Equity Bottom-Up

Minor International (MINT TB) represents a unique combination of exposure to a diverse set of hotel and restaurant brands both in Thailand and globally making it a true recovery proxy.
The company’s hotel portfolio is well-diversified geographically and across different segments giving it exposure to both tourism in Thailand and globally and to the recovery in business travel.
Minor Food has also seen a strong recovery as revenge dining draws consumers to dine out. Overall valuations look attractive given expected growth rates over the next two years.

APAC Insurers Series (#1): A Hidden Gem in This Bear Market?

By Alec Tseung

The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds.
Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

Hisense Announced the Long-Awaited Equity Incentive Scheme

By Xin Yu, CFA

Hisense announced the long-awaited equity incentive scheme on Jan 2.
For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level.
We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company.

Raise 2023 Forecasts Due to High Take Rate

By Shawn Yang

There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important.
In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale.

November Brazil Bank Data in Charts – Household and Corporate NPL Metrics Broadly Worsening

By Victor Galliano

In November most consumer NPL ratio categories, except credit cards, worsened with corporate delinquencies, especially in micro and SME, also deteriorating; the system NPL ratio is approaching its pre-pandemic high
System loan growth continues to decelerate; +14.7% for the twelve months to November is a further reduction from the October rate (+15.7%), due to slower corporate and consumer loan growth
New system credit spreads rose further MoM, and we expect average loan spreads to remain elevated into 2023; we favour Banco do Brasil, and are cautious on Santander Brasil

China Power International (2380 HK): Stepping up Transformation Strategy

By Osbert Tang, CFA

The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.
Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC.

Zoetis Inc.: Initiation of Coverage – The Jurox Acquisition & Key Drivers

This is our first report on animal health pharma major, Zoetis.
Despite the world’s volatile external environment and economic unpredictability, Zoetis has performed well from a financial standpoint given to its varied durable portfolio and global reach.
It delivered a 5% operating revenue increase in Q3, which reflected a decent yet below-par performance across its range of innovation-driven companion animal products, particularly in its overseas markets.

DexCom Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on medical device major, DexCom.
Although DexCom anticipates that these primary care connections will be crucial to its long-term consumer goals, they also enable the company to serve the nation’s extensive insulin users.
In addition, DexCom carried out its previously disclosed accelerated share repurchase program, buying roughly 550 million outstanding shares.

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Jan 04

Daily Brief Equity Bottom-Up: Pinduoduo (PDD US): More Thoughts on TEMU and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Pinduoduo (PDD US): More Thoughts on TEMU
2021 High Conviction Seven & I: Major Headwinds Deflected By The Yen Depreciation, Upside Is Limited
Ibiden (4062 JP): Another Chance for Long-Term Investors
Softbank Group – Vision Fund: Gains on Dollar Basis in Q3 but Stronger Yen Points to Quarterly Loss
Peptidream (4587 JP): Rising Drug Discovery Collaborations To Drive Growth; New Revenue Stream Added
Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers
Super Hi International: Trading Dynamics Post Listing Amid High Volatility
Leapmotor: Sell
Jiangsu Hengrui Medicine (600276.CH) – About The Performance Recovery and the Concerns Behind
IPAR: Catalysts for Further Growth

Pinduoduo (PDD US): More Thoughts on TEMU

By Eric Chen

We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.
Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.
We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.

2021 High Conviction Seven & I: Major Headwinds Deflected By The Yen Depreciation, Upside Is Limited

By Oshadhi Kumarasiri

We would be closing our 2021 high-conviction long trade on Seven & I Holdings (3382 JP) before they release 3QFY23 results next week.
Although we are not expecting the company to miss consensus estimates this time around, we are expecting significant downside risks to Seven & I’s US business throughout the year.
Given that shares went nowhere after 12% revenue and 1% OP beats in the previous quarter is a good indication that the upside is limited.

Ibiden (4062 JP): Another Chance for Long-Term Investors

By Scott Foster

Operating profit hit a 15-year high in the six months to September. That appears to have been the cyclical peak.
Guidance for 2H of FY Mar-23 is probably conservative, but year-on-year profit comparisons will probably be negative for at least a year.
After rising by 44% from mid-October to mid-November, Ibiden’s share price has given up more than half that gain. Long term investors may again look for an entry point.

