Category

Equity Bottom-Up

Sep 01
0

Daily Brief Equity Bottom-Up: Rakuten Bank (5838) – 4 Months On and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
  • Record Fund Ownership in Six Taiwanese Companies
  • Elecon Engineering Co. Ltd- Forensic Analysis
  • Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns
  • Huawei Quietly Debuts Flagship Smartphone in Effort to Ride Sales Wave
  • Lixil (5938 JP): Levered Business Facing Cyclical & Secular Headwinds & Continued Mkt Share Pressure
  • Alibaba Group Holding Limited: Making Huge Strides In AI Which Could Prove A Growth Catalyst! – Key Drivers
  • AppLovin Corporation: A Laser-Focused Strategy That Is Paying Off Big Time! – Major Drivers
  • Evergrande EV Unit Reports Vehicle Deliveries and Narrower Loss
  • [Xiaomi(1810 HK, SELL, TP HK$8.2)  Update]: Huawei’s Impact on Xiaomi Will Be Meaningful in 2024

Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks

By Travis Lundy

  • Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
  • Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up. 
  • Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.

Record Fund Ownership in Six Taiwanese Companies

By Steven Holden

  • Delta Electronics and Wiwynn Corp among 6 Taiwan stocks at their highest levels of fund ownership among active Emerging Market funds.
  • The combined weight in these 6 stocks has aggressively moved higher to 1.2% from less than 30bps in 2018.
  • All stocks enter the top 15 most widely held companies in Taiwan, but potential for further buying is clearly there.

Elecon Engineering Co. Ltd- Forensic Analysis

By Nitin Mangal

  • Elecon Engineering (ELCN IN)  (EECL) is one of the renowned manufacturers of Gears, often used in Industrials. 
  • The company has gathered operational momentum in the last few years, coupled with debt reduction. 
  • However, its balance sheet still has some concerns that are important. This relates to unaudited subsidiary, fixed asset disposals, write offs and ECL policy and large RPTs.

Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns

By Angus Mackintosh

  • Bank Rakyat Indonesia (BBRI IJ) continues to be the key and unique proxy for micro and ultra-micro lending in Indonesia, with 1H2023 reflecting its increasingly strategic positioning in the space.
  • Microloans now account for 48% of loans and of this higher-yielding Kupedes microloans make up an increasingly larger portion, as it diversifies its KUR exposure. 
  • The bank is set to see improving returns in 2H2023, with loan growth expected to pick-up and NIMs should also improve. 2.6x PBV with an ROE of 20.0% is attractive.

Huawei Quietly Debuts Flagship Smartphone in Effort to Ride Sales Wave

By Caixin Global

  • Huawei Technologies Co. Ltd. launched a new flagship smartphone on Tuesday, in a discreet fashion and ahead of schedule, said to be powered by a self-developed chip that can rival the speed of 5G handsets, as the tech giant tries to shrug off the impact of U.S. sanctions and capitalize on robust quarterly sales growth in China.
  • The company began offering the Mate 60 Pro at 6,999 yuan ($962) in its stores and online around noon, without prior advertisement other than an open letter that cited the early launch as a celebration of its Mate series reaching 100 million units in cumulative shipments.
  • The company gave no detail about what kind of system-on-a-chip (SoC) the smartphone uses and whether the handset is compatible with 5G wireless networks.

Lixil (5938 JP): Levered Business Facing Cyclical & Secular Headwinds & Continued Mkt Share Pressure

By Robert C Prather Jr

  • 2/3 of sales face secular decline in housing demand/shrinking population and the other 1/3 facing weak housing environment due to rising rates
  • Competition from private label and weak trends and ratios exist
  • The valuation does not seem to reflect the risks highlighted

Alibaba Group Holding Limited: Making Huge Strides In AI Which Could Prove A Growth Catalyst! – Key Drivers

By Baptista Research

  • Alibaba Group Holding Limited managed to exceed expectations in terms of revenue and earnings.
  • Their team’s efforts to create a thriving ecosystem and realize technology-driven innovation methods also show promising results.
  • The overall sales growth for the Alibaba International Digital Commerce Group was 41%, and the retail division had revenue growth of 60% year over year.

AppLovin Corporation: A Laser-Focused Strategy That Is Paying Off Big Time! – Major Drivers

By Baptista Research

  • AppLovin Corporation managed to exceed the revenue and earnings expectations of Wall Street.
  • The Software Platform sector achieved significant revenue of $406 million, which reflects an increase of 28% over the previous year.
  • With $334 million in sales from apps and $61 million in adjusted EBITDA for the second quarter, the company had an 18% margin.

Evergrande EV Unit Reports Vehicle Deliveries and Narrower Loss

By Caixin Global

  • The electric-vehicle unit of defaulted property developer China Evergrande Group reported that in the first half of 2023 it delivered 760 cars and its net loss narrowed by almost half from a year earlier to 6.87 billion yuan ($942 million).
  • China Evergrande New Energy Vehicle Group Ltd.’s revenue jumped more than fivefold to 155 million yuan, mainly from mass production and delivery of its flagship model, the Hengchi 5, starting last October.
  • The electric-car company has been plagued by production delays and setbacks since touting its first Hengchi model as early as 2019 and pledging to rival Tesla within three to five years.

[Xiaomi(1810 HK, SELL, TP HK$8.2)  Update]: Huawei’s Impact on Xiaomi Will Be Meaningful in 2024

By Shawn Yang

  • Users are enthusiastic about the return of 5G Huawei smartphones, and thus we expect sales volume of Huawei devices to improve. 
  • If the combined share of Huawei+ Honor can reach 30/32% we estimate Xiaomi’s current 12.5% share of the China smartphone market could decline 0.8/1.3ppts, respectively.
  • We maintain Xiaomi’s SELL and HK$ 8.2 TP, implying 26x FY23 PE. The increase in CY23 EPS reflects lowered OPEX, improved gross margin due to the impact of IC oversupply.

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Aug 31
0

Daily Brief Equity Bottom-Up: NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change
  • Pinduoduo (PDD US): Don’t Fight with PDD
  • Telkom Indonesia (TLKM IJ) – Ring My Digital Bell
  • PT Avia Avian (AVIA IJ) – Painting by Numbers
  • Taiwan Tech Weekly: New Huawei Phone Works Around U.S. Restrictions?; Taiwan AI Stocks Surging Again
  • Taiwan Dual Listings Monitor: TSMC, ASE Technology, and ChipMOS Opportunities
  • Yageo: Company Visit — Improving Revenue Quality & Cashed-Up Actively Looking For Acquisitions
  • Ping An Insurance – Weak Results, Net Asset Growth 5% From 9%, Profit Delta -Ve In Many Divisions
  • Greentown China (3900 HK):  Disciplined Market Share Gainer Amid Chaos
  • Keep (3650): Mixed H123 and Slow Post-Pandemic Recovery. Will Growth Story Come To an End?

NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change

By Pranav Bhavsar

  • As part of our Narrative and Numbers themed Annual Report insights, we shift our focus to FSN E-Commerce Ventures (Nykaa) (NYKAA IN).
  • We focus on Nykaa Fashion due to its financial significance in spite of not being a material subsidiary warranting the need for board review on materiality policy.
  • Notable issues demanding scrutiny include (1) Declining Financials, (2) Inconsistent Reporting, (3) Misleading Narrative, and (4) Elevated Executive Compensation.

