In today’s briefing:
- Ace Hardware Indonesia (ACES IJ) – Reasons to Be Helpful
- [XPeng Inc. (XPEV US, BUY, TP US$13.7) Target Price Change]: Buy on More Visibility of Future Growth
- [Meituan (3690 HK, BUY, TP HK$165) TP Change]: Competition with Douyin Continues, Cut TP to HK$165
- Japan Elevator Service Holdings (6544) – Going up to Reach New Heights
- Talos Energy, Inc. – Value Creation Catalysts
- Earthstone Energy, Inc – Delaware Expansion Adds Quality Inventory
- Culp, Inc. – 4QFY23: Results Beat Estimates; Trends Improve in Mattress Fabrics
Ace Hardware Indonesia (ACES IJ) – Reasons to Be Helpful
- Ace Hardware Indonesia is starting to see the seeds of recovery come through in SSSG through April and May and should get a further boost from its BOOM sale.
- The company has resumed its store opening with plans for 13 new stores this year and a new store concept being rolled out across existing stores providing a potential boost.
- Ace Hardware Indonesia has a more cohesive digital strategy and has taken on its first brand ambassadors to boost millennial demand. Valuations remain attractive.
[XPeng Inc. (XPEV US, BUY, TP US$13.7) Target Price Change]: Buy on More Visibility of Future Growth
- We are more positive on G6’s potential due to attractive pricing and higher conversion rate brought by nationwide availability of display vehicles.
- The success of G6 will add visibility of its growth due to the shared architecture. We reiterate a rebound of sales momentum starting from 2Q23, driven by:
- 1) increased order intake of P7i and G6; 2) faster channel expansion than its peers. We raise our TP to US$ 13.7. Our TP implies 2.5x PS.
[Meituan (3690 HK, BUY, TP HK$165) TP Change]: Competition with Douyin Continues, Cut TP to HK$165
- We expect that Meituan and Douyin engaged in fierce competition in 2Q23. Meituan intensified its efforts in three aspects: commission reduction and rebates, promotion of “Meituan Quanquan,” and video subsidy.
- However, our 2Q23 Meituan revenue/profit estimates are in-line/34% higher vs. cons. This is mainly because it was Meituan’s first quarter of counterattack.
- Meituan’s counterattack has shown initial results, in Douyin’s slowing local services growth during 618, and the return of merchants. We maintain Meituan’s BUY rating, but lowered TP to HK$ 165.
Japan Elevator Service Holdings (6544) – Going up to Reach New Heights
A successful market disruptor – Japan Elevator Service (JES) has been executing its growth strategy, increasing market share in the domestic elevator maintenance market via organic and acquisitive growth.
Operating in a market dominated by OEMs, it is making solid headway by 1) offering a cost-effective solution, 2) a differentiated service offering technical services and availability of parts on par with the OEMs, and 3) experiencing rapid growth through by establishing a nationwide network providing regionally rooted services.
Pursuing growth opportunities – we highlight two drivers for the company; 1) secular growth as building owners convert to reputable independent providers for cost management, and 2) structural demand from aging elevators requiring modernization.
Talos Energy, Inc. – Value Creation Catalysts
Talos’s current valuation implies a steep discount to net asset