Equity Bottom-Up

Eisai Co Ltd (4523 JP) has announced positive clinical trial results for its Alzheimer’s disease (AD) drug candidate, lecanemab. Lecanemab succeeded in slowing cognitive decline by 27%.
Importantly, the study shows that removal of aggregated amyloid beta in the brain is associated with a slowing of disease in patients, thereby opening innovation pathway for new treatment options.
Eisai aims to file for traditional approval in the U.S. and to submit marketing authorization applications in Japan and Europe by the end of FY23.

Appier (4180) | Five Reasons to Remain Bullish

Appier provides AI software that helps large enterprises to grow and monetize their customer base.
Using Appier’s AI analysis tools, brands can automate the way they interact with shoppers and create new business models more efficiently
Business is booming, it is sheltered from macro headwinds and the TAM is expanding aggressively as Appier expands into key US/EMEA markets

Prodia (PRDA IJ) – Injecting Digital Health

Prodia (PRDA IJ) remains the leading diagnostics company in Indonesia and was a huge beneficiary of the pandemic and hence has seen a recent slowdown.
The number of tests per visit increased in 1H2022, as customers returned to more routine testing post COVID plus the company is increasingly employing a digital approach to its business.
Prodia is forecast to return to growth over the next two years, with +11% EPS growth forecast for FY2023E and FY2024E, implying a forward PER of 8.6x.

China Datang Renewable Power (1798): Ideal Name for ESG Fund.

By Henry Soediarko

Low valuation against peers in China albeit China Datang Corp Renewable Power (1798 HK) is one of the few pure-play wind farm operators in HK.
Its free cash flow reached its highest in more than 10 years.
The challenging equity market makes China Datang Renewable Power looks even more attractive.

Key Market Technicals

By BluSuit

This is certainly a macro development that will influence the direction of the markets.
Essentially, what this means is that the markets are showing “signs of breaking” from the Federal Reserves aggressive tightening cycle.
Today, we are going to be more focused on market technicals but I wanted to touch briefly on this and will go into more depth this weekend.

Selamat Sempurna (SMSM IJ) – Filter Me Please

Selamat Sempurna (SMSM IJ) is one of the most interesting industrial companies in Indonesia but also the largest filter manufacturer in South-East Asia for heavy equipment and autos.
The company mainly produces filters for the replacement market under its Sakura brand, with Indonesia being the major growth driver along with the US but it exports to 120 countries.
The company has an almost second-to-none track record for growth in both profits and dividends, with current valuations looking attractive.

Delta Taiwan Vs. Thailand Pairs Monitor: SET50 Index Driver, But Taiwan Margins Always Higher

Since 2Q22 results end-July, Delta Thailand has risen 31% compared to a 3% rise for Delta Taiwan and a 2% rise for Thailand’s SET Index.
Delta Taiwan’s gross margin has historically been consistently higher than Delta Thailand’s. Delta Thailand is a significant licensor of IP from its parent, which could be one reason.
Historical data shows that the relative valuation can swing back over time and the current divergence of Delta Thailand vs. Delta Taiwan is historically extreme.

Ad-Based Streaming: Are We Sure This Is Netflix’s Panacea (Or Disney?)

By Aaron Gabin

Netflix has had a slew of upgrades recently on bullish estimates for its coming advertising supported tier…with the upgrades buying into Netflix’s exorbitant CPM demands.
We think advertising supported is revenue accretive for the US and Canada, but question how this works out internationally.
Disney is far better positioned for AVOD. It has a developed ad infrastructure, owns all its content, and has better brands to sell advertising against.

AKR Corporindo (AKRA IJ) – Multiple Drivers Ahead

AKR Corporindo (AKRA IJ) continues to see strong sales momentum in July and August after releasing a strong set of 1H2022 results previously with strong momentum expected to year-end.
Both petroleum distribution and chemical distribution are seeing strong tailwinds and its gas station business should be a beneficiary of the fuel price hike.
AKR Corporindo‘s JIIPE estate booked a large 37-hectare plot sale in August with a potential for more smelter-related buyers to come. Valuations look fair but there are potential catalysts ahead.

Joinn Laboratories (6127.HK) 22H1 – It’s Time to Face Reality Before the Magic of Monkeys Disappears

By Shifara Samsudeen, ACMA, CGMA

The monkeys have become Joinn Laboratories (H) (6127 HK)’s important profit growth point based on the logic chain of “monkey supply shortage – monkey price rise – Joinn’s performance increase”.
Faced with doubts about the future prosperity of CXO, we don’t think Joinn is immune as a part of this industrial chain. Joinn is hard to achieve the V-shaped rebound.
Valuations are hard to increase by when the industry is very mature.For investment logic, my favorite is the industry beta, followed by industry beta+alpha. The last is low P/E ratio.