Pinduoduo (PDD US): Don’t Fight with PDD

By Eric Chen

  • PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
  • 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
  • We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.

Telkom Indonesia (TLKM IJ) – Ring My Digital Bell

By Angus Mackintosh

  • Telkom Indonesia (TLKM IJ)‘s 1H2023 results looked solid but drilling down 2Q2023 looked a lot more encouraging in terms of growth and higher ARPUs for Telkomsel.  
  • Ongoing digital initiatives are yielding positive results and Indihome continues to register positive results, with its merger with Telkomsel underlining convergence strategy. Data centre consolidation looks like a future spin-off. 
  • Telkom continues to enrich its digital ecosystem with services and make it more accessible to less affluent subscribers. Valuations remain attractive at less than 5.0x forward EV/EBITDA

PT Avia Avian (AVIA IJ) – Painting by Numbers

By Angus Mackintosh

  • PT Avia Avian is Indonesia’s leading integrated paint manufacturing company with around 20% market share. It is undergoing a strong recovery in margins as raw material inputs have stabilised. 
  • The company continues to expand both its distribution centres and the range of products it offers, with a strong emphasis on below-the-line marketing, reaching 54,000 retail outlets.
  • PT Avia Avian (AVIA IJ) is an interesting proxy for the strong recovery in Indonesia’s economy and property market, with the added tailwind of lower input costs. Valuations are attractive. 

Taiwan Tech Weekly: New Huawei Phone Works Around U.S. Restrictions?; Taiwan AI Stocks Surging Again

By Vincent Fernando, CFA

  • Huawei’s new Mate 60 Pro phone has made many wonder if it has worked around U.S. technology restrictions to produce a 5G-capable chip domestically.
  • Nvidia hits new all-time highs… Taiwan AI-supply chain stocks are surging again.
  • Dell will report earnings — Look for PC upgrade cycle color and AI PC comments. SEMICON Taiwan is coming soon, we will attend.

Taiwan Dual Listings Monitor: TSMC, ASE Technology, and ChipMOS Opportunities

By Vincent Fernando, CFA

  • TSMC: 9.2% premium — Trending down, can consider shorting the ADR vs. the local.
  • ASE: 10.5% premium is historically high — Short the ADR vs. the local.
  • ChipMOS: -0.4% discount, ADRs have lagged Taiwan shares — Long ADR vs. local.

Yageo: Company Visit — Improving Revenue Quality & Cashed-Up Actively Looking For Acquisitions

By Vincent Fernando, CFA

  • We visited Yageo’s headquarters to learn more about the business and strategy. We expect revenue quality to improve, margins to rise through 2025E, and possible accretive acquisitions.
  • The company is a heavily shorted stock based on our short model — This implies short squeeze potential we believe. The company has over US$1.5bn of dry powder for acquisitions.
  • We rate Yageo as a Structural Long with a NT$690 target price. Potential upside catalysts outnumber downside catalysts in our view.

Ping An Insurance – Weak Results, Net Asset Growth 5% From 9%, Profit Delta -Ve In Many Divisions

By Daniel Tabbush

  • Weak results at Ping An Insurance across many divisions, with banking most important
  • Life and Health negative insurance revenue delta, not offset by insurance cost delta
  • Net asset growth is now at 5% YoY, from 9% YoY last year, from ~29% avg for years

Greentown China (3900 HK):  Disciplined Market Share Gainer Amid Chaos

By Steve Zhou, CFA

  • Greentown China (3900 HK) is a high quality China property developer that is unfairly suppressed given the extreme pessimism of the sector. 
  • Even though the overall sales of China property industry will likely continue to decline, the market is large enough that some developers could stand to gain massive market share. 
  • The company trades at 2.5x 2024E PE, and 71% discount to NAV, with expected growth in net profit in 2023 and 2024. 

Keep (3650): Mixed H123 and Slow Post-Pandemic Recovery. Will Growth Story Come To an End?

By Andrei Zakharov

  • Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down. 
  • The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
  • Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story. 

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Aug 30
0

Daily Brief Equity Bottom-Up: Pinduoduo (PDD): 2Q23 and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Pinduoduo (PDD): 2Q23, Revenue Significantly Higher Than Consensus, Buy
  • Oriental Land: Google Searches For Tokyo Disneyland Dips Double Digits in July & August 2023
  • Taiwan Shorts Analysis: AI Supply Chain Stocks With High Short Squeeze Risk
  • Ultrajaya Milk (ULTJ IJ) – Back on Track with Dairy and Tea
  • Wuliangye (000858 CH):  Classic Value Trap
  • Gogoro: Hunting for a Contrarian EV Buy; Valuing It as a Utility/Infra Business
  • Genting Berhad: 2Q23 Results Show Early Positive Ramping in Early Post Covid Era
  • ZTO Express Q2 Results: Strong on Volume | Weak on Price | Margins Up in Q2, But H2 Much Tougher
  • Shenzhen Intl (152 HK): Brighter Outlook in 2H23 Not to Be Overlooked
  • Rent.com.au Ltd – FY23 Refocus Set to Benefit Future Revenue Generation

Pinduoduo (PDD): 2Q23, Revenue Significantly Higher Than Consensus, Buy

By Ming Lu

  • PDD’s revenue increased by 66% YoY to RMB52 bn, significantly higher than the market consensus RMB43 bn.
  • The operating margin declined to 24% in 2Q23 from 28% in 2Q22 due to aggressive expansion outside China.
  • We believe the stock still has an upside of 47% for year end 2023. Buy.

Oriental Land: Google Searches For Tokyo Disneyland Dips Double Digits in July & August 2023

By Oshadhi Kumarasiri

  • During the initial months of 2QFY24, both Tokyo Disneyland and Tokyo DisneySea experienced a significant double-digit QoQ drop in Google search interest.
  • Using Google Search trends data for the first two months of 2QFY24, we anticipate a QoQ decline of about 17% in Oriental Land’s Theme Parks revenue, dropping below ¥100bn.
  • 2QFY24 consensus OP is 2.5x above the company’s guidance, and both short and medium term consensus revenue and OP targets for Oriental Land (4661 JP) appear blatantly unachievable.

Taiwan Shorts Analysis: AI Supply Chain Stocks With High Short Squeeze Risk

By Vincent Fernando, CFA

Ultrajaya Milk (ULTJ IJ) – Back on Track with Dairy and Tea

By Angus Mackintosh

  • Ultrajaya Milk (ULTJ IJ) remains a core proxy for the under-penetration of dairy products in Indonesia, which stands at less than half of Thailand in terms of per capita consumption.
  • Ultrajaya has seen a strong rebound in sales this year for its UHT milk sales but material pressure persisted in 1H2023 but will abate in 2H2023 improving margins.  
  • Its carton tea products are seeing a strong rebound and a new distribution warehouse in Cikarang will improve distribution. Ultrajaya‘s growth trajectory is resuming and valuations are attractive. 

Wuliangye (000858 CH):  Classic Value Trap

By Steve Zhou, CFA

  • Wuliangye Yibin Co Ltd A (000858 CH), the second largest Chinese liquor company in China, trades at one of the lowest PE multiples in the space. 
  • Kweichow Moutai (600519 CH), the largest Chinese liquor company trades at 26x 2024 expected earnings, and most other listed Chinese liquor names trade above 20x 2024 expected earnings.
  • Upon closer look, Wuliangye is actually a classic case of value trap – slow growth with no change or slowly deteriorating PE multiples. 

