Equity Bottom-Up

Tencent’s revenue growth continued to slow down to 8% YoY in 4Q21.
The company used more extraordinary income to bolster EPS in recent years.
We believe the stock has a downside of 28% within 2022.

Xiaomi 4Q: Good Results Despite a Challenging Environment

Xiaomi Corp (1810 HK) reported 4Q2021 results on Tuesday. Revenue grew 21.4% YoY to RMB85.6bn (vs consensus RMB82.1bn) while reported OP declined 54.0% YoY to RMB4.5bn (vs consensus RMB4.3bn).
Adjusted OP (excluding fair value adjustment and other gains) grew 21.4% YoY to RMB85.6bn, with an adjusted OPM of 4.0% vs 3.0% in 4Q2020.
Xiaomi’s smartphone revenues bounced back in 4Q2021 after growing less than 1.0% YoY during the previous quarter. The company also announced a share buyback of HK$10bn.

Screen Holdings (7735 JP): Book-To-Bill 1.2x in 3Q

By Scott Foster

The share price has bounced back from the Ukraine war sell-off. Attention should now shift to orders, sales and profits. 26% potential upside to our price target
New SPE orders exceeded sales by 20% in the December quarter, taking the backlog to a new high and pointing to further sales and profit growth next fiscal year.
Management’s FY Mar-22 guidance remains unchanged, with sales up 41% and operating profit up 2.2x. Upside potential of 26% to our price target.

AbbVie Inc (ABBV US): Great Value Stock to Buy in Choppy Market

Abbvie Inc (ABBV US) shares remained rangebound in 2021, mainly due to Humira patent expiration overhang. Humira is the flagship drug of the company, accounting for 37% of total revenue.
Increasing label expansion of its two other drugs, Skyrizi and Rinvoq are now increasingly opening up new growth avenues for AbbVie. Together these drugs contributed 8% to total revenue.
Attractive valuation and healthy dividend yield make AbbVie a top value investment idea amid this turbulent time.

Channel Insight #29 | AU Bank, Kajaria, APL Apollo, Blue Star

By Pranav Bhavsar

We spoke to channels associated with AU Small Finance Bank Limited (AUBANK IN) , Kajaria Ceramics (KJC IN) , Apl Apollo Tubes (APAT IN) & Blue Star Ltd (BLSTR IN)
Small Business Loan growth is slowing at AU, some down trading due to price increases seen in Kajaria
APL is getting hurt by cheaper alternatives, Blue Star channels are cautiously optimistic about the upcoming Air Conditioner season.

Tencent 4Q2021: Disappointing Earnings but Expected

Tencent (700 HK) reported 4Q2021 results yesterday. Revenue grew 7.9% YoY to RMB144.2bn (vs consensus RMB146.5bn) while non-IFRS OP decreased 13% YoY to RMB33.2bn.
This marks the slowest quarterly revenue growth for Tencent since 2004 mainly due to lower VAS revenue growth and decline in revenue from online advertising.
Tencent’s 4Q revenues were in line with our forecast of RMB144bn while adjusted OPM of 23% was slightly below our estimates of 26%.

BBL: Good Quality Growth

Maintain our BUY call with a target price of Bt162. Our valuation is derived from the Gordon Growth Model (ROE 6.6%,growth 2%), implying 0.6x PBV’22E, -1SD to its five-year means.
With its focus on corporate and international loans, BBL will likely suffer fewer impacts when compared with its competitor from elevated household debts and a conflict between Russia and Ukraine.
Net profit will continue to rise further in 2022-23, supported by solid fundamentals and an improvement in economic activity.

Before it’s here, it’s on Smartkarma

Mar 23

Equity Bottom-Up: Tencent Music, Xiaomi Corp, Ums Holdings, Capcom Co Ltd, Pinduoduo, CPMC Holdings, Siam Wellness Group and more

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

In today’s briefing:

Tencent Music (TME): 4Q21, Revenue Down for First Time
Xiaomi (1810 HK): 4Q21, Growth Rate Bounced Up, as High End Strategy Worked
UMS Holdings: Excellent Results in 2021 & Valuation Has Become More Attractive After Recent Sell-Off
Capcom – The Prospects for Street Fighter 6
Pinduoduo 4Q21: A Big Compromise
TME 4Q Results: Earnings Continue to Weaken
CPMC Holdings (906 HK): Short Term Tough but Long Term Story Intact
SPA: Reopening Recovery Play Post 2021 Bottom

Tencent Music (TME): 4Q21, Revenue Down for First Time

In 4Q21, TME’s revenue decreased YoY for the first time since its IPO.
We do not believe the music rise will cover the social entertainment decline in 2022.
Either, we do not believe social entertainment will recover based on its operating data.

Xiaomi (1810 HK): 4Q21, Growth Rate Bounced Up, as High End Strategy Worked

The growth rate of total revenue bounced up and all business lines grew strongly in 4Q21.
Smartphone revenue grew more rapidly than smartphone shipment, as the high-end strategy worked.
We set an upside of 56% and a price target of HK$21 for the year end 2021.

UMS Holdings: Excellent Results in 2021 & Valuation Has Become More Attractive After Recent Sell-Off

By Douglas Kim

UMS Holdings’ stock price has been oversold in the past several weeks. It posted excellent results in 4Q 2021 and its valuations have become more attractive.
If the global semiconductor cycle undergoes a major downtrend, UMS Holdings would not be immune from such downturn and the company is likely to experience lower sales and profit growth.
We believe that UMS Holdings has 20% to 40%+ upside from current levels over the next one year, based on historical valuation multiples in the past three years.

