and negatives reflected in the data and future company outlook.
• Starting with the positives, CarMax noted several encouraging business trends, such as a stabilization in vehicle values and a decrease in average vehicle selling prices, which fell by approximately $700 per unit.

• NetDragon’s stock is priced at 11.0 HKD with 531 million shares and a market cap of 5,870 HKD
• Company completed a reverse merger listing for its education business, causing some complications, but gaming business is seen as a hidden gem with growth potential
• NetDragon, operated by the Liu family, has a history of successful business incubation and has returned around 50% of its market capitalization to shareholders in the past three years

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Telecom companies are traditionally “easy” to value. They have assets, debt, depreciation, earnings, cashflow. Lots of people like to use EV/EBITDA to measure.
• In comparing Japan’s telcos, I believe when Softbank Corp (9434 JP) is in the mix, one has to use forward PERs. EV/EBITDA is too fraught with complications.
• Softbank is currently at its most expensive multiple since listing on a Price to Forward Earnings basis, and relative to its major Peers. And KDDI has a big buyback now.

• Deepak Nitrite spending INR 9000 crore on capex for backward integration and forward integration along with focus on import substitution with foray into domain like Polycarbonates and Fluorination
• Deepak Nitrite promoters have been continuously increasing stake by 5% in the last few years and recently added 36 crore worth of equities
• The most interesting thesis building operationally is the revival of its key chemical spreads

• Haw Par Corp (HPAR SP), with a rich investment portfolio and an attractive consumer health care business, trades at 4% dividend yield but at a steep discount to SOTP value.
• The recent rise in share price of UOB (UOB SP) , where it holds a 4.5% stake, has widened this discount.
• We believe the management can unlock immense value for share holders by de-merging the consumer healthcare business and publicly listing it.

• After hitting a low point in Q4 2023, Research on Hong Kong companies has been slow to pick up reflecting the ongoing skepticism from investors. 
• Reports on the large China tech companies dominated the top ten companies covered over the last couple of years and in the first half of 2024.
• As China continues to dominate and make news in the global EV market, research in that sector has picked up.

• This writeup was inspired by David Orr’s tweet about the U.S. listed Chinese company DouYu (Nasdaq: DOYU) paying out a $9.76 special dividend.
• The stock closed at $12.59 the day before and was $6.59 earlier in the year.
• Among Chinese ADRs with significant cash balances, SOHU is my favorite. 

• The company’s annual revenue was $35,820 million in 2023 compared to $44,200 million in 2022, seeing a decrease of 18.96%.
• We estimate that for FY2024 the annual revenue will range at around $37,671 million and for 2025 at around $39,934 million.
• Gross profit for FY2023 was $19,951 million, decreased by 21.96% compared to $25,565 million for the corresponding period of 2022. 

• Matahari Department Store (LPPF IJ) results reflected a positive impact from the timing of Lebaran although the like-for-like comparisons were slightly below management expectations., although SSSG remains very strong YoY. 
• Management highlighted that better inventory controls meant that inventory levels finished 1Q2024 at significantly lower levels versus last year, with effective cost controls resulting in better EBITDA and net margins. 
• The company will slow its new store build-out to focus on improving the productivity of existing stores, with refurbishment of six stores and improving merchandise mix driving growth. 

• Rapid7, under the leadership of CEO Corey Thomas and CFO Tim Adams, remains at the forefront of cybersecurity solutions focused on delivering integrated risk and security operations.
• The company concluded the first quarter of 2024 with $807 million in Annual Recurring Revenue (ARR), which indicates an 11% year-over year growth.
• The quarter saw steady performance in its Direct Complete offerings but noted a shortfall in ARR expectations primarily due to slower transitions in the vulnerability management (VM) base to its integrated Cloud Risk Complete offering.

• The Walt Disney Company is a diversified worldwide entertainment company. The Company’s segments include Entertainment, Sports and Experiences.
• The Entertainment segment generally encompasses the Company’s non- sports focused global film, television and direct-to-consumer (DTC) video streaming content production and distri- bution activities.
• Its line of business includes Linear Networks, Direct-to-Consumer, and Content Sales/Licensing. 

• “Life is like a cup of coffee, it is best made with love…” I’ve loosely followed Farmer Bros (FARM) for quite some time but a series of events triggered me to revisit the situation.
• Part of my New Year’s resolution was to go cold turkey on my addiction of the highly acidic blend of roasted Robusta and Liberica black coffee one would find all over Singapore, typically consumed sugarless and without milk for the true aficionados – their presence never going unnoticed as every sip leaves an unmistakable yellow taint on the crooked canvas assembled right behind those lips.
• This turkey survived for quite a bit until two weeks ago … I took a short trip to Shanghai to visit some buddies (will be flying to Bangkok in a week – drop me an email if you’d like to grab a drink) and in the spirit of “whatever happens on vacation, stays on vacation” decided to steal a couple cups of freshly brewed black coffee to tide through the day, especially after a number of late drunken nights.