💡 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

Sep 28

Daily Brief Equity Bottom-Up: Indiamart Intermesh Ltd- Forensic Analysis and more

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

In today’s briefing:

Indiamart Intermesh Ltd- Forensic Analysis
Tencent Increases Its Investment in Medical and Healthcare
GMO Q2 2022 Quarterly Letter
Nintendo (7974) | Beware of Cycles
Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday
Rakuten: Two Consecutive Quarters of Narrowing Mobile Losses Could Change Price Momentum
Mitra Adiperkasa (MAPI IJ) – Universally Retail
Vipshop: Rebound in Chinese Apparel Sales Should Trump Conservative Management Guidance
Summers Value Partners Q2 2022 Investor Letter
Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook

Indiamart Intermesh Ltd- Forensic Analysis

By Nitin Mangal

IndiaMart (INMART IN)‘s annual report analysis highlights some of the issues that should not be overlooked.
In addition to changes in important disclosures, the company still continues to see less flow-through of deferred income into revenues.
On the assets side, it should be noted that the strategic investments are yet to show any promise, while fixed assets show some concerns including non-verification, disposals, etc.

Tencent Increases Its Investment in Medical and Healthcare

Tencent known to outspend its peers on strategic investments, has made only around 80 investments and acquisitions so far this year compared to more than 200 deals done in 2021.
Tencent’s vast investment portfolio has attracted regulatory scrutiny and it’s the market’s belief that Tencent was asked to divest some of its stake in other leading tech players in China.
However, over the last few months, Tencent has been increasingly investing on companies operating in the medical field.

GMO Q2 2022 Quarterly Letter

By Fund Newsletters

Equity investors in countries with overvalued currencies have two ways to lose and those with undervalued currencies have two ways to win.
Today’s strong USD looks, in the end, to be our currency and our problem.
Keep an eye out for dangerously destructive economic policies, but don’t use that as an excuse to avoid the asset class entirely.
The yen and euro are at their cheapest levels in decades and hedging emerging market equities would be an expensive proposition even if the currencies weren’t generally cheap versus the USD.

Nintendo (7974) | Beware of Cycles

Nintendo’s stocked recently popped on two positive developments – Splatoon 3 sales set a record for a Switch game & Nintendo Direct announced the release date of Legend of Zelda
Switch life cycle is coming to an end. The cycle had been extended by Covid and supply issues for Sony PS5
Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower

Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday

We estimate that Nanya Technology has the highest level of net cash as a percent of its market cap in its history and it is trading well below 1x PBV.
The median 6-month total shareholder return has been 40.5% for instances since 2012 when Nanya Tech has traded below 1.0x PBV.
Micron’s results this Thursday will provide color on Nanya’s outlook and could be a catalyst.

Rakuten: Two Consecutive Quarters of Narrowing Mobile Losses Could Change Price Momentum

By Oshadhi Kumarasiri

Rakuten’s Mobile losses have held back its share price over the last few years, but it is finally starting to show some improvements with costs shrinking sequentially in 2QFY22.
However, most investors seem to have overlooked this QoQ drop thinking that it is driven by the impact of seasonality.
With the loss of subscribers in the previous quarter seeming temporary, we are expecting revenue growth through ARPU expansion to more than offset Rakuten Inc (4755 JP) Mobile’s cost growth.

Mitra Adiperkasa (MAPI IJ) – Universally Retail

Mitra Adiperkasa (MAPI IJ) has proved itself with flying colours during the pandemic and continues to do so as mobility resumes, with offline sales recovering but digital remaining firm.
The company continues to build out its newer brands such as Boots, Footlocker, Sketchers, DigiMAP, and Lego, with 161 store openings in 1H2022 and more to come in 2H2022.
Mitra Adiperkasa is starting to ramp up its regional presence in Vietnam and the Philippines especially, which represents a future growth driver. Valuations are attractive despite the recent run up.

Vipshop: Rebound in Chinese Apparel Sales Should Trump Conservative Management Guidance

By Wium Malan, CFA

Following a contraction in Chinese apparel sales since 3Q21, and similar negative GMV and product revenue growth for Vipshop, we have witnessed a recovery to growth since June.
Current sell-side forecasts are, however, still for a -10.8%y/y contraction in product revenue for Vipshop in 3Q22f, followed by a -4.4% contraction in 4Q22f which seems overly pessimistic.
Given the conservative nature of near-term top-line growth expectation, and management guidance, the probability for positive earnings surprise seems high.