Gogoro: Hunting for a Contrarian EV Buy; Valuing It as a Utility/Infra Business

By Vincent Fernando, CFA

  • We spoke to Gogoro (GGR US), a beaten-down and under-covered Taiwan EV play listed in the US — As part of a hunt for contrarian plays.
  • The company has faced headwinds recently, with hardware sales relatively weak vs. its local market. The battery swapping business is compelling and steadily growing however.
  • We find the company fairly valued unless it can show more growth — We value it as two parts, a EV 2-wheeler hardware business and an infrastructure-like battery swapping business. 

Genting Berhad: 2Q23 Results Show Early Positive Ramping in Early Post Covid Era

By Howard J Klein

  • The company is the most geographically diverse operator in the global gaming space. It has been something of a post-covid laggard relative to sector peers.
  • Return to modern profit largely comes from Malaysia Highlands flagship.
  • Big unnoticed catalyst could be its key position in the bidding wars for three new licenses to be awarded in metro New York. Genting active there since 2011.

ZTO Express Q2 Results: Strong on Volume | Weak on Price | Margins Up in Q2, But H2 Much Tougher

By Daniel Hellberg

  • Solid Q2 results from ZTO, with deep unit cost reductions offseting weak pricing
  • But ultimately, Q2/H1 results are merely in-line with guidance — not better, nor worse
  • In this environment, it’s difficult to see what will move ZTO out of recent trading range

Shenzhen Intl (152 HK): Brighter Outlook in 2H23 Not to Be Overlooked

By Osbert Tang, CFA

  • Poor 1H23 result at Shenzhen International (152 HK) should have been anticipated, and we believe there is good room for sharp earnings improvement in 2H23.
  • Completion of logistics projects, more asset value realisation (through REIT and private equity funds), contribution from Yicheng Qiwanli and lower finance costs should underpin outlook.
  • SZI is an asset play with significant upside and this is reflected in the undemanding 0.42x P/B. Against its historical average of 0.67x, such a level is almost -2SD below. 

Rent.com.au Ltd – FY23 Refocus Set to Benefit Future Revenue Generation

By Research as a Service (RaaS)

  • Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through its technology platform and a growing number of aligned transactional services.
  • The company has reported FY23 revenue of $2.77m, down 17.8% on the previous corresponding period (pcp) but in line with our expectations.
  • The EBITDA loss for the year was $2.48m, an increase of 55.5% on the pcp and a little higher than our forecast for a $2.3m EBITDA loss. 

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Aug 29
0

Daily Brief Equity Bottom-Up: NVIDIA. Revenue On Track For 2.7x YoY Growth in Q3’CY23 and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • NVIDIA. Revenue On Track For 2.7x YoY Growth in Q3’CY23
  • IHH Healthcare (IHH MK): Recent Acquisitions Are Positive for Future Growth; Strong 1Q23 Performance
  • China Merchants Bank – New Results: Property Dev. NPLs at 5.5% from 4.1%…  25% Lower Credit Costs
  • PT Nippon Indosari Corpindo (ROTI IJ) – Increasingly Oven Ready
  • New Relic Takeover Valuation Analysis: The Buyout Price Looks Reasonable
  • Merck & Co. Inc.: Setting New Standards in Oncology & Pneumococcal Immunization! – Major Drivers
  • Pinterest Inc.: Embracing Challenges and Emerging as a Dominant Force in Digital Landscape! – Major Drivers
  • Paycom Software Inc.: Sustaining High Margins Amidst Rapid Expansion! – Major Drivers
  • Howmet Aerospace Inc.: 3 Factors Powering Its Dynamic Growth Trajectory Despite Strikes and Supply Chain Hurdles! – Major Drivers
  • Singapore Stocks Poised to Book Net Institutional Inflows in August

NVIDIA. Revenue On Track For 2.7x YoY Growth in Q3’CY23

By William Keating

  • NVIDIA Q2’CY23 revenues of $13.51 billion, up 88% QoQ, up 101% YoY, blowing way past the $11 billion guidance midpoint.
  • Current quarter revenue is expected to be $16.00 billion. This will be a roughly 2.7x increase YoY 
  • Are we in the middle of witnessing a bubble of dot.com era proportions?

IHH Healthcare (IHH MK): Recent Acquisitions Are Positive for Future Growth; Strong 1Q23 Performance

By Tina Banerjee

  • IHH Healthcare (IHH MK) will acquire remaining stake in Indian hospital chain operator Ravindranath GE Medical Associates for RM415M. The transaction is expected to close by 4Q23.
  • IHH is acquiring Bedrock Healthcare for RM245M. Bedrock operates 82-bed hospital in the Malaysian state of Sarawak and has earmarked a vacant land for the construction of a 200-bed hospital.
  • In 1Q23, IHH reported highest ever quarterly revenue of RM5.1B, representing 24% YoY growth on higher patient volume across key markets. Net income nearly triples to RM1.4B.

China Merchants Bank – New Results: Property Dev. NPLs at 5.5% from 4.1%…  25% Lower Credit Costs

By Daniel Tabbush

  • New results detail from CMB shows divergence with credit quality and actual credit costs
  • The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
  • Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total

PT Nippon Indosari Corpindo (ROTI IJ) – Increasingly Oven Ready

By Angus Mackintosh

  • PT Nippon Indosari Corpindo (ROTI IJ) booked a strong profit performance in 2Q2023 despite slower sales growth, as return rates normalised and raw material and packaging prices stabilised further. 
  • Sales to Modern Trade led the way in 2Q2023 as post-pandemic consumption habits shifted to those formats, whilst General Trade saw pressure as hawkers and warung owners took holidays
  • ROTI should continue to benefit from lower input costs together with a normalisation of its General Trade Business plus productivity is set to improve markedly in 2H2023.

New Relic Takeover Valuation Analysis: The Buyout Price Looks Reasonable

By Andrei Zakharov

  • Following takeover rumors surrounding New Relic Inc (NEWR US) , private equity firms finally agreed to acquire a US-based low-cost observability provider for ~$6.5B.
  • American private equity firm Francisco Partners and global alternative asset manager TPG offered $87 per New Relic Inc (NEWR US) share in an all-cash transaction.
  • The New Relic Inc (NEWR US) Board of Directors approved the buyout deal, and is expected to close in late 2023 or early 2024.

Merck & Co. Inc.: Setting New Standards in Oncology & Pneumococcal Immunization! – Major Drivers

By Baptista Research

  • Merck delivered an all-around beat in the quarter, making excellent strides in advancing compelling science that will contribute to meeting the world’s most critical unmet medical needs.
  • Concerning their research organization, Merck’s encouraging late-stage pipeline keeps proving beneficial for patients with a wide spectrum of ailments.
  • In oncology, Merck highlighted information from ASCO’s extensive pipeline, including evidence for KEYTRUDA in lung cancer that is in an earlier stage.

Pinterest Inc.: Embracing Challenges and Emerging as a Dominant Force in Digital Landscape! – Major Drivers

By Baptista Research

  • Pinterest delivered an all-around beat in the most recent quarterly result.
  • The company’s strategic focus on core differentiators and visual discovery led to increased user engagement and expansion of the user base.
  • Despite challenges in the advertising environment, Pinterest achieved consistent year-on-year revenue growth and margin expansion.

