Equity Bottom-Up

The management of The Keepers Holdings, Inc. (KEEPR PM) highlighted bullish trends from their call for H1 2022 for on-premise and travel retail that bode well for H2 2022.
We believe the company is on the cusp of backward integration by acquiring its supplier, Bodegas William and Humbert (in Spain). We believe this is an exciting future catalyst.
The stock trades at 6x PE FY22e (ex-cash) with seven bn+ pesos of cash on the balance sheet representing 37% of market capitalization. We see significant upside ahead.

China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong

By Ming Lu

Express parcels increased by 8% YoY in China in July.
TikTok was still the top non-game app in the world in July.
Meituan raised its prices of bike sharing on August 10.

Huadong Medicine (000963.CH) 2022H1 – Huadong Is Back on Track. If Shares Pullback, Then Be Long

By Xinyao (Criss) Wang

Huadong released encouraging 2022H1 results. After a significant decline due to the loss of VBP bid for core varieties, Huadong is out of trouble and back on track now.
The future profit contribution would be on medical cosmetology and industrial microorganisms businesses. For 2022 forecast, revenue YoY growth is below 10%, and net profit YoY growth is above 15%.
Due to unfriendly macro environment, Huadong’s share price could face a correction. But based on its promising outlook, we recommend that investors could take advantage of the pullback to long.

Navigating the Housing Downturn

By subSPAC

iBuying giant Opendoor has benefited significantly from soaring home prices over the last eighteen months, as revenues have tripled and its asset portfolio has skyrocketed in value.
However, surging mortgage rates coupled with sky-high prices are leading to a steep decline in sales.
Potential buyers are now waiting on the sidelines for lower rates/prices, while sellers are now pulling listings until prices start climbing again.

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Aug 14

Daily Brief Equity Bottom-Up: Asics (7936) | Strong Performance Meets Reasonable Valuation and more

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

In today’s briefing:

Asics (7936) | Strong Performance Meets Reasonable Valuation
Mayne Pharma (MYX AU): CDMO Business Sale- A Step Towards Focus Solely on Specialty Pharma
SOBR Safe Inc.: A Unique Technology On The Cusp Of Commercialization
Advanced Micro Devices ($AMD)

Asics (7936) | Strong Performance Meets Reasonable Valuation

The stock price has rallied 40% since our last note. We are happy to take profit here, hence we label this insight as Bearish
The results and full year guidance hike were positive but largely currency assisted
We expect that a focus on China and Direct will drive margin expansion in the medium term

Mayne Pharma (MYX AU): CDMO Business Sale- A Step Towards Focus Solely on Specialty Pharma

Mayne Pharma (MYX AU) is selling its U.S.-based CDMO business, Metrics Contract Services for $475 million. The transaction is expected to close by the end of 2022.
Allowing for reinvestment needs, the net proceeds from the sale will be used to repay the syndicated debt facility and return surplus capital to shareholders.
Combined oral contraceptive Nextstellis remains the company’s most significant commercial opportunity. While Nextstellis was launched in the U.S. in June 2021, Mayne has launched Nextstellis in Australia in July 2022.

SOBR Safe Inc.: A Unique Technology On The Cusp Of Commercialization

Alcohol intoxication of employees during work hours is known to result in millions of dollars’ worth of productivity loss as well as many other risks to corporations each year.
Given this background, SOBR Safe (NASDAQ:SOBR) has a highly relevant technological solution that can help mitigate and minimize the these risks.
The company has a particularly large addressable market as it helps employers carry out the alcohol intoxication monitoring of workers with the help of its preventive detection technology platform.

Advanced Micro Devices ($AMD)

By MT Capital

Today I will be completing an in-depth analysis on AMD .
Within, I will break down the multitude of opportunities the company has in front of it and provide a succinct overview of the company’s vast technology portfolio.
Additionally, I will spend time discussing how the company is eating Intel’s lunch, dig deeper into their financials, and discuss some positive and risk-based factors alike that I am considering with respect to the company.

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Aug 13

Daily Brief Equity Bottom-Up: Rakuten: Turning a Corner and more

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

In today’s briefing:

Rakuten: Turning a Corner
Deepak Nitrite: Forensic Analysis
Rorze (6323) | Japan Small Cap Winner
Softbank Group (9984 JP) 1Q 22 Results – Focus on Fintech and LatAm Holdings
Samsung’s Lee Jae-Yong Receives Pardon & Get Out of Jail Card: A Signal of Major M&As by Samsung?
Adobe Inc.: Creative Cloud Upside & Other Drivers
Honeywell International Inc.: Competitive Advantages & Acquisition-Led Growth
Progyny (PGNY US): Q2 Results Ahead of Expectations; 2022 Guidance Raised Second Time This Year
Mastercard Inc.: New Set Of Collaborations & Other Key Drivers
Monster Beverages: New Product Launches & Other Drivers

Rakuten: Turning a Corner

The biggest drawback of Rakuten Inc (4755 JP)’s share price momentum over the last few years was its Mobile business’ losses.
However, based on Rakuten’s projections, the Mobile business could get close to breaking even by Q4 2023.
With narrowing Mobile losses and outperforming E-commerce and Fintech, we think it is unreasonable for Rakuten to trade at a 40% discount to the bottom-end of the long-term trend channel.