Summers Value Partners Q2 2022 Investor Letter

By Fund Newsletters

Summers Value Partners is a boutique value manager that uses a focused, long-term approach to investing in areas of the market where most managers are unwilling or unable to participate.
The Summers Value Fund LP (“the Fund”) returned -25.9% net in the first half of 2022.
The majority of our decline took place in the first quarter as we were too slow to react to the Fed’s decision to increase interest rates and shrink its balance sheet to cool the over-heated economy.
The next stage of the bear market will most likely involve lower corporate earnings due to a more challenging businessclimate and reducedaccess to capital.

Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook

Caregen Co Ltd (214370 KS) is a niche biotech company, with focus on biomimetic peptide-based cosmeceuticals and medical devices targeting anti-aging industry. The company has a large addressable market opportunity.
Despite the negative impact from the re-spread of COVID-19, Caregen reported 4% y/y growth in total revenue in H1 2022, with operating profit margin expanding 260bps.
Caregen’s COVID-19 nasal spray is in phase 1 trial. FDA has registered Caregen’s health functional food to control blood sugar as a new dietary ingredient (NDI).

💡 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

Sep 27

Daily Brief Equity Bottom-Up: Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’ and more

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

In today’s briefing:

Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo
Xiaomi: Margins to Remain Under Pressure with Premiumisation and Investment in EV (Quantamental)
Taiwan Tech Weekly: Micron Forecasts This Week, Intel Conference, AMD CEO to Visit Taiwan Suppliers
PT Avia Avian (AVIA IJ) – Beyond Paint
China Shineway Pharmaceutical (2877HK)-Shineway Is Undervalued, but Downside Risk Is Hard to Control

Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo

By Shifara Samsudeen, ACMA, CGMA

We visited a store of Freshippo Outlets in Shanghai in workhour.
We believe the store is popular and accumulating more customers.
However, the digitalized services bring some difficulties to old customers.

Xiaomi: Margins to Remain Under Pressure with Premiumisation and Investment in EV (Quantamental)

Xiaomi Corp (1810 HK) share price has declined more than 50% over the last 12-months from HK$22.1 to HK$9.46.
In the meantime, the company’s earnings also have weakened with resurgence of Covid-19 in China alongside decline in demand for smartphones in Europe and other markets.
Xiaomi has entered into the premium smartphones segment which has negatively impacted the company’s margins due to aggressive expansion of offline stores.

Taiwan Tech Weekly: Micron Forecasts This Week, Intel Conference, AMD CEO to Visit Taiwan Suppliers

Micron’s outlook for next quarter’s margin will be key, provides good color on future margin for key Taiwan names
Intel conference could be catalyst for Intel Long/Short, CEO will be giving a keynote on company’s new direction
AMD meeting many Taiwan-listed companies, Hon Hai EV platform closes new deal in Indonesia

PT Avia Avian (AVIA IJ) – Beyond Paint

PT Avia Avian (AVIA IJ) is known for its position as the leading and best-quality paint manufacturer in Indonesia but it now has an increasingly diverse products portfolio.
The company has successfully offset raw material price pressure with price rises to keep margins relatively steady and also saw a sharp pick up in sales in 2Q2022.
Avian continues to launch new products and build out new distribution centres to support future growth, with future M&A also a potential growth driver. Valuations reflect its leading market position.

China Shineway Pharmaceutical (2877HK)-Shineway Is Undervalued, but Downside Risk Is Hard to Control

Shineway showed good performance growth in 22H1, which was mainly driven by outstanding growth of TCM formula granules business. We think such positive momentum would continue in the short term.
The implementation of national standards is actually paving the way for future VBP. Together with increasing competition, Shineway could be difficult to maintain over 70% gross margin in long run.
Shineway is cash rich and is undervalued. Obviously, the unfriendly macro environment provides a buying opportunity, but investors may need to consider the downside risks, which is hard to control.

💡 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

Sep 26

Daily Brief Equity Bottom-Up: Alibaba: Accelerating Retail Sales and more

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

In today’s briefing:

Alibaba: Accelerating Retail Sales, and a Depressed Comp Base, Bode Well for Near-Term Earnings
Meta Platforms ($META)
Fast Retailing (9983) | Elevated Multiple and Guidance Risk
China Internet Weekly (26Sep2022): S.F., STO, YTO, Yunda, JD Logistics, Alibaba, Baidu, Trip.com
Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth
Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

Alibaba: Accelerating Retail Sales, and a Depressed Comp Base, Bode Well for Near-Term Earnings

By Wium Malan, CFA

In line with previously reported trends in Chinese retail sales growth, the large Chinese eCommerce operators reported a decline (or contraction) in GMV growth in 2Q2022.
Following a contraction between March and May this year, China’s retail sales growth has returned to growth since June, which continued in July and accelerated in August.
Alibaba’s next reported quarter’s annualised growth will be on an extremely depressed base.