Paycom Software Inc.: Sustaining High Margins Amidst Rapid Expansion! – Major Drivers

By Baptista Research

  • Paycom Software managed to exceed analyst expectations in terms of revenue and earnings.
  • The company’s initiative to simplify clients’ experiences was evident by introducing tools like Everyday and the Client Action Center.
  • As Paycom continues to execute its strategies and capitalize on its expanding market opportunities, its potential for sustained success remains promising.

Howmet Aerospace Inc.: 3 Factors Powering Its Dynamic Growth Trajectory Despite Strikes and Supply Chain Hurdles! – Major Drivers

By Baptista Research

  • Howmet Aerospace delivered an all-around beat in the most recent quarterly result.
  • Revenues showed significant year-over-year and sequential growth, with a notable highlight in the commercial aerospace sector.
  • Moreover, Howmet maintained a healthy cash balance and generated robust free cash flow.

Singapore Stocks Poised to Book Net Institutional Inflows in August

By Geoff Howie

  • Singapore stocks have booked net institutional fund inflow for three consecutive weeks ending 25 August.
  • With four trading sessions for the month remaining, August is poised to be the first month local stocks have booked net inflows since Nov 2022.
  • Back in November 2022, UOB posted a 12.4% return and booked the highest net institutional inflow in the Singapore stock market for that month with S$306 million of net inflow.

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Aug 28
0

Daily Brief Equity Bottom-Up: SEA Ltd: The Prodigal Son (2Q deep-dive) and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • SEA Ltd: The Prodigal Son (2Q deep-dive)
  • [Futu Holdings (FUTU US, BUY, TP US$55) Earnings Review]: Short Term Peaking but Momentum Remains
  • Playmates Toys: 1H23 Results Show Strong TMNT Potential
  • CIMC Enric (3899 HK): Demonstrating Sustained Resilience
  • Sinotrans (598 HK): Challenges Have Not Abated Yet
  • [Meituan (3690 HK, BUY, TP HK$165) Earnings Review]: Counterstrike Remains Effective… Maintain BUY
  • The Keihin Co (TYO 9312) – A Consistently Profitable and Growing Small Cap Logistics Company
  • Ricegrowers Limited (SunRice) – AGM Commentary Supports RaaS Estimates
  • [NetEase (NTES US, BUY, TP US$105) TP Change]: Raise TP for and Upcoming Pipeline
  • Wuxi Biologics (2269.HK) 23H1 – The Positives, the Negatives and the Outlook

SEA Ltd: The Prodigal Son (2Q deep-dive)

By Value Investing

  • Forrest Li: “Look How They Massacred My Boy” When CEO Forrest Li announced SEA Ltd’s Q2 results in mid-August, he was probably expecting a pat on the back.
  • After all, the team at SEA Ltd had slogged through fire and brimstone over the past year trying to bring the company back to profitability.
  • After all, the team at SEA Ltd had slogged through fire and brimstone over the past year trying to bring the company back to profitability.

[Futu Holdings (FUTU US, BUY, TP US$55) Earnings Review]: Short Term Peaking but Momentum Remains

By Shawn Yang

  • FUTU reported 2Q23 revenue 5.9%/13.5% vs. our estimate/consensus, non-GAAP NI beat our estimate/consensus by 9.9%/19.4%, mainly contributed by higher revenue from interest income due to continuous interest rate hike.
  • Overseas expansion turns to be the primary focus. However, we think exploit new market is a bumpy and slow path, which cannot solve the near-term headwind on weak trading sentiment.
  • We maintain the stock as BUY rating and maintain TP at US$55/ADS, which implies 12.6x PE in 2023, the stock currently trading at 11.3x PE in 2023, leaving 12% upside.

Playmates Toys: 1H23 Results Show Strong TMNT Potential

By Nicolas Van Broekhoven

  • Playmates Toys (869 HK) reported strong 1H23 results on the back of initial demand for TMNT toys. Revenues were up 30% and operating profits increased 3x.
  • Management remains optimistic for 2H23 on the back of continued excitement for TMNT movie and follow-up series on Paramount+.
  • Playmates Toys trades at 5x FY23 P/E and >1x P/E on an ex-cash basis. The company also declared another 2c interim dividend.

CIMC Enric (3899 HK): Demonstrating Sustained Resilience

By Osbert Tang, CFA

  • We like the 17.7% core earnings growth for CIMC Enric Holdings (3899 HK) as this has demonstrated its operating strengths under a challenging environment in 1H23. 
  • With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. 
  • The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.

Sinotrans (598 HK): Challenges Have Not Abated Yet

By Osbert Tang, CFA

  • The 1H23 result of Sinotrans (598 HK) is unexciting as recurring profit contracted 9.8%. The decline has also accelerated to 13.5% in 2Q23, from just 4.6% in 1Q23. 
  • Weak export (-14.5% YoY in Jul) and poor airfreight price (-45% YoY in Jul) did not bode well for profitability. The flattening of DHL-Sinotrans’ contribution also limits earnings upside.
  • Valuations are inexpensive at 5.3x PER and 9% yield for FY23, but growth outlook is not encouraging. We think it is a good time to take money off the table.

[Meituan (3690 HK, BUY, TP HK$165) Earnings Review]: Counterstrike Remains Effective… Maintain BUY

By Shawn Yang

  • Meituan reported CY2Q23 rev./non-IFRS net income in-line/70% vs. cons., and in-line/28% vs. our estimate. Increased spending on in-store competition was offset by abundant rider supply that lowered food delivery cost. 
  • We raise our 3Q net margin est. by 3ppts as (1) the in-store counterattack against Douyin has been a success, (2) CGB spending to counter Duoduo Maicai has remained restrained.
  • Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain Meituan’s BUY rating and HK$ 165 TP.

The Keihin Co (TYO 9312) – A Consistently Profitable and Growing Small Cap Logistics Company

By Altay Capital

  • The Keihin Co is a ¥10.94B ($74.7m) market cap logistics company in Japan that owns and operates warehouses and distribution facilities mostly in and around Tokyo.

  • They’ve been profitable for 19 of the last 20 years and have compounded tangible book value at 6.5% over the last decade while growing profits.

  • Stock has gone nowhere over the last decade despite compounding tangible book value and net income at a respectable clip.

Ricegrowers Limited (SunRice) – AGM Commentary Supports RaaS Estimates

By Research as a Service (RaaS)

  • Ricegrowers Limited, trading as SunRice (ASX:SGLLV), held its AGM last week and provided some updated commentary around trading for FY24.
  • Most notably, the ‘strong momentum from H2 FY23 has continued into Q1 FY24’, remembering H2 FY23 EBITDA increased 37% on the pcp.
  • Factors supporting this growth include the cycling of annualised price rises, additional pricing reviews, international market expansion, improvement in freight and logistics costs, and the ongoing recovery in the CopRice business.

[NetEase (NTES US, BUY, TP US$105) TP Change]: Raise TP for and Upcoming Pipeline

By Shawn Yang

  • NetEase’s 2Q rev. miss cons. by (3.08%) and non-GAAP net income beat cons by 50.6%.
  • We anticipate that former legacies will continue to be under pressure. However, the 3Q23 is expected to show strong performance with new titles like “Justice Mobile” and “Racing Master.”
  • We have raised our annual revenue expectations for “Justice Mobile” and maintain an optimistic view of NetEase’s upcoming pipeline. We increased to TP US$ 105, implying 17x PE in 2023

Wuxi Biologics (2269.HK) 23H1 – The Positives, the Negatives and the Outlook

By Xinyao (Criss) Wang

  • The market is clearly satisfied with WuXi Bio’s interim results. Growth of both non-COVID revenue and new projects were beyond expectations. This makes us look forward to 2023 full-year result.
  • There’s a significant strength gap between WuXi Bio and Lonza/Samsung Biologics in undertaking commercial-stage orders, which puts WuXi Bio at a disadvantage in competition,making it more vulnerable to financing environment.
  • It’s not impossible to restore the high growth before COVID,but WuXi Bio needs to meet two conditions.Instead of betting on a V-shaped reversal, it’s wiser to take profits in time.

