In today’s briefing:
- Oriental Watch: Increasing Visibility on H2 2022
- PCOMP Index Rebalance: EMP, MONDE Could Pop; BLOOM, RRHI Could Drop
- Toyota – So About That Whole Tesla Being Years Ahead of The Competition in Autonomous Thing…
- AT Group (8293 JP) MBO – Looks Fully Priced But A Closer Look Is Warranted
- Seven & I’s Response: Dispels Accusations But Gives in to ValueAct’s Demands
- Snapchat 4Q21: A Quick Turnaround…And Why Facebook Didn’t Snapback
- Korea Small Cap Gem #13: Daehan Flour Mills
- Disney: Facing The Reality Of Intensifying Competition
- Suzuki – Steady but Nothing Special
- TTK Prestige: New Product Launches to Propel Revenue Growth
Oriental Watch: Increasing Visibility on H2 2022
- We have increasing confidence in Oriental Watch (398 HK) paying out a > 74 cent dividend for FY22 ( implied dividend >40 cents for H2 2022, full-year yield 17%).
- Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for >50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety.
- Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.
PCOMP Index Rebalance: EMP, MONDE Could Pop; BLOOM, RRHI Could Drop
- Emperador Inc (EMP PM) and Monde Nissin Corp (MONDE PM) will replace Bloomberry Resorts (BLOOM PM) and Robinsons Retail Holdings (RRHI PM) in the Philippines Stock Exchange PSEi Index (PCOMP).
- There will be a lot to trade from passive funds. Implementation will take place at the close on 11 February – there are only 5 days to go.
- Emperador Inc (EMP PM) has rallied over the last month while the deletions have traded lower. As re-opening plays, the passive selling could provide an opportunity to buy the deletes.
Toyota – So About That Whole Tesla Being Years Ahead of The Competition in Autonomous Thing…
- We have pointed out previously that the hype surrounding Tesla’s FSD system was delusional.
- We have always regarded their differentiating factor as simply being a greater risk tolerance for endangering the lives of their customers.
- However, some automakers are actually making efforts to improve safety… and they actually know what they are doing.
AT Group (8293 JP) MBO – Looks Fully Priced But A Closer Look Is Warranted
- The CEO and family leader Yamaguchi-san is launching an MBO to take out one of the largest Toyota dealers out there.
- Optically, it looks fully-priced, with significant net debt and a 74% takeover premium. A closer look is, however, warranted.
- This is large enough (despite illiquidity) to be interesting, and it could get interestinger.
Seven & I’s Response: Dispels Accusations But Gives in to ValueAct’s Demands
- Seven & I Holdings (3382 JP) is down 2.71% today following the company’s response to ValueAct’s public letter.
- We think this share price move is unwarranted and driven by a false interpretation that Seven & I’s response is a rebuttal.
- Therefore, we would be using this as an opportunity to add more Seven & I shares.
Snapchat 4Q21: A Quick Turnaround…And Why Facebook Didn’t Snapback
- Snapchat largely dispelled the Apple bear case, and should return to the mid $60s.
- Actual competitive differentiation vs. TikTok and Facebook means Snapchat’s user growth and engagement remain strong.
- Revenue growth will reaccelerate as it works through IDFA, but international monetization is the kicker.
Korea Small Cap Gem #13: Daehan Flour Mills
- Daehan Flour Mills is the 13th company in our Korea Small Cap Gems series.
- Daehan Flour Mills is one of the largest companies in Korea engaged in the flour milling industry. It provides various types of flour in Korea.
- Daehan Flour Mills, which is a deep value play, has just become very interesting since Lee Jong-Gak (honorary chairman and largest shareholder of the company), passed away on 3 February.
Disney: Facing The Reality Of Intensifying Competition
- Disney is in negative territory since I first covered the company, while the market returned nearly 50% over the period.
- Pandemic lockdowns are only part of the story, while consistently lower return on capital appears to be the chief culprit for this performance.
- Even as margins are likely to improve, more content spend and higher competition suggest that it would likely not be enough to support valuation.
Suzuki – Steady but Nothing Special
- Suzuki reported its 3QFY22 results on Friday with revenue of ¥901bn (+8.8% QoQ, -0.5% YoY) and OP of ¥47.5bn implying an OPM of 5.3% compared to 5.3% in 2QFY22.
- The reported revenue and OP were 3.8% and 5.9% higher than the consensus estimates respectively.
- The company revised its full year revenue guidance to ¥3,400bn (¥200bn up from the previous guidance), while OP guidance remained unchanged on ¥170bn.
TTK Prestige: New Product Launches to Propel Revenue Growth
- TTK Prestige is India’s leading player in kitchen solutions and has been successful in transforming itself from a company manufacturing pressure cookers
- It continues to be market leader in the cooker segment and has material share in other appliance and cookware categories
- Target Price and Valuation: We value TTK at Rs 1270 i.e. 45x FY24E EPS
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