Meta Platforms ($META)

By MT Capital

The technology sector is full of polarizing personalities, many of whom stand at the helm of some of the largest companies in the world.
Whether that be with the brash antics and lofty ambitions of Elon Musk, the undoubtable brilliance tainted by Bitcoin Maximalism exhibited by Jack Dorsey, the SEC-challenging twitter threads blasted by Brain Armstrong, or the naivety potentially falsely portrayed by Vlad Tenev, there is no shortage of individuals that, love or hate, you can’t help but pay attention to.
Mark Zuckerburg is one of those people. The man that steers the ship of of Metaverse has clear technical aptitude, a far-cry away from the resume full of consulting experience and MBAs possessed by a lot of modern c-suite executives.

Fast Retailing (9983) | Elevated Multiple and Guidance Risk

Fast Retailing’s share price has risen 24% year-to-date, outperforming the index and global peers
The share price has been driven by multiple expansion, which we believe is now at risk of reversing
With an uncertain economic backdrop, we believe management may issue conservative guidance for the next fiscal year. We turn Bearish.

China Internet Weekly (26Sep2022): S.F., STO, YTO, Yunda, JD Logistics, Alibaba, Baidu, Trip.com

Revenues of major express parcel companies grew rapidly in August.
JD logistics will provide logistics service to live streaming retailers on Douyin.
In 2Q22, revenue of Trip.com decreased by 32% YoY and operating profit turned negative.

Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth

Classys (214150 KS), under new management, has announced a treasury stock acquisition program of KRW20 billion through March 2023. As of June 2022, Classys had cash equivalents of KRW68 billion.
Global expansion of Classys’ latest lifting product, Shrink Universe is the near-term growth driver. The product is seeing steady domestic demand, with cumulative sales exceeding 1,000 units.
In August Classys received approval for its new skin care product Volnewmer. The company is expected to start selling Volnewmer in Q3 and initially targeting 100 units for the device.

Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

Xinjiang Goldwind Science & Technology H (2208 HK) had a tough 2Q22; but with the recent retreat in share price, the stock appears attractive now at 8.5x FY23F PER.
Goldwind has many growth initiatives backing its outlook. These include solid order backlog, upside on gross margin, contribution from wind farms and growth from the servicing business.
Its WTG backlog of 24.1GW is 1.3x higher QoQ and well covers revenue for next two years. Further strategic disposals of wind farm will help realising underlying asset values.

💡 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

Sep 24

Daily Brief Equity Bottom-Up: Pine Care Group (1989 HK): Chinachem Takeover Offers a Good Exit Opportunity for Investors and more

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

In today’s briefing:

Pine Care Group (1989 HK): Chinachem Takeover Offers a Good Exit Opportunity for Investors
Breaking Growth Short Candidates: Outset Med., NVIDIA, Intuitive Surgical, Plug Power
Bandhan Bank Ltd (BANDHAN IN) | Still Waters, but May Not Run Deep
Astra International (ASII IJ) – Autos and Commodities Driving Growth
SillaJen Inc (215600 KS): Baselia Deal Enriches Pipeline; Stock Trading Resumption Decision Soon
Hamamatsu Photonics (6965 JP): Difficult Year Ahead
HWKN: Pricing the Expected

Pine Care Group (1989 HK): Chinachem Takeover Offers a Good Exit Opportunity for Investors

Hong Kong’s leading property developer, Chinachem Group agreed to acquire a 56.15% stake in Pine Care Group (1989 HK) for HKD451.2 million ($57.5 million) from its controlling shareholders.
Post-Acquisition, Chinachem will launch an unconditional mandatory offer for the remaining shares, which it does not hold at HKD0.89 per share, same as the purchase price.
Considering delisting risk, limited upside potential of the shares after a huge run-up, and muted growth outlook of the company, investors should tender their holdings.

Breaking Growth Short Candidates: Outset Med., NVIDIA, Intuitive Surgical, Plug Power

By Eric Fernandez, CFA

This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
The key judgement is whether a slowdown is temporary or the beginning of a trend. These shorts tend to have high valuations and betas. Multiple compression accelerates the stock’s decline.
Today we are flagging Outset Med., NVIDIA, Intuitive Surgical, Plug Power

Bandhan Bank Ltd (BANDHAN IN) | Still Waters, but May Not Run Deep

By Pranav Bhavsar

Over the last 6M, Bandhan Bank Ltd (BANDHAN IN) has underperformed the Nifty 50 by ~7.3% (BANDHAN -5.92% vs Nifty +1.39%)
Our flash checks across West Bengal and Assam indicate a stable to improving business environment.
We reiterate our view of that the asset quality downcycle could be on the verge of ending. Additional provisioning requirements should be sharply lower from Q3 FY23.