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Aug 27
0

Daily Brief Equity Bottom-Up: Telix Pharmaceuticals (TLX AU): Strong 1H23 Result; Revenue Jumps 9x; 80% Reduction in Net Loss and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Telix Pharmaceuticals (TLX AU): Strong 1H23 Result; Revenue Jumps 9x; 80% Reduction in Net Loss
  • Activist Investor Stirs the Pot: Is Hanesbrands on the Brink of a Comeback? – Key Drivers
  • Marathon Oil Corporation: Projected Capital Program – Are They Aiming Too High? – Major Drivers
  • Occidental Petroleum: Tackling Challenges with Bold Operational Improvements! – Major Drivers
  • Gartner Inc.: Why Enterprise Leaders Can’t Get Enough of Gartner’s Insights! – Major Drivers
  • Stanley Black & Decker Inc.: Breaking Down the Reasons Behind Their Revenue Surge! – Major Drivers
  • Humana Inc.: Pushing the Envelope in Member Experiences! – Major Drivers
  • Exact Sciences Corporation: Cancer Research Through Collaborative Partnerships & Other Drivers
  • Phillips 66: How Strategic Moves Paint a Bright Future Amidst Mixed Results! – Major Drivers
  • Zimmer Biomet Holdings Inc.: Navigating Global Uncertainties with A Unique Growth Strategy! – Major Drivers

Telix Pharmaceuticals (TLX AU): Strong 1H23 Result; Revenue Jumps 9x; 80% Reduction in Net Loss

By Tina Banerjee

  • Telix Pharmaceuticals (TLX AU) reported 1H23 revenue of A$221M, a nine-fold increase on 1H22, reflecting continued growth in sales of its prostate cancer imaging agent, Illuccix.
  • Gross margin improved to 64% in 1H23 from 56% in 1H22. Telix has transitioned to positive earnings on an adjusted EBITDAR basis. Net loss decreased 80% YoY to A$14M.
  • With the increasing adoption in global PSMA PET imaging market, Illuccix has positive outlook. Telix is expected to launch two new products in 2024 for brain and kidney cancer imaging.

Activist Investor Stirs the Pot: Is Hanesbrands on the Brink of a Comeback? – Key Drivers

By Baptista Research

  • This is a special one-time report on Hanesbrands Inc, a company that is internationally recognized for its Hanes underwear and Champion sportswear and has recently garnered the attention of the New York-based hedge fund, Barington Capital Group LP.
  • With its acquisition of a stake in Hanesbrands, which is slightly below 1%, Barington has initiated active dialogues with the company’s board and management.
  • At the heart of their concerns is Hanesbrands’ subpar performance when placed side by side with its industry competitors and the wider market.

Marathon Oil Corporation: Projected Capital Program – Are They Aiming Too High? – Major Drivers

By Baptista Research

  • Marathon Oil delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
  • The company reported a strong adjusted free cash flow of $531 million and returned $434 million to shareholders, marking a 10% increase in distributions compared to the previous quarter.
  • In the third quarter, Marathon Oil’s management team expects total company oil and oil equivalent production to either meet or surpass the upper limit of its annual guidance range.

Occidental Petroleum: Tackling Challenges with Bold Operational Improvements! – Major Drivers

By Baptista Research

  • Occidental Petroleum delivered a disappointing set of results as the company could not meet Wall Street’s revenue and earnings expectations.
  • The company’s adjusted profit of $0.68 per diluted share slightly exceeded the reported profit of $0.63.
  • Despite planned maintenance activities across their oil and gas businesses, the company generated over $1 billion of free cash flow for working capital.

Gartner Inc.: Why Enterprise Leaders Can’t Get Enough of Gartner’s Insights! – Major Drivers

By Baptista Research

  • Gartner delivered a strong result and managed an all-around beat in the last quarter, marked by double-digit growth in revenue, along with high single-digit growth in contract value.
  • Additionally, Gartner reported excellent free cash flow during the quarter.
  • The company’s focus on research as its primary revenue segment was highlighted, with significant growth in research revenue during the quarter.

Stanley Black & Decker Inc.: Breaking Down the Reasons Behind Their Revenue Surge! – Major Drivers

By Baptista Research

  • Stanley Black & Decker exceeded analyst expectations in terms of revenue and earnings.
  • Second-quarter revenue decreased from the previous year due to reduced consumer outdoor and DIY volume.
  • Global automotive and aerospace continue to show momentum across Stanley Black & Decker’s industrial end sectors.

Humana Inc.: Pushing the Envelope in Member Experiences! – Major Drivers

By Baptista Research

  • Humana Inc. delivered a solid result and managed an all-around beat in the last quarter, with adjusted earnings per share meeting expectations and positive results from all lines of business, supported by the growth in Medicare Advantage utilization.
  • The company has reaffirmed its full-year guidance, reflecting a significant increase in adjusted EPS over the previous year.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Exact Sciences Corporation: Cancer Research Through Collaborative Partnerships & Other Drivers

By Baptista Research

  • Exact Sciences Corporation exceeded Wall Street’s revenue and earnings expectations.
  • Revenue increased in the second quarter.
  • Exact Sciences continues to see widespread Cologuard acceptance and traction among health systems.

Phillips 66: How Strategic Moves Paint a Bright Future Amidst Mixed Results! – Major Drivers

By Baptista Research

  • Phillips 66 delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
  • The last quarter was marked by strong operational performance and strategic execution, evident in its adjusted earnings of $1.8 billion.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Zimmer Biomet Holdings Inc.: Navigating Global Uncertainties with A Unique Growth Strategy! – Major Drivers

By Baptista Research

  • Zimmer Biomet Holdings delivered a strong result and managed an all-around beat last quarter.
  • The company reported increased GAAP diluted earnings per share due to higher revenues and effective cost management.
  • Moreover, the company’s strong operating cash flows and solid balance sheet position provide the strategic flexibility needed for future growth initiatives.

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Aug 26
0

Daily Brief Equity Bottom-Up: Grab Holdings (GRAB US) – Growth with Scale from a Stable Platform and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Grab Holdings (GRAB US) – Growth with Scale from a Stable Platform
  • Meituan: Strong Earnings but Tough Times Ahead
  • Pop Mart (9992 HK):  Short-Term Trading Opportunity On International Expansion
  • Grab: Profitability Seems Not So Easy to Sustain
  • Electronic Arts Inc.: he Big Push in Mobile Gaming and Major Drivers! – Financial Forecasts
  • SolarEdge Technologies Inc.: Solar-Attached EV Management Solution & Major Developments
  • Global Payments Inc.: 3 Reasons Behind Consistent Growth in Merchant Solutions! – Financial Forecasts
  • Devon Energy Corporation: Surging Oil Volumes
  • TM: Initial Concentrate Recovery Exceeds Expectations
  • BioMarin Pharmaceutical Inc.: What Are The Biggest Catalysts For Its Future Growth? – Financial Forecasts

Grab Holdings (GRAB US) – Growth with Scale from a Stable Platform

By Angus Mackintosh

  • Grab Holdings (GRAB US) released another set of positive results but this time the balance between profitability and growth was well-struck, as it reduced incentives yet increased its market share. 
  • Grab saw GMV growth in both deliveries more notably in mobility, with revenues growing at a faster pace and adjusted EBITDA surprising on the upside, bringing forward breakeven to 3Q2023. 
  • Prospects for 2H2023 look even better with Grab’s affordability initiatives gaining traction and improving retention and profitability.

