Equity Bottom-Up

• 1983 was the year both TMNT and Mario Bros were created by two different animation studios
• Mario Bros latest movie has now grossed $1.3 billion in box office receipts YTD, entering the all-time top-3 of animated movies 
• TNMT will see its debut in US theatres on the 2nd of August 2023. Will the turtles get the same reception as Mario Bros?

• We conducted fundamental analysis on Link REIT, the largest REIT In Asia, who owns and operates retail assets, office buildings and logistics in the APAC region
• Link REIT has strong track record for capital management, we expect that to continue.  In the LT, Link REIT is on the path to grow its fund management business
• Link REIT is currently trading at 0.64x P/B and 6% dividend yield, which is attractive from a historical perspective

For our next Corporate Webinar, we are glad to welcome UMP Healthcare’s  Chief Investment & Project Officer, Patrick Cheung. 

In the upcoming webinar, Patrick will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Sameer Taneja. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Monday, 19 June 2023, 17:00 SGT/HKT.

About UMP Healthcare

Founded in 1990, UMP Healthcare is a medical group listed on the main board of the Hong Kong Stock Exchange (stock code 722.HK) and is one of the leading comprehensive healthcare service platforms in the Hong Kong market. We have been committed “To provide comprehensive, diversified and coordinated care for everyone” by creating a network of high-quality and effective medical services for patients, payers, providers and partners.

Along with providing healthcare services that address a wide range of individual needs, UMP closely works with more than 2,000 local and international businesses and insurance organizations to establish and administer corporate healthcare benefit programs for members. The medical service network spans over 1,000 self-owned and affiliated institutions across Hong Kong, Macau, and Mainland China, offering services such as family medicine, specialist consultation, dental care, diagnostic imaging and laboratory testing, preventive medicine and health examination, physical therapy, day surgery, and endoscopy, among others. In 2022, the annual volume of outpatient visits under UMP exceeded 1.1 million.

• Secom’s share price has surged by 8% following shareholder proposals submitted by Dalton Investments, raising expectations for potential approval of a 10% share buyback and its impact on stock price.
• Secom, operating in a mature industry with limited growth prospects, faces challenges in deploying capital and maintaining consistent earnings growth, leading to an accumulation of capital on its balance sheet.
• While Dalton’s proposals may not gain sufficient support to pass at the upcoming AGM, the potential involvement of other activists warrant a bullish outlook.

• GSI Technology (GSIT US) share price is up ~5x in the past month fuelled by the fact that they have an AI Accelerator (APU) called Gemini-I
• Launched in 2020, Gemini-I was 3 years late, has never been properly benchmarked and has thus far attracted just one customer, the Israeli military
• We remain wholly unconvinced that GSIT is on the cusp of a breakthrough in the world of Accelerated AI

• IPL 2023 concluded recently with record streaming views and TV viewership. This bodes well for the valuation of the IPL Lucknow franchise owned by RPSG Ventures Limited (RPSGVENT IN) [“RPSGV”]. 
• FMCG business is currently doing a run-rate of INR 400cr+ revenue, however, needs to scale up faster. To drive this, Too Yumm! has entered into a new category, traditional Namkeens.
• The Firstsource Solutions business seems to be bottoming out. Operating margin has stabilized in the 11.5-12% range. FY23 revenues de-grew at -1.1% YoY as guided at -1% to -2%.

• Recruit’s share price been up +13% YTD and gained more than 22% over the last 30-days with the US Dept of Labour releasing job data for April 2023.
• Job openings were 10.1m in April 2023 vs estimates of c. 9.4m which created positive sentiment over labour market’s resilience to economic turmoil. However, April numbers were 13.5% down YoY.
• Recruit Holdings (6098 JP) is currently trading at a lofty FY+2 EV/EBIT multiple of 17.9x despite earnings expectations deteriorating, we are set to benefit nicely on the short side.

• 2022 saw Light and Wonder make a major strategic pivot from legacy units to focus on three core businesses: Gaming equipment and systems, social online gaming and IGaming.
• Recent move to acquire the 17% of SciPlay social gaming platform it does not own has evoked investor interest in the sector due to a 29% premium on offer.
• After taking a big tax hit related to the sale of two of its legacy verticals the company is well positioned to compete for rising Asia-Pacific gaming equipment business.