Softbank Group – Vision Fund: Gains on Dollar Basis in Q3 but Stronger Yen Points to Quarterly Loss

By Kirk Boodry

The Vision Fund public portfolio closed Q3 in the black as gains for Didi and AutoStore offset weakness for Asian investments Goto and Coupang. We have included updated tables inside
On a yen basis, however, Softbank will likely post a Q3 segment loss for Vision Fund as a weaker dollar more than offsets the local currency gains.
SBG shares have traded close to the 35% discount to NAV level since end-November but that could expand if sentiment on China weakens or tech valuations remain volatile

Peptidream (4587 JP): Rising Drug Discovery Collaborations To Drive Growth; New Revenue Stream Added

Peptidream Inc (4587 JP) aspires to be a world leader in drug discovery and development to address unmet medical needs by leveraging on proprietary PDPS technology, a peptide discovery platform.
Driven by expanding research collaboration programs and progressing pipelines, Peptidream guided for revenue of ¥13–15B from drug discovery and development business in 2022, up from ¥9.4B in 2021.
Foray into Radiopharma adds a regular revenue stream. Peptidream expects the business to report revenue of ~¥11.5B and remain marginally profitable for 2022.

Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers

TSMC’s revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.
Samsung has guided staff internally for a major slump in its semiconductor unit’s operating profit.
Apple is pushing for price cuts amongst its suppliers due to weak end demand for its products.

Super Hi International: Trading Dynamics Post Listing Amid High Volatility

On 30 December, Super Hi International Holding (9658 HK) completed its separate listing in HK from Haidilao by the way of introduction. The trading has been highly volatile so far.
Our base case valuation of Super Hi International is target price of HKD13.6 per share, which represents a 40% upside from current levels.
The same store sales at Super Hi improved significantly in nearly all major regions in 1H 2022.

Leapmotor: Sell

By Xin Yu, CFA

Sales has been weak since October, mainly due to price hike.
Technology leadership may not be sustainable with limited R&D investments.
EREV version may not be the right solution for the company’s long-term growth.

Jiangsu Hengrui Medicine (600276.CH) – About The Performance Recovery and the Concerns Behind

There could be some catalyst for Hengrui, such as the NRDL negotiation in early January 2023, the slowing down of the negative impact of VBP and the increasing outpatient volume.
Hengrui’s performance low point was in 2022, and it would gradually recover after that. If investors want to invest in Hengrui, 2023 is a good time to take action.
However, Hengrui could be hard to return to its peak. Without the next PD-1 level blockbuster product, it would be difficult for Hengrui to achieve complete performance reversal.

IPAR: Catalysts for Further Growth

By Hamed Khorsand

IPAR has added Lacoste to its portfolio of fragrance licenses and should lead to incremental growth in 2024.
Lacoste, like IPAR’s other major licenses, is a well-established brand that is likely to immediately contribute to sales and earnings growth when in 2024
Heading into the holiday shopping season of 2022, fragrance was proving as a high demand category from consumers

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Jan 03

Daily Brief Equity Bottom-Up: Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds
Cie De Saint-Gobain (SGO FP): Deep Value
Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services
Korea Small Cap Gem #18: Shinwon
New Relic: $1B+ Revenue By FY24. Cost Discipline Will Drive Profitability
Hormel Foods Corporation: Initiation of Coverage – Investment In Garudafood & Other Drivers
China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin
Norfolk Southern Corporation: Initiation of Coverage – Business Strategy & Other Drivers
International Paper Company: Initiation of Coverage – Business Model & Key Drivers
The Sherwin-Williams Company: Initiation of Coverage – Recent Acquisitions & Key Drivers

Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds

By Oshadhi Kumarasiri

After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.

Cie De Saint-Gobain (SGO FP): Deep Value

By Alexis Dwek

New Management, New Targets, New Profile. Mission to change the underlying culture to one of ‘accountability’ and ‘delivery’
Launch of the Grow & Impact program which sets out a clear and coherent strategy to 2025, a plan designed to accelerate the group’s profitable growth.
Valuation upside. The stock trades on EV/Sales below 0.5x. Historical multiple above 1x. We see rerating potential. Price could double if the Company delivers on targets

Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services

China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.

Korea Small Cap Gem #18: Shinwon

Shinwon Corp (009270 KS) is the 18th company in our Korea Small Cap Gems series.
Established in 1973, Shinwon is a leading apparel company which has been in business for nearly 50 years. Its most popular apparel brands include Besti Belli, Si, Viki, and SIEG.
The four key catalysts with Shinwon include significant share buybacks, strong growth in sales and profits driven by exports, potential change in the controlling shareholding structure, and discounted valuations.

