Equity Bottom-Up

We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers

Sea Ltd – No Bringing Back to Life For Free Fire, Shopee’s Top Line Growth Could Disappear

Garena has introduced nine major updates to “Free Fire” since June last-year but none of them has managed to turn around the game’s declining trend and regain the lost users.
With Sea Ltd (SE US) no longer capable of funding Shopee’s growth, we are expecting e-commerce to start losing its top-line growth potential from 4Q22.
Even though we are predicting a lot of downside to Sea Ltd over the medium term, an okayish Q3 could see shares bouncing back from the bottom.

Suzuki (7269) | Small Cars at Tiny Valuations

We are bullish on the share price of Suzuki given its exposure to secular growth in India
The ex-Maruti business is recovering as supply chain constraints ease.
We see at least 25% upside to the share price and believe the non-Maruti business is significantly undervalued

Keepers Holdings: Global Market Weakness Creates Opportunity

By Sameer Taneja

The Keepers Holdings, Inc. (KEEPR PM) correction in share price by 23% from the peak provides an opportunity with the stock trading at 7.4x/6.1x PE FY22e/23e (excluding Bodegas W&H earnings).
The company will release its Q3 2022 earnings in early November, and we expect revenue and earnings growth to be >25% YoY.
We also eagerly await more color on accretion to earnings from a 50% stake in Bodegas W&H post which we expect the stock to be even cheaper.

TikTok Dives Into Southeast Asia With E-Commerce Push

By Caixin Global

ByteDance’s TikTok is cranking up its e-commerce foray into Southeast Asia as the Chinese tech giant pushes to commercialize the popular short video app to create a new revenue stream.
During the first half, TikTok launched e-commerce businesses in Thailand, Vietnam, Malaysia, the Philippines and Singapore, expanding its presence to all major markets in the region.
TikTok has been operating online shopping services in Indonesia, Southeast Asia’s largest economy, since early 2021.

Ship Healthcare Holdings (3360 JP): Continues to Be a Strong Beneficiary of Japan Reopening

Ship Healthcare Holdings (3360 JP), being a leading supplier of hospital consumables in Japan reported stellar Q1 results, with 7% y/y revenue growth in its medical supply business.
The impact of COVID-19 is easing in Japan and economic activities are gradually returning to normal. The number of surgeries is recovering due to increasing number of medical consultations.
Ship Healthcare is expected to report high-single-digit revenue growth in FY23, accelerated from low-single-digit revenue growth reported in FY21 and FY22.

IRay Technology (688301.CH) – Overvalued; Performance Deceleration Will Lead to Valuation Correction

IRay Masters all the major core technologies. It has a complete technical system of TFT SENSOR design and invention patents in the field of scintillators,setting it apart from domestic peers.
The market where iRay is located has slow growth rate and obvious growth ceiling. The higher the short-term performance growth of iRay, the faster it would encounter a growth bottleneck.
IRay is overvalued. The valuation has already overdrawn the performance of the next few years. Any deceleration in revenue/profit in any given year would lead to a significant valuation correction.

Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

By Douglas Kim

In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE.
CJ ENM’s valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023.
The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.

PetroTal Corp (AIM: PTAL): Barge constraints should be alleviated in 4Q22

By Auctus Advisors

3Q22 production was ~12,229 bbl/d. This is below the guidance of 14.25 mbbl/d due to a continuing shortage of barges caused by the low level of the Amazon river during the dry season.
With the upcoming end of the dry season, the shortage of barges is expected to disappear in 4Q22. The eventual goal is to send 600,000 bbl per month (~20 mbbl/d) eastbound to Brazil and Iquitos.
No firm date for the restart of the ONP pipeline has been provided yet and the company is now excluding any contributions from sales through the ONP in its new guidance of 16.5 mbbl/d for 4Q22 (19.5 mbbl/d previously).

Mahindra EPC – A Proxy Play on MIS Opportunity

By Gauri Anand

Micro Irrigation firms > reeling under commodity stress > cut in Govt budgets > long wcap cycle
Long term outlook, however is robust > revival in spends likely
Negative sentiments > low earnings visibility > low valuation offers entry opportunity

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 13

Daily Brief Equity Bottom-Up: Bic Camera (3048) | Cash-Strapped Consumers and more

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

In today’s briefing:

Bic Camera (3048) | Cash-Strapped Consumers
Oriental Land: Consensus Is Tangled in a Fantasy
BYD (1211): Respectable Result
Yahoo Mart’s Q-Conbini Stores: A Potential Competitor to the Big 3 CVS?
Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery
TCS: Resilient Outlook but Fairly Valued
CDW Corporation: Initiation of Coverage – Acquisition Of Sirius Computer Solutions & Other Drivers
MEX: “A Recession is an Ideal Time for Expansion”
OMI update
Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