• We think by adopting the new strategy to unbind vehicle sales with battery swapping, NIO could broaden its customer base to non-Yangtze-Delta regions and regain price competitiveness.
• We upgrade to BUY and raise TP to US$ 10.5, due to 1) recovered growth outlook brought by widened customer base, more competitive pricing and intact model cycle
• And 2) smaller-than-feared margin pressure. Our TP implies 2x PS. 

• In 1Q FY23/12, CARTA Holdings posted a 23.3% YoY increase in transaction volume for programmatic TV commercial service TELECY, and a 2.8-fold increase in gross sales in the retail domain, showing steady performance in the mass retail domain, which the company has positioned as a priority area in its medium-term management plan.
• On the other hand, the weak macro environment continued to weigh on double-digit sales declines in reservation-based ads, resulting in a 7.7% YoY drop in sales and a 59.3% drop in operating profit overall. 
• YoY comparisons will ease off from the next quarter, but with 2Q usually being a slow period for advertising and the lack of activity from advertisers in the new fiscal year from April onward, earnings are expected to recovery smoothly rather than sharply.

For our next Corporate Webinar, we are glad to welcome KTMG Limited’s Chief Executive Officer, Damien Lim. 

In the upcoming webinar, Damien will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Tuesday, 20 June 2023, 17:00 SGT/HKT.

About KTMG Limited

KTMG Limited (“KTMG” and together with its subsidiaries, the “Group”) is an integrated textile and apparel manufacturer.

KTMG is a contract manufacturer of apparel specialising in athleisure wear, casual wear, loungewear, and pyjamas for various ages, with facilities in Malaysia and Cambodia. The Group manufactures apparel for retailers in the United Kingdom, United States, European Union, and Canada, who then sell apparel products under their own brands. The Group has a co-creation business model through which it collaborates closely with its customers during the product initiation process, thereby offering customers a one-stop value-added platform.

In 2019, KTMG expanded upstream into the knitting, dyeing, and finishing of fabric, with its very own textile manufacturing facility in Johor, Malaysia.

• Nikkei reported last week that NTT (Nippon Telegraph & Telephone) (9432 JP) is developing a generative AI and plans to offer services to the company’s corporate clients by Next March.
• Over the recent years, NTT has been extensively investing on AI, robotics and other data-driven products and services to boost its top line growth as its core business is saturating.
• AI and semiconductors are two key policy areas of Japanese government for development as the country is dealing with population and other demographic changes.

• Oil is down dramatically from USD83.26 in April this year to USD67.37 now
• DBS saw a surge in NPLs in FY16 from the oil price decline in that time
• There appears to be some correlation between DBS and oil prices

• Hon Hai shares have broken out to near-term highs after news flow regarding its investment agreement in Lordstown Motors.
• PC makers Acer & Asustek’s share prices remain subdued since Nvidia results despite AI’s potential to accelerate the PC upgrade cycle.
• TSMC’s ADR premium went even higher just today; Also, Realtek is suing Mediatek in the U.S., adding to our Long/Short watchlists.

• Nippon Shinyaku (4516 JP)‘s FY24 revenue guidance is 3% below mid-term target, while operating and net profits guidance are 20% and 17% below the target, respectively.  
• Revenue growth of Viltepso is expected to decelerate to 28% in FY24 from 85% in FY23, dragged by the U.S. sales, which contributes 74% of Viltepso revenue.
• Rival Sarepta Therapeutics (SRPT US) is expected to receive FDA approval for its next DMD gene therapy drug this month, leading to a new competition for Viltepso.

• Indian Energy Exchange Ltd (IEX IN)  is a market leader among power exchanges. However, the company’s market share might be delicate, especially with the developments of market coupling.
• The company might be a market leader, however there are some aspects accounting wise that are unique to IEX as compared to other exchanges like MCX and BSE.
• This includes settlement guarantee fund, accounting of software license, etc.

• Target Corporation delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• Target’s focus on building trust and delivering affordable products to consumers led to three consecutive years of traffic growth, with a 0.9% increase in comparable traffic in Q1.
• We give Target Corporation a ‘Buy’ rating with a revised target price.

• Motorola Solutions managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• Revenue increased by 15%, and earnings per share increased by 31% over the preceding year, exceeding the company’s guidance.
• We give Motorola Solutions a ‘Hold’ rating with a revised target price.

• Take-Two Interactive Software delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• Moving forward into fiscal 2024, Take Two expects full-year net bookings from $5.45 billion to $5.55 billion, considering the challenging consumer backdrop.
• We give Take-Two Interactive Software a ‘Hold’ rating with a revised target price.