New Relic: $1B+ Revenue By FY24. Cost Discipline Will Drive Profitability

By Andrei Zakharov

We double down on New Relic stock as we see operational improvement and a clear path to non-GAAP profitability. A strong balance sheet will help to survive an economic downturn.
The company will repay 0.5% senior convertible notes in 2023 and is not interested in diluting existing shareholders. New Relic ended 2QFY23 with $833M in cash and cash equivalents.
American activist investor Jana Partners held ~3.2M New Relic shares as of Nov-22. New Relic Inc (NEWR US) shares underperformed in 2022, with shares down ~49%

Hormel Foods Corporation: Initiation of Coverage – Investment In Garudafood & Other Drivers

This is our first report on Hormel Foods Corporation, one of the leading protein food companies across the globe.
Hormel achieved another quarter of growth in organic sales led by its solid performances from its food service businesses and its center store grocery portfolio.
In the quarter, Hormel saw growth from its food and ethnic forward portfolios.

China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin

By Ming Lu

Alibaba’s CEO will lead the cloud business himself, because the retailing business faces headwind.
Tencent will enter the short video market again, because the online game is till stagnant.
Douyin will launch a car-hailing platform, which will compete with Meituan.

Norfolk Southern Corporation: Initiation of Coverage – Business Strategy & Other Drivers

This is our first report on rail transport major, Norfolk Southern.
The company delivered strong financial results in Q3 surpassing Wall Street expectations in terms of revenues as well as earnings.
We initiate coverage on the stock of Norfolk Southern Corporation with a ‘Hold’ rating.

International Paper Company: Initiation of Coverage – Business Model & Key Drivers

This is our first report on International Paper Company, one of the largest producers of renewable fiber-based industrial packaging and pulp products.
It has been a challenging and dynamic environment for International Paper and the company experienced a sharp decline in the demand for its Industrial Packaging segment and higher cost headwinds significant from higher distribution and energy costs.
Operating margins were lower because of significant macro headwinds and International Paper saw a decline across all the end-use segments.

The Sherwin-Williams Company: Initiation of Coverage – Recent Acquisitions & Key Drivers

This is our first report on Sherwin-Williams, one of the largest distributors of paints and coatings in the U.S.
The company had a stellar third quarter, with high teen sales growth leading to the first $6 billion sales quarter and significant sequential and year-over-year gross margin improvement which resulted in an all-around beat.
In contrast to China’s and Europe’s persistent weakness, demand is still robust in the pro-architectural and North American industrial end sectors.

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Jan 02

Daily Brief Equity Bottom-Up: Alibaba 4Q Ecommerce Outlook and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Alibaba 4Q Ecommerce Outlook
A House of High Style

Alibaba 4Q Ecommerce Outlook

By Xin Yu, CFA

December GMV was below expectations, due to elevated case counts after the relaxation of the covid restriction
With high return rate and more merchant supports, gap between GMV growth and CRM growth remained large in 4Q.
Long-Term wise, Alibaba will continue losing market share while PDD’s market share may potentially surpass JD.

A House of High Style

By subSPAC

Luxury brands had a rather fashionable year in 2022, bouncing back from the pandemic slump with the help of pent-up demand and lockdown savings spent on travel-worthy threads.
However, even the resilient luxury market isn’t immune to the macroeconomic forces at play, from inflation to the war in Ukraine and the impending recession in the US and Europe.
It is a surprise then that Luxury Fashion house Lanvin Group decided to plunge into the public markets despite the choppy economic waters.

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Jan 01

Daily Brief Equity Bottom-Up: China Semiconductor Restrictions: How the Vice Is Becoming Tighter and Tighter and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

China Semiconductor Restrictions: How the Vice Is Becoming Tighter and Tighter
Taiwan Dual-Listings: Premium/Discounts Mostly in the Middle, ChipMOS Opportunity
Clinuvel Pharmaceuticals (CUV AU): Strong Start of FY23; Pipeline Progress Enhances Conviction
Elan Microelectronics: Capacity for Share Buybacks in 2023E, Intel Event Could Provide Cycle Clarity
TMT Short Idea: Pinterest
Taiwan Apple Ecosystem Monitor: Quanta and Pegatron Shares Lagging Apple Decline?

China Semiconductor Restrictions: How the Vice Is Becoming Tighter and Tighter

We provide a timeline and analysis of key measures from May 2019 to December 2022.
How successive tightening steps led to a critical consolidation in October 2022.
Recent developments show the U.S. has motivated additional countries to participate and more restrictions are likely in 2023E.

Taiwan Dual-Listings: Premium/Discounts Mostly in the Middle, ChipMOS Opportunity

TSMC ADRs are trading at a small premium; 4Q22 results will be released on January 12th.
UMC ADRs are trading at a discount; 4Q22 results will be released on January 16th.
ChipMOS ADRs are trading at a decent discount, opening a trade opportunity.