Capcom – The Prospects for Street Fighter 6

A month ago Capcom announced Street Fighter 6 with a small trailer featuring no actual gameplay footage.
Given the somewhat haphazard launch of Street Fighter 5 expectations for the title are likely to be moderate.
However, there has been much progress since the launch of Street Fighter 5 and there are some promising signs to consider.

Pinduoduo 4Q21: A Big Compromise

Pinduoduo (PDD US) shares dropped 6.1% yesterday following the 4Q21 results as the company’s revenue fell short of the consensus estimate by 8.9%.
Pinduoduo’s OP improved 223% QoQ to RMB 6.9bn (consensus RMB 3.2bn) through pushing back sales and marketing investments. However, it affected the company’s user growth as MAUs declined by 8.0m.
Consensus is yet to factor in the impact on user growth through reduced marketing spend, which makes further downside to Pinduoduo shares possible.

TME 4Q Results: Earnings Continue to Weaken

TME reported 4Q2021 results on Monday. Revenue for the quarter decreased 8.7% YoY to RMB7.61bn (vs consensus RMB7.66bn) and reported OP decreased 47.3% YoY to RMB682m (vs consensus RMB1.3bn).
Revenue from Online music services grew single digit (4%) for the first time while revenue from Social Entertainment services dropped further during the quarter.
TME expects its revenues to decline in 2022 as it expects the social entertainment services business to remain under pressure due to competition and regulatory pressure.

CPMC Holdings (906 HK): Short Term Tough but Long Term Story Intact

FY21 result of CPMC Holdings (906 HK) indicated it is under pressure from higher input costs in 2H21, as profit growth rate has slowed to 3.1%, from 36.5% in 1H21.
1H22 will stay challenging, but management guided for improvement in 2H22. That said, CPMC expects gross margin for FY22 can be marginally higher than in FY21.
Structural story of higher can demand, rise in industry concentration and increase de-plasticisation remains intact. We see any pull-back in share price as opportunity.

SPA: Reopening Recovery Play Post 2021 Bottom

Maintain BUY rating with a TP of Bt8.30, based on DCF (WACC of 9.8% and Terminal Growth of 3.5%), implying 25.9xPE’23. We see attractive play on reopening, upon the progress
Its 4Q21 net loss was at Bt46m, which continued for 7 consecutive quarters, attributed mainly to its operation below EBIT breakeven level.
SPA’s 2021 net loss was at Bt287m, pressured by weak revenue growth, which drop 61%YoY upon brief closure of spas and massages in Jan 21 and end of Apr-Sep 21.

Before it’s here, it’s on Smartkarma

Mar 22

Equity Bottom-Up: Pinduoduo, Alibaba Group, China Power International, Premier Anti-Aging, ASICS Corp, Vanguard Intl Semiconductor, PHC Holdings, Xometry and more

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

In today’s briefing:

Pinduoduo (PDD): 4Q21, Undervalued Growth Rate and Record Profit Since IPO, Buy
US Expansion of Travel Bans the First Step in Broader Escalation?
China Power International (2380 HK): Transformation to Soon Bear Fruits
Premier Anti-Aging Company: Getting to an Interesting Level
ASICS (7936): Time for a Bounce
Vanguard (5347.TT): We Think Vanguard Can Easily Reach 1Q22 Guidance.
PHC Holdings (6523 JP): Eyeing a Bigger Pie of Global Diabetes Management Solution
Recent IPO Insights: Xometry

Pinduoduo (PDD): 4Q21, Undervalued Growth Rate and Record Profit Since IPO, Buy

PDD’s total revenue growth was low 4Q21, as the company gave up on direct sales.
However, we believe the revenue growth will bounce back in 2023.
PDD cut sales and marketing expense, so we believe operating margin will improve in following two years.

US Expansion of Travel Bans the First Step in Broader Escalation?

The US just expanded travel bans against Chinese officials said to be repressing ethnic and religious minorities.
The timing, a few days after a Biden-Xi call on Russia that appeared to achieve little of substance is telling.
Noises out of the UK have been similarly aggressive here and the question now is how Europe responds.

China Power International (2380 HK): Transformation to Soon Bear Fruits

2H21 is bad for China Power International (2380 HK) as coal price surged. But the positive news is that its wind and solar segments logged a 50.6% full-year profit growth.
There is good progress on transformation and it has 7GW of clean energy capacity to come on stream in FY22. This is equivalent to 46% of the existing capacity.
CPI said coal-fired plants are marginally profitable in Jan-Feb; meanwhile, hydropower will do better in this year. Overall, these set the stage for a turnaround.

Premier Anti-Aging Company: Getting to an Interesting Level

We last wrote on this relatively small Japanese cosmetics company in September 2021 suggesting that it could be worth keeping an eye on given its cheaper valuation compared to peers.
Premier Anti-Aging (4934 JP) shares are down 80% from the peak, mostly because it was sold-off alongside the low quality names in Mothers.
It seems early to turn outright bullish on Premier Anti-Aging yet. However, if you are short other unprofitable names in Mothers, we think Premier Anti-Aging is a sensible long hedge.