Deepak Nitrite: Forensic Analysis

By Nitin Mangal

Deepak Nitrite (DN IN) has emerged as one of the key players in the chemical intermediate industry over the last few years.
The company’s emergence saw a structural and more or less a positive change in the balance sheet health and overall scheme of operations.
The green flags include strong balance sheet position and surging return ratios, while the red flags include poor cash transmission and margin losses lately.

Rorze (6323) | Japan Small Cap Winner

We are Bullish on Rorze, a global leader in ultra-clean wafer substrate handling solutions.
We believe that Rorze is well placed to monetise the long-term growth in semiconductor demand and WFE spend
The stock has recently underperformed its peer group and valuations collapsed. We see almost 100% upside potential based on a 14x target multiple

Softbank Group (9984 JP) 1Q 22 Results – Focus on Fintech and LatAm Holdings

By Victor Galliano

Softbank Group’s fintech portfolio companies – and especially those in the largely Softbank-funded Vision Fund 2 – were a meaningful part of the group’s large loss in fiscal 1Q 2022
However, Klarna and eToro “down rounds” – concluded in early July – do not seem to have been incorporated into June-end losses; the Vision Funds are absorbing the LatAm Fund
Despite the public markets rebound, Softbank faces multiples challenges, and it is hard to find positives in the Alibaba derivatives contracts

Samsung’s Lee Jae-Yong Receives Pardon & Get Out of Jail Card: A Signal of Major M&As by Samsung?

By Douglas Kim

On 12 August, the South Korean government finally gave a presidential pardon to Samsung’s heir Lee Jae-Yong.
With Lee Jae-Yong given the presidential pardon, there is an increasing likelihood that the Samsung Group could become more aggressive in making major global M&As in the next several years.
Three major M&As that Samsung could make in the next several years include ARM, Infineon, and NXP Semiconductor.

Adobe Inc.: Creative Cloud Upside & Other Drivers

Adobe has witnessed a particularly robust demand over Experience Cloud, Document Cloud, and Creative Cloud.
Adobe is winning in its established business and is viewing significant momentum in innovative categories.
During the quarter, it hiked prices for particular creative cloud subscriptions which helped the revenue growth.

Honeywell International Inc.: Competitive Advantages & Acquisition-Led Growth

Honeywell has successfully maintained a particularly high level of resilience despite persistent supply chain restrictions, inflationary headwinds, and geopolitical upheaval.
Despite the inflationary challenges, Honeywell continued with margin expansion and this helped the management surpass the earnings expectations of Wall Street.
It is also increasing technology investments in sustainability through Honeywell Ventures and a classic example was the investment in Electric Hydrogen.

Progyny (PGNY US): Q2 Results Ahead of Expectations; 2022 Guidance Raised Second Time This Year

Progyny Inc (PGNY US) announced strong Q2 results, with both revenue and EPS surpassing consensus as well as company guidance. Revenue and adjusted EBITDA margin reached to highest ever levels.
The company has raised lower end of its 2022 revenue and adjusted EBITDA guidance second time in this year. Progyny is seeing continued strong employer demand for fertility solutions.
Despite inflation and a potential softening in the economy, Progyny is seeing strong customer demand and is upbeat about new client acquisition for its upcoming selling season.

Mastercard Inc.: New Set Of Collaborations & Other Key Drivers

Mastercard continued to bear the brunt of inflationary pressures since the start of 2022 but the company has definitely benefitted from the fact that travel-related spending and consumer spending have remained strong.
Apple Pay Later has been recently announced by Apple which is using the Mastercard installments program.
In the U.S., the company established a partnership agreements that extend its small, co-brand, credit, and debit business credit programs.

Monster Beverages: New Product Launches & Other Drivers

Monster Beverages continues to witness a rise in the demand for its energy drinks and this helped the company surpass Wall Street expectations in terms of revenues.
In the quarter, Monster experienced a significant rise in the cost of sales that resulted in a material reduction in gross profit.
Among major updates, Monster Beverage has recently released its foremost malt beverage, alcoholic flavored under the Monster brand.

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Aug 12

Daily Brief Equity Bottom-Up: Comfortdelgro (CD): Stable Vs Volatile SIA and more

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

In today’s briefing:

Comfortdelgro (CD): Stable Vs Volatile SIA
Tencent (700 HK) Pre-Earnings: Still to Be Slow in 2Q22, But Price Overly Impacted
Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch
The Launch of Apple Pay Is Likely to Result in Market Share Losses for Kakao Pay
Vietnam Consumer Discretionary – Phu Nhuan Jewelry: Hedge Against Rising Inflation Rates
Kuaishou Dives Into Cloud Services and Chipmaking
Tokyo Base: A Future Abroad
China Everbright Water (1857 HK): Long-Term Pipeline Stays Resilient
Confident In Growth Opportunities. Weak Q3FY22 Billings Guidance Does Not Change Our Bullish Thesis
PetroVietnam Transportation Corporation (PVT VN/ BUY)

Comfortdelgro (CD): Stable Vs Volatile SIA

By Henry Soediarko

It is a recovery play yet its has lagged to SIA. 3 year basis, Comfortdelgro is -46% yet SIA has recovered to only -15% despite the former having better numbers.
SIA Free Cash Flow is often in red while Comfortdelgro’s has been consistently on the green. 2021 Comfortdelgro’s FCF was SGD +433 million while SIA was SGD -83 million.
Taxi demand has gone up through the roof judging from the price you have to pay.

