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In today’s briefing:
- Nvidia’s China Dominance in AI Accelerator Has Serious Deficiencies
- Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure
- Rome Capital’s Alex Feng and Jason Quan making the case for Samsonite $1910.HK
- AMD. Playing The Long Game
- TMON and WeMakePrice File for Court Receivership – Impact on the Korean E-Commerce and PG Sectors
- Portfolio Update: July 2024
- Mediatek: AI Features Can Shorten Smartphone Replacement Cycle; New Verticals to Kick In 2H25E
- [Earnings Preview] Bleeding Refining Margins & Lower Gas Prices to Eat into Shell’s Earnings
- Bank Central Asia (BBCA IJ) – Growth Momentum Maintained with Lower Credit Costs
- China Comm Const (1800 HK): Robust Growth Prospects Accelerating
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Nvidia’s China Dominance in AI Accelerator Has Serious Deficiencies
- Nvidia’s H20 and upcoming B20 were launched to comply with China export controls, and have remained successful due to deficiencies and supply issues for Huawei’s Ascend AI accelerators.
- However, Nvidia’s China success will be short-lived due to increasing LLM compute requirements and no method for it to offer a more performance dense offering due to export controls.
- Not only will Huawei’s upcoming Ascend AI accelerator mitigate this issue, but it will likely also aim to address some of the other deficiencies of the Ascend platform too.
Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure
- The Bank of Japan has raised its short-term interest rate to 0.25% from 0.1% ahead of the core of consensus expectations, and BoJ plans to pare back purchases of JGBs
- We focus on those big-cap Japanese banks that are well geared into higher domestic rates through loan books and BoJ deposits, that also have lesser exposure to rising JGB yields
- We stay broadly positive on Japanese bank shares, despite their performance; we add Chiba to the buy list of Resona, Mizuho, SMFG and Concordia, whilst keeping Kyoto as a sell
Rome Capital’s Alex Feng and Jason Quan making the case for Samsonite $1910.HK
- Samsonite is a global luggage leader with three major brands: Samsonite, Tumi, and American Tourister
- Despite challenges during COVID, Samsonite has successfully executed a turnaround by closing stores and improving sales and margins
- The stock is undervalued in Hong Kong, with plans for a secondary US or European listing in the near future, potentially offering a 100% upside opportunity.
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AMD. Playing The Long Game
- Q224 revenues of $5.8 billion, +5.5% QoQ, +9% YoY and $100 million above the guided midpoint
- AMD forecasted current quarter revenues of $6.7 billion at the midpoint, up 15% QoQ and about the same YoY.
- AMD shares are up 9% in premarket trading, hardly the response one expected from a good but not amazing report. But why?
TMON and WeMakePrice File for Court Receivership – Impact on the Korean E-Commerce and PG Sectors
- One of the biggest stories in the Korean e-commerce sector this week has been TMON and WeMakePrice filing for court receivership due to liquidity crisis.
- Singapore’s Qoo10 is the controlling shareholder of TMON and WeMakePrice. Young-Bae Ku is the largest shareholder of Qoo10 with a 42.77% stake, followed by KKR with a 25.65% stake.
- Competitors such as E-Mart and Coupang are most to benefit. PG companies such as KG Inicis and NHP KCP are negatively impacted.
Portfolio Update: July 2024
- Welcome back to the portfolio updates series!
- This month, I am a few days early with the update. The reason is that my wife and I are celebrating our wedding next weekend, followed by an extended vacation, during which I will be disconnected for a couple of weeks.
- As a result, the next stock deep dive will not be released until the last week of August.
Mediatek: AI Features Can Shorten Smartphone Replacement Cycle; New Verticals to Kick In 2H25E
- Mediatek 2Q24 Earnings Beat Expectations; Strong Mid-Term Revenue Guidance Maintained
- 2Q24 Global Smartphone Market Witnessed Best Growth in Three Years
- Repeats Strong Mid-Term Guidance; Continues to Signal Revenue Strength for 2025E & 2026E. Maintain Structural Long Rating.
[Earnings Preview] Bleeding Refining Margins & Lower Gas Prices to Eat into Shell’s Earnings
- Shell forecasts a decline in upstream production, gas price realisations, and refining margins. Its QoQ Revenue & EPS are expected to drop 4.3% and 21.7%, respectively.
- Shell anticipates Q2 post-tax impairments of USD 1.5 to USD 2 billion due to halting a biofuels plant in Rotterdam and divesting its Singapore refinery.
- On a brighter note, Shell anticipates higher chemical margins, increased marketing sales volume, and improved refinery utilisation rates in Q2.
Bank Central Asia (BBCA IJ) – Growth Momentum Maintained with Lower Credit Costs
- Bank Central Asia (BBCA IJ) booked another set of impressive results in 2Q2024, with continuing momentum behind loan growth driven by corporate and consumer loans, with credit quality under control.
- The bank continued to grow its deposits with CASA growth outpacing overall deposits, which helped underpin an increase in net interest margin to 5.8%, with credit costs at 0.2%
- BCA remains a top pick amongst Indonesian banks, with a long-term track record of producing sector returns, with a strong risk management but dynamic management culture.
China Comm Const (1800 HK): Robust Growth Prospects Accelerating
- China Communications Construction (1800 HK)‘s overseas contracts surged sharply in 2Q24 as market share gained. Slow domestic contracts are transient as bond issues will accelerate.
- Its backlog continued to grow to 4.7x 12-month forward revenue, which is higher than the 5-year average of 4.1x. Improving margin trend in 1Q24 will sustain into 2H24.
- With a projected ROE of 8.4% for the next two years, its 0.2x P/B is inexpensive. It is also attractive based on dividend yields of 7.7% and 8.4%, respectively.