ASICS (7936): Time for a Bounce

By Mark Chadwick

Demand for ASICS running shoes remains strong. That should become clear as factories reach full capacity and shipping problems recede.
Profit margins will expand due to less discounting and an improved channel mix.
We turn bullish following a 30% decline from 52-week high. The stock is now trading at undemanding multiples versus peers.

Vanguard (5347.TT): We Think Vanguard Can Easily Reach 1Q22 Guidance.

By Patrick Liao

It’s NTD$4.976~5.176bn to go in March to reach the 1Q22 guidance of NTD$13.2~13.6bn.
Despite Consumer and Smartphone demands could be weak in 1Q because of seasonality, we still see the demands can be strong in PMIC, Auto, 5G and etc.
For the continuous 8” demand, the clients have high willingness to sign up an LTA (long term agreement), which explains the strong demand situation now.

PHC Holdings (6523 JP): Eyeing a Bigger Pie of Global Diabetes Management Solution

PHC Holdings (6523 JP) is a diversified healthcare company, which serves ~$25 billion broader end-market, of which global glucose monitoring is the largest end-market.
The company’s diabetes management business is the highest margin earning segment and is poised to grow through expanding presence in continuous glucose monitoring system.
PHC can be an early investment idea as a passive play on the fastest growing segment of the global diabetes management segment ahead of its global launch of next-generation CGM.

Recent IPO Insights: Xometry

By Aaron Gabin

Two-Sided online marketplace connecting buyers and sellers. But is this more Amazon or Angi?
Game changing acquisition in December of Thomas should turbocharge growth and margins for 2022-2023.
At 4x sales, this is a very high growth asset that has been crushed since IPO, down 55%. Interesting entry point.

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Mar 21

Equity Bottom-Up: Alibaba Group, Tobila Systems Inc, Platinum Group PCL, Matahari Department Store, Bloomberry Resorts, ENN Energy, GitLab, Microport Scientific, BigCommerce Holdings and more

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

In today’s briefing:

Alibaba Group: Looking Through the Noise
Tobila Systems: The Monopoly that You Probably Never Heard Of (Even as Its Customer)
Platinum (PLAT): The Shoppers Coming Back
Matahari Department Store (LPPF IJ) – All Eyes to the Podium
Bloomberry Resorts: Recovery Cycle Has Arrived for This Manila-Based Casino Hotel
ENN Energy (2688 HK): Mediocre FY21, Management Update Not Exciting
Gitlab 4Q22 Earnings: Impressive
Microport Scientific (853.HK) – The Subsidiaries Would Be a Better Investment
BigCommerce: Stock Selloff Looks Finished As Valuation Hit $1.5 Billion

Alibaba Group: Looking Through the Noise

By Wium Malan, CFA

The major trend, witnessed over the past two years, has been the continued loss of relative market share by Alibaba, and the continued market share gains by JD.com.
Alibaba has been able to steadily grow its active user base, on its Chinese retail platforms, by above 10%y/y since at least 2019, off an extremely high base.
Short-Term growth expectations seem relatively conservative, with limited risk for a further negative surprise.

Tobila Systems: The Monopoly that You Probably Never Heard Of (Even as Its Customer)

By Steven Chen

With less than 60 employees, Tobila Systems is the absolute dominator in the space that can make a significant impact on Japan’s society;
The valuation starts to look attractive while the fundamentals remain sound;
Partly benefiting from being the first entrant to this niche with a robust flywheel business model, the company now “monopolizes” both the supply side and the distribution side.

Platinum (PLAT): The Shoppers Coming Back

By Henry Soediarko

The Thai government plans to scrap pre-travel COVID-19 to boost tourism, and visitors will only be tested on arrival in Thailand – expect to have more tourists in Thailand.
Q4 2021 revenue started to bounce higher YoY although still 50% of pre-COVID level but shows some promise.
Platinum Group PCL (PLAT TB) share price went up by 24%within a year, with a 0.7x PBR to 1.02x PBR. Still early but why wait longer?

Matahari Department Store (LPPF IJ) – All Eyes to the Podium

By Angus Mackintosh

Matahari Department Store’s results marked a turning point in terms of profitability, and this year will see the company back in expansion mode, with a new strategy in place.
Management is pushing hard to entrench its position in existing categories as well as pushing into new ones, with an omnichannel approach and new partnerships in place.
Matahari Department Store has the potential for a re-rating as it regains its place on the winning podium amongst Indonesian retailers in very reasonable valuations.

Bloomberry Resorts: Recovery Cycle Has Arrived for This Manila-Based Casino Hotel

By Howard J Klein

We have been bullish on the broad Philippine gaming market because it has moved ahead dealing with covid. It is Asia’s second most robust gaming market.
The company’s Solaire resort at Manila’s Entertainment Zone just reported increases in mass revenue sector indicating that recovery is well underway.
4Q21 and total 2021 results do not include South Korea property due to lockdowns. But once reopened, it will be accretive to forward earnings.

ENN Energy (2688 HK): Mediocre FY21, Management Update Not Exciting

Core earnings growth of 14.6% YoY at ENN Energy (2688 HK) is not very exciting. Gas sales gross profit was down 5% while integrated energy looks better with 51.2% growth.
Management guidance of 12-15% growth in FY22 seems to be optimistic, especially in a period of time where high input cost is likely to eat into margin still.
Valuations are not too stretched, yet not very appealing. Its net debt position also does not compare well with CR Gas (1193 HK) and Kunlun Energy (135 HK).