Tencent (700 HK) Pre-Earnings: Still to Be Slow in 2Q22, But Price Overly Impacted

By Ming Lu

We believe revenue would Still Be Slow in 2Q22, but will recover in 4Q22 or 2023.
We believe FinTech will be the only highlight, but online game and advertising will be negatively impacted.
However, we estimate the stock price will have an upside of 55%.

Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch

By Vincent Fernando, CFA

TSMC’s ADR premium has fallen substantially and is at the lower end of its 3-year range
ASE’s ADR premium is in contrast near the upper end of its range
ChipMOS ADRs are now trading at a discount to their Taiwan shares

The Launch of Apple Pay Is Likely to Result in Market Share Losses for Kakao Pay

By Douglas Kim

In the past several days, there have been numerous local media outlets that have mentioned about a potential launch of Apple Pay in Korea in the coming months.
We believe the launch of Apple Pay in Korea could occur in the next 6-12 months and this is likely to further heighten the competitive pressures on Kakao Pay.
We continue to be concerned about the lofty valuation multiples of Kakao Pay as it is trading at 165x P/E (2024E) and 5.1x P/B (2024E).

Vietnam Consumer Discretionary – Phu Nhuan Jewelry: Hedge Against Rising Inflation Rates

By Douglas Kim

Phu Nhuan Jewelry Jsc (PNJ VN) is the number one jewelry company in Vietnam.
The company is benefiting from several key catalysts including reduced social distancing measures resulting in higher store visits and sales, hedge against rising inflation, and pent up demand for jewelry.
The combination of higher expected earnings this year along with stable recent prices have resulted in more attractive valuations for the company.

Kuaishou Dives Into Cloud Services and Chipmaking

By Caixin Global

Kuaishou Technology Co. Ltd., the operator of China’s second-largest short video app, unveiled the new video cloud brand StreamLake and a self-developed intelligent video processing chip Wednesday in key moves to expand its business
The launch of StreamLake, the first enterprise-facing product from Kuaishou, marks the short-video platform operator’s official entry into the cloud services market and a shift from its original consumer-focused businesses
StreamLake will provide artificial intelligence-powered video creation and distribution solutions for corporate clients, Kuaishou said.

Tokyo Base: A Future Abroad

By Michael Causton

Tokyo Base rebounded in 2021 thanks to strong support at home and overseas for its Japan-made designs.
The fashion retailer plans to add new concepts as well as expand more quickly overseas.
The Japanese fashion sector has taken a beating in the market but over the medium term there will be recovery for the better retailers, particularly those with potential overseas.

China Everbright Water (1857 HK): Long-Term Pipeline Stays Resilient

By Osbert Tang, CFA

A slow 1H22 new project momentum and a slight retreat in net profit are not expected to materially alter the positive outlook for China Everbright Water (1857 HK).
We estimate project pipeline equals to about 28% of its existing operating capacity. They will underpin growth prospects over the next two years.
New project growth should accelerate in 2H22 given the increase in local governments’ special purpose bonds issue. Cost inflation is expected to moderate sequentially as well.

Confident In Growth Opportunities. Weak Q3FY22 Billings Guidance Does Not Change Our Bullish Thesis

By Andrei Zakharov

Freshworks (FRSH US) reported solid 2QFY22 results, and the company beat all key estimates, showed strong revenue growth of 37% YoY, and added ~1,800 net new customers.
Welcomed high-profile new customers such as Cloudera, Dynatrace, Sterling Bank, Thomas Cook, World Market, Angi Home, and more.
Shares of Freshworks (FRSH US) have been exposed to heightened volatility lately, which we think provides long-term investors with an opportunity.

PetroVietnam Transportation Corporation (PVT VN/ BUY)

By Mirae Asset Securities

PetroVietnam Transportation Corporation (HOSE: PVT)

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Aug 11

Daily Brief Equity Bottom-Up: Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome and more

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

In today’s briefing:

Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
Kirin: With Myanmar in the Rear-View Mirror, an Additional 30% Upside Is Quite Possible
Toshiba – Little Good News
Rakuten (Neutral) – Q2 22 Results Reaction: Mobile Losses Narrow but Little Good News Beyond That
Denso (6902) | No Reason to Be Uber-Bearish
Revisiting Galaxy Digital Post 2Q Earnings
Shakey’s Pizza: Q2 2022 Recovery Far Better Than Expectations, Management Guidance Extremely Bullish
Pharmaessentia Corp (6446 TT): Key Marketed Drug Besremi Is Showing No Sign of Slow Down
ACCO: Inflationary Headwind
XPER: Ready for a Split

Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome

Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically

Kirin: With Myanmar in the Rear-View Mirror, an Additional 30% Upside Is Quite Possible

Kirin Holdings (2503 JP)’s 2Q22 normalized OP of ¥46.2bn from ¥500.3bn revenue was slightly above the consensus OP of ¥45.9bn from ¥500.8bn revenue.
Kirin raised its 2022 revenue and normalized OP guidance by ¥40.0bn and ¥6.0bn respectively, due to the progress of profit improvement measures mainly in Coke-Northeast and Kyowa Kirin in 1H22.
Meanwhile, Kirin is due ¥22.4bn from MEHL for the Myanmar JV. Even though this is not the fair value, receiving at least something is a bonus in our opinion.

Toshiba – Little Good News

By Mio Kato

Toshiba reported 1Q results today missing at both the revenue and OP lines.
While revenue was barely above consensus the company generate a ¥4.8bn operating loss rather than the ¥22bn OP consensus was projecting.
1Q is seasonally weak so the loss itself would not be concerning except for how widespread deterioration was.

Rakuten (Neutral) – Q2 22 Results Reaction: Mobile Losses Narrow but Little Good News Beyond That

Mobile losses narrowed sequentially as expected but not by much as the company missed consensus and Redex expectations for profitability
Rakuten also reported a 220K net subscriber loss in the quarter as point-chasing free users churned off when zero-yen tiers were cancelled but worringly, network coverage/capacity was also a factor
If there is a silver lining, fintech businesses Rakuten Bank and Securities posted solid results and remain on pace to IPO but negative mobile sentiment is unlikely to change

Denso (6902) | No Reason to Be Uber-Bearish

Denso started the fiscal year with an overly optimistic view of Toyota production – it is now too bearish
Chip shortages and supply disruptions are starting to ease, making it easier for automakers to meet end demand
We are bullish on the stock as we believe that Denso’s earnings will beat lowered guidance and valuations are at the bottom of the range

Revisiting Galaxy Digital Post 2Q Earnings

By Rose Choy

Galaxy reported 2Q earnings this week and revealed a net loss of over $550 million, driven by realized and unrealized losses in both digital assets and investments.
With $1 billion cash, Galaxy is now in “clean up” mode but could deploy cash for potential M&A. Management sounds cautious and favors asset management business over other proprietary segments.
However, the current cost base run-rate looks high and despite undemanding stock valuation, we believe upside is capped.

Shakey’s Pizza: Q2 2022 Recovery Far Better Than Expectations, Management Guidance Extremely Bullish

Shakey’s Pizza (PIZZA PM) reported a strong SWS of 77% YoY in H1 and 121% YoY in Q2 2022. Excluding Potato Corner (PC), recovery tracked >90% of 2019 levels.
The management guided that ex-PC recovery was over 100% in May and July, and numbers will improve with a resurgence in people at work, resulting in an upside to SWS.
We see margin upside as dine-in numbers are set to increase in H2 and the company beds down its PC acquisition; the stock trades at 16x/10x FY22/FY23e.

Pharmaessentia Corp (6446 TT): Key Marketed Drug Besremi Is Showing No Sign of Slow Down

Pharmaessentia Corp (6446 TT) is on a robust growth path following the U.S. launch of its key drug Besremi for polycythemia vera (PV) in December 2021.
The company has reported July net revenue of NT$348.5 million, an increase of 937% and 26% from July 2021 and June 2022, respectively.
Besremi has further label expansion opportunity as the drug is undergoing clinical trials for additional indications including essential thrombocythemia (ET), myelofibrosis, and chronic hepatitis.

ACCO: Inflationary Headwind

Strong back to school sell-in was not enough to offset the impact of a weaker Euro and slowdown in video game spending
The weaker Euro to the US Dollar was expected in our numbers when we revised them in July. However, the drop off was more meaningful than expected
The decline in video game accessory sales also put pressure on the quarter with ACCO now expecting a “reset” in the segment’s performance

XPER: Ready for a Split

XPER is in the final stages of separating its IP business from its product business.
The Company reported second quarter results in line with our updated estimates after announcing the purchase of Vewd Software and an IP license agreement
XPER’s multiple revenue streams gives the Company the ability to grow free cash flow even though one segment could be lagging

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Aug 10

Daily Brief Equity Bottom-Up: Tokyo Electron (8035 JP): Caught Out by a Decline in Sales and more

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

In today’s briefing:

Tokyo Electron (8035 JP): Caught Out by a Decline in Sales
LICHF: Earnings On Track To Beat Our Prior Projections
Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised
Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back
Kaken Pharmaceutical (4521 JP): Falling Revenue of Top-Selling Drugs Limit Near-Term Growth Prospect
Result Flash Q2 2022: Keepers Holdings Stellar Headlines

Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

By Scott Foster

A sudden decline in sales led to a 30% sequential decline in operating profit in the three months to June. Year-on-year, operating profit was down 17%.
Nevertheless, management left sales and profit guidance unchanged – despite cutting their semiconductor equipment demand forecast – and R&D and capital spending continue to rise.
FY Mar-23 EPS guidance puts the shares on 13x earnings, but potential downside risk is considerable. Stand back while the economic recession unfolds.

