In today’s briefing:
- India Channel Insight #41 | Haier, Samsung, Voltas
- Nexteer (1316): Unjustly Punished and Bounce Soon?
- Shanghai/Shenzhen Southbound Connect: Weekly Moves (8 July 2022)
- Palm Valley Capital Fund Second Quarter 2022 Commentary
- Palm Valley Capital Fund Second Quarter 2022 Commentary
- Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year
India Channel Insight #41 | Haier, Samsung, Voltas
- The demand environment for offline electronic retailers has been good in Q1, the macro factors also point to good growth for FY23.
- Companies like Haier Smart Home Co Ltd (6690 HK) and Samsung Electronics (005930 KS) have done well. Voltas Ltd (VOLT IN) has not been able to recover.
- Indian consumer no longer wants everything cheap, assuming affordability, quality and brand value is taking prominence.
Nexteer (1316): Unjustly Punished and Bounce Soon?
- Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world.
- It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value.
- Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector.
Shanghai/Shenzhen Southbound Connect: Weekly Moves (8 July 2022)
- Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
- Overall, the net inflow over the past week was ~US$1.3bn, split US$0.7bn for Shanghai and US$0.6bn for Shenzhen.
- The largest inflows were into Tencent (700 HK) and Li Auto (2015 HK). The largest outflow was in Meituan (3690 HK) and Great Wall Motor (2333 HK).
Palm Valley Capital Fund Second Quarter 2022 Commentary
- The Palm Valley Capital Fund invests in small cap stocks. While our Fund is new, its underlying absolute return-based investment strategy is not. We have practiced the same strategy throughout our careers in investment management.
- Investors’ faith in central banks is currently being tested by the highest U.S. inflation in over 40 years.
- Two-thirds of the nonfinancial members in the Russell 2000 Index are either unprofitable or trade above 20x EV/EBIT.
- The median EBIT growth since 2019 for small caps in the sub 10x EV/EBIT bucket is an astonishing 194%.
- Small caps didn’t sell off enough to create compelling opportunities across the board and the market simply unwound its undeserved gains from 2021.
Palm Valley Capital Fund Second Quarter 2022 Commentary
- The Palm Valley Capital Fund invests in small cap stocks. While our Fund is new, its underlying absolute return-based investment strategy is not. We have practiced the same strategy throughout our careers in investment management.
- Investors’ faith in central banks is currently being tested by the highest U.S. inflation in over 40 years.
- Two-thirds of the nonfinancial members in the Russell 2000 Index are either unprofitable or trade above 20x EV/EBIT.
- The median EBIT growth since 2019 for small caps in the sub 10x EV/EBIT bucket is an astonishing 194%.
- Small caps didn’t sell off enough to create compelling opportunities across the board and the market simply unwound its undeserved gains from 2021.
Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year
- Z Holdings will integrate its eCommerce platforms in a move that boosts the PayPay brand and may generate some (very) modest synergies
- We are publishing updated forecasts and setting a new target price at ¥550 but we remain cautious on the shares in the near term as consensus remains high
- Shares of ZHD still appear expensive at 14-16x our estimate of FY22e EBITDA and are more expensive than Alphabet at these levels (12x EBITDA)
Before it’s here, it’s on Smartkarma