Meituan: Strong Earnings but Tough Times Ahead

By Shifara Samsudeen, ACMA, CGMA

  • Meituan (3690 HK) reported 2Q2023 results yesterday which beat consensus estimates and the company’s profitability has further strengthened during the quarter.
  • However, there has been clear signs of a slowdown in the company’s core local commerce biz with increased promotions/incentive, decline in revenue per on-demand delivery transaction and fall in OPM.
  • Meituan has flagged that macroeconomic headwinds and adverse weather conditions could slowdown core local commerce biz in the current quarter which should drag down earnings.

Pop Mart (9992 HK):  Short-Term Trading Opportunity On International Expansion

By Steve Zhou, CFA

  • Pop Mart International Group L (9992 HK) presents an interesting story of a Chinese domestic brand going overseas, and potentially being successful overseas (at least in the short-term). 
  • A recent case of a Chinese brand achieving success overseas is Miniso (MNSO US), and shareholders of Miniso have been richly rewarded. 
  • Pop Mart trades at a PE of 24x based on estimated 2024 earnings, with around 30% expected net profit growth in 2024E.   

Grab: Profitability Seems Not So Easy to Sustain

By Shifara Samsudeen, ACMA, CGMA

  • Grab’s share price moved up by about 10% following its 2Q2023 earnings announcement as the market got excited over the company’s prospect of reaching profits in the next few quarters.
  • Mobility GMV is nearing pre-Covid levels, however, there has been a sharp increase in incentive spending during 2Q2023 suggesting incentives is a key driver of GMV growth.
  • Our analysis on deliveries biz suggests that segment’s margins have very little room for improvement and further reducing incentives could stall growth going forward.  

Electronic Arts Inc.: he Big Push in Mobile Gaming and Major Drivers! – Financial Forecasts

By Baptista Research

  • Electronic Arts delivered a mixed set of results in the last quarter, with revenues below the analyst consensus.
  • The company achieved net bookings of $1.6 billion, up 21% yearly, due to continued growth across the EA SPORTS FIFA ecosystem and the release of Star Wars Jedi: Survivor.
  • Electronic Arts executed across its business during the quarter, introducing 5 new high-quality titles and offering over 145 content upgrades across 37 titles.

SolarEdge Technologies Inc.: Solar-Attached EV Management Solution & Major Developments

By Baptista Research

  • SolarEdge Technologies delivered mixed results in the quarter, with revenues failing to meet analysts’ expectations but above-par earnings.
  • SolarEdge’s solar business generated $947 million in revenue, while its non-solar businesses generated $44 million.
  • Their solar business revenue increased due to significant revenues in Europe.

Global Payments Inc.: 3 Reasons Behind Consistent Growth in Merchant Solutions! – Financial Forecasts

By Baptista Research

  • Despite the uncertain financial situation around the world, Global Payments managed to exceed analyst expectations in terms of revenue as well as earnings.
  • The company once again produced excellent organic growth in the Merchant Solutions business, driven by the continuous success of their companies that use technology.
  • This quarter, they again achieved significant revenues, outpacing the impressive results of the previous quarter.

Devon Energy Corporation: Surging Oil Volumes

By Baptista Research

  • Devon Energy Corporation delivered a mixed result in the quarter, with revenues above expectations, but the company failed to surpass the analyst consensus regarding earnings.
  • In terms of production, the company managed to increase oil volumes by 8% year over year this past quarter.
  • By averaging 323,000 barrels per day in the quarter, this outcome beat midpoint forecast estimates and created a new all-time high oil production high for the corporation.

TM: Initial Concentrate Recovery Exceeds Expectations

By Atrium Research

  • Trigon announced initial production results from its first copper concentrate.
  • The newly commissioned mill produced a concentrate grade of 33.5% copper (well above the 20% expected) at 79.5% recoveries.
  • Underground Fleet On August 21st, TM announced its $8.9M order to purchase underground mining equipment from Epiroc.

BioMarin Pharmaceutical Inc.: What Are The Biggest Catalysts For Its Future Growth? – Financial Forecasts

By Baptista Research

  • BioMarin Pharmaceutical delivered an all-around beat in the most recent quarterly result.
  • In the quarter, revenues showed 13% year-over-year growth and 16% growth, excluding KUVAN.
  • BioMarin is on track to meet its 2023 goals of double-digit revenue growth and considerable operating leverage with Q2 total revenues of $595 million, including $113 million in Voxzogo revenues.

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Aug 25
0

Daily Brief Equity Bottom-Up: Is Samsung M&A About to Happen? and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Is Samsung M&A About to Happen?
  • Wuxi Biologics (2269 HK): Mixed 1H23 Result; Strong Non-COVID Business Momentum Enhances Visibility
  • MT (Meituan 3690 HK): 2Q23, Record High Op Profit, 38% Buy
  • India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
  • Daikin (6367) | Cooling on Heat Pumps
  • Nvidia: Better than Dreamed
  • VIPShop (VIPS US): Attractive Value Play Underappreciated by Investors Looking for Growth
  • [iQIYI, Lnc. (IQ US, BUY, TP US$6.25) Review]: Ads Revenue Will Continue to Have Fair Growth
  • Western Digital Corporation: How Cloud is Redefining Their Revenue Streams! – Major Drivers
  • Memory Monitor: SK Hynix Appearing Prescient; Relative Value in Micron

Is Samsung M&A About to Happen?

By Ken S. Kim

  • Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
  • The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
  • With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A

Wuxi Biologics (2269 HK): Mixed 1H23 Result; Strong Non-COVID Business Momentum Enhances Visibility

By Tina Banerjee

  • Wuxi Biologics (2269 HK) recorded 8% YoY revenue growth to RMB8.5B in 1H23. Strong momentum continued in the base business, with the non-COVID revenue achieving a 60% YoY growth.  
  • Ramping up of new manufacturing facilities, maintenance shutdown of existing facilities, slowdown in funding environment in China, and increasing expenses have negatively impacted the profitability.
  • Total number of integrated projects reached a new record of 621 with 46 integrated projects added to the pipeline. As of June 30, backlog increased 9% YoY to $20.1B.

MT (Meituan 3690 HK): 2Q23, Record High Op Profit, 38% Buy

By Ming Lu

  • Total revenue grew by 33% YoY, which is the highest growth rate in the past seven quarters.
  • The company achieved a higher operating profit in 2Q23 after turned the profit positive in 1Q23.
  • The stock price has risen by 20% since our last buy rating, but we believe there will be still 38% upside for yearend 2024.

India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells

By Pranav Bhavsar

Daikin (6367) | Cooling on Heat Pumps

By Mark Chadwick

  • Daikin’s air conditioning business continues to benefit from the secular trends of urbanization, climate change, and rising incomes.  
  • However, the same logic might not apply to heat pumps, which face far more “structural” issues, warranting a lower valuation.
  • Overall, we believe that Daikin deserves to trade at its historical multiple of 15x EV/EBIT and see 20% downside from here.