Clinuvel Pharmaceuticals (CUV AU): Strong Start of FY23; Pipeline Progress Enhances Conviction

Clinuvel Pharmaceuticals (CUV AU) is recording consistent profitable revenue growth backed by Scenesse. 2023 will be marked by several clinical trial progress and data readouts from the company.
The first readouts of the DNA repair program on xeroderma pigmentosum patients treated with afamelanotide are expected to be available early in the new year.
Clinuvel has started FY23 on a strong note, with Q1 recording highest ever customer receipts. Current cash balance of A$138 million represents sufficient funding for nearly eight quarters.

Elan Microelectronics: Capacity for Share Buybacks in 2023E, Intel Event Could Provide Cycle Clarity

We believe Elan Microelectronics has capacity for share buybacks in 2023E, and that it could be in shareholder interests.
Even in the coming 2023E down-year, we believe the company could generate over NT$1.7bn in EBITDA. Its balance sheet will remain net-cash.
The company is in a strong position as a leader in touch screens, touch pads, and fingerprint sensors. Intel’s upcoming January webinar could provide clarity on the industry cycle.

TMT Short Idea: Pinterest

By Aaron Gabin

Pinterest has rallied 40% over the past 5 months on hopes that its new CEO Bill Ready will pivot the company from a pure advertising model to an ecommerce juggernaut.
Altering what consumers use online platforms for is exceedingly difficult and rarely succeeds: TripAdvisor, Yelp, Groupon, Stitchfix, eBay.
Ultimately, unless Pinterest convinces its users to more frequently utilize the platform, efforts to boost monetization will likely fall flat.

Taiwan Apple Ecosystem Monitor: Quanta and Pegatron Shares Lagging Apple Decline?

Apple shares have fallen recently, nearing 52-week lows as analysts have been cutting share targets on China production uncertainty and weak consumer end-market demand.
Key Apple suppliers Quanta and Pegatron, in particular, appear to have not yet reacted to the declining market sentiment towards Apple.
Investors can consider Shorting Quanta and Pegatron vs. a Long position in Apple. We see limited potential for positive news flow for the stocks through January.

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Dec 31

Daily Brief Equity Bottom-Up: Bank Mandiri (BMRI IJ) – Growing By Digital Means and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Bank Mandiri (BMRI IJ) – Growing By Digital Means
Eicher Motors (EIM IN) | “Hunting” Down Competition
Intel Vs. TSMC Monitor: After a Quiet December, January Will Be a Big Month

Bank Mandiri (BMRI IJ) – Growing By Digital Means

Bank Mandiri (BMRI IJ) is seeing significant rewards already being harvested from its digital strategy as it attracts low-cost fund through both its Livin’ app and its KOPRA platform.
The bank’s 9M2022 results reflected the changing shape of its business, with lower costs and higher returns being generated through its move to higher-yielding assets and digital strategy.
Bank Mandiri (BMRI IJ) remains a core holding among the Indonesian banks as a proxy for the overall economy with valuations attractive given rising and sustainable returns.

Eicher Motors (EIM IN) | “Hunting” Down Competition

By Pranav Bhavsar

The competitive position and demand environment for Eicher Motors (EIM IN)‘s “Classic 350” remains intact.
The recent launch “Hunter 350” is expanding markets by taking on the competition.
Cannablisation fears from Hunter 350, remain unfounded, and unlikely to have any major impact on margin trajectory.

Intel Vs. TSMC Monitor: After a Quiet December, January Will Be a Big Month

Intel outperformed TSMC in 1H December, and then TSMC outperformed after some negative rumors about an Intel product delay/cancellation.
After a quiet December, January will be a big month as we will have 4Q22E result for both companies. The expectatioins bar for INTC is set very low.
We see a potential Long INTC vs. Short TSMC opportunity after TSMC has released results and before INTC has released its results.

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Dec 30

Daily Brief Equity Bottom-Up: China Allows Import of 45 Foreign Video Games Including 7 Korean Games and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

China Allows Import of 45 Foreign Video Games Including 7 Korean Games
Bank Negara Indonesia (BBNI IJ) – Time to Play Catch Up?
Sinopharm Group (1099 HK): Industry Tailwind and China Reopening To Drive Growth
Mediatek: We Contacted Management Re: Latest Arm Restrictions, Accumulate
African Rainbow Minerals Vs. Impala Platinum: Which One Is A Better Buy?
BliBli (BELI IJ) – A Very Different Animal
Chewy Inc.: Initiation of Coverage – Post-Pandemic Recovery & Key Drivers
Hon Hai: EV Growth Will Come Into Focus in 2023E, Can Hit NT$155 Per Share
Tencent/Netease: Tencent Behind Smaller Peers in This Year Game Approval
Honeys: Sweet Profit in a Downturn

China Allows Import of 45 Foreign Video Games Including 7 Korean Games

On 28 December, the Chinese regulators announced that it will allow import of 45 foreign video games in China, among which seven are Korean video games.
Now that the Chinese authorities have allowed greater imports of foreign games, this will act as a significant positive catalyst to boost share prices of Korean game companies.
Among the major Korean game companies, we believe that NCsoft and Netmarble are best positioned to capitalize on this catalyst.