• The TJX Companies delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• TJX experienced an increase in pretax profit margin and earnings per share, surpassing last year’s figures.
• The company’s divisional performance also showcased positive results for Marmaxx, with sales and traffic consistency across regions.

• TSMC is back to an 11.8% ADR premium after dropping to 8%… potentially another good Long/Short point.
• UMC has flipped to a -0.6% ADR discount, from a 5.6% Premium. If the discount ticks slightly more negative then a good setup level will open up.
• ASE, ChipMOS, and CHT spreads have also experienced significant swings since our last dual-listings piece.

• Oriental Watch is a prominent luxury watch retailer in the Greater China region.
• While the company offers various brands, the majority of its sales, over 80%, come from its core brands, particularly Rolex and Tudor, a sister brand of Rolex.
• Over the past two years, Oriental Watch has benefited greatly from the strong popularity of Rolex watches and has rewarded its shareholders with a dividend payout of over 100%.

• Share price performance has been strong in spite of pressure on margins from heavy investment in power semiconductors for electric vehicles. 
• Management’s medium-term targets are ambitious, but could be achieved in a reasonably favorable economic environment.
• Projected valuations compare favorably with historical ranges. The primary risk to investors appears to be  over-optimism. 

• We explored the primary share price drivers for HKL, the prime office landlord in Hong Kong, including share buybacks, HK office recovery and as a reopening/ESG thematic play. 
• HKL has been constantly evaluating its capital management strategy.  Despite interest rate environment has changed substantially, HKL still sees buyback (7% earnings yield) as a good option
• Valuation remains attractive.  Part of the risks is priced in.  Although it can remain as a value trap, it can unlock its value and re-rate over the long term.

• Anhui Conch Cement (914 HK) has been facing numerous challenges, but at 0.5x P/B (2SD below average) and 36.4% of share price is net cash, it pays not overly bearish. 
• Government stimulus measures may not be effective immediately, but should pave the way for better cement demand. A 16.5% increase in special purpose bond issuance in 4M23 is positive.  
• Depressed cement price is bad, but this will drive small and inefficient players out of the market. This will bring more orderly competition and allow Conch Cement gain market share. 

• Benesse Holdings (9783 JP) share price has fallen 18% annually since 4 years ago with PER going from 55x to 14x
• The structural decline in the main business remains although the smaller business has shown some improvement.
• Japan has received a lot of investors interest recently and Benesse could pick up some investor interest too. 

• Thomson Medical Group Limited (TMG SP) has updated its future growth plan in Southeast Asia. The company is currently in preliminary confidential discussions to explore a potential transaction.
• Media reports suggest, Thomson Medical is eyeing a controlling stake in Vietnam-based leading multi-specialized tertiary care provider, FV Hospital for $300–400M.  
• Thomson Medical has a strong balance sheet, with cash reserve of S$143M, against debt of S$626M. Last month, the company has issued S$120M 5.5% notes due 2028.

• 2022 was a turning point for China Resources Pharmaceutical (CRP), because performance of core subsidiaries saw a historic improvement.After China reopens, CRP is expected to achieve double-digit growth in 2023.
• CRP’s development history indicates that its current scale/industry position are mainly due to continuous M&A based on SOE resource advantages/background, but holding platform companies have valuation discounts in secondary market.
• Different business models lead to different valuation logic. But Sinopharm/SH Pharma/CRP all enjoy SOE background dividends+valuation system with Chinese characteristics. If investors mainly focus on industry trend, they can all be invested.  

• Edelweiss reported a decent Q4FY23. Across businesses, Edelweiss reported strong growth. The credit business is also now scaling up with Q4FY23 disbursements at INR 400cr in housing finance.
• The demerger of Nuvama Wealth Management is now complete with record date as Jun 2 2023. Nuvama is on track to list on the exchanges by the end of July.
• Based on our sum-of-the-parts valuation, Edelweiss can be valued at INR 15000cr+. At the current market cap of INR 4400cr, it is trading at a huge discount of 70%+.

• The evolution of the digital age over the last two decades has seen an uninterrupted growth trajectory for the data center market, with demand being driven by increasing storage and computing requirements, as well as the widespread shift from on-premises infrastructure to cloud solutions.
• Developments in software applications and IT have reshaped the way clients interact with data, instigating a significant expansion of data center inventory.
• As the wheel of progress spins inexorably forward, Fortune 500 companies are turning their gaze toward the vast and uncharted frontier of Artificial Intelligence (AI) and its applications. 