Nvidia: Better than Dreamed

By Douglas O’Laughlin

  • Nvidia, in characteristic fashion, murdered EPS estimates.
  • Revenue was $2 billion ahead of the guide, and the guide was another $4 billion ahead of consensus for the next quarter.
  • Going into the print, many people were concerned that positioning was bad, i.e., everyone was bullish and expectations were too high. Well, they did not disappoint.

VIPShop (VIPS US): Attractive Value Play Underappreciated by Investors Looking for Growth

By Eric Chen

  • Over the last decade, VIPShop proved it is the undisputed leader in China’s online discount retail business with the longest streak of profitability and impressive ROE among China internet names.
  • Investors are misplaced to look to the stock for growth. Rather, it is cash cow in mature business with deep moat and run by disciplined management who cares about shareholders.
  • Trading at 4.5x our FY23 earnings excluding net cash, it valuation is attractive even compared to depressed sector comps. Expect 20% CAGR of return by 2025 driven by intrinsic value.

[iQIYI, Lnc. (IQ US, BUY, TP US$6.25) Review]: Ads Revenue Will Continue to Have Fair Growth

By Shawn Yang

  • IQ reported 2Q23 revenue and non-GAAP net income 0.2%/28.5% vs cons.
  • We cut our projections for 3Q23’s membership services revenue, but increased estimations for online ads services revenue, and raised margin forecasts for 2023.  
  • We maintain our US$ 6.25 TP, implying 16.2X PE in 2023.

Western Digital Corporation: How Cloud is Redefining Their Revenue Streams! – Major Drivers

By Baptista Research

  • Western Digital Corporation delivered an all-around beat in the quarter, with total revenue of $2.7 billion.
  • In the fourth quarter, cloud comprised 37% of all revenue at $1 billion, down 18% from the previous quarter and 53% from the previous year.
  • Shipments of nearline bits were 59 exabytes, a 26% sequential decline driven by persistent difficulties among cloud clients.

Memory Monitor: SK Hynix Appearing Prescient; Relative Value in Micron

By Vincent Fernando, CFA

  • Major memory names have fallen with the recent market concerns and only staged a small reboound due to Nvidia’s bullish results.
  • NAND and DRAM price declines have stabilized. Demand for DRAM from servers is expected to exceed that from mobile devices, driven by AI usage.
  • We see relative value in Micron vs. Nanya Technology and SK Hynix. SK Hynix is ahead of the game for AI, and Nanya offers focused DRAM exposure however.

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Aug 24
0

Daily Brief Equity Bottom-Up: Taiwan Tech Weekly: Key Supply Chain Names to Watch for Nvidia’s Earnings Today and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Taiwan Tech Weekly: Key Supply Chain Names to Watch for Nvidia’s Earnings Today
  • Alibaba: Navigating in Reverse
  • RPPL: Weak Q1FY24 Earnings, However, Long-Term Growth Trajectory Remains Intact
  • 3P Learning (3PL): Steady Through the 3Rs, Eyes on FY24
  • Anta Sports (2020 HK):  Most Resilient In Industry Down-Cycles
  • Kuaishou: Earnings Beat, Improved Profitability and Further Upside
  • HCG: Hitting All The Right Notes To Scale Up
  • Bangkok Dusit Medical Services (BDMS TB): International Patients Drove 2Q23 Performance
  • [Baidu (BIDU US, BUY, TP US$162) Earnings Review]: Online Ads Growth Will Remain Robust
  • RCI Hospitality Holdings, Inc. – Solid 3Q Results

Taiwan Tech Weekly: Key Supply Chain Names to Watch for Nvidia’s Earnings Today

By Vincent Fernando, CFA

  • Nvidia will report its earnings today U.S.-time, we outline the key Taiwan AI supply chain names to watch around the earnings.
  • TSMC has maintained its full-year revenue guidance despite media reports questioning whether a further downgrade was coming.
  • Hon Hai produces over 50% of Nvidia’s AI hardware according to media reports.

Alibaba: Navigating in Reverse

By Oshadhi Kumarasiri

  • Alibaba (ADR) (BABA US)‘s New Retail strategy stumbled, prompting the company to revert to its e-commerce origins with a renewed emphasis on social commerce.
  • Creating a social media platform could be relatively simple, yet turning it into a prosperous venture amid established social media giants could be challenging.
  • Branching out from social media to e-commerce might be straightforward, but Alibaba Group Holding (9988 HK)‘s unprecedented reverse path could present unique challenges.

RPPL: Weak Q1FY24 Earnings, However, Long-Term Growth Trajectory Remains Intact

By Ankit Agrawal, CFA

  • RPPL reported a weak Q1FY24 due to correction in raw material prices that led to inventory losses and decline in EBITDA margin to 12% vs 14%+ QoQ and 16% YoY.
  • Given that Q1 tends to be a high demand quarter, RPPL had kept high inventory, which further accentuated the inventory losses.
  • The raw material prices have stabilized now. EBITDA per kg should stabilize back to around INR 34-35 and should help the EBITDA to grow in line with the volume growth. 

3P Learning (3PL): Steady Through the 3Rs, Eyes on FY24

By Anik Siwach

  • Holistic Educational Suite: 3PL enriched its product portfolio, with the APAC debut of WritingLegends and BrightPath Assessement. 
  • Steady Financial Growth: Amidst challenges in the UK, 3PL’s 9% ARPU growth highlights its consistent performance and market strength. 
  • Setting the Pace: With attractive-priced offerings, an integrated product approach, and an innovative teacher training vision, 3PL is expected to continue growing its top line as more schools join. 

Anta Sports (2020 HK):  Most Resilient In Industry Down-Cycles

By Steve Zhou, CFA

  • Anta Sports Products (2020 HK) reported a set of resilient earnings in 1H23, with net profit up 32% yoy.
  • Management reconfirmed 2023 guidance for Fila and Anta at double-digit retail sales growth, and increased 2023 guidance for other brands to 40% yoy compared to 30% before. 
  • Anta’s sales growth has been the most resilient in previous industry down-turns in China.  China macro worries should not be overly read through to Anta’s future results.

Kuaishou: Earnings Beat, Improved Profitability and Further Upside

By Shifara Samsudeen, ACMA, CGMA

  • Kuaishou Technology (1024 HK) reported 2Q2023 results yesterday which beat consensus estimates. The company reported an OPM of 4.7% with net profits for the first time.
  • The company’s domestic business continues to see improvement in operating profits while losses of the overseas business have reduced significantly over the last few quarters.
  • Though livestreaming growth has decelerated, the company’s online marketing and e-commerce businesses continue to expand driving Kuaishou’s earnings.

HCG: Hitting All The Right Notes To Scale Up

By Ankit Agrawal, CFA

  • HCG’s cancer segment reported decent revenue growth of 14% YoY in Q1FY24. EBITDA margin came in weaker than expected due to a few transient adverse factors.
  • HCG is hitting all the right notes to drive growth. It is beefing up clinical talent to attract patients. It is also making strategic tuck-in acquisitions to expand its presence.  
  • As cancer treatment is becoming more advanced, the mix of immunotherapy and hi-tech treatment is growing, helping the realization and the profitability to improve.