Bank Negara Indonesia (BBNI IJ) – Time to Play Catch Up?

Bank Negara Indonesia (BBNI IJ) has been a perennial underdog in terms of valuations versus its peers but as its ROE and ROA converge with those peers it should rerate.
The bank’s 3Q2022 reflected the changing shape of its loan portfolio towards higher-quality and lower-risk exposure in corporate loans and tier 1 clients’ value chain, KUR, and payroll loans.
BNI management is cautiously optimistic about the outlook for FY2023 in terms of loan growth and credit quality. Valuations remain attractive and ROEs may rise faster than consensus estimates.

Sinopharm Group (1099 HK): Industry Tailwind and China Reopening To Drive Growth

Sinopharm Group Co Ltd H (1099 HK) remains a beneficiary of both VBP and China reopening. Consensus expects double-digit revenue and earnings growth for the company in 2023 and 2024.
SinoPharm’s acquisition of VBP varieties constantly stood in the leading position in the industry. Through June 2022, China carried out seven batches of VBP, with 294 categories being included.
With China gradually re-opening, SinoPharm should record accelerated growth in its pharma distribution business. With subsiding COVID-19 cases in Q3, SinoPharm reported 10% YoY and 8% QoQ revenue growth.

Mediatek: We Contacted Management Re: Latest Arm Restrictions, Accumulate

By Pearl Gray Equity and Research

We contacted Mediatek management in regards to the latest Arm restrictions for China; Mediatek doesn’t expect to be impacted.
Mediatek’s latest chipsets are competing well against Qualcomm, and its China competition has been stunted by U.S. restrictions in our view.
We have established our financial model for the company – We believe the shares should be held or accumulated on a value-basis.

African Rainbow Minerals Vs. Impala Platinum: Which One Is A Better Buy?

Impala Platinum and African Rainbow Minerals are overlooked mining stocks with tremendous total return prospects.
Both companies are breadwinners. Both stocks’ total returns prospects are unparalleled, according to the analysts.
Both stocks have strong buy ratings to both stocks, which are assigned strong buy Ratings to both.

BliBli (BELI IJ) – A Very Different Animal

Blibli (BELI IJ) is a very different animal from its listed peers given its omnichannel approach and its large 1P business plus a substantial private-public institutional B2B business.
The company’s IPO was a relative success, raising US$508m in fresh funds, and the share price is still above the IPO price after listing on 8th November.
Blibli (BELI IJ) is still loss-making but has a strong backer in the Djarum Group. Its travel business could move to profitability quite rapidly and Ranch is there already.

Chewy Inc.: Initiation of Coverage – Post-Pandemic Recovery & Key Drivers

This is our first report on Chewy, the leading pure play e-commerce company in the U.S. in the domain of pet food, pet supplies, and pet healthcare products.
During the quarter, they announced the growth of CarePlus, their exclusive line of insurance and wellness products with Lemonade-powered plans.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Hon Hai: EV Growth Will Come Into Focus in 2023E, Can Hit NT$155 Per Share

Hon Hai’s Zhengzhou problems appear to be easing; Nevertheless, the company is expanding in India and Vietnam regardless.
We believe the company’s EV platform business and EV milestones will drive the shares in 2023E.
We have developed a financial model for Hon Hai and are establishing a 12-month price target of NT$155 per share, 55% above current levels. This is higher than the Street.

Tencent/Netease: Tencent Behind Smaller Peers in This Year Game Approval

By Ke Yan, CFA, FRM

China just announced game approval for December batch. The number of games approved is slightly higher than the previous three months.
Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
In both December batch, as well as over the past year, we see Tencent behind its smaller peers in terms of receiving game approval.

Honeys: Sweet Profit in a Downturn

By Michael Causton

Honeys is proving a resilient provider of low-cost women’s basic fashions in Japan.
While it struggled after losing the fickle younger fan base five years ago, Honeys has bounced back through careful control of costs that has kept prices down.
Along with Workman and Shimamura, Honeys looks to be one of the longer-term beneficiaries of the shift to discount apparel, particularly in rising operating margins.