Astra International (ASII IJ) – Autos and Commodities Driving Growth

Astra International just held its public expose at which the company reiterated the strong performance in 1H2022 driven by automotive, finance, heavy equipment and commodity-related businesses.
The momentum will continue into 2H2022 and car sales continue to show strong growth, with the tailwind of higher commodity prices and increased mobility.
Astra International remains one of our top picks in Indonesia for the ongoing recovery in an environment where commodity prices remain high. Valuations are attractive versus history.

SillaJen Inc (215600 KS): Baselia Deal Enriches Pipeline; Stock Trading Resumption Decision Soon

SillaJen Inc (215600 KS) has developed a differentiated pipeline of oncolytic vaccinia immunotherapy. Its lead drug candidate Pexa-Vec is in phase 2 clinical trial for renal cell carcinoma.
SillaJen has acquired a first-in-class anti-cancer drug candidate BAL0891 from Basilea for upfront payment of $14 million. The company’s cash position is capable to fund the acquisition and R&D expenses.
Korean Stock Exchange is expected to announce its decision on SillaJen stock trading resumption by October 12.

Hamamatsu Photonics (6965 JP): Difficult Year Ahead

By Scott Foster

FY Sep-22 results are likely to beat management’s guidance, but this should be in the price. Recession and rising interest rates are probably not in the price.
Growth rates slowed in 3Q and are likely to decline further in 4Q. In the year ahead, we expect both sales and profits to decline.
The shares have rebounded by 21% since the 1st of July to 30x our EPS estimate for FY Sep-23. This does not look sustainable. Sell into current strength.

HWKN: Pricing the Expected

The seasonal strength of the water treatment business should lead to Hawkins (HWKN) offsetting the sales decline from industrial specialty chemicals declining in price in the September quarter
There is now evidence some specialty chemical prices are beginning to decline. When there has been no LIFO charge, HWKN has reported gross margin above 20 percent.
Summer months are seasonally the time when there is greater demand from HWKN’s water treatment customers. Over the course of the past year HWKN has grown the segment through acquisitions

💡 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

Sep 23

Daily Brief Equity Bottom-Up: Elan Microelectronics: Index Removal Ending and more

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

In today’s briefing:

Elan Microelectronics: Index Removal Ending, Cash Rich for Buybacks or Acquisitions
Tao Heung (573 HK): Bon Appetit
Wynn Macau Ltd: Trading Below Many Peers Which Are Moving up Facing the Same Headwinds
AptaBio Therapeutics (293780 KS): Near-Term Cash Crunch Is Clouding Promising Prospects of Pipeline

Elan Microelectronics: Index Removal Ending, Cash Rich for Buybacks or Acquisitions

Elan’s index removal has resulted in a spike in volume, however the removal selling should be abating.
The company remains in a very strong position with a large cash warchest and additional cash to be generated even in a down-cycle.
The company should buyback shares in our view, as it did in 2021. Industry weakness also presents acquisition opportunities.

Tao Heung (573 HK): Bon Appetit

Tao Heung (573 HK), a Chinese cuisine restaurant operator, has lost significant shop-days in 1H22 due to the pandemic. However, this is behind us and 2H22 outlook is better.
The recovery of Hong Kong operations will be supported by further relaxation of social distancing measures while, for mainland China, business has rebounded following removal of lockdowns.
Its Chairman has upped his stake, signaling a vote of confidence. The stock’s valuations are not expensive, but given low turnover, there will be potential share price volatility.

Wynn Macau Ltd: Trading Below Many Peers Which Are Moving up Facing the Same Headwinds

By Howard J Klein

Macau peer shares are higher largely due to bullish resolutions of long term uncertainties about re-licensing which have now been favorably resolved.
Some easing of Hong Kong hotel duration quarantines in general and specific to Wynn, the promotion of Ms. Linda Chen to Presidency will resonate favorably in Beijing.
Wynn’s two Macau properties well positioned to recapture leading share of premium mass customer segment. Not reflected in go forward share price.