Gitlab 4Q22 Earnings: Impressive

By Aaron Gabin

Revenue grew 69% YoY to $78M vs. consensus at $70M (+52%), with very impressive underlying growth metrics that show the larger customers are the fastest growing.
Increased selling through hyperscaler partners may aid S&M leverage over time.
Acquisition of Opstrace accelerates the platform expansion into observability, but right now positioned vs. nonconsumption rather than against Datadog.

Microport Scientific (853.HK) – The Subsidiaries Would Be a Better Investment

By Xinyao (Criss) Wang

MicroPort’s net loss widened according to its profit warning. The negative impact of centralized procurement is already being shown. We analyzed the situation of its different business segments.
After continuous M&A, Microport Scientific (853 HK) could face cash flow pressure in this unfriendly financing environment.
Due to MicroPort’s development mode, the market value of its subsidiaries could be higher than the parent company. Our view is that the subsidiaries would be a better investment.

BigCommerce: Stock Selloff Looks Finished As Valuation Hit $1.5 Billion

By Andrei Zakharov

Shares of BigCommerce Holdings (BIGC US) slipped below the IPO price of $24.00 per share, and at current valuation, we see limited downside risk for BigCommerce stock investors.
In 2020, Intuit Inc (INTU US) offered to acquire BigCommerce for $1.5 billion, according to CNBC and other public sources. Both BigCommerce and Intuit didn’t provide a comment.
Insider selling activity has slowed down noticeably over the past three months and BigCommerce Holdings (BIGC US) insiders sold ~$5 million worth of shares.

Before it’s here, it’s on Smartkarma

Mar 20

Equity Bottom-Up: Oneness Biotech and more

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

In today’s briefing:

Oneness Biotech (4743 TT): Worth of Attention Ahead of Upcoming Key Milestones

Oneness Biotech (4743 TT): Worth of Attention Ahead of Upcoming Key Milestones

Oneness Biotech (4743 TT)’s approved drug in Taiwan, Fespixon is the world’s first drug to treat diabetic foot ulcers with superiority in complete wound closure to the standard of care.
Fespixon is under review in China, and is under multiple NDA submissions to Asian health authorities. The U.S. phase 3 study is expected to be completed in H1 2023.
Key milestones are expected from two other late-stage pipeline drug candidates, FB825 and FB704A in 2022 and beyond.

Related tickers: Oneness Biotech (4743.TWO)

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Mar 19

Equity Bottom-Up: Sea Ltd, W Scope Corp, Eubiologics and more

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

In today’s briefing:

Sea Ltd.’s Money Machine Is Broken, Downside Is Not Fully Priced-In
W Scope (6619): Wrong Victim of Nickel Price Surge
EuBiologics (206650 KS): Base Business Recovery; COVID Vaccine Undergoing Phase 3 Trial

Sea Ltd.’s Money Machine Is Broken, Downside Is Not Fully Priced-In

Perhaps, misled by the Chinese tech rally due to the change in stance from the Chinese Government, Sea’s shares rose by 33% compared to the broader market’s 8.3%.
With fundamentals deteriorating and the Federal Reserve signalling an aggressive rate hike outlook, Sea Ltd (SE US)’s 33% move seems unwarranted.
Meanwhile, the downside potential is quite significant as Sea trades at a significant FY+2 EV/Sales premium to regional peers whose cyclical bottoms are unknown.

W Scope (6619): Wrong Victim of Nickel Price Surge

By Henry Soediarko

Nickel price was the catalyst for the share price underperformance in the last 2 weeks, especially after the Russian invasion of Ukraine which drove it up to a 100% increase.
Its main product is a lithium-ion secondary battery separator that is critical for rechargeable battery safety. Thus the sell-off due to the higher commodity price especially nickel is unwarranted.
W Scope Corp (6619 JP) share price has underperformed the NCM and LFP battery makers presents a compelling buying opportunity.

EuBiologics (206650 KS): Base Business Recovery; COVID Vaccine Undergoing Phase 3 Trial

Eubiologics (206650 KS) signed contract with UNICEF to deliver 67.1 million doses of its oral cholera vaccine, Euvichol-Plus, through 2023. Euvichol-Plus is the cash cow for the company.
The company’s COVID-19 vaccine EuCorVac-19 is in phase 3 trial and is one of the early movers among Korean vaccine manufacturers in terms of clinical timeline.
EuBiologics has successfully diversified portfolio and its pipeline of non-cholera vaccine and non-vaccine product candidates are also progressing, thereby lending long-term visibility beyond COVID.

Before it’s here, it’s on Smartkarma

Mar 18

Equity Bottom-Up: Softbank Group, Astra International, Rakuten Inc, LINE Corp, Nikola Corp, Meituan, Hotel Shilla, HashiCorp and more

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

In today’s briefing:

Softbank Group – China Bounce Erases a Week of Losses
Astra International (ASII IJ) – A Glimpse into the Future
Rakuten Group (Neutral) – Bank IPO a Step Towards Unlocking Fintech but Mobile Worries Remain
LINE Gift: The Next Stage
Liquidity Risk Short Candidates: Rivian, Nikola, ChargePoint, Domo & Enviva
Meituan (3690 HK): Authorities Turned Friendly to Internet Companies, Upgrade to Buy
Elimination of Purchase Limits at Duty Free Shops in Korea
Will Cisco Make A Bid For HashiCorp As Valuation Fell By Half From The IPO Price?