LICHF: Earnings On Track To Beat Our Prior Projections

By Ankit Agrawal, CFA

With Q1FY23 PAT at INR 925cr+, LICHF is on track to beat our prior estimate of INR 3600cr+ for FY23 PAT.
We now project that LICHF can do INR 3850cr+ PAT in FY23, implying that at the current market cap of INR 21,000cr, LICHF is trading cheap at <5.5x FY23 P/E.
Credit cost for the quarter was slightly higher at annualized 0.5% of AUM, however, excluding slippages from the OTR book, it was in line with long-term average of around 0.2-0.3%.

Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised

Shockwave Medical Inc (SWAV US) had a solid Q2 across the board, with total revenue surging 116% y/y, driven by a 139% y/y jump in coronary products (73% of revenue).
The company raised 2022 revenue guidance to $465–475 million (+96–100% y/y). Revenue guidance was raised for the second time this year.
Shockwave shares gained 28% since I published bullish insight on the company on June 7. I believe further stream is still left.

Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back

By Xinyao (Criss) Wang

Due to the lockdown/pandemic, Pientzehuang Pharmaceutical’s 2022H1 performance slowed down. Considering the economic downturn and people’s cutting back spending on non-rigid consumption, the full-year revenue growth could be around 10%-20%.
The Company’s key challenge lies in revenue growth. However, it is not easy to increase sales largely due to the scarcity of raw materials, which limits the expansion of production.
Pien Tze Huang is overvalued. Share price could continue to fall,but it will bounce back due to its high moat. 2022 is a good time for bottom fishing this stock.

Kaken Pharmaceutical (4521 JP): Falling Revenue of Top-Selling Drugs Limit Near-Term Growth Prospect

Kaken Pharmaceutical (4521 JP) is reporting declining revenue from its three largest selling products, due to NHI price revision. These products together contribute more than 60% of total revenue.
The company’s newly launched products are growing at a rapid pace. However, the fastest growing product Ecclock contribute just 2% of total revenue.
Kaken guided for just 1% y/y revenue growth and 12% y/y decline in operating profit in FY23. Due to pipeline expansion, R&D expenses are likely to remain elevated.

Result Flash Q2 2022: Keepers Holdings Stellar Headlines

The Keepers Holdings, Inc. (KEEPR PM) reported solid growth in its Q2 2022 results, with 30% revenue growth YoY(%) and 44% profit growth ahead of our expectations.
The stock trades at 4.5x PE ex-cash (with ~50% of the market capitalization in cash), making it a cheap discretionary consumption plays in the Philippines with good execution.
Further catalysts include the potential for making an accretive acquisition. More to follow once the company has its investor call on Friday the 12th of August 2022.

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Aug 09

Daily Brief Equity Bottom-Up: Smartkarma Corporate Webinar | First REIT: Balancing Growth and Stability and more

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

In today’s briefing:

Smartkarma Corporate Webinar | First REIT: Balancing Growth and Stability
Softbank Group – Q1 22 Results Reaction: So Many Surprises…a Few Were Positive
China Internet Weekly (8Aug2022): Tencent, NTES, Kuaishou, Autohome
Magic Empire Global: More Trick than Treat
Inpex (1605) | Blockbuster Buyback
NTT (Buy) – Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability
India Banks – Solid Strength at ICICI
Tesla Trading Strategy Until August 25th Stock Split
Coupang: Just About Halfway in Correction
Is A Corner In Magic Empire Global Underway?

Smartkarma Corporate Webinar | First REIT: Balancing Growth and Stability

By Smartkarma Research

For our next Corporate Webinar we are glad to welcome First REIT’s Executive Director and CEO, Tan Kok Mian, Victor.

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

The Corporate Webinar will be hosted on Tuesday, 6 September 2022, 17:00 SGT.

Register for the Webinar here

Listed on the Singapore Exchange Securities Trading Limited on 11 December 2006, First Real Estate Investment Trust (“First REIT”) is Singapore’s first healthcare real estate investment trust. Its investment strategy encompasses a diverse portfolio of yield-accretive healthcare and healthcare-related real-estate assets in Asia.

Over the years, the Trust has successfully built a high quality and diversified asset portfolio of 31 properties comprising 16 located in Indonesia, three in Singapore and 12 in Japan. The properties are collectively valued at over S$1,253.0 million¹ as at 31 December 2021. The stable income-producing portfolio covers the full scale of healthcare real estate, including hospitals, nursing homes and other healthcare-related facilities.