Bic Camera (3048) | Cash-Strapped Consumers

Bic Camera is trading close to its 52-week high after rallying on expectations for the reopening of Japanese borders and increased sales from inbound tourists.
We think the market has gotten way ahead itself due to (a) falling real household spending and (b) less than expected impact from inbound
Bic’s high valuation is likely to derate due to rising interest rates. We see around 30% downside for the stock based on peer multiples

Oriental Land: Consensus Is Tangled in a Fantasy

It seems like Oriental Land (4661 JP) has yet again failed to land the number of visitors that consensus expected it to attract during the second quarter of FY23.
Even though we don’t see much downside risk to the 2QFY23 consensus OP due to price hikes, we believe that there is plenty of downside to its medium-term estimates.
There is also room for valuation multiple contraction with Oriental Land currently trading at an inflated 28.2x consensus FY27 OP multiple.

BYD (1211): Respectable Result

By Henry Soediarko

BYD (1211 HK) has recorded a more respectable result this year compared to the peers such as Tesla, Nio, and Xpeng.
Overseas sales could be the next growth engine if the domestic market sales may stall.
The price increase early this year to the customers did not deter the company’s growth rate which indicates its pricing power.

Yahoo Mart’s Q-Conbini Stores: A Potential Competitor to the Big 3 CVS?

By Michael Causton

Quick (Q)-commerce continues to grow, with rapid home delivery providing a new level of convenience to meet demand from busy, urban consumers.
Z Holdings’ team of Yahoo, Askul and Demae-can have run what is now called Yahoo Mart since 2020 which has opened its first three retail stores, a new omnichannel model.
Given the data analysis and supply chain power of its backers, these stores could quickly become a thorn in the side of the big convenience store chains.

Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery

Rainbow Children’s Hospital (RAINBOW IN) is India’s largest pediatric multi-specialty healthcare chain, operating 15 hospitals and 3 clinics in 6 cities, with a total bed capacity of 1,550+.
Due to its presence in the affluent cities of India, the company has superior ARPOB. With the normalization of business occupancy and outpatient volume improved significantly.
The company plans to add 100 beds by the end of FY23. Higher occupancy and greater scale of operation are the biggest margin driver for the company.

TCS: Resilient Outlook but Fairly Valued

By Ankit Agrawal, CFA

Demand environment remains robust despite recessionary fears in US and Europe. Demand is being driven by structural factors like shift in the business model towards enterprise-wide digital transformation.
One of the biggest headwinds – attrition – has now peaked and is trending downwards. Job market has cooled off and salaries of new hires have become reasonable.
While the demand outlook and margin guidance is resilient, we estimate that the current valuations are fairly pricing the optimism. Projected IRRs are likely to be subdued from here on.

CDW Corporation: Initiation of Coverage – Acquisition Of Sirius Computer Solutions & Other Drivers

This is our first report on CDW Corporation, a leading IT solutions provider to companies across the U.S., Canada, and U.K.
The second quarterly result was strictly mediocre for CDW as the company failed to meet Wall Street expectations on the revenue front but managed an earnings beat.
With a continued emphasis on hybrid work and the return to the office driving collaboration, networking, and endpoint solutions, digital transformation, agility, and security remain major considerations.

MEX: “A Recession is an Ideal Time for Expansion”

By Investment Talk

Tortilla is a clear market leader, boasting 5x more units than the nearest competitor, operating a superior supply chain, and is highly cash-generative with a track record of savvy capital allocation.
The founder and CEO have reasonable equity stakes in the business.
As peers went into administration during the pandemic, they expanded aggressively and acquired a competitor for a reasonable price.

OMI update

By Newmoon Capital

It looks to me that the company is now run-rating to $500M of EBITDA, but it is possible that it is much lower depending on how Q3 turn out.
It was very possible that things were fine for the first 2 months of Q3 and then got really bad thereafter and so the run-rate EBITDA is actually much lower…but let’s just use $500M as our base case
Capex in this business is really closer to Opex. Apria is really a leasing/distribution business and so Capex is needed to keep the business running.

Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

By Shifara Samsudeen, ACMA, CGMA

This is our first report on Guidewire, a leading provider of software solutions for property and casualty (P&C) insurers worldwide.
The company reported an excellent finish to its fiscal year and beat Wall Street expectations on all counts.
Guidewire also introduced 13 new solution partners to the Guidewire Marketplace, bringing the total number of solution partners on its platform to over 160.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 12

Daily Brief Equity Bottom-Up: Does Meituan Have the Appetite to Serve HK Food Delivery Market and Take On Foodpanda and Deliveroo? and more

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

In today’s briefing:

Does Meituan Have the Appetite to Serve HK Food Delivery Market and Take On Foodpanda and Deliveroo?
Taste Gourmet: Buybacks And Recovery Into Q2 2023
Asia Casino Sector: We Are Raising Guidance on Nagacorp to Strong Buy and Overweight
Anhui Conch Cement (914 HK): Well Geared Towards the Long-Term Drivers
J Front Retailing (3086) | Still in the Bargain Basement
Adastria Signs Forever 21, New Growth Through Licensing?
BEM : Expect 3Q22 Earnings to Hit 12 Quarter High
Zebra Technologies Corporation: Initiation of Coverage – Wide Footprint
Adyen ($ADYEY, $ADYYF, $ADYEN)
Fortive Corporation: Initiation of Coverage – The Provation Acquisition & Other Drivers

Does Meituan Have the Appetite to Serve HK Food Delivery Market and Take On Foodpanda and Deliveroo?

Several news media outlets reported that food delivery giant Meituan (3690 HK) is preparing to enter the food delivery market in Hong Kong as domestic market is slowing down.
Slowdown in Chinese economy coupled with regulatory hurdles have made it impossible for Meituan and other domestic tech players to expand locally.
Online food delivery market in HK is dominated by Foodpanda and Deliveroo, and we think Meituan will have to offer deep discounts to grab market share from these two dominants.

Taste Gourmet: Buybacks And Recovery Into Q2 2023

By Sameer Taneja

Taste Gourmet Group (8371 HK) is a play on the HK recovery with a promising outlook in the long-term at 5.7x/4.3x FY23/24e PE (10.5%/14.1% dividend yield assuming 60% payout).
The company recently initiated a buyback mandate on the 20th of September for (10% of outstanding shares) and has repurchased 2.2% of outstanding shares so far.
We believe the company will report strong earnings for its quarterly release on November 11th and payout a good dividend which will be a further catalyst for rerating.

Asia Casino Sector: We Are Raising Guidance on Nagacorp to Strong Buy and Overweight

By Howard J Klein

A recent dip in the shares against an accelerating revenue recovery trend signals a stronger buy signal not yet broadly recognized by the market.
Performance to date augers well for a considerable upside by 4Q22 to 1Q23.
Gains achieved in all customer segments: main floor mass, premium mass as well as VIP.

Anhui Conch Cement (914 HK): Well Geared Towards the Long-Term Drivers

By Osbert Tang, CFA

We see improvements in the underlying drivers of Anhui Conch Cement (914 HK) over the last two months, and we believe value has emerged for long-term investors.
There is a slight recovery in cement price in Sep, and the proceeds from local governments’ special purpose bonds issuance will make incremental stimulus to demand.
Net cash now amounts to 37.5% of share price, providing support to its over 9% prospective dividend yield as well as potential value-enhancing M&As.

J Front Retailing (3086) | Still in the Bargain Basement

J. Front is a key beneficiary of improving consumption post-pandemic and a return of inbound tourism.
Q2 sales rose 4.8% on the year. 2H sales guidance +2% YoY looks too conservative given full resumption of inbound tourism.
We believe the stock still represents good value at 0.9x book value.

Adastria Signs Forever 21, New Growth Through Licensing?

By Michael Causton

Adastria’s growth has been sporadic in recent years as it adjusts to maturity and saturation in core apparel markets.It has diversification projects but these will take time to develop.
It thinks it can find faster growth by franchising and licensing with already well-known brands, starting with Forever 21.
It also has a new business providing apparel collections to General Merchandise Retailers, starting with Izumi.

BEM : Expect 3Q22 Earnings to Hit 12 Quarter High

By Pi Research

Maintain BUY recommendation for BEM with a new target price of Bt11.40 (Previous TP: Bt9.90) after we incorporate value from orange line project into our valuation. We expect the company
Expect solid profit recovery in 3Q22 and onwards Expect BEM’ revenue in 3Q22 to touch Bt3.6bn (+69%YoY +12%QoQ) supported by solid rebound in daily average MRT ridership to 313k trips
Gross profit margin is assumed to expand to three-quarter high at 42% thanks to benefit from high operating leverage,which should help absorb the impact from an increase in MRT revenue

Zebra Technologies Corporation: Initiation of Coverage – Wide Footprint

This is our first report on one of the leading players in the Automatic Identification Data Capture (AIDC) market, Zebra Technologies Corporation.
For the solutions which automate and digitize workflows, customer demand remains strong for Zebra and it saw good growth in the e-commerce, retail, manufacturing, and healthcare end markets.
We initiate coverage on the stock of Zebra Technologies Corporation with a ‘Buy’ rating.

Adyen ($ADYEY, $ADYYF, $ADYEN)

By MT Capital

When I think about the world of tech, there is no shortage of products, developments, or innovations that deserve attention.
Some pieces of technology, when broken down, are extraordinarily complex and exist out in the open.
Others hide in plain sight, functioning in the shadows, but are still responsible for certain components of indispensable processes that allow our world to operate as we know it today.