AptaBio Therapeutics (293780 KS): Near-Term Cash Crunch Is Clouding Promising Prospects of Pipeline

AptaBio Therapeutics (293780 KS) announced positive topline data for European phase 2 clinical trial of its lead candidate, APX-115, which is being developed for the treatment of diabetic nephropathy.
Future progress of APX-115 in clinical trial will depend much on AptaBio’s capacity to enter a licensing deal for APX-115 with global pharmaceutical companies.
The company’s other pipeline drugs are also progressing, thereby keeping R&D expenditures at elevated level. However, the company’s current cash balance is not sufficient fund its R&D expenditures for long-term.

💡 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

Sep 22

Daily Brief Equity Bottom-Up: Mahindra & Mahindra (MM IN) | The Bookings Fallacy and more

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

In today’s briefing:

Mahindra & Mahindra (MM IN) | The Bookings Fallacy
Softbank Group – A Surplus of VC Cash Could Re-Energize Vision Fund’s Investment Pace
Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued
Long Idea: Warner Music’s New CEO Could Prove a Catalyst
SKYX Platforms Inc. – Investment Thesis
Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22
XPER: Unlocking Value Thru Separation
Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over
Mill City Ventures III
Air China (753 HK): Can It Sustain the Outperformance?

Mahindra & Mahindra (MM IN) | The Bookings Fallacy

By Pranav Bhavsar

We challenge Mahindra & Mahindra (MM IN) ‘s narrative of strong demand and booking pipeline (140k+ open bookings, excl Scorpio N as of Q1 FY23)
There is a possibility of a monthly booking rate of 10.3k for XUV700 and 5K per month for Thar being overstated.
With increasing competition (MSIL + Toyota), cancellations will increase leading to even lower waiting periods and a reduced booking pipeline.

Softbank Group – A Surplus of VC Cash Could Re-Energize Vision Fund’s Investment Pace

By Kirk Boodry

News reports indicate venture capital firms are sitting in cash reserves 2x normal levels and that needs to be put to work
We expected a narrowing of public v private valuation levels was needed for Softbank to pivot from recent defensive but competition for deals may be more relevant
Access to investment capital is easier after settling of Alibaba-linked derivative contracts and Softbank has showed as recently as 2020 asset sales that it can lever up quickly

Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued

Angelalign Technology (6699 HK) has reported muted H1 2022 results, which were negatively impacted by the resurgence of the COVID-19 pandemic in China and the corresponding restrictions.
Revenue from core business of clear aligner treatment grew just 3% y/y. However, lower ASP and higher cost of sales, pulled down the gross profit margin by 930bps to 60.2%.
Thus far in H2 2022, China has imposed lockdowns in multiple major cities. With the uncertainty over the duration of COVID, no immediate respite is seen in Angelalign’s business.

Long Idea: Warner Music’s New CEO Could Prove a Catalyst

By Aaron Gabin

Warner Music hired YouTube’s Chief Business Officer Robert Kyncl as its new CEO, an impressive executive well positioned to expand music monetization to newer frontiers.
The stock has roundtripped its $25 June 2020 IPO price after doubling.
There is a compelling “comping the comp” catalyst path for 2023, as streaming revenues reaccelerate, and Kyncl renegotiates static licensing deals with Peloton, Tiktok, etc.

SKYX Platforms Inc. – Investment Thesis

This is our first report on SKYX Platforms and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
Another important fact about SKYX Platforms is that the company’s management comprises several former GE and NEC employees which is a big positive.
We believe that there is a good chance the company’s offerings may become universally accepted in the years to come.

Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22

This is our first report on Jupiter Wellness and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
With all of these developments, a stock priced at 63 cents appears to be highly affordable and supports our positive outlook.
Overall, we believe that Jupiter has phenomenal growth prospects and is an excellent investment prospect.

XPER: Unlocking Value Thru Separation

XPER held an investor day to highlight the two businesses XPER would separate into on October 1, 2022.
The expectation is the two companies operating separately would be able to grow faster without worries over customer relationship to the other segment.
Xperi has been the underpinning of our investment thesis due to the investments the Company has made in different products and customer engagements.

Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over

Due to declining performance, lack of core competitiveness and increasing competition, the market has to re-examine the growth potential and outlook of Angelalign.The era of high margin is fading away.
Angelalign’s low-price strategy is easily hit by similar products with lower prices. Once its price loses advantage, it will directly lead to a rapid and substantial decline in overall performance.
Due to its worse-than-expected 2022H1 performance and economic downturn, we lowered our 2022 forecast of Angelalign. Angelalign shouldn’t be valued that much higher than Align Technology, expecting more downside ahead.

Mill City Ventures III

This is our first report on Mill City Ventures III and we look to provide a detailed account of the various industries that the company operates in and the key macro-economic factors.
Given its current size, Mill City Ventures III is exempt from many of the regulatory restrictions that apply to other traditional lenders or institutional rivals.
Overall, we believe that Mill City Ventures III has phenomenal growth prospects and is an excellent investment prospect.