First REIT is managed by First REIT Management Limited, which is 60% owned by OUE Limited and 40% owned by OUE Lippo Healthcare Limited (“OUELH”). First REIT enjoys the right-of first refusal (“ROFR”) to the pipeline of hospitals in Indonesia by PT Lippo Karawaci Tbk (“Lippo Karawaci”), Indonesia’s largest broad-based listed property company. First REIT also has another ROFR from OUELH, and the opportunities to tap on its growing healthcare network across Pan-Asia.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

Softbank Group – Q1 22 Results Reaction: So Many Surprises…a Few Were Positive

Softbank posted record quarterly losses again ($23bn this time) after an aggressive writedown of private investments in the portfolio
Vision Fund’s cumulative returns since FY17 are now less than $1bn and valuation losses for WeWork at the parent mean VF and related have lost money
The good news is Softbank valuations are more closely aligned with reality whilst a ¥400bn buyback takes some of the sting away but tech values (and ARM) remain a risk

China Internet Weekly (8Aug2022): Tencent, NTES, Kuaishou, Autohome

By Ming Lu

Tencent aims to raise shareholdings in an overseas game company and reduce shareholdings in a domestic movie producer.
Tencent and NetEase have not got new game licenses and a license black market has emerged in China.
Autohome revenue decreased in 4Q22 due to the lockdown in Shanghai.

Magic Empire Global: More Trick than Treat

By Arun George

Magic Empire Global (MEGL US) shares are currently up 45x since its listing at US$4.00 per share on 5 August. Its market cap currently stands at US$3.6 billion.
Just like AMTD Digital (HKD US), it is hard to pinpoint the real reason for MEGL’s share price surge. MEGL’s financials are uninspiring and cannot justify the share price ramp.
MEGL has no unique competitive advantage which could justify it’s current large premium multiple compared to larger and better-established peers.

Inpex (1605) | Blockbuster Buyback

Inpex reported strong Q2 financial results with operating income rising 161% to ¥584 billion
The company revised its full-year OP guidance by 23% to ¥1,133 billion. It is still conservative
Inpex also announced a blockbuster buyback of 120 million shares, or 8.65% of its outstanding capital

NTT (Buy) – Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability

Q1 revenue growth was the highest since Q3 17, helped by forex tailwinds and stability in the mobile segment
Core telecom results were also positive as mobile erosion was less intensive than peers on better subscriber growth whilst DX demand has kept enterprise sales healthy
Management did not change full-year guidance but this almost never happens with a Q1 report and we expect this report is enough to nudge consensus higher

India Banks – Solid Strength at ICICI

By Daniel Tabbush

Typically net interest margins and loan volume are what matter most for banks
ICICI is showing strength in both core financial metrics, but also in credit costs
Of the large 3 banks in India, ICICI may continue to show the best marginal deltaCI

Tesla Trading Strategy Until August 25th Stock Split

By SC Capital

Last Friday, Tesla shareholders approved a 3:1 stock split set to go into effect on August 25th. The stock has already rallied on these expectations, up 44% since mid-June lows.
We wouldn’t be surprised if CEO Elon Musk sells into the split, given his need to shore up cash for the potential Twitter buyout in October.
Both Amazon and Google outperformed the market, but sold off in the days and weeks post-split. We expect Tesla to follow this pattern, but in a more augmented fashion.

Coupang: Just About Halfway in Correction

Leading into 2Q22 results (due 10th August 2022), we are short Coupang (CPNG US) with expectations of around 5% and 27% downside to consensus 2022 and 2023 revenue estimates.
Consensus has just about reached the halfway stage of a long correction process with current revenue estimates standing significantly above the pre-COVID trend.
Meanwhile, Coupang is under a lot of pressure to cut losses in the short term and attain the targeted long-term EBITDA margin of 7-10%.

Is A Corner In Magic Empire Global Underway?

By Andrei Zakharov

Magic Empire Global (MEGL US) priced its IPO at $4.00 per share in August. Unknown financial services company sold 5M ordinary shares to investors and raised ~$18M.
Return since IPO totaled a whopping ~2,825%. IPO investors are sitting on ~$570M in paper profits and own 25% of Magic Empire’s shares outstanding.
Network 1 Financial Securities, an independent full-service broker-dealer based in New Jersey, led the offering. The firm specializes in investment banking services for small to mid-sized companies.

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Aug 08

Daily Brief Equity Bottom-Up: PayPal: Elliott Sees Opportunity and more

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

In today’s briefing:

PayPal: Elliott Sees Opportunity, So Do We
Disco (6146 JP): YoY Growth Headed Toward Zero
Graftech: Headwinds Persist from Cost Inflation and Soft Pricing Guidance
Komatsu (6301) | Back Test Suggests 56% Upside from Here
Mesoblast (MSB AU): Trading Halt; Decreased Net Cash Usage in Q4; Positive Clinical Trial Results
Shandong Weigao Orthopaedic – 2022 Is the Real Test. Short-Term Performance Pressure Is Inevitable
COSCO Shipping Energy (1138 HK): Stay Away at the Moment
Back From the Grave

PayPal: Elliott Sees Opportunity, So Do We

By Aaron Gabin

Elliott Management has bought a $2B stake in PayPal and seeks cost cutting measures.
PayPal has started to take action through cost cutting, a new buyback, new organizational measures, and increased focus on revenue strategy.
The wild card that would get us more bullish is Elliott forcing a merger with Pinterest, which would yield a readymade Dan Schulman replacement in Bill Ready.