Softbank Group – China Bounce Erases a Week of Losses

By Kirk Boodry

Softbank is a $23bn winner on the China bounce as Alibaba (+37% over 2 days, $18bn) and Vision Fund (+$4.8bn) recovered from selling pressure over the last week
Improving sentiment aside the discount remains above 50% and the rebound appears to be more about correcting excess selling than a change in market outlook
We remain wary of Chinese exposure in the near-term on political, regulatory and economic risks although the worst appears to be over for now

Astra International (ASII IJ) – A Glimpse into the Future

By Angus Mackintosh

Astra International (ASII IJ) held an informative post-results analyst briefing that provided a glimpse into its future plans, with capex set to double in 2022 with a war chest ready.
Other than investing in expanding existing businesses and in areas such as EVs, Astra also has a pipeline of deals related to the growing digital ecosystem in Indonesia.
Astra International (ASII IJ) is a proxy for the recovery in Indonesia’s economy through cars, motorbikes, and commodities but has an emerging digital and sustainability edge plus reasonable valuations.

Rakuten Group (Neutral) – Bank IPO a Step Towards Unlocking Fintech but Mobile Worries Remain

By Kirk Boodry

The pending IPO of Rakuten Bank could be worth ¥380bn (2x book) and boosts appreciation of a fintech business we think is worth ¥1,400/share
That is well above the current share price reflecting the valuation drag of an expensive mobile segment, which is expected to hit peak losses in Q1 22
We expect mobile break-even will take longer than expected and downside here offsets fintech excitement – we remain at Neutral

LINE Gift: The Next Stage

LINE Gift has doubled its user base to 20 million in a year, and added merchants like Seven Eleven, but isn’t content with this.
It has only just integrated with Zozo and Yahoo Shopping and expects these new partners, as well as new TV ad campaigns, to deliver a major increase in user numbers.
The collaboration with Z Holdings’ through Yahoo Shopping and Zozo shows the potential for leveraging the groups’ huge user base.

Liquidity Risk Short Candidates: Rivian, Nikola, ChargePoint, Domo & Enviva

By Eric Fernandez, CFA

Liquidity shorts can be great short candidates. The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements.
Liquidity shorts have built-in catalysts, have moderate to higher betas, and can have strong down moves if a crisis develops. They can go bankrupt, pushing the stock price near zero.
Today we are flagging Rivian, Nikola, ChargePoint, Domo & Enviva.

Meituan (3690 HK): Authorities Turned Friendly to Internet Companies, Upgrade to Buy

Central Financial Working Committee turned friendly to overseas listed internet Companies.
We believe Meituan will be free from the pressure of anti-monopoly rules.
Meituan stock has fallen significantly and we upgrade it to BUY.

Elimination of Purchase Limits at Duty Free Shops in Korea

By Douglas Kim

Starting 18 March, the current $5,000 purchase limit at the domestic duty free shops will be abolished for the locals.
The removal of the $5,000 purchase limit at duty free shops in Korea should encourage purchase of luxury women’s apparel, bags, and cosmetics.
The removal of the purchase limit should help the major duty free operators in Korea including Hotel Shilla (008770 KS) and Shinsegae (004170 KS).

Will Cisco Make A Bid For HashiCorp As Valuation Fell By Half From The IPO Price?

By Andrei Zakharov

Shares of HashiCorp (HCP US) , a leading VC-backed infrastructure automation company, fell ~50% below the IPO price of $80.00 per share.
HashiCorp (HCP US) is a multi-product company that helps to accelerate cloud adoption. The company reported total revenue of $321M in FY’22 ended Jan-22, up 51% year-over-year.
According to public sources, Cisco Systems (CSCO US) has already approached HashiCorp with an acquisition offer in 2019. However, both Cisco and HashiCorp declined to comment on rumors.

Before it’s here, it’s on Smartkarma

Mar 17

Equity Bottom-Up: Tencent, Nintendo Co Ltd, Ping An Healthcare and Technology Company Limited, Far East Hospitality Trust, Pola Orbis Holdings, PT Nippon Indosari Corpindo Tbk. (ROTI), CanSino Biologics Inc, Askul Corp, SK Biopharmaceuticals Co Ltd, Hon Hai Precision Industry and more

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

In today’s briefing:

Tencent (700 HK): Layoff and Penalty Before 4Q21 Result
Nintendo – Switch Pro Leaks And Implications For Developers
Ping An Health 2021 Results: Is Strategy 2.0 Continuum as Successful as Claimed?
Far East Hospitality Trust (FEHT): Your Hedge in the Far East.
Pola Orbis: Our Preferred Choice Leading up The Reopening of Japan to Foreign Tourists
PT Nippon Indosari Corpindo (ROTI) – Bringing the Bread Home
CanSino Biologics (6185.HK/688185.CH) – Still Have Investment Value
Askul Corp – Q3 22 Results Reaction: Margin Concerns Hold Back Shares Despite Beat
SK Biopharmaceuticals (326030 KS): Highest Performance in 2021; Pipeline Progress Entails Visibility
Hon Hai(2317.TT): It Will Be More Challenging in 2022, but Hon Hai Will Focus on EPS.

Tencent (700 HK): Layoff and Penalty Before 4Q21 Result

Layoff rumors are spreading, which shadow two departments and 10% of Tencent’s employees.
China Banking Regulatory Commission (CBRC) will fine Tencent for money laundering.
Short video apps are taking time on site from Tencent’s WeChat app.