Air China (753 HK): Can It Sustain the Outperformance?

Despite record losses in 2Q22, share price of Air China Ltd (H) (753 HK) has rallied 14% YTD, outperformed the 23.9% decline in HSCEI and its Chinese peers.
Air China’s stub value has returned to pre-pandemic level, but is primarily driven by the A-share. Cathay Pacific (293 HK) recovery is an important catalyst for narrowing H-A share discount.
News flow over the next 12 months, mostly related to further relaxation of quarantine requirements, will be positive. The surge in demand should support elevated passenger yield.

💡 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

Sep 21

Daily Brief Equity Bottom-Up: Nexon (3659) | The Best Pipeline Ever and more

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

In today’s briefing:

Nexon (3659) | The Best Pipeline Ever
Remegen Co Ltd (9995.HK) 22H1 – Mr. Market’s “Misjudgment” Brings Opportunities to Make Money
Access Bio (950130 KS): COVID-19 Rapid Tests Demand Lose Sheen Sending Share Prices Down to Lows

Nexon (3659) | The Best Pipeline Ever

Nexon’s stock price is down -20% from the highs made in April and -30% from its highs last year.
Nexon is a key beneficiary of the trend to immersive virtual worlds and live game operations
The best pipeline in Nexon’s history will drive higher Free Cash Flows and shareholder returns

Remegen Co Ltd (9995.HK) 22H1 – Mr. Market’s “Misjudgment” Brings Opportunities to Make Money

For RC18, it depends on whether RemeGen can seize this short period of strategic opportunities to further establish its leading position. The situation faced by RC48 is much more complex.
From the current situation, it’s very challenging for RemeGen to evolve into biopharma.That is to say, RemeGen’s future positioning is still likely to remain a biotech, which limits valuation expansion.
Even based on conservative forecast, there’s still decent upside potential. We’re bullish on RemeGen. Due to unfriendly macro, investors may need to consider the potential downside risks when going long.

Access Bio (950130 KS): COVID-19 Rapid Tests Demand Lose Sheen Sending Share Prices Down to Lows

Access Bio Inc (950130 KS) has been reporting triple-digit revenue growth since 2020, thanks to massive demand for the COVID-19 tests. The performance continued in this year too.
Going forward, the stellar revenue growth is not expected to be replicated as demand for COVID-19 tests looks uncertain beyond 2022. Revenue from the company’s malaria test is declining.
Access Bio has developed monkeypox tests. However, monkeypox does not seem be a large and attractive market opportunity, which can compensate for the revenue loss from COVID-19 tests.

💡 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

Sep 20

Daily Brief Equity Bottom-Up: Seven & I: Going Strong in Overseas and more

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

In today’s briefing:

Seven & I: Going Strong in Overseas, Another Beat On the Cards
Taiwan Tech Weekly: Biden Says US Will Defend Taiwan, Texas Instruments Gives Hope
Meituan (3690 HK): User Base Beating Competitor, Industry Recovering, Upgrade to Hold
Aier Eye Hospital (300015.CH) 22H1 – More Downside Ahead; The Long Logic Doesn’t Exist
CPMC Holdings (906 HK): Good Time to Re-Visit
Agilent Technologies: New Launches In Mass Spectrometry & Other Drivers
Big Food Automation
ATEN: Security Remains in Demand
WDFC: Expectations Set for Disappointment

Seven & I: Going Strong in Overseas, Another Beat On the Cards

By Oshadhi Kumarasiri

After raising guidance yet again in 1QFY23 through stronger than expected performance in the overseas business, Seven & I is scheduled to release Q2 results on 6th October 2022.
We are optimistic that 2QFY23 could provide the platform for Seven & I to break the ¥6,100 level, at which the share-price has been stuck for the first 9-months 2022.
This is because, we are seeing a significant improvement in Seven & I’s domestic performance while, North America is carrying the growth momentum that been there since the Speedway-acquisition.

Taiwan Tech Weekly: Biden Says US Will Defend Taiwan, Texas Instruments Gives Hope

Biden makes the most definitive statement to date that the US will defend Taiwan.
Texas Instruments hikes dividend, annouces additional buyback. Will other cash rich semiconductor stocks follow suit?
Intel vs. TSMC/UMC Trade Monitor: We look at performance streaks for the pairs. Intel outperforming over the last trading sessions.

Meituan (3690 HK): User Base Beating Competitor, Industry Recovering, Upgrade to Hold

In July, Meituan’s user base exceeded Ele.me and Ele.me’s active user base decreased by 24% YoY.
In China, Monthly active user bases of local life and food delivery recovered from May to July.
We believe Meituan’s stock has only a downside of 6% for year end 2023.