• The General Office of National Health Commission issued a notice on further strengthening the management of clinical medication for children. Pediatric TCM is more popular, with decent growth potential.
• Long-Term money choosing to leave A-share isn’t due to geopolitical risks. If outlook isn’t good, the logic of capital’s allocation in A-share isn’t based on promising growth, but on liquidity instead.
• We analyzed key points of Clover Biopharmaceuticals (2197 HK). The Company has entered a vicious cycle. If Clover is abandoned by the market, it will lead to lack of liquidity.

• Conventional corporate wisdom says market leaders have less room to grow and must concentrate on holding share. Not true.
• As Macau recovery gains steam, Galaxy is meeting challenges with its expansion likely to move its dominant market share higher as the total pie grows.
• The company’s focus is on capacity as well as diversity of offerings bolstered by a balance sheet among the healthiest in the sector.

• Home Depot delivered a disappointing set of results as the company was unable to meet the revenue expectations as well as earnings expectations of Wall Street.
• However, despite these challenges, Home Depot observed strength in key spring-related categories, such as live goods and other garden-related products, where the weather was more favorable.
• Despite the challenges, Home Depot’s dedicated team prioritizes associates and customers, delivering value and service throughout the quarter.

• Stylam Industries (SYIL IN) is a play on the Indian laminate space with a 25% CAGR growth predicated on growth in both international and domestic markets.
• The stock trades at 23.6x/19x FY24e/25e. While this is not cheap by any stretch of the imagination, the company is a high grower/best in class amongst its competitors. 
• Stylam Industries (SYIL IN)  is completing an expansion to increase capacity by 40% in FY24 and expanding in a new segment that can double its revenue over FY23-25e. 

• In May, JD Health made a voluntary announcement that the company has made operating income of RMB795.4m (5.7% of revenues) in 1Q2023 vs RMB61.6m (0.7% of revenues) reported in 1Q2022.
• JD Health’s share price been down more than 25% despite the company announcing strong 1Q2023 results, as the market has become concerned over the company’s ability to sustain its profits.
• Our quantamental analysis proves that JD Health may not be able to generate OPM in excess of 2-3% as there is very little room for GPM to improve.

• CP ALL is increasingly one of the best proxies for consumption in Thailand, with its broad exposure to convenience stores, hypermarkets, supermarkets, wholesale through Makro’s cash & carry stores.
• The company continues to expand its store footprint and improve margins through a better product mix towards fresh and private labels, as well as group synergies around growing omnichannel sales. 
• CP ALL is the largest weighting in MSCI Thailand and has seen pressure from foreign outflows due to political uncertainty but this may be about to work in its favour. 

• Balkrishna Industries (BIL IN) is one of the big names in Off-Highway Tyre (OHT) segment across the globe.
• The company is currently in a capex mode and looks to augment its tyre capacity and expand the carbon black manufacturing.
• However, there are some corporate level discomforts regarding the payouts to the stakeholders on the back of capex, and disclosure errs in few lone items on the balance sheet.

• Of the six Malaysian banks screened, we maintain RHB Bank and CIMB on the buy list; we add funding and liquidity metrics to our screens
• RHB Bank is our top pick for its strong post-provision profitability, its high CET1 ratio understating its ROE, and it is attractive valuations on PE multiples and PBV ratios
• CIMB remains our deep value pick as we believe it has potential to improve post-provision returns; the constructive return outlook combines positively with CIMB’s modest valuations, including its PEG ratio

• Tandem Diabetes Care (TNDM US) has been consistently missing earnings expectations. This is taking a toll on the share price performance, with shares plunging ~61% over the last one year.
• Tandem’s nearest rival has recently launched its new insulin pump in the U.S. This will affect Tandem’s Q2 sales growth. Tandem guided for 10–12% revenue growth in 2023.
• Tandem is a hugely beaten down stock. However, it will be wise to wait for Tandem to launch new product, ensure its good uptake amid competition, and exhibit earnings stability.

• Elastic NV (ESTC US) reported a solid 4QFY23, reflecting a stronger-than-expected non-GAAP operating margin of ~9% and GAAP subscription gross margin of ~79%. 
• Elastic cloud revenue grew 28% y/y, representing 40% of total revenue. Elastic cloud is scaling well, and margins improved faster-than-anticipated. 
• We are concerned about slowing H1 FY24 y/y growth in total revenue and failure to achieve the $2B revenue mark in FY25. Price target to $112.