Nintendo – Switch Pro Leaks And Implications For Developers

Recent hacks into Nvidia have resulted in leaks that have got the rumour mills churning again for an upgrade to the Switch.
Most details are similar to previous reporting by Bloomberg for the Switch Pro that was expected last year but failed to materialise.
However, the recent leaks point to a bigger GPU upgrade that previously envisioned and that has implications…

Ping An Health 2021 Results: Is Strategy 2.0 Continuum as Successful as Claimed?

Ping An Health (SEHK:1833) reported 2H2021 earnings on Tuesday after market close. The company’s revenue declined by 14.7% YoY with a 7.5% decline in gross margins.
On a full-year basis, 2021 revenue grew by 6.8% despite a 3.9% decline in gross margins. We are concerned on the slowdown of revenue growth and margin decline.
The company is trading at a significant discount to historical median and peers. Withou clarity regarding segments, we think it is too soon to take a completely negative stance.

Far East Hospitality Trust (FEHT): Your Hedge in the Far East.

By Henry Soediarko

Proven ability to navigate during the downturn by keeping occupancy rate high.
A beneficiary of reopening play in Singapore from the expected higher number of tourists arrival.
Far East Hospitality Trust (FEHT SP) is a defensive play during market uncertainty with potential for upside and dividend.

Pola Orbis: Our Preferred Choice Leading up The Reopening of Japan to Foreign Tourists

With Omicron under control, Japan is expected to relax home quarantine requirements for foreign travellers some time or the other.
Meanwhile, Google Mobility data hints that domestic customers are starting to head back to places like shopping centres, suggesting an improvement in demand conditions.
Based on valuation and the price performance trend, long time underperformer Pola Orbis Holdings (4927 JP) seems like the best option to capitalise on the reopening of Japan to foreign tourists.

PT Nippon Indosari Corpindo (ROTI) – Bringing the Bread Home

By Angus Mackintosh

Indonesia’s leading mass-market bread producer PT Nippon Indosari Corpindo (ROTI IJ) booked a strong set of FY2021, with general trade driving growth, and greater efficiencies enhancing margins and FY2021 growth.
The company continues to improve its product mix and distribution to cater for more home consumption and also continues to push out into East and West Indonesia geographically.
Higher wheat prices are a risk but the company has bought forward and will increase prices if needs to be offset higher cost. Valuations are attractive versus history.

CanSino Biologics (6185.HK/688185.CH) – Still Have Investment Value

By Xinyao (Criss) Wang

The main performance contributor in 2021 was CanSino’s COVID-19 vaccine.However, the high vaccination rates, new alternatives (e.g. oral COVID-19 pills) and concerns on capacity make the future sales highly uncertain.
The commercialization performance of MCV2 and MCV4 would largely determine when CanSino could truly shift to relying on conventional vaccine business rather than COVID-19 vaccine to contribute performance.
Objectively speaking, CanSino’s pipeline, R&D capability and technology platforms do have advantages and investment value.

Askul Corp – Q3 22 Results Reaction: Margin Concerns Hold Back Shares Despite Beat

By Kirk Boodry

Q3 22 results were in-line/ahead of consensus expectations but shares fell 7% today anyway
Operating profit fell 10% as improvements in operating losses for new businesses like Lohaco and logistics were not enough to make up for higher spending in the core B2B segment
Despite the decline, Askul shares have largely outperformed peers YTD on optimism over the planned launch of quick commerce business Yahoo!Mart announced in late January

SK Biopharmaceuticals (326030 KS): Highest Performance in 2021; Pipeline Progress Entails Visibility

SK Biopharmaceuticals Co Ltd (326030 KS) surpassed KRW400 billion sales last year, the highest since inception. The company targets more than doubling sales this year, through global expansion of cenobamate.
The company is expected to launch its third commercial drug, carisbamate (currently in phase 3 trial) in global market in 2025.
On the back of robust 2021 financial performance, SK Biopharmaceuticals shares have recovered and reached to two-month high, thereby offering an attractive and confirming buying opportunity.

Hon Hai(2317.TT): It Will Be More Challenging in 2022, but Hon Hai Will Focus on EPS.

By Patrick Liao

The revenue/ gross profit/ GM %/ EPS is NT$1,889.8bn/ NT$113.9bn/ 6.03%/ NT3.2 in 4Q21. 4Q21 revenue is growth 34% QoQ, but growing -5.9% YoY.
We expect the material shortage would become more stabilized in 2H22. The revenue was better than expected since 2021, and it will become more challenging in 2022.
2025 EV revenue is about US$600bn. Hon Hai is targeting at 5% market share and aim at US$1,000bn revenue scale.