Fortive Corporation: Initiation of Coverage – The Provation Acquisition & Other Drivers

This is our first report on Fortive Corporation, a leading provider of provider of essential technologies for connected workflow solutions.
Fortive delivered an all-around beat as software ARR and hardware orders both increased, reflecting a more diversified and resilient product portfolio.
In the quarter, orders and demand remained strong despite the rising FX headwinds and higher inflation.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 11

Daily Brief Equity Bottom-Up: Hisense (921 HK/000921 CH) Nonsense and more

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

In today’s briefing:

Hisense (921 HK/000921 CH) Nonsense
Fast Retailing – FY23 Guidance Could Knock Some Sense into Market
BRI – Spectacular Margins and ALM
Tencent Seeks Majority Stake in Overseas Game Companies as Game Revenue Slows Down Further
Yaskawa (6506 JP) | Constant Currency Concerns
South Korean Banks Screener; KB Financial Is Our Core Pick
Wuxi Biologics (2269.HK) – Removed from UVL, but the Crisis Is Not Over

Hisense (921 HK/000921 CH) Nonsense

By David Blennerhassett

Back on the 21 October 2016, Hisense Home Appliances Group Co., Ltd. H (921 HK) announced it would invest RMB1.7bn of “idle” funds into wealth management products, or ~HK$1.43/share.
Between 16 September 2022 and 8 October, Hisense announced it has invested HK$1.13bn of idle funds in wealth management products.
Hisense reckons the investment is “beneficial for enhancing efficiency of use of idle self-owned funds“. But if truly idle, they should be returned to shareholders.

Fast Retailing – FY23 Guidance Could Knock Some Sense into Market

By Shifara Samsudeen, ACMA, CGMA

Although we are not expecting a major miss for Fast Retailing (9983 JP) in FQ4, we believe FY23 guidance could be disappointing to prompt a substantial correction in FY23 consensus.
China is continuously failing to live up to the company’s expectations and the only factors holding Uniqlo’s share price from breaking-down are the North America growth and the Yen depreciation.
Those too are now under threat, with a looming recession and Fed rate hikes failing to curb inflation.

BRI – Spectacular Margins and ALM

By Daniel Tabbush

BRI’s margins are highest of major Asean banks at nearly 9% and growing
Asset-Liability management (ALM), core to banking, can see NIM remain strong
Credit costs remain high relative to the past, there is scope for a ratcheting downward

Tencent Seeks Majority Stake in Overseas Game Companies as Game Revenue Slows Down Further

Several news media outlets reported last week that Tencent has changed its M&A strategy to obtain majority stakes in overseas gaming companies as opposed to buying minority stakes previously.
Tencent’s online game revenue declined YoY for two-consecutive quarters primarily due to decline in domestic game revenue that was impacted by absence of new game titles and minority protection rules.
Our analysis on Tencent’s game downloads and ranks reveal that both domestic and international game revenues would decline further in 3Q2022E.

Yaskawa (6506 JP) | Constant Currency Concerns

Yaskawa’s order momentum has peaked. On a constant currency basis, orders growth was -6% sequentially
Margins for the key Motion Control segment were 160bps lower in the quarter compared to a year ago
A minor revision down relies on aggressive FX assumptions for the 2H. We feel there is another downgrade to come. Stay Bearish

South Korean Banks Screener; KB Financial Is Our Core Pick

By Victor Galliano

Six of the seven South Korean banks screen favourably on valuation versus returns metrics to June 2022; we like KB Financial, whilst Woori Financial is a wait and see story
KB has undemanding valuations, and one of the lowest PEG ratios; it delivers steady pre-provision returns, has sound core capital ratio of close to 13% and healthy credit quality ratios
Woori Financial and potentially KakaoBank are two names to review post 3Q22 results, with Woori and KakaoBank having seen their 2Q22 cost of risk rise sharply; we seek positive catalysts

Wuxi Biologics (2269.HK) – Removed from UVL, but the Crisis Is Not Over

Wuxi Biologics (2269 HK) has been removed from the “Unverified List”, but the crisis is not over. CXO’s valuation center could gradually volatile to the downside,during which there would be temporary rebounds.
Biotechnology of US and China has entered a higher level of game. As domestic CXO is deeply embedded in global supply chain, we won’t take any chances on WuXi Biologics.
We may face a long high-interest-rate environment after the Fed hikes,but the booming of US pharmaceutical IPOs is the underlying logic of CXO. We provided suggestions on CXO trading strategy.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 09

Daily Brief Equity Bottom-Up: PT Metrodata Electronics (MTDL IJ) – Driving Digitalisation in Indonesia and more

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

In today’s briefing:

PT Metrodata Electronics (MTDL IJ) – Driving Digitalisation in Indonesia
Is Kakao Cheap or Not? Actions Louder than Words
KLA Corporation: Initiation of Coverage – Business Strategy & Key Drivers
Antengene (6996.HK) 22H1-Defective Business Model and Uncompetitive Pipeline; Bearish on the Outlook

PT Metrodata Electronics (MTDL IJ) – Driving Digitalisation in Indonesia

By Angus Mackintosh

PT Metrodata Electronics booked a solid set of 1H2022 given that although revenues decline -11% its net profit grew +11.7% supported by its solutions and consulting business.
We expect a 2H2022 recovery given 2Q2022 was impacted by Lebaran and solutions & consulting continues to recover driven by banking, oil & gas, and telecoms sectors.
This remains an interesting and unique play on the increasing digitalisation of the Indonesian corporate ecosystem. Valuations remain attractive on 9.5x FY2023E PER, with 2-year EPS CAGR of +over +25%.

Is Kakao Cheap or Not? Actions Louder than Words

By Ken S. Kim

Why KakaoBank (323410 KS) , Kakao Games Corp (293490 KS) and Kakao Pay (377300 KS) were hit recently
Aside from the sum of the 3, why Kakao Corp (035720 KS) is getting hit further
Are near the bottom or is there more to go?

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

This is our first report on KLA Corporation, a well-known provider of process control and yield management solutions to the semiconductors industry and other electronics businesses.
Strong customer demand across key product categories, macroeconomic uncertainties, and the effects of consumer demand are factors driving this performance.
Despite macroeconomic and supply chain headwinds, KLA continues to focus on addressing the most pressing process control concerns.

Antengene (6996.HK) 22H1-Defective Business Model and Uncompetitive Pipeline; Bearish on the Outlook

There’s an “insurmountable obstacle” to license-in business model. Antengene (6996 HK) has to go all the way to the end. Otherwise, Antengene won’t end up well.
Considering the pipeline quality/speed of clinical advancement/high cost of license-in/fierce competition/just APAC rights/limited cash balance, the biggest problem Antengene has to face is how to “survive this winter” .
Theoretically, Antengene is undervalued, so if willing to, investors could do short-term trade. However, due to the concerns, we are still bearish on Antengene’s outlook overall.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 08

Daily Brief Equity Bottom-Up: Hero Motocorp (HMCL IN) | Brace for Disappointment and more

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

In today’s briefing:

Hero Motocorp (HMCL IN) | Brace for Disappointment
Seven & I – The US Is About to Hit the Brakes
BASF India: Catalyzing Chemistry and Possibilities
Observability: ServiceNow Acquisition Threatens Dynatrace and Elastic
NTGR: Hotspot of a Preview
Ciena Corporation: Initiation of Coverage – Partnership With MSAR & Other Drivers

Hero Motocorp (HMCL IN) | Brace for Disappointment

By Pranav Bhavsar

Hero Motocorp (HMCL IN) has been outperforming the Nifty 50 over the last 6M
Our flash checks done in the south suggests the outperformance may not last long
Failure of a model, high competitive intensity, and changing preferences can again lead to high inventory levels leading to a possible correction in wholesales post-festive season.

Seven & I – The US Is About to Hit the Brakes

With OP up by 22% YoY to beat the consensus estimate by ¥2.0bn, Seven & I turned in a strong 2QFY23 along with a considerable upgrade to FY23 guidance.
However, the post-earnings price reaction seems to suggest that the market is a bit worried about the short-term performance of Seven & I Holdings (3382 JP)’s US convenience store business.
In addition, the struggling non-core businesses whose future remains undecided could also be weighing in on Seven & I’s price performance.

BASF India: Catalyzing Chemistry and Possibilities

By Gauri Anand

Pivoting the world’s biggest transformation; addresses chemistry needs of the new economy
These new themes will outgrow world GDP growth – perhaps almost >2x
BASF is systematically aligning to the emerging trends, investing in future technologies and is integrating all of this sustainably in its value chain

Observability: ServiceNow Acquisition Threatens Dynatrace and Elastic

By Aaron Gabin

ServiceNow acquired Era Software this week to extend its presence in the observability and log management space.
The deal is most threatening to DT/ESTC (we advocate as longs) and SPLK (short) because of ServiceNow’s ability to bundle functionality for larger deals.
That said…the observability space remains one of the hottest in digital transformations, and the deal is on net, more validating than threatening to DT/ESTC.