Disco (6146 JP): YoY Growth Headed Toward Zero

By Scott Foster

After beating guidance every quarter last fiscal year, Disco fell short in the three months to June.
Management is guiding for the usual seasonal rebound in 2Q, but year-on-year growth rates are forecast to drop sharply – most likely on their way to negative territory in 2H.
Disco has stopped disclosing orders data, reducing visibility for investors. 2Q results are likely to be the next catalyst. We see no reason to jump in now.

Graftech: Headwinds Persist from Cost Inflation and Soft Pricing Guidance

Since our first bullish note on GrafTech International Ltd (EAF US) the stock is down -31% due to softer ASP’s and cost inflation. We believe these headwinds will persist.
Deleveraging continues with net debt declining from 1.1 bn to 865 mn USD YoY, but the pace has slowed due to negative working capital changes resulting in lower OCF.
Factoring in a 12% drop in ASP YoY, the stock trades at 6.3x FY23 and 4.7x EV-EBITDA, pushing our thesis of debt deleveraging/capital return further out.

Komatsu (6301) | Back Test Suggests 56% Upside from Here

At 1.1x PB, Komatsu’s stock price has already discounted a severe recession
Our back test suggests a 56% return over 12-months from this level (100% hit rate)
We see little risk of balance sheet impairment and believe the stock is trading at attractive valuations for long-term investors

Mesoblast (MSB AU): Trading Halt; Decreased Net Cash Usage in Q4; Positive Clinical Trial Results

Mesoblast Ltd (MSB AU) shares have been put on trading halt on August 4 due to pending announcement on private placement. The company undertook last private placement in March 2021.
Net operating cash usage has been declining over the last six quarters. In Q4FY22, net cash usage for operating activities decreased 33% y/y to $13.9 million.
Last month, Mesoblast announced promising results from rexlemestrocel-L trial in chronic heart failure patients. Rexlemestrocel-L delivered an improvement in left ventricular ejection fraction at 12 months.

Shandong Weigao Orthopaedic – 2022 Is the Real Test. Short-Term Performance Pressure Is Inevitable

By Xinyao (Criss) Wang

Although Weigao achieved solid growth in 2021 after pandemic was under control,the real test will come in 2022. The implementation of centralized procurement will have a significant impact on performance.
After spinal implants are included in centralized procurement this year, all of Weigao’s three major businesses (spinal implants/trauma implants/joint implants) are within the scope. Short-term performance pressure is inevitable.
As a result of the pandemic/lockdown in 2022H1, we lowered our performance forecast on Weigao.

COSCO Shipping Energy (1138 HK): Stay Away at the Moment

By Osbert Tang, CFA

At 0.71x 12-month forward P/B multiple, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) has overly discounted the earnings recovery for FY22 and FY23.
VLCC rate has rebounded since end-Jun but are still at unexciting US$10,000/day level only. This is below an estimated cash breakeven level of US$25,000/day for its fleet.
Tanker demand-supply balance looks to be at equilibrium over the next 12 months, leaving limited potential for significant surge in rate. This opens room for earnings disappointment, in our view.

Back From the Grave

By subSPAC

Things have gone from bad to worse at Nikola over the past year.
The Commercial Battery and Hydrogen Truck maker, once considered the SPAC poster child, has been shrouded in controversy after defrauding investors and delaying production on several occasions.
After seeing its stock crushed, Nikola has strung together a succession of wins to stage a comeback in recent months. Can the company maintain its momentum and deliver on its original vision?

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Aug 07

Daily Brief Equity Bottom-Up: Alcoa Corp: The Alumina Price Upside & Other Drivers and more

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

In today’s briefing:

Alcoa Corp: The Alumina Price Upside & Other Drivers
Microsoft Corporation: The Continuing Cloud Momentum
Moody’s Corporation: The Latam Expansion & Other Drivers
Stryker Corporation: The Vocera Acquisition & Other Drivers

Alcoa Corp: The Alumina Price Upside & Other Drivers

Alcoa Corp is seeing improving shipment volumes and benefitting heavily from the stronger U.S. dollar as well as the higher alumina price index.
Higher costs and lower aluminum and alumina premiums combined with lower metal prices, which included about $40 million to set inventories to net realizable value, more than offset those advantages.
It is worth highlighting that Alcoa holds accreditations from the Aluminum Stewardship Initiative, the most comprehensive independent system for auditing ethical aluminum production.

Microsoft Corporation: The Continuing Cloud Momentum

Despite the massive size of its revenues, Microsoft has proven to be a remarkable story in terms of percentage-basis top-line growth over the past few years.
The Microsoft Cloud achieved a quarterly revenue milestone of $25 billion for the first time, up 28% and 33% in constant currency.
Additionally, Microsoft acquired the cyber threat research and analysis company Miburo to advance threat intelligence gathering on fresh foreign cyber threats.