Before it’s here, it’s on Smartkarma

Mar 16

Equity Bottom-Up: Tencent, Softbank Group, Alibaba Group, Beijing Enterprises Clean Energy Grp, Globalwafers, HKEX, Pan Pacific International Holdings, Hana Tour Service, China Everbright Environment, AEON Mall and more

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

In today’s briefing:

Tencent: Possible Record Fine for Anti-Money Laundering
Softbank – That ¥4000 Mark Is Getting Close…
Alibaba: Rumoured Layoffs Could Be a Sign of The Company Running Out of Funding Sources
BE Energy (1250 HK): Not A Take-Out, More A China Shandong Hi-Speed Bail Out
GlobalWafers (6488.TT): Under Current Ukraine Crisis, We Have to Admit the Volatility Is Very High.
HKEx (388.HK): Aftermath of Epic Short Squeeze of Nickel Future
Donki Back with a Plan at Home and Overseas
Korea Drops Quarantine Requirements Vs. Yoon Suk-Yeol’s Hard Line Stance on North Korea
China Everbright Environment (257 HK): Sell-Down Unwarranted Given Positive Prospects
Aeon Mall: Experiential Shift Will Get Footfall Back in Japanese Malls

Tencent: Possible Record Fine for Anti-Money Laundering

Wall Street Journal (WSJ) reported yesterday that Tencent (700 HK) is facing a possible record fine for violating anti-money laundering regulations in China.
People’s Bank of China has found that WeChat Pay had allowed transfer and laundering of funds with illicit transactions which violates the country’s anti-money laundering regulations.
Tencent’s shares dropped further 10.3% to HK$331 per share from HK$369 per share during yesterday’s trade following the above report.

Softbank – That ¥4000 Mark Is Getting Close…

When Softbank announced its strange buyback in November we wondered aloud whether buyback maximums of ¥1trn and 250m meant Softbank foresaw a ¥4,000 share price in its future.
With the stock price now having jauntily sashayed down to ¥4,265 it is a question why they aren’t more aggressive with their buyback.
A question that may be answered by all the cash raising measures that Softbank is engaged in perhaps?

Alibaba: Rumoured Layoffs Could Be a Sign of The Company Running Out of Funding Sources

Over the last two days on Weibo there was a lot of noise regarding massive layoffs at Chinese tech giants such as Alibaba Group (BABA US) and Tencent (700 HK).
Local news outlet “Yilanshangye”, called that Alibaba’s community group buying platform MMC is planning to release around 20% of its employees, with several business lines already finalising their layoff lists.
With investor appetite for growth companies changing rapidly over the last few months, it seems Alibaba Group (9988 HK) could be struggling to finance several of its loss-making ventures.

BE Energy (1250 HK): Not A Take-Out, More A China Shandong Hi-Speed Bail Out

By David Blennerhassett

China Shandong Hi-Speed Financial Group (412 HK) (CSFG) has entered into a subscription agreement with Beijing Enterprises Clean Energy Grp (1250 HK) (BECE).
Subscription shares total 43.45% of BECE on a diluted basis. The subscription price is HK$0.096/share, a 7.69% discount to last close
A mandatory takeover would be triggered at completion of this agreement, provided a whitewash waiver is not granted.

GlobalWafers (6488.TT): Under Current Ukraine Crisis, We Have to Admit the Volatility Is Very High.

By Patrick Liao

Under current Ukraine crisis, we have to admit the volatility is very high. Not only the GlobalWafers, but the other semiconductor names are stumbled as well.
Although 4Q21 revenue is NT$15.8bn, the highest record in GlobalWafers’ history, but the termination fee on Siltronic deal was €15mn, which was consuming NT$3.5 for GlobalWafers’ net EPS.
GlobalWafers keeps NT$100bn, ~US$3.6bn, for the expansion in next couple of years, which covers investments across Asia, Europe and the United States spanning both brownfield and greenfield projects.

HKEx (388.HK): Aftermath of Epic Short Squeeze of Nickel Future

By Roger Xie

LME Nickel future trading will be resumed on March 16 after its epic price surge before halting; the focus will be on safe reopen as more restrictions will be applied
The trading suspension benefits Chinese billionaire behind Nickel short position, who has secured bank lending in past few days. The angry parties are mainly hedge fund and financial investors.
We remain bullish on HKEX (388 HK) with the view that China economy will likely rebound in 2022, which will drive the rebound of IPO activities and trading volume.

Donki Back with a Plan at Home and Overseas

Pan Pacific International Holdings (7532 JP) is Japan’s largest discount retailer but also a major GMS operator.
It is on track to achieve consolidated sales around ¥1.87 trillion by the end of the year, 85% of this in Japan despite the lack of inbound tourists.
PPI also has a great retail proposition in Asia which is proving popular. The long-term outlook at home and overseas looks solid.

Korea Drops Quarantine Requirements Vs. Yoon Suk-Yeol’s Hard Line Stance on North Korea

By Douglas Kim

In this insight, we discuss two major issues impacting the Korean hotels, travel, duty free shops, cosmetics, leisure, & casino related companies.
First is that the South Korean government announced that it will drop quarantine requirement for international arrivals from 21 March.
Second is the potential ramifications of Yoon Suk-Yeol (newly elected South Korean President) who has a relatively hard line stance on North Korea.

China Everbright Environment (257 HK): Sell-Down Unwarranted Given Positive Prospects

Share price was off 23% in the last two days, yet we think China Everbright Environment (257 HK) has posted a set of healthy result, though somewhat behind expectations.
Good new project momentum, further increase in operation revenue and collection of national subsidies are key factors backing earnings growth and improvement in cash flow over the next 2 years.
Longer term, management stays bullish on the industry growth opportunities. Its 14.5% ROE and mid-teens earnings growth both suggest the stock’s 3.3x PER, 0.45x P/B and 9.4% yield inexpensive.