NTGR: Hotspot of a Preview

By Hamed Khorsand

NTGR is relying on the back-to-school shopping season to help sell through some of its lingering wireless router inventory as it transitions to higher end models
We continue to believe the retail market remains challenging for NTGR and the Company could have experienced difficulty in selling down inventory to desired levels
During the third quarter NTGR used Prime Day as an opportunity to reduce inventory for certain Nighthawk wireless routers. We expect the same again during Prime Day on October 11

Ciena Corporation: Initiation of Coverage – Partnership With MSAR & Other Drivers

This is our first report on Ciena Corporation, a networking systems, services and software player catering primarily to the telecom industry.
In spite of the elongated lead times and supply chain challenges, the strong secular demand trends have not shown any sign of abating.
In spite of the supply challenges, Ciena had a record quantity of quarter for its WaveLogic 5 shipments.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 06

Daily Brief Equity Bottom-Up: Rakuten – Sale of Stake in Securities Business Eases Funding Pressure and more

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

In today’s briefing:

Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle
Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
Ryohin Keikaku: A Beat Can Turn Around Price Performance
A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate
We are Not Crashing, It’s Just Volatile
MicroPort NeuroTech (2172.HK) 22H1 – Advantages Deserve Recognition, but with Overvaluation Risk
85: Watchlist Update: Adding Sherwin-Williams

Rakuten – Sale of Stake in Securities Business Eases Funding Pressure

Rakuten is reportedly selling a stake in its Securities unit for ¥80bn, which probably means a near-term IPO of that business is off the table
It may also give Rakuten greater flexibility on the timing of a Rakuten Bank IPO should pricing for that be problematic
In terms of surfacing the value of Rakuten’s fintech assets this is good news but it is mobile losses that have held the shares back. We remain at Neutral.

Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle

By Scott Foster

Canon’s reported capital spending plan suggest that commercial production of nanoimprint lithography tools could start in time for the next semiconductor up-cycle.
If this is the case, Kioxia is likely to be the main beneficiary. In the meantime, LightStream recommends that investors in Toshiba hedge against tech/semi weakness.
Technical hurdles remain formidable, but nanoimprint lithography has the potential to be much cheaper than EUV.

Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate

The PayPay conversion is complete and management is focused on managing costs, which is reassuring for ZHD financial targets and for an eventual IPO
There was less said about the latter, however, whilst detail on the valuation gain that parent Softbank Corp needs to hit its own operating income target has not been confirmed
Our valuation of ¥500bn for PayPay looks more reasonable as 50-73% YTD declines in public comps have brought trading multiples in line (PayPay at 5x FY22e revenue versus 5-8x)

Ryohin Keikaku: A Beat Can Turn Around Price Performance

Our analysis points to a significant earnings beat for Ryohin Keikaku, whose share price is down more than 50%-YTD and is currently hugging the bottom-end of the long-term trend channel.
With freight and logistics down more than 50% since June 2022, we are expecting Ryohin Keikaku (7453 JP)’s gross margin to return to around 49-50%.
In addition, the company’s monthly sales growth figures indicate that FQ4 revenue should be around ¥114.6bn compared to ¥105.8bn for consensus.

A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate

By Douglas Kim

In the past few days, a senior government Korean official announced that the indoor mask mandates will likely be lifted in March 2023.
Although this is not officially finalized, we believe that there is a very high probability of the Korean government finally ending the indoor mask mandate sometime in March 2023.
The end of the indoor mask mandate is likely to have a positive impact on the Korean cosmetics companies. Nonetheless, we are still concerned about the relatively high valuation multiples.

We are Not Crashing, It’s Just Volatile

By BluSuit

Listening to sentiment alone would lead investors to believe we are 50% down on the S&P 500 and we have another 50% to go.
But, this simply is not true. When benchmarking the markets recent price action by sector, this bear market, on a technical basis, has the hall marks of every market bottom since 2000.
Recollecting Howard Marks book, “Mastering the Market Cycle”, there was a particular part that was of importance.

MicroPort NeuroTech (2172.HK) 22H1 – Advantages Deserve Recognition, but with Overvaluation Risk

Among domestic enterprises, MicroPort NeuroTech (2172 HK)’s product richness takes the lead. With the support of Microport Scientific (853 HK), the production quality system and capacity are relatively more guaranteed.
Fierce competition and centralized procurement are the major challenges, but the rich domestic distribution network and promising internationalization prospects would help NeuroTech find way out.
By reducing the size of the IPO to maintain a good share price, at the expense of stock liquidity, it doesn’t really solve the problem.There’s risk of overvaluation for NeuroTech.

