In today’s briefing:
- 2021 & 2022 High Conviction Review: Time’s Up For Seven & I But Japan Tobacco Has More Room to Run
- Korean Pair Trades Review in 2022
- Omron (6645) | Key Beneficiary of Industry 4.0
- Long-Term Growth Intact: Xtep
- Gujarat Ambuja Exports
- Acotec Scientific Holdings (6669.HK) – Logic Behind Boston Scientific’s Partial Offer and the Impact
- Oracle: Key Considerations For Long-Term Investors From Yet Another Strong Quarter
- Intuitive Surgical Inc.: Initiation of Coverage – Recent Approvals & Other Drivers
- Lumen Technologies Inc.: Initiation of Coverage – Expansion Of Quantum Fiber & Other Drivers
- GlaxoSmithKline ADR: Initiation of Coverage – Business Strategy & Other Drivers
2021 & 2022 High Conviction Review: Time’s Up For Seven & I But Japan Tobacco Has More Room to Run
- As the year draws to a close, we took time to assess the effectiveness of our high-conviction calls made during the past two years.
- With further dividend hikes looking increasingly possible, our 2022 high-conviction call, Japan Tobacco (2914 JP) has more room to run this year.
- However, it’s probably the right time to take profits from our 2021 high-conviction trade, Seven & I Holdings (3382 JP) as the US gas-stations profitability maxed-out in the last quarter.
Korean Pair Trades Review in 2022
- In this insight, we review all the 16 Korean pair trade ideas in 2022.
- A few of the best performing pair trade ideas this year included long LG Chem/short LGES, long Doosan Corp/short Doosan Enerbility, and long KIH/short MFG.
- Going forward in 2023, as the market continues to show higher volatility, there could be continued strong interest in pair trade ideas in Korea.
Omron (6645) | Key Beneficiary of Industry 4.0
- Omron is a structural growth stock that has fallen by 39% YTD reflecting near term risks to growth and margins
- We believe that Omron is a major beneficiary of continued investment in automation and the shift to Industry 4.0
- We analyse Omron’s core value drivers – revenue, margins, risk and reinvestment – and see 35% upside
Long-Term Growth Intact: Xtep
- 4Q22 retail sales was negatively affected by the covid restrictions
- Sales growth is expected to recover in 1Q23 with China’s nationwide loosening policy.
- Long term growth is intact with continued upgrades of brands, products and channels
Gujarat Ambuja Exports
- Company holds pole position in corn starch processing in India with ~ 25% market share; but accounts for a significant share of industry’s profit pool.
- Further expanded capacity by 40% (1200tpd) just last week and another 25% expansion is planned for Q4FY24E, the 60%+ capacity expansion will drive volume led growth forward.
- Cost pressures (commodity, energy) to abate in FY24E. Formidable player, capital efficient business, cost leadership, net cash stature, low valuations(<10x PER, <1x EV/Sales), favors investment.
Acotec Scientific Holdings (6669.HK) – Logic Behind Boston Scientific’s Partial Offer and the Impact
- Boston Scientific angles for majority stake with US$523 million for Acotec Scientific Holdings (6669HK), which is the largest acquisition of a Chinese medical device company by a MNC since 2014.
- Completion of the Partial Offer would further strengthen Boston Scientific’s presence in China and create the potential for commercialization of Acotec products globally. It’s a win-win deal for both sides.
- Companies listed in HKEX don’t have to seek valuation within HKEX system. If they can find “new anchor points”, they’ll have higher valuation.Chapter 18A companies’ future stock prices would diverge.
Oracle: Key Considerations For Long-Term Investors From Yet Another Strong Quarter
- Oracle continues to outperform its peers and the broader equity market after reporting yet another strong quarter.
- The cloud application segment continues to deliver, the infrastructure side of the business deserves more attention, according to analysts and market commentators.
- The early signs were plain to see a couple of years back, says analyst.
Intuitive Surgical Inc.: Initiation of Coverage – Recent Approvals & Other Drivers
- This is our first report on Intuitive Surgical, one of the largest players in robotic surgery offerings across the globe.
- Korean growth remained steady, while Japanese procedure growth quickened compared to Q2.
- We initiate coverage on the stock of Intuitive Surgical with a ‘Hold’ rating.
Lumen Technologies Inc.: Initiation of Coverage – Expansion Of Quantum Fiber & Other Drivers
- This is our first report on Lumen Technologies, one of the major facilities-based technology and communications companies in the world.
- During the quarter, 31,000 Quantum Fiber customers were added.
- Apart from that, Lumen Technologies has been expanding its premier residential as well as Quantum Fiber aggressively in over 30 cities and metro areas.
GlaxoSmithKline ADR: Initiation of Coverage – Business Strategy & Other Drivers
- This is our first report on GlaxoSmithKline (GSK), one of the largest pharmaceutical companies in the world.
- The company is making a significant performance in both operating performance and R&D productivity.
- GSK continued disciplined cost control by prioritizing investments in the growth for supporting launches in Vaccines and Specialty Medicines, namely Shingrix.
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