Aier Eye Hospital (300015.CH) 22H1 – More Downside Ahead; The Long Logic Doesn’t Exist

The fundamental changes in the population structure will lead to a decline in the growth rate of the total retail sales of consumer goods. The long logic doesn’t exist.
Aier has hit a growth ceiling. As the endogenous demand will be stepped downward gradually, the performance of Aier will further decline. The downward elasticity of valuation is greater.
It is still difficult for healthcare sector to have its own independent growth logic. The bottom of healthcare sector would appear after the collapse of Aier’s valuation.

CPMC Holdings (906 HK): Good Time to Re-Visit

Underpinned by higher ASP and sequentially lower input costs, CPMC Holdings (906 HK) should achieve better margin in 2H22. Its 17% fall in share price YTD makes it appealing.
Average aluminum price was down 14% so far in 2H22, vs. 1H21, good to its costs. Well-controlled selling and administrative costs will help to support profitability recovery.
New two-piece can capacity will grow by 54% over the next three years as 5 production lines are expected to be added. Most of them already have demand lined up.

Agilent Technologies: New Launches In Mass Spectrometry & Other Drivers

Agilent Technologies delivered an excellent quarterly result with earnings and revenue exceeding market expectations significantly.
The strong results were led by strength in its biggest markets i.e., chemical, energy, and pharma.
We provide the stock of Agilent Technologies with a ‘Hold’ rating with a revision in the target price.

Big Food Automation

By subSPAC

While the pandemic has uprooted many industries, perhaps none have seen a larger impact than the Restaurant and Fast Food Industry.
These industries have been hit with a barrage of issues including a mass exodus of workers, inflation hitting the prices of ingredients, and foot traffic being much lower due to a change in eating preferences.
These chains have struggled with their profit margins, which have yet to reclaim their pre-covid levels and could get worse due to several headwinds in the coming months.

ATEN: Security Remains in Demand

ATEN should continue to benefit from security remaining at the top of priority lists for enterprises and service providers after more network intrusion and hacking news in recent days
The proposal from Vista Equity Partners to purchase KnowBe4 (KNBE) provides greater clarity of the discount ATEN’s stock trades at
ATEN’s purchase of shares from its venture capital shareholder, Summit Partners, at $12.75 per share suggests there is value at current levels

WDFC: Expectations Set for Disappointment

The recent decline in crude oil has resulted in optimism WDFC’s gross margin would improve. There is a delay before WDFC sees a benefit/impact from the price of oil
We continue to maintain our viewpoint of WDFC experiencing slower demand for its products from consumers and retailers holding back on orders
WDFC’s exposure to international markets could negatively impact sales due to the strong US Dollar

💡 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

Sep 19

Daily Brief Equity Bottom-Up: Takeaways from the Times Neighborhood Investment Debacle and more

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

In today’s briefing:

Takeaways from the Times Neighborhood Investment Debacle
Genting’s Suprise Bid for Macau Casino Not Resonating with Investors Seeing Uncertainties Ahead
Roblox Analyst Day Observations
China Internet Weekly (19Sep2022): Tencent, NetEase, Meituan, Trip.com

Takeaways from the Times Neighborhood Investment Debacle

By Sameer Taneja

Times Neighborhood (9928 HK) has been a disastrous call since we first highlighted it. In this insight, we reflect upon the red flags we could have done well to spot.
We cover red flags ranging from the level of precise guidance, pivot in strategy, and the parent’s poor financial health, to the effect on receivables sucking cash from the company.
Everyone makes mistakes (we are human, after all). We would like to share our experience to educate readers to become better investors and sidestep investments in such names.

Genting’s Suprise Bid for Macau Casino Not Resonating with Investors Seeing Uncertainties Ahead

By Howard J Klein

During the current rebidding process for the six Macau concessions, a seventh “surprise guest”filed a bid. Opinion of their chances are mixed at best.
Genting has tended to overreach over time in other markets.
Macau operators already face daunting recovery odds ahead that will impose strains on cash and debt refis at higher rates.

Roblox Analyst Day Observations

By Aaron Gabin

Roblox Analyst Day featured some interesting new initiatives around advertising and marketplace dynamics.
The company will launch a self serve advertising platform in 2023 that has the potential to be worth an incremental 20% of revenues and margin supportive.
The company is also allowing developers to start introducing scare items, and begin participating in the on-platform resale market.

China Internet Weekly (19Sep2022): Tencent, NetEase, Meituan, Trip.com