85: Watchlist Update: Adding Sherwin-Williams

By Watchlist Investing

Sherwin-Williams continues the home improvement theme started last month by Home Depot and Lowe’s (HD, LOW | Disclosure: None).
SHW is the dominant player in the architectural coatings industry.
The scientific-sounding industry classification translates into paint for the interior and exterior of buildings.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 04

Daily Brief Equity Bottom-Up: China Internet Weekly (3Oct2022): Tencent and more

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

In today’s briefing:

China Internet Weekly (3Oct2022): Tencent, NetEase, Alibaba, Kuaishou, Uxin
Lasertec (6920 JP): Accumulate for the Long Term
Asics (7936) | Nike Air Pockets
Japanese Cosmetics: Trading Around Q3 Earnings
NTT (Buy) – Investor Day Highlights Global Data Center Business
Breaking SPAC Convention
ACCO: Adjusting for Macroenvironment
Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines
Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside
Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality

China Internet Weekly (3Oct2022): Tencent, NetEase, Alibaba, Kuaishou, Uxin

By Ming Lu

The global game market can shrink in 2022, which will impact Chinese game companies’ global diversification.
NetEase formally launched its own social networking service to compete with Tencent.
Kuaishou announced that it would launch an e-commerce channel on its App’s homepage.

Lasertec (6920 JP): Accumulate for the Long Term

By Scott Foster

The shares are down 58% from their January high. Our 3-year forecast brings valuations down to levels not seen since FY Jun-18.
The great surge in orders is coming to an end, but EUV lithography and SiC power devices should keep demand for Lasertec’s mask inspection systems at high levels.
The severity of the emerging semiconductor down-cycle and global recession remain to be seen, but the company’s long-term potential warrants another look.

Asics (7936) | Nike Air Pockets

NIKE reported Q1 results post close on Thursday sending the shares down 9% after hours and hitting the stock price of Asics on Friday (-10.7%).
ASICS is unlikely to face ALL of the same problems that impacted NIKE, but investors should be aware of the rising inventory risk
ASICS is less risky given less exposure to apparel. Even so, we remain bearish for now

Japanese Cosmetics: Trading Around Q3 Earnings

The latest rally in Japanese cosmetics, driven by improving domestic market conditions has strangely avoided two of the big names in the market, Shiseido Company (4911 JP) & Pola Orbis.
Although both of these names seem to offer big upside potential, we think Pola Orbis Holdings (4927 JP) has a significantly better risk-reward profile in the short term.
We would also be inclined to hedge the market risk using Kose Corp (4922 JP) on the short side as the name has the biggest downside potential.

NTT (Buy) – Investor Day Highlights Global Data Center Business

NTT’s global data center business has 6% market share with annual revenue growth of 20% that is twice the industry average
We have updated our model and valuation summary to reflect the transfer of NTT Ltd, which operates the GDC business, into NTT Data
Our valuation remains unchanged although we have lowered our target price ¥4,500 to ¥4,450 for payment of the H1 dividend. NTT remains a top pick in our coverage

Breaking SPAC Convention

By subSPAC

Over the last two years, SPACs have emerged as an alternative to the traditional IPO process, especially for those who’ve found it challenging to raise money from the public markets in the past.
In fact, SPACs have been a great investment vehicle for Space Launch firms, Electric Vehicle Upstarts and even Quantum Computing firms.
It is surprising then that Italian Luxury Fashion House Zegna, which has a rich 110-year heritage, has decided to take the SPAC route to make its debut in the US markets rather than list in Europe or in Asia like most of its peers.

ACCO: Adjusting for Macroenvironment

By Hamed Khorsand

The business climate has not improved for Acco Brands (ACCO) in Europe since the Company reported second quarter results, and thus could result in lower than expected third quarter numbers
The macroenvironment has been volatile in a quarter dependent on back-to-school sales and more people working from their offices.
We are updating our earnings model for the rest of the year. Our third quarter sales estimate is now $517.1 million

Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines

By Vincent Fernando, CFA

Taiwan’s tech space fell hard last week, with the tech sector down 5.4%, compared to a 4.9% drop for the overall market. Semiconductors performed the worst, down 6.2%.
Hon Hai, Delta, Lite-On — EV a major theme for the first-ever Taiwan Expo USA coming October 12th.
Taiwan wafer exports were at an all-time high in August. We note that wafer names have underperformed TSMC.

Hanall Biopharma (009420 KS): Clinical Trial Progress of Key Pipeline Assets to Provide Some Upside

Hanall Biopharma (009420 KS) has two leading pipeline assets, HL161 (batoclimab) and HL036 (tanfanercept), which are being developed by global license partners.
Batoclimab is in phase 3 trial for myasthenia gravis, which causes weakness of voluntary muscles. Tanfanercept is being developed as a treatment for dry eye disease in China and U.S.
Batoclimab and tanfanercept trials are approaching multiple data readouts in near-term. Hanall will be entitled for milestone payments for clinical trial progress of its out-licensed assets.