• Toyota managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company faced production constraints due to factors like semiconductor shortages, natural disasters, and the ongoing impact of COVID-19.
• Their expert team members also remain committed to managing risks, investing in growth, and shaping the future of the automotive industry.

• Coinbase lost 16% of its value after the SEC announced a lawsuit against the company.
• The lawsuit comes 24 hours after a similar action against rival exchange Binance, which saw $780 million in outflows.
• Coinbase may continue to make quarterly losses due to market uncertainty, loss of deposits and potential SEC fines.

• Wynn Resorts managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• In Las Vegas, Wynn Resorts achieved significant results in Q1, supported by a thriving consumer base.
• In Macau, Wynn Resorts generated significant earnings despite some challenges, including a lower VIP hold.

• The Kishida administration is looking for funding sources for its two big objectives – 1) raising the birthrate, 2) raising defense spending by 60% in 5yrs to 2% of GDP.
• The second is not new. It was in an “order” PM Kishida gave to FinMin Suzuki and MinDef Hamada last November. They need ¥48trln by end 2027. 
• Yesterday, in an LDP meeting, the idea of changing the NTT Law so the government could sell more NTT shares was mooted. It’s worth thinking about.

• Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
• In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
• Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.

• Apollo Hospitals Enterprise (APHS IN) reported a 21% YoY growth in revenue in Q4FY23, mainly driven by 31% and 18% revenue growth in Apollo HealthCo and hospital business, respectively.
• For FY24, Apollo expects HCS segment revenue growth at 15% YoY, mainly driven by higher occupancy. The company aims to improve hospital occupancy to 70% by the end of FY24.
• Apollo 24/7 business is on track to achieve breakeven at an entity level in Q4FY24. GMV of Apollo 24/7 is expected to be double in FY24 compared to FY23 level.

• The waiting is over – Q4 FY3/2023 results highlighted 1) continued recovery in the hotel industry spurred by domestic and overseas traveler demand, 2) improvement in profit structure through business model transformation and increased accommodation demand has led to an increase in revenue, and 3) the completion of the acquisition of Red Planet’s business in the Philippines highlights the company’s expansion into overseas operations.
• However, as the tourism industry in Japan is in a full-fledged recovery phase, the company believes it can achieve sustained growth.
• Sound financial foundations – the company’s recapitalization strategy has been a success, and we maintain our view that there will be positive free cash flow generation in FY3/2024.

• GMR Airports Infrastructure (GMRI IN) saw pressure on its scrip after its results, that witnessed losses widening to INR-8.4 bn in F23 from INR -7.5 bn in F22 (continuing operations).
• The losses have further dented the balance sheet, that already looked fragile over a number of years.
• The company also faces cash generation problems on the back of debt burden, apart from severe contingent liabilities, that could further hamper the net-worth. Investors should remain cautious.

• Electronic Arts managed to surpass the revenue expectations as well as the earnings expectations of Wall Street in its recent quarterly result.
• The fiscal year 2023 saw EA SPORTS FIFA thrive, with double-digit growth in net bookings and FIFA 23 becoming the best-selling title in franchise history.
• We give Electronic Arts Inc. a ‘Hold’ rating with a revised target price.

• Airbnb delivered a mixed result in the recent quarter, with revenues above market expectations, but it failed to surpass the analyst consensus in terms of earnings.
• The company experienced significantly high bookings, with over 120 million Nights and Experiences Booked in Q1.
• Revenue grew significantly year-over-year, and the quarter was the most profitable GAAP-based.

• Occidental Petroleum Corporation delivered a disappointing set of results as the company was unable to meet the revenue expectations as well as the earnings expectations of Wall Street.
• However, their disciplined approach to capital spending and operational excellence has led to some progress in their shareholder return framework.
• We give Occidental Petroleum Corporation a ‘Hold’ rating with a revised target price.

• We recently interviewed some Temu merchants, and the main conclusion is that Temu continues to experience rapid growth despite the chaos. 
• Temu’s GMV reached a new high in May; Temu faces upcoming challenges from Shein and TikTok, as they are also about to launch their fully managed models.
• Moreover, Temu’s unit economics (UE) has not seen further improvement for several months, and the supply of goods has been a problem;

• Palantir Technologies delivered an all-around beat in the most recent quarterly result with solid revenue growth driven by the U.S. commercial business and disciplined spending management.
• Their commercial segment saw significant revenue growth, while the government showed strength.
• Their expanding adjusted operating margins and strong cash flow generation highlight their ability to manage costs while driving revenue growth effectively.