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Dec 29

Daily Brief Equity Bottom-Up: India Channel Insight #47 | Go Fashion and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

India Channel Insight #47 | Go Fashion, Lux Industries
London Stock Exchange Group: Record Holdings
Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess
Adi Sarana Armada (ASSA IJ) – Harnessing Logistics and Autos
Danaher Corporation: Initiation of Coverage – Business Strategy & Key Drivers
Illinois Tool Works Inc.: Initiation of Coverage – Diversified Business Lines & Other Drivers
Jinxin Fertility Co Ltd (1951.HK) – Hard to Achieve Performance Reversal in 2023
An Update to Our Pair Trade Between Emart & Coupang

India Channel Insight #47 | Go Fashion, Lux Industries

By Pranav Bhavsar

Our flash checks for Go Fashion India (GOCOLORS IN) and LUX Industries Ltd (LUX IN) suggest weak consumer sentiment continues to prevail.
Competitive intensity is an area of concern for category creator and leader Go Fashion India (GOCOLORS IN)
Rupa & Company (RUPA IN) is giving a tough fight to LUX Industries Ltd (LUX IN) in the rural markets.

London Stock Exchange Group: Record Holdings

By Steven Holden

Percentage of UK funds invested in the LSE Group has risen from under 10% in 2012 to a record 41.8% today
Rise in ownership has been driven by high growth investors, with both Aggressive Growth and Growth strategies at their highest levels of ownership on record
The LSE Group has risen to the 22nd most widely held stock in the UK and the 12th largest on an average weight basis.

Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess

Sawai Group Holdings (4887 JP) is negatively impacted by drug reimbursement pricing in Japan. H1FY23 revenue, operating profit, net profit decreased 1%, 36% y/y, and 29%, y/y, respectively.
Generic pharmaceutical companies are more affected by the drug price revisions than their branded counterparts. In addition, APIs are impacted by increases in the cost of oil and exchange rates.
The sustainability of the U.S. business rebound is still uncertain. We want to watch Sawai from sidelines and wait for full-year FY23 results, FY24 guidance, and NHI pricing decision.

Adi Sarana Armada (ASSA IJ) – Harnessing Logistics and Autos

Adi Sarana Armada (ASSA IJ) continues to represent a unique proxy to play both transport and logistics in Indonesia through its auto business plus logistics including last-mile player Anteraja.
ASSA Rent is the largest car leasing leader in Indonesia, with Autopedia leading auto auctions and a leader in used car sales through Caroline, which is expanding its presence fast.
Anteraja has seen rapid growth and may see some slowdown from e-commerce but continues to gain share and ASSA logistics continue to diversify. Valuations are attractive on 10x FY2023E PER.

Danaher Corporation: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on Danaher Corporation, a well-known manufacturer and provider of instruments and various other offerings to the medical, diagnostics, and environmental sectors.
The company had a strong quarter and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
It delivered market share gains and strong price execution amid strong foreign exchange headwinds and an inflationary environment.

Illinois Tool Works Inc.: Initiation of Coverage – Diversified Business Lines & Other Drivers

This is our first report on industrials giant, Illinois Tool Works.
The company achieved a 13% revenue increase on the top line, with 16% organic growth from its core businesses which is a good sign.
While the recent results were good, Illinois Tool Works is far from being immune to the potential macro problems and uncertainties ahead.

Jinxin Fertility Co Ltd (1951.HK) – Hard to Achieve Performance Reversal in 2023

We have seen some positive policies released in China to support assisted reproduction. However, domestic policy support is more of a short-term catalyst and would not fundamentally change Jinxin’s prospects.
The number of assisted reproductive centers in China is close to supply-demand equilibrium. It’s hard to support Jinxin’s valuation expansion by relying on China market. The breakthrough point is internationalization.
Jinxin’s 2023 performance wouldn’t rebound largely. Investors could do short-term trade based on positive news/policy related to ARS in China.There’s no signal to support the complete reversal of share price.

An Update to Our Pair Trade Between Emart & Coupang

In this insight, we discuss an update of pair trade between Emart (long) and Coupang (short).
Back on 1 August 2022, we recommended a pair trade between E Mart Inc (139480 KS) (long) and Coupang (CPNG US) (short).
This pair trade has worked well in the past five months and we continue to like this pair trade (long Emart and short Coupang).

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Dec 28

Daily Brief Equity Bottom-Up: Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash
MR D.I.Y. Group (MRDIY MK) – Unique in Malaysia
Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea
Keeper’s 50% Payout Ratio Makes The Yield Better and The Investment Exciting
Dynasty Ceramic Pub (DCC TB) – Tiling Thailand with Large and Small
Ono Pharmaceutical (4528 JP): Key Drugs On High Growth Trajectory; Pipeline Expands Beyond Opdivo
AviChina Industry (2357 HK): Another Step in Restructuring
More Profit for Donki as It Expands Private Label, Even Freezers

Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash

By Sameer Taneja

FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months.
With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the market cap in cash.