Shanghai United Imaging Healthcare (688271.CH) – Overvalued; Stock Price Will Return to Rationality

United Imaging’s high valuation is driven by pandemic/policy dividends. After the impact of COVID-19 fades,the market needs new stories to judge a sustainable business model with increasing investment value.
Although in the name of domestic substitution of high-end medical imaging equipment, most of sales still come from middle/low-end products. The real competitiveness in high-end market remains to be seen.
United Imaging’s fundamentals and prospects hardly justify a market value of more than RMB100 billion. It’s expected that the stock price will return to rationality in the future.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 02

Daily Brief Equity Bottom-Up: Easy Trip Planners: Unattractive Inspite of High Profitability and more

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

In today’s briefing:

Easy Trip Planners: Unattractive Inspite of High Profitability
Woori – Plenty to Worry About

Easy Trip Planners: Unattractive Inspite of High Profitability

By Nitin Mangal

Easy Trip Planners (EASEMYTR IN) has had a good run on its bourses and is probably one of the very few new-age companies which is profitable.
However, the overall narrative does not look attractive to us when we deep dive into the forensics, including the cost drivers and balance sheet risks to the company.
Perplexing business model, customer concentration and high valuations make it unattractive inspite of high profitability.

Woori – Plenty to Worry About

By Daniel Tabbush

Woori is the fastest growing major bank in Korea, not positive into a downturn
Credit metrics look poor in granular data on loans and in credit costs
Capital levels are relatively low, while funding mix is worsening

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 01

Daily Brief Equity Bottom-Up: Softbank Group – Vision Fund Losses Accelerate into Quarter End and more

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

In today’s briefing:

Softbank Group – Vision Fund Losses Accelerate into Quarter End
Indian Energy Exchange (IEX IN): Immense Value at Current Levels
Redington (India) Ltd: Forensic Analysis
Craftsman Automation Ltd: Forensic Review
Bank Negara Indonesia (BBNI IJ) – More Than Meets the Eye
Nanya Tech: Micron Results, Light at the End of the Tunnel? Shares Rise
Boryung Pharmaceutical (003850 KS): Oncology Portfolio Expansion to Accelerate Growth Momentum
Medikaloka Hermina (HEAL IJ) – Forging Ahead Beyond COVID

Softbank Group – Vision Fund Losses Accelerate into Quarter End

Valuation losses in the Vision Fund public portfolio are now approaching $5bn as the end of the quarter looms versus break-even as recently as 13 September
That may have influenced the level of VF staff reductions which press reports ut at 30% versus expectations of 20% last month
The discount remains elevated on tech weakness and that is unlikely to change

Indian Energy Exchange (IEX IN): Immense Value at Current Levels

By Gauri Anand

IEX is a play on digital infrastructure (hedge against inflation), electricity reforms, decarbonisation and energy transition
An opportunity that offers virtuous growth, minimalistic capital needs and presents a scalable business model (addressing INR 8trn electricity market)
India will see an average power consumption growth of 5% over the foreseeable period. Power Exchanges should outgrow this meaningfully

Redington (India) Ltd: Forensic Analysis

By Nitin Mangal

Redington India (REDI IN)‘s primary business pertains to distribution of Information Technology,mobility and other technology products. The company also is engaged in supply chain solutions and after sales services.
Although company has a strong business, a glance at the balance sheet and financials reveals some concerns particularly at the subsidiary level which should not be ignored.
Forensic discomforts revolve around goodwill, poor earnings quality, instances of margin flirting, branch audit not being carried out by statutory auditors, etc.

Craftsman Automation Ltd: Forensic Review

By Nitin Mangal

Craftsman Automation (CRAFTSMA IN) is engaged in the business of manufacturing engineering components, sub-assemblies, products and rendering of contract manufacturing services to various industries
Key forensic takeaways include working capital troubles, alongside inflation woes deteriorating gross margins etc. There is grey area noticed in accounting treatment pertaining to JV as well.
Focus should also be on the aluminum segment, which is going through a tough phase regarding operating leverage and low margins.

Bank Negara Indonesia (BBNI IJ) – More Than Meets the Eye

By Angus Mackintosh

Bank Negara Indonesia (BBNI IJ) remains the laggard amongst the top four Indonesian banks but we see this as unjustified given improving returns and falling credit costs.
The bank continues to focus on top-tier corporate clients and large commercial clients plus growing subsidized KUR loans as well as expanding mortgages and payroll loans in the consumer segment.
Bank Negara Indonesia continues to improve returns with its ROE back to 15% in 1H2022 and it trades on 1.2x FY2022 PBV. The bank will benefit from rising interest rates.

Nanya Tech: Micron Results, Light at the End of the Tunnel? Shares Rise

By Vincent Fernando, CFA

Micron’s near-term guidance implies that consensus estimates likely need to come down for both Micron and Nanya Tech.
However, Micron indicated that they expect supply/demand balance to improve in 2023E.
There could be more negative industry news to come, however Nanya Tech has a very strong balance sheet to weather some weak quarters and is trading at trough-type valuations.

Boryung Pharmaceutical (003850 KS): Oncology Portfolio Expansion to Accelerate Growth Momentum