Bangkok Dusit Medical Services (BDMS TB): International Patients Drove 2Q23 Performance

By Tina Banerjee

  • Bangkok Dusit Medical Services (BDMS TB) recorded 10% YoY growth in revenue from hospital operations in 2Q23, driven by 22% YoY from international patients, which contributed 26% of revenue.
  • Thai patient revenues increased 7% YoY, despite COVID-19 related revenue decreased sharply from year-ago quarter.
  • EBITDA margin declined 70 basis points YoY to 22.6% due to lower occupancy rate and economies of scales from a decline in number of COVID-19 patients.

[Baidu (BIDU US, BUY, TP US$162) Earnings Review]: Online Ads Growth Will Remain Robust

By Shawn Yang

  • Baidu reported 2Q23 revenue/non-GAAP net income 2.3%/38.1% vs cons., Baidu core’s online marketing revenues and other revenues grew 7.1%/13.0% YoY, respectively. 
  • We expect that Baidu’s ads growth will continue into 2H23, supported by recovery of key advertisers. 
  • We slightly increase FY23 EPS estimates and maintain our TP of US$162, which implies 17.8X PE.

RCI Hospitality Holdings, Inc. – Solid 3Q Results

By Water Tower Research

  • Summary thesis. RCI reported another solid quarter, slightly exceeding our expectations.

  • The company is well- positioned for accelerating earnings growth looking out to 2HFY24 and FY25 given the opening of new clubs, Bombshells, and its first casino properties in Central City, CO, as well as our expectation of improving same-store sales (SSS).

  • With RCI’s industry-leading growth metrics and margins (40%+ for nightclubs), RCI’s valuation remains below peers on both an EV/EBITDA and P/E basis (see page 3 for valuation analysis).

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Aug 23
0

Daily Brief Equity Bottom-Up: Zydus Lifesciences (ZYDUSLIF IN): Strong Start of FY24 Riding on US Formulation Business and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Zydus Lifesciences (ZYDUSLIF IN): Strong Start of FY24 Riding on US Formulation Business
  • KS (Kuaishou 1024 HK): 2Q23, First Net Profit Since IPO, Growth Accelerated, Buy
  • Ping An Insurance – Dramatic Worsening Key Areas, Big Bank Exposure, Macro Insurance Stats Are Poor
  • Dollar General (DG-US) – It’s a trap!
  • SHK 86_HK: Dividend Yield 8.5%, P/E 1.96x, P/B 0.25x
  • ClouDr Group (9955.HK) 23H1 – Turning Losses into Profits Is Within Reach
  • IQIYI (IQ US): Embracing Moderate yet Stable Growth
  • Kolte Patil: Strong Growth Momentum Continues from FY23
  • Sekisui Chem (4204) | Potential of Perovskite PV
  • OMG: Wide Gold Zones Continue to Fill Gaps in Resource

Zydus Lifesciences (ZYDUSLIF IN): Strong Start of FY24 Riding on US Formulation Business

By Tina Banerjee

  • Zydus Lifesciences Ltd (ZYDUSLIF IN) recorded 30% YoY growth in revenue to INR51B in Q1FY24, driven by 57% YoY growth in US formulation business. India business revenue grew 6% YoY.
  • US business growth was driven by new product launches and improvement in base business. The company has launched four new products in the US during the quarter.
  • Zydus Lifesciences expects double-digit growth in India branded formulation business to continue and the U.S. business to grow on a formidable base of FY23 going forward.

KS (Kuaishou 1024 HK): 2Q23, First Net Profit Since IPO, Growth Accelerated, Buy

By Ming Lu

  • The total revenue growth rate accelerated significantly to 28% YoY in 2Q23.
  • The high-margin businesses grew more rapidly than the low margin business.
  • Gross Merchandise Value and Active user base still increased strongly.

Ping An Insurance – Dramatic Worsening Key Areas, Big Bank Exposure, Macro Insurance Stats Are Poor

By Daniel Tabbush

  • There is considerable worsening in net profit, including from key divisions
  • Despite rising assets for Health and Life, profit in this core division is down a lot
  • Banking exposure is significant, with a poor outlook, and making Ping An less pure

Dollar General (DG-US) – It’s a trap!

By Guasty Winds

  • After spectating DG for some time, I bought a small starter position in June. It is not often that you get a chance to buy a compounder like this 35% from its highs.
  • Historically it has paid to buy the dips on DG, so I figured I would buy now and ask questions later.
  • This time it has not paid, at all. My average was ~$185 and I sold my stock last monday at $168. I know that some of my subs also follow the stock so I thought I would collect my notes and write up a few paragraphs.

SHK 86_HK: Dividend Yield 8.5%, P/E 1.96x, P/B 0.25x

By Evaluate Research

  • Despite Headwinds Revenue Remains Relatively Stable at HK $1,968 million 
  • For 1HFY2023–Total Buyback of 0.77 million shares (HK$2.3 million) at average price of $2.99 
  • Stock at 0.25x tangible P/B and at 1.96x P/E on our FY2024 earnings estimate 

ClouDr Group (9955.HK) 23H1 – Turning Losses into Profits Is Within Reach

By Xinyao (Criss) Wang

  • When we discovered that JD Health’s growth could face a downturn crisis, we hope to find a suitable substitute. ClouDr has such potential due to its good performance/reasonable business model.
  • The current anti-corruption campaign could bring new opportunities to ClouDr, who can rely on “hospital first” strategy to take the upper hand, but it should be based on some prerequisites.
  • ClouDr’s business is expected to keep strong growth momentum in 2023. The Company is expected to achieve breakeven in 2024. Investors could see good stock price performance at that time.

IQIYI (IQ US): Embracing Moderate yet Stable Growth

By Eric Chen

  • IQiyi failed to give its share price a lift with  stronger-than-expected 2Q results except for slight miss in paying subscribers .
  • We believe that investors are expecting the end of its remarkable turnaround story and embracing a stable and moderate growth stage.
  • While iQiyi trades at ~10x our FY23 earnings, the cheap valuation by itself doesn’t stand out among China internet peers as a group. We would wait for better entry points.

Kolte Patil: Strong Growth Momentum Continues from FY23

By Ankit Agrawal, CFA

  • Kolte Patil (KPDL) reported record sales velocity in Q1FY24 and is on track to achieve 25%+ sales value growth in FY24 as per its stated guidance.
  • Business development activity is also happening at a record pace and Kolte Patil is on track to beat its prior FY24 guidance of INR 8000cr by a wide margin.
  • Despite 80%+ rise in the share price since our coverage initiation 2Y ago, Kolte Patil still offers an upside potential of 25%+ IRR over a holding period of three years. 

Sekisui Chem (4204) | Potential of Perovskite PV

By Mark Chadwick

  • Perovskite solar cells have the potential to be more efficient and less expensive than traditional silicon solar cells.
  • Recent research suggests that the global market for Perovskite PV could be worth around $12 billion in 2032
  • If Sekisui Chemical were to take a 10% market share, then the potential impact on earnings could be 22%.

OMG: Wide Gold Zones Continue to Fill Gaps in Resource

By Atrium Research

  • Today’s results highlight the strong continuity of high-grade along the Wenot Shear and the Company’s ability to efficiently fill wide gaps in zones which will be important for the upcoming resource update.
  • The Company has completed 14 drill holes, totalling 5,235m.
  • This morning, Omai Gold Mines Corp. (OMG:TSXV, OMGGF:OTC) announced additional drill results from the Omai gold project in Guyana.

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