MR D.I.Y. Group (MRDIY MK) – Unique in Malaysia

MR D.I.Y. Group (MRDIY MK) has continued to perform as coming out of the pandemic, offsetting inflationary pressures with selected price increases helping to stabilise margins.
4Q2022 should be strong with an upward normalisation of inventories, with a target for 180 new stores in 2022 and a further 180 stores in FY2023, fuelling future sales growth.
MR D.I.Y. has a unique market position and strong brand in Malaysia, and Brunei and generates much higher ROEs than its regional peers hence justifying a premium valuation.

Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea

Hotel Shilla is a key beneficiary of the end of the zero COVID policy in China and the end of the mask mandate in Korea.
In the past several weeks, there has been a major shift on the highly stringent zero COVID policies in China which should have a positive impact on Hotel Shilla.
In the next several quarters, we believe that there is a good chance that the company’s results exceed the consensus expectations, driven by millions of tourists from China to Korea.

Keeper’s 50% Payout Ratio Makes The Yield Better and The Investment Exciting

By Sameer Taneja

The Keepers Holdings (KEEPR PM) set a new precedent of paying out 50% of its earnings. If sustained, the yield for FY22e/FY23e will be 6.6%/8.4%.
The move has made The Keepers Holdings (KEEPR PM) a growth/dividend yield stock with mid-teens profit growth and a forward yield >6% (~10% cash as % of mkt cap).
The catalyst for the company will arise from its strong Q4 2022 earnings. The management has already indicated the growth trajectory is similar to the prior quarters.

Dynasty Ceramic Pub (DCC TB) – Tiling Thailand with Large and Small

Dynasty Ceramic Pub (DCC TB) is Thailand’s leading ceramic tile manufacturer with a large portion of sales in the mass market as well as upcountry, diversifying sales.
The company continues to build new capacity and is moving into the porcelain tile business to cater for the higher-end market where it will compete with Chinese imports.
Dynasty Ceramic Pub (DCC TB) is a high-quality play on the economic recovery in Thailand, with a good governance reputation. Valuations look reasonable plus a dividend yield of over 6%.

Ono Pharmaceutical (4528 JP): Key Drugs On High Growth Trajectory; Pipeline Expands Beyond Opdivo

Ono Pharmaceutical (4528 JP) is an innovation driven pharmaceutical company, with major focus on oncology. Opdivo, Forxiga, and Orencia are the top three products, together contributing ~75% of product revenue.
While the competition intensified, use of Opdivo for malignant tumors was expanded to first-line treatment for NSCLC, esophageal cancer, and gastric cancer, resulting in FY22 sales of ¥112.4B (+14% y/y).
Ono’s second largest drug Forxiga is also on a double-digit growth path. The company has been expanding its pipeline beyond Opdivo by reinforcement of in-house research and in-licensing activities.

AviChina Industry (2357 HK): Another Step in Restructuring

By Osbert Tang, CFA

AviChina Industry & Tech (2357 HK) announced plan to consolidate helicopter business by disposing Changhe Aircraft and Harbin Aircraft to its subsidiary Avic Helicopter (600038 CH).
AviChina can achieve synergy at its helicopter business, realise capital gains from disposal and enjoy higher valuations on these assets while maintaining its controlling ownership.
The resultant increase in stake in Avicopter will further widen AviChina’s discount to its holdings in four listed A-share subsidiaries. Its current 66% discount is just too steep.

More Profit for Donki as It Expands Private Label, Even Freezers

By Michael Causton

Pan Pacific International Holdings (7532 JP)’ Don Quijote stores rebounded strongly from Covid, despite the lack of inbound tourists, reflecting the hard work done to update stores and merchandise.
This innovation continues and Don Quijote stores recently even began offering several new private brand cosmetics ranges and new electronics, including a new small footprint freezer.
The company expects 15% of domestic sales from private brands alone but rising to 25% in the near term, with significant upside for operating profits.

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Dec 27

Daily Brief Equity Bottom-Up: Sumber Alfaria Trijaya (AMRT IJ) – Lawson Taking Up the Reins of Convenience and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Sumber Alfaria Trijaya (AMRT IJ) – Lawson Taking Up the Reins of Convenience
Freshworks: Insiders Keep Buying Shares. Path To Sustainable FCF Positive Business Looks Clear
Green Lawson: More Eco and Avatars
An Update to the Long-Short Pair Trade on Hyundai Motor & Tesla
Merck Puts Eye-Popping $9.3B in ADC Deal with Kelun – The “New Story” Is About to Begin
Taiwan Tech Weekly: Samsung Will Keep Expanding Capacity, China Chip Restrictions Tighten Further
Royal Caribbean Cruises Ltd.: Initiation of Coverage – Business Recovery & Key Developments
McKesson Corporation: Initiation of Coverage – Business Strategy & Recent Developments
The Mosaic Company: Initiation of Coverage – Business Strategy & Other Drivers
What Will Crypto SPACs Look Like in 2023?

