In today’s briefing:
- China Meidong: Back the Porsche at 20 HKD
- Health And Happiness (H&H) (1112.HK) – High Bankruptcy Risk Together with Gloomy Prospects
- Yamada Denki – GINORMOUS Buyback To Dramatically Boost EPS and ROE
- Campus Activewear IPO Trading – Strong Bookbuild and Anchor
- H&H (1112): Difficult Period?
- DoorDash 1Q22 Earnings: Are Delivery Platforms More Profitable than Ride Sharing?
- Aristocrat Leisure: A Value/Growth Bet on Gaming Trading near 52 Week Low
- Much Ado About Netflix – House of Cards, or Queen’s Gambit at 17x PE?
- Ohsho Food Service (9936): Solid Sales for April; Announced Price Hikes
- ERW: Spike in International Tourists Will Speed up the Recovery
China Meidong: Back the Porsche at 20 HKD
- China Meidong Auto (1268 HK) trades at a 12x/9x PE FY22/23E with a 6.5% dividend yield at a 20 HKD/share price (assuming an 80% payout ratio).
- In buying China Meidong Auto (1268 HK), you get an industry leader in the dealership space with supreme execution (35% ROE/47% CAGR profit growth/best capital allocator).
- The integration of the Starchase Porsche Dealerships provides an upside potential, as the management, with their superior track record, can significantly improve the target’s operations.
Health And Happiness (H&H) (1112.HK) – High Bankruptcy Risk Together with Gloomy Prospects
- H&H is faced with multiple challenges. Internally, the performance is under pressure, with stagnating revenue, decreasing profits, cash flow shortage and bankruptcy risk.It’s difficult for H&H to turn things around.
- Externally, factors such as the declining birth rate, lower demand, fierce competition in the infant formulas market, rising costs due to inflation, and economic slowdown worsen the Company’s prospects.
- Based on our 2022 forecast (14% or lower adjusted EBITDA margin,1%-2% or flat revenue growth), we do not think H&H is a good investment. We are conservative about its outlook.
Yamada Denki – GINORMOUS Buyback To Dramatically Boost EPS and ROE
- Yamada Denki (9831 JP) reported earnings (Revs -7.6% (slight beat), OP -28.6% (slight miss), NP -2.4% (slight miss)), and slightly upbeat forecasts to Mar-2023 (Revs +4.6%, OP +12.5%, NP +2.9%)
- They also announced an unchanged dividend at ¥18/share, and a VERY BIG BUYBACK. This is one of the largest, most aggressive, on-market buyback programs I have ever seen.
- Previous buybacks have been duds. Yamada Denki is not playing around this time. This time it will be a buy.
Campus Activewear IPO Trading – Strong Bookbuild and Anchor
- Campus Activewear Ltd (1535013D IN) India IPO raised around US$184m. The IPO was a 100% secondary selldown.
- The overall subscription rate for Campus had led the likes of Zomato, PAYTM and PB Fintech, and was most similar to that of Polycab India.
- Campus’ growth outlook and vertically integrated model should warrant it to trade at a premium to Metro Brands, while at a discount to Relaxo, given the latter’s more diversified offering.
H&H (1112): Difficult Period?
- FY 2021 was a difficult period for Health And Happiness (H&H) (1112 HK) with the lower than usual sales growth and a big one-off expenses.
- It is true that the D/E ratio has gone up to 161% but this is not the first time it happened.
- FCF/Sales remain at low double-digit and cash/TA is also at low double-digit so it is far from going bust.
DoorDash 1Q22 Earnings: Are Delivery Platforms More Profitable than Ride Sharing?
- Doordash’s multiple has come in from 14x to 4x, it is no longer a good standalone short, but its valuation discrepancy vs. Uber means it is a good paired short.
- Solid quarter overall, but commentary about pushing on investments remains openended, and with little quantification of unit economics, Dash remains uninvestable to us.
- We still prefer Uber to Dash on valuation and long term profitability.
Aristocrat Leisure: A Value/Growth Bet on Gaming Trading near 52 Week Low
- Tis diverse maker of land based gaming machines and publisher of social games platforms has sustained strong growth and built value at the same time over the years.
- The company’s core strategy involves a strong commitment to M&A that will continue to bring accretive EBITDA to its long range performance.
- A strong balance sheet suggests plenty of financial strength to fulfill its M&A goals.
Much Ado About Netflix – House of Cards, or Queen’s Gambit at 17x PE?
- NFLX’s share price has since fallen by -68% YTD, resulting in their current valuation of 17x trailing PE. This was likely due to three recent changes from the status quo: 1) negative 1Q22 subscriber growth, 2) password sharing crackdown, and 3) their entry into an ad-supported business model.
NFLX’s reporting of their Amortization of content assets reflects a true & fair view of their consumption patterns; and their outsized Commitments & Contingencies are all above board. No hanky panky going on here.
We’ve actually seen this story before – Investors seem to have forgotten that NFLX actually experienced similar concerns during 2015, 2018 and 2019 – when their share price experienced drawdowns of -30%, -40% and -30% respectively.
Ohsho Food Service (9936): Solid Sales for April; Announced Price Hikes
- All-store sales of 6.649bn yen (107.7% vs. April 2021) were the record high for April. In-store dining sales were 118.4% vs. April 2021, and delivery sales were 111.8% vs. April 2021.
- In April, the company opened two new stores (two directly-owned stores) and closed one store (one franchised store)
- The company announced that it would raise the retail price of approximately 20% of all items on its grand menu by 20 to 30 yen excluding tax, effective May 14
ERW: Spike in International Tourists Will Speed up the Recovery
- We upgrade to BUY rating from SELL rating and raise TP by +75% to Bt4.2 derived from DCF valuation (WACC=7% & Terminal growth= 2%) implying 10% discount to 23.1xPE’23.
- We expect ERW to post net loss of Bt296m against loss of Bt492m in 1Q21 and Bt246 in 4Q21 despite strong revenue growth.
- Strong revenue growth is underpinned by the growth in domestic and international tourism due to the introduction of Test and go scheme and ‘Rao Tiew Duay Kan phase-4’ in 1Q22
Before it’s here, it’s on Smartkarma
