In today’s briefing:
- 2024 High Conviction: Anta Sports (2020 HK)
- Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
- Kuaishou: Strong Earnings With Further Improvement in Profitability
- Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval
- China Dongxiang (3818 HK): Turned Around on Sports Business
- Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value
- Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)
- 2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era
- Fast Retailing: On to the Next (Bigger) Stage
- Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge
2024 High Conviction: Anta Sports (2020 HK)
- Anta Sports Products (2020 HK) is the second largest China sportswear company at 20% market share in 2022.
- The thesis for Anta lies in Anta’s above-industry earnings growth for the next 3 years, low market expectations on China sportswear sector, and flexible multi-brand strategy.
- Anta trades at a forward PE of 17x based on estimated 2024 earnings, with around 15-20% expected net profit growth in 2024-2026.
Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
- Bangladesh’s garment industry grapples with a 14% export dip, prompting worker unrest over wage discrepancies.
- Efforts by a wage board fall short as workers advocate for a Tk25,000 minimum, seeking fair compensation.
- Economic turbulence looms as 3,500 factories, constituting 85% of exports, confront closure amid widespread unrest.
Kuaishou: Strong Earnings With Further Improvement in Profitability
- Kuaishou’s 3Q2023 earnings beat consensus estimates with significant improvement to the company’s profitability driven by growth across all business segments.
- Operating losses of the overseas segment has further reduced, and new offerings such as paid mini dramas have been driving strong growth for the company.
- Though Kuaishou’s share price has moved up during the last few months, valuation multiples are at a steep discount to historical multiples, suggesting there is further upside.
Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval
- Medtronic Plc (MDT US) reported Q2FY24 revenue of $8B, representing 5% organic growth, topping guidance of 4.0–4.5%. Cardiovascular, neuroscience, and medical surgical grew mid-single-digit with diabetes accelerating to high-single-digit.
- The company now expects FY24 organic revenue growth of 4.75% versus the prior 4.5%. Medtronic raised FY24 adjusted EPS guidance to $5.13–5.19 from $5.08–5.16 earlier.
- In November, the company has received FDA approval for innovative renal denervation device for the treatment of hypertension, which should open a multi-billion-dollar market opportunity.
China Dongxiang (3818 HK): Turned Around on Sports Business
- The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
- Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation.
- CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.
Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value
- Sunpower reported 9M23 results which showed the company performing strongly as a 100% GI business.
- Revenues +15% and EBITDA +46% YoY. Earlier this month a competitor listed in China at a massive premium to Sunpower’s valuation.
- The uncertainty over the CB due in April 2025 will be an overhang but management believes there are multiple ways to resolve this in FY2024.
Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)
- Price momentum in October was negative, but decline moderated somewhat
- Disparate Q3 profitability trends reported by Maersk, Evergreen, and ZIM
- As sentiment weakens (again), we also see signs of a cyclical bottom
2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era
- After COVID-19, China healthcare has been under pressure for a long time. High interest rate environment is unfriendly to companies, but the current situation is not entirely devoid of opportunities.
- GLP-1s has reignited investors’ interest in this industry, which will be long-term opportunity and bring alpha. With rich domestic/overseas catalysts ahead, related share price performance is worth looking forward to.
- Among the domestic GLP-1s companies, Innovent is our top pick. The “concept validation” of Innovent’s business model has been completed. A qualitative change in the Company is coming soon.
Fast Retailing: On to the Next (Bigger) Stage
- We once called Uniqlo the Toyota of clothing. And this remains apposite. Its consistent, reliable quality, focus on supply chain efficiency, and increasingly global renown make it a solid bet.
- The majority of the growth last year came from overseas markets, including even the US and Europe and the appointment of Daisuke Tsukagoshi as president will boost overseas performance further.
- Fast Retailing is talking up the potential of GU, which should make up for lower domestic growth from Uniqlo but also now thinks it can make it a global brand.
Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge
- Nvidia’s street-beating results indicate strong growth to continue; Generative AI demand will next expand from startups, consumer internet, and cloud service providers increasingly to enterprise AI-linked demand.
- Nvidia is not expensive despite recent market concerns. We believe Nvidia can meet or even beat its current calendar year 2024 earnings expectations and forward PE is cheap.
- Short a basket of Taiwan AI concept stocks vs. a core Nvidia long position rather than take profits in Nvidia. We have swapped one Taiwan stock in our short basket.
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