Aeon Mall: Experiential Shift Will Get Footfall Back in Japanese Malls

Japan has seen a large drop off in new mall developments in recent years.
This is partly due to a dwindling supply of viable locations but also because of competition from e-commerce.
To make malls more relevant, Aeon Mall is shifting to a more localised approach with a broader range of services.

Before it’s here, it’s on Smartkarma

Mar 15

Equity Bottom-Up: Palantir Technologies Inc, JD Logistics, Tencent Music, Jubilant Foodworks, Workman Co Ltd, Topchoice Medical, Com7 PCL, Paradigm Biopharmaceuticals, Krung Thai Bank Pub and more

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

In today’s briefing:

Palantir – Little Early But Getting Interesting Again
JD Logistics (2618 HK): Shrinking Operating Loss in 2H21 and Exclusive Revenue Support
Tencent Music Entertainment: A Fallen Star for High Risk Investors that Could Promise Huge Returns
Jubilant Foodworks (JUBI IN) | Anyone Can Hold the Helm when the Sea Is CALM
Workman to Open in Ginza, Launches Workman Shoes and More Suits
Topchoice Medical (600763.CH) – The Logic Changes
COM7: Dilution Effect Have Significant Impact to 22E EPS Growth
Paradigm Biopharmaceuticals (PAR AU): Concerns Persist Amid Deteriorating Financials
KTB: Growth Normalization Is Underway

Palantir – Little Early But Getting Interesting Again

We last wrote on Palantir over a year ago when we suggested stepping away given expiring lock-ups.
The stock is down 58% since that call as it has sold off together with other unprofitable, high-growth names.
However, we remain of the view that there is something to Palantir unlike many of its compatriots and Ark is now out…

JD Logistics (2618 HK): Shrinking Operating Loss in 2H21 and Exclusive Revenue Support

JD.com (JD)’s revenue growth is a strong support for JD Logistics’ revenue.
JDL successfully acquired corporate clients and expanded warehouse network in 2021.
We believe the stock has an upside of 40% and a target price of HK$27.

Tencent Music Entertainment: A Fallen Star for High Risk Investors that Could Promise Huge Returns

By Howard J Klein

The US traded unit of China’s Tencent entry into digital music has lost exclusive rights to its foundational music and entertainment content due to Beijing policies.
Stock price has been in free fall from a $31 high last March to $3.44.
The historic term “fallen angel: applies to bonds but TME ‘s current trade suggests it could well apply to special situations in common.

Jubilant Foodworks (JUBI IN) | Anyone Can Hold the Helm when the Sea Is CALM

By Pranav Bhavsar

Jubilant Foodworks (JUBI IN) announced the departure of its CEO Mr Pratik Pota.
The timing of departure coupled with recent disappointment around disclosures is making the market nervous.
As the “sea” gets stormy thanks to high food inflation and pressured “Dine-Ins”, who would be JUBI’s new captain is the key.

Workman to Open in Ginza, Launches Workman Shoes and More Suits

Workman has consolidated its position as a leading domestic outdoor/sports casual retailer in the last two years.
Growth has been less dramatic but it has developed more infrastructure and brand foundations for what it hopes will be the next big expansion.
It is expanding the number of banners, increasing the ratio of private label and widening the number of categories it sells, including footwear and camping.

Topchoice Medical (600763.CH) – The Logic Changes

By Xinyao (Criss) Wang

Policy risk is the biggest uncertainty for domestic medical service sector, without any overseas revenue to “hedge” such risk.
The market places great hope on Topchoice to become a cross-regional enterprise with high growth sustainability. Without a reliable and replicable expansion model, the high valuation is not logical.
Therefore, our view is that the Company’s investment logic has been shaken. Topchoice Medical (600763 CH) could be a short-term trade, but not long-term hold.

COM7: Dilution Effect Have Significant Impact to 22E EPS Growth

We downgrade to HOLD rating with a new TP of Bt38.75 derived from 28.9xPE’22E (-0.5SD of 5-Yr trading average)to factor in negative impact from stock dividend on 22E EPS growth
COM7 announced annual cash dividend of Bt1.00 and stock dividend (Bt0.25), XD date on 11 Mar.
We believe the dilution effect will have a negative impact on the company’s shareholders.Recurring EPS growth should drop to-38.4%YoYin 22E,down from 23.2%YoYpre-dilution,while dividend yield will also be halved to 1.2%.

Paradigm Biopharmaceuticals (PAR AU): Concerns Persist Amid Deteriorating Financials

Paradigm Biopharmaceuticals (PAR AU) shares plunged 32% since we published our bearish insight on the company on January 11. Shares are trading near their pandemic lows.
Our negative view on the company due to the inherent safety proposition of lead drug and financial uncertainty remain intact. Insider buying led to the recent uptick in share prices.
Amid uncertain global market condition and general market apathy toward biotechnology companies, we will not be an investor of Paradigm Biopharmaceuticals despite its recent sell-down.

KTB: Growth Normalization Is Underway

Maintain HOLD with a target price of Bt15.00. Our HOLD call reflects KTB’s slowing growth ahead and limited upside gain. Yet, a dividend yield of 4.5-4.8% for 2022-23 remains attractive.
Management guided loan growth to moderate to 3-4% YoY in 2022. Asset quality remains manageable.
Government expenditure will bolster Thailand’s economy in 2022. But growth potential may weaken than expected on potential impacts from higher energy prices and geopolitical uncertainties.

Before it’s here, it’s on Smartkarma