In this next installment of our #webinar Wednesdays, we welcome Smartkarma Insight Provider, Nicolas Van Broekhoven, as he shares his thoughts and insights on three different small cap stock ideas. From Hong Kong to Canada, tune in as Nicolas delves deeper into stock ideas from across the globe.

The webinar will be hosted on Wednesday, 14 June 2023, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buyside for 15 years, and most recently at a medium-sized boutique asset management firm. Having grown up in Europe, attending university in the US and living in Singapore for the last 7 years, this has given him a broad scope on the world and investing in general. He considers himself as a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique his interest. His style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years. Nicolas likes businesses with real earnings, cash flows, dividends, book value and insider ownership.

• In this insight, we provided the most recent ranking of the top 100 most popular YouTube channels in Korea (according to Socialblade website).
• The top 100 YouTube channels in Korea have received 390.7 billion in total views as of June 2023. Of these total views, K-Pop channels views accounted for 46.4% share.
• YouTube has been meaningfully taking away market share from Kakao and Naver in the past three years. KakaoTalk’s MAU was 41.5 million in May 2023. YouTube was a close second.

• One of the few long-term success stories in supermarkets is Yaoko, which recently celebrated 34 consecutive years of record operating profits. 
• Thanks to a combination of innovation and attention to detail, Yaoko’s financial performance continues to trounce larger rivals in the highly competitive food market in Kanto.
• With Japan’s supermarket sector about to enter a period of consolidation, Yaoko will be one of the leaders.

• Japan’s newly approved hydrogen strategy has ignited a stock market rally in related names: KHI (+20%) Iwatani (+15%) Kansai Elec (+2%)
• Japan government approved higher supply targets for hydrogen to bring the hydrogen strategy in line with the most recent energy mix targets
• Kawasaki Heavy Industries plays a key role in Japan’s hydrogen supply chain, specializing in liquefied hydrogen and innovative initiatives

• Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.
• BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.
• The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.

• Credit quality risks are rising in US commercial real estate (CRE) and specifically in office property; furthermore, the prospect of increasing US Treasury bond issuance may heighten T-bond volatility
• We screen for US banks that have strong capital ratios, that can deliver premium returns and can confront the rising credit quality challenges, especially in CRE
• We maintain buys on M&T Bank and Western Alliance, adding Capital One with its healthy capital ratios and low office exposure; we recommend profit taking on First Horizon

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Vincent Fernando, CFA. Vincent will be sharing with us his top picks in the Taiwanese Tech space. From trends in the industry, its opportunities, and insights into his top picks, join us as we hear more from Vincent.

The webinar will be hosted on Wednesday, 21 June 2023, 17:00 SGT/HKT.

Vincent Fernando, CFA has 20 years of experience researching capital markets in Asia and the USA. He is currently the Managing Director and founder of Zero One Partners. He has more than 15 years of investment research & capital raising experience working at both boutique firms and larger investment banks such as Citi and Macquarie. He has traveled extensively during his career, having been based in New York, Hong Kong, Thailand, and finally Singapore where he was Director of Equity Research covering Southeast Asia where he originated and marketed multiple investment banking deals.

• Q123 Net Revenue was strong, exceeding Q119 (pre-Covid) levels by over 12%
• Almost six months into recovery, Trip.com (TCOM US) has also managed SG&A expenses well
• A good result for the company, but we see no reason to alter our long-term view

• According to WuXi Bio’s management, the Company’s growth in 23H1 would be challenging. That is to say, investors don’t need to expect too much from the semi-annual report.
• Based on “hedge logic” of CXO, AD drugs cannot bring about the prosperity of entire CXO industry as COVID-19 vaccines/drugs did.But WuXi Bio would be beneficiary if receiving large orders.
• We are not sure where the bottom of share price is, because shareholders could continue to reduce their holdings and CXO’s valuation has not reached the inflection point.

• There may be no imminent yield curve control relief in Japan
• MUFG market capitalization is up 2-3x and at a near decade peak level
• Without YCC relief maybe the bank’s 60% rise in NPLs in the past 4 years is better noticed

• TSMC reduced capex guidance to the bottom of its guidance range but maintained revenue expectations and still expects substantial growth in 2024E.
• Dell, HP, and Qualcomm comments signal an AI-Driven PC refresh cycle ahead and 2024E PC Growth. Windows 11 upgrades could be accelerated as new PC AI applications roll out.
• Hon Hai reported that it gained market share globally in 2022, and that it has 40% global market share for servers. Hon Hai’s AI servers expected to experience triple-digit growth.

• Sanken benefits from the structural growth in EVs, which should underpin revenue growth and margin accretion. 
• DCF valuation suggests the stock is slightly undervalued. However, better-than-expected revenue trends could easily drive significant upside. 
• Almost 30% of shares are held by activist investors – there is an attractive 57% upside to a SOTP valuation that could be realised over time.

• ASSA continues to demonstrate the ability to adapt to the changing environment in 1Q2023 with growth in its car fleet and improving profitability for logistics and the last mile. 
• Anteraja has seen a slowdown in e-commerce revenues but is focusing more on building offline customers, whilst ASSA logistics is increasingly focused on mid-mile and cold-chain logistics. 
• JBA Auction is seeing a strong recovery to pre-pandemic levels and maintains 40% market share, whilst Caroline is targeting 3,000-4,000 used car sales in 2023, whilst expanding its offline network.

• Beauty Farm Medical and Health Industry (BFM HK) reported decline in revenue and net profit in 2022, due to the implementation of nationwide pandemic prevention and control policies.
• The company is seeing recovery in 2023. During January–May, customer traffic and average transaction value achieved double-digit growth YoY, while customer spending increased 20%+ YoY.
• In 2023, revenue and EPS are expected to grow 34% and 106%, YoY, respectively. The preliminary business operation overview seems to fall short of the expectations.

• Rakuten sold its 20% stake in Seiyu to KKR at the end of May, divesting from direct ownership in physical supermarkets. 
• This provides a much needed injection of cash for Rakuten’s digital projects and should also help the online platform build trust with other supermarket chains interested in joining its platform.
• Both companies reaffirmed their commitment to build the largest online food retail platform within the next two years.

• HP and Dell’s industry outlook after their results last week indicate a PC market stabilizing and set for growth in 2024E. Qualcomm provided AI comments at a recent conference.
• Both HP and Dell managed to beat earnings expectations despite experiencing 20%+ YoY revenue declines. Neither stock’s price has made a significant move since results.
• AI incorporated into Windows 11 and PC’s themselves could be a major reason for companies and consumers to buy new PC’s. PC’s are being designed to run AI capabilities locally.

• HCG ended FY23 with decent profitability and is on track to see significant scale up over the next 12-18 months as its emerging centers become mature.
• During the course of the next couple of years, HCG is also looking to enhance its presence through the inorganic route.
• We project that HCG may do a PAT of INR 200cr by FY25. At the current market cap of INR 4450cr, HCG is attractively valued at 22x per FY25E PAT. 

• CTO Realty Growth, Inc. possesses the necessary characteristics to outperform the market.
• Diminishing credit spreads and more predictable inflation could result in tailwinds for best-in-class cyclical REITs such as CTO.
• Real Estate Investment Trusts (“REITs”) situated in the United States have underperformed the S&P 500 (SP500) by approximately 10% during the past year, which should not be a surprise as factors such as rising credit spreads, an unstable interest rate environment, and softening consumer sentiment have all dented the hopes of many cyclical assets.

• In 1Q FY12/23, net sales rose 12.8%, and operating profit increased 20.3%; thus, MARUKA FURUSATO made good progress toward achieving 1H forecasts of 9.2% increase in net sales and 9.4% decline in operating profit.
• As a large percentage of the company’s earnings comes from business orders, short-term earnings are unlikely to change much.
• It appears, however, that the company is making greater than initially expected progress in reducing its order backlog as supply constraints, such as shortage of semiconductors, are eliminated.

• Most Brazilian e-commerce platforms evade taxes by treating orders as individual transactions instead of business operations, despite the 60% tax on international e-commerce shipments by companies.
• The Brazillian government plans to address this tax loophole by strengthening oversight and implementing administrative measures.
• If Sea (SE US) cannot find a viable solution to navigate this tax, there is a strong possibility that Shopee will exit the Brazilian market.

• BFI Finance Indonesia management recently confirmed its expectations for receivables growth of +20% YoY this year, which looks conservative after a strong start to the year, with +53.9% new-financing growth. 
• The company booked a strong set of 1Q2023 numbers with strong new bookings growth,  improving net interest spreads, low NPLs, and an ROE of over 22%
• BFI Finance Indonesia has the lowest cost of funds of the multi-finance companies in Indonesia, with a long track record of strong risk management, and remains a top pick.

• We believe shares of Douzone Bizon are deeply oversold and ready for a turnaround.
• The company is increasingly buying back shares. Treasury shares as a percentage of total outstanding shares increased from 0% at end of 2021 to 9.3% at end of 1Q 2023. 
• Korean government’s plans to boost the domestic software industry by spending more than 560 billion won in the software industry is also likely to positively benefit the company this year. 

• Apple’s stock reached an all-time high ahead of the 2023 Worldwide Developer Conference.
• The company unveiled its mixed-reality headset, Apple Vision Pro, which could revolutionize communications and be a game-changer for the metaverse.
• McKinsey predicts that the headset could be a $5 trillion opportunity by 2030.

• ADEA could be the most under the radar artificial intelligence (“AI”) beneficiary through its patent portfolio related to hybrid bonding
• Hybrid bonding is expected to help usher the next generation of semiconductors to handle the growing need for speed and bandwidth with lower power consumption
• ADEA’s stock has been mainly valued on the free cash flow it is able to generate from its media patent portfolio with little value given to ADEA’s semiconductor patent portfolio

• Hogy Medical (3593 JP) reported mixed FY23 result. Revenue and operating profit were ahead of guidance while net profit missed guidance mainly due to a one-off loss of ¥464M. 
• For FY24, Hogy guided for 5% revenue growth. However, operating, and net profits are expected to decline 23% and 19%, respectively, due to rising costs and exchange rate fluctuations.
• While Hogy will continue cost cutting and improving productivity, the company is not expected to fully offset the cost pressure. Hence near-term outlook for the company remains bleak.

• AViC announced its 2HFY9/23 earnings on May 15.
• For 1H,Oct.–Mar., AViC posted net sales of ¥730 mn, +30.1% YoY, and operating profit of ¥140 mn, a slight year-on-year decline of 5.1%.
• On account of a deterioration in the funding environment for start-up companies, AViC lost some of its start-up clients, which account for a percentage of clients that is not insignificant, and saw others cut their budget.

• Against a backdrop of slowing revenue/active users growth, a return to profit in FY2023, while welcome, is shaky.We think Alibaba Health’s growth would continue to slow down in the future.
• The low gross profit and strong regulatory characteristics of drug sales indicate that Alibaba Health Information Technology (241 HK) is difficult to replicate the scale effect brought by traditional internet platforms. 
• The current business model and revenue structure have already made Alibaba Health lack imagination space.From a comprehensive perspective, its valuation should be lower than JD Health but higher than PAGD.

• Elevance Health, Inc. has been active in the M&A market with the divestiture of its life disability business and a “new markets” acquisition.
• However, evidence suggests that success is not guaranteed, according to the company.
• The company’s stock has been downgraded to a moderate buy.

• McKesson managed an all-around beat in the last quarter, closing out a solid fiscal 2023 with full-year revenues of $277 billion and adjusted earnings per diluted share of $25.94.
• The core Pharmaceutical Distribution business supported growth in the U.S.
• Pharmaceutical segment, and they divested their European operations to streamline their portfolio.

• In the second half of this year, innovative device companies could be listed on the SSE STAR Market one after another, which is a systematic opportunity.
• Shareholders’ reduction in CXO will continue. Then, CXO could become a company mainly controlled by various funds, with the original owners all cashing out and leaving, such as WuXi AppTec. 
• We analyzed some key points of CStone Pharmaceuticals (2616 HK). We remain conservative about the Company, and its stock price may continue to remain weak.

• Different from peers whose pharmaceutical assets are scattered in different listed companies, all assets/resources of SH Pharma are integrated within the Company. The intrinsic value of this model is greater.
• SH Pharma is in a traditional industry, facing weak profitability and negative policy impacts, Thus, the Company lacks attractiveness and imagination space for investors, leading to long-term undervaluation. 
• Considering the transformation to more high-margin businesses, SH Pharma’s performance/profitability would improve. Since China hopes to establish a valuation system with Chinese characteristics, there’s valuation repair opportunity for SH Pharma.

• With the inception of the pandemic, borrowers have largely been wrestling with financial distress, compelling fintech companies like SoFi technologies, which banks on student loan financing, to largely reimagine their business model.
• SoFi has moved away from its core business over the past three years, instead casting a wider net, extending its services to include diverse financial products, personal loans, and its banking-as-a-service business targeting enterprise customers.
• In 2023, SoFi has had to grapple with mounting external pressures emanating from a slowing economy.