Moody’s Corporation: The Latam Expansion & Other Drivers

Moody’s Corporation has seen its business get hit badly by the impact of volatile market conditions and foreign exchange fluctuations.
The issuance activity for high yield bonds and leveraged loans has been dampened in the prevailing high-interest rate environment affecting the company.
Given the current environmental uncertainty, we provide the stock of Moody’s Corporation with a ‘Hold’ rating with a revision in the target price.

Stryker Corporation: The Vocera Acquisition & Other Drivers

Stryker Corporation has faced a challenging macro environment and is undergoing various supply shortages but this did not stop the company from delivering a solid growth in organic sales.
Spine and orthopedics net sales also increased in the quarter in constant currency.
We prove the stock of Stryker Corporation with a ‘Hold’ rating and a revision in the target price.

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Aug 06

Daily Brief Equity Bottom-Up: Alibaba: Growth Avenues Are Closing Fast and more

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

In today’s briefing:

Alibaba: Growth Avenues Are Closing Fast
China Aviation Oil Fuels Up for Next Stage of Growth
Vertex Pharmaceuticals (VRTX US): Beat-And-Raise Q2 Results Driven by Strong Uptake of Trikafta
3M Company: Innovation
SHEN: Return of Debt
IIJ (Buy) – Q1 22 Results Reaction: Solid Results and Share Split
HWKN: A Growth Story Continues
Cadence Design Systems Inc: The Future Facilities Acquisition & Other Drivers
Schlumberger NV: Increasing Exploration Activity
HHC: Operating Model Generating Income

Alibaba: Growth Avenues Are Closing Fast

Alibaba Group (9988 HK)’s 1QFY23 results were above consensus but it was still quite disappointing with revenue and OP declining 0.1% and 19.1% YoY respectively.
Withholding the disclosure of active buyers, which Alibaba was proudly speaking of in the previous quarter, is a tell-tale sign that the business is undergoing some serious trouble.
With expectations of 9.4% YoY OP growth in the next 3-quarters and 42% YoY OP growth in FY24, we think consensus is optimistic from 2QFY23 and bound for a correction.

Vertex Pharmaceuticals (VRTX US): Beat-And-Raise Q2 Results Driven by Strong Uptake of Trikafta

Vertex Pharmaceuticals (VRTX US) reported strong Q2 results, with both revenue and adjusted EPS surpassing consensus. Flagship drug, Trikafta reported 51% y/y revenue growth and contributed 86% of revenue.
Vertex estimates more than 25K CF patients that are addressable with its Trikafta are still untreated, thereby providing sustainable growth opportunities. No immediate competition is seen.
The company lifted 2022 product revenue guidance by 2% at the mid-point to $8.6–8.8 billion. R&D costs are also expected to remain elevated as multiple ongoing clinical trials.

3M Company: Innovation

Apart from being known as one of the most innovative companies in today’s times, 3M also has a strong reputation of successful restructuring and cost management which has helped the industrial conglomerate survive through many challenging business cycles.
The company continues to benefit from strong spending discipline, restructuring savings, and selling price actions.
We provide the stock of 3M Company with a ‘Hold’ rating with a revision in the target price.

SHEN: Return of Debt

SHEN reported a narrower than expected operating loss for the second quarter as revenue increased from first quarter levels.
SHEN has started to see an increase in the number of Glo Fiber subscribers as the Company ramps up its fiber buildout
SHEN drew on its credit facility in July and expects to draw additional capital before the end of the year. The return of leverage could lead to a lower valuation.

IIJ (Buy) – Q1 22 Results Reaction: Solid Results and Share Split

IIJ posted solid results including double-digit revenue and operating profit growth as corporate DX demand drive cloud and security growth at rates well above larger rivals
Shares sold off 7% after the mid-day announcement which reflects modestly aggressive consensus forecasts and/or disappointment on lack of a guidance raise
The company did announce its second share split in three years which tells us management remains confident on the mid- to long-term track

HWKN: A Growth Story Continues

HWKN reported fiscal first quarter (June) results where continued price increases resulted in the Company reporting higher sales and earnings compared to our estimates
HWKN operates a business where the increase in sales generates higher gross profit dollars with minimal change in operating expenses
HWKN reported sales of $246.5 million compared to our forecast of $209.9 million. A LIFO charge of $3.8 million was lower and led to EPS beating our estimate

Cadence Design Systems Inc: The Future Facilities Acquisition & Other Drivers

Digital transformation is accelerating across various industries thanks to generational trends like 5G, hyperscale computing, and autonomous vehicles supported by AI, ML, and data analytics.
These trends are boosting design activity, creating a strong secular tailwind for the core end-to-end EDA, IP, and expanding systems portfolio.
Cadence also acquired Future Facilities during the quarter to expand its CFD portfolio to include data centres.

Schlumberger NV: Increasing Exploration Activity

Schlumberger has benefitted from the growing oil industry activity by leveraging the strength of its core, its global reach, and its technology, showcasing its capacity to seize growth in every land and offshore basin.
The management also reports substantial offshore and onshore growth in North America’s increased drilling and completion activity.
Besides, their second quarter sequential growth in most regions and in support of all divisions was largely due to the increase in offshore activity, particularly deepwater.

HHC: Operating Model Generating Income