Sumber Alfaria Trijaya (AMRT IJ) – Lawson Taking Up the Reins of Convenience

Sumber Alfaria Trijaya through its Alfamart and Alfamidi formats is one of the largest mini-market operators in Indonesia but is now expanding aggressively into the convenience store space through Lawson.
The company should have a strong finish to the year with an additional 1,200-1,300 new stores being added over the period plus margins improving as Alfamart adds new services.
Sumber Alfaria Trijaya is a core proxy to the winning mini-market format in Indonesia plus it is looking to replicate its success in the Philippines in Collaboration with SM Investments.

Freshworks: Insiders Keep Buying Shares. Path To Sustainable FCF Positive Business Looks Clear

By Andrei Zakharov

Freshworks (FRSH US) shares underperformed in 2022, with shares down ~47% YTD versus a 33% loss on the Nasdaq Composite. US software stocks lost ~51% on average over the year.
Insiders keep buying shares. VC firm Accel, a 5%+ shareholder, acquired ~$50 million worth of Freshworks (FRSH US) shares in 2H22. Strong insider buying indicates the stock could hit bottom.
We estimate Freshworks (FRSH US) crossed the $500M ARR mark in 3QCY22. The company may report strong 4QCY22 results and surprise investors and analysts.

Green Lawson: More Eco and Avatars

By Michael Causton

Lawson introduced a new store format in Tokyo last month called Green Lawson, touting new ways to save energy and reduce waste.
The new store also features an early version of a retail advertising system that emulates Familymart Vision.
The latest updates emphasise the continued investment by the big three convenience stores to remain relevant and improve sales efficiency while also countering the labour shortage.

An Update to the Long-Short Pair Trade on Hyundai Motor & Tesla

In this insight, we provide an update to our long-short pair trade of Hyundai Motor (long) and Tesla Motors (short), which we presented back in June 2022.
Since 9 June 2022, Hyundai Motor’s share price is down 13.4% and Tesla’s share price is down 48.6% in the same period, resulting in net gains of 35.2%.
We discuss five major factors impacting Tesla’s share price this year including market share losses, Musk’s acquisition of Twitter, valuation multiples decline, China operations, and global recessionary fears in 2023.

Merck Puts Eye-Popping $9.3B in ADC Deal with Kelun – The “New Story” Is About to Begin

Merck entered into an agreement with Kelun to develop seven new ADC candidates. Merck will pay an upfront payment of US$175 million, with milestone payments worth up to US$9.3 billion.
It’s a strong signal that Merck gives up acquiring Seagen and fully embraces Kelun. Merck may not just simply recognize Kelun’s ADC candidates but is optimistic about its ADC platform/technology.
Chinese pharmaceutical enterprises are becoming more pragmatic and peaceful in licensing cooperation, which has more trend significance for the development of industry than the value of a product or an enterprise.

Taiwan Tech Weekly: Samsung Will Keep Expanding Capacity, China Chip Restrictions Tighten Further

While most of the semi industry is reducing capex due to market weakness — Samsung says it will still expand capacity next year.
China chip restrictions get more severe — Now Arm is not selling its most advanced chip architectures to Chinese firms.
TSMC in advanced talks to set up its first European production capacity in Germany.

Royal Caribbean Cruises Ltd.: Initiation of Coverage – Business Recovery & Key Developments

This is our first report on Royal Caribbean Cruises, a well-known player operating three cruise vacation brands, including Royal Caribbean International, Celebrity Cruises and Silversea Cruises.
Royal Caribbean Cruises has seen strong demand, fighting off inflation, and continues to focus on its value proposition of providing the best-quality vacations in the world.
We initiate coverage on the stock of Royal Caribbean Cruises with a ‘Hold’ rating.

McKesson Corporation: Initiation of Coverage – Business Strategy & Recent Developments

This is our first report on leading U.S. healthcare distributor, McKesson.
The company delivered a mixed quarterly result with revenues of $70.2 billion falling short of the Wall Street consensus.
McKesson is also extending its services to additional channels like the government, consumer, and direct-to-home sectors in response to the requirements of the patients.

The Mosaic Company: Initiation of Coverage – Business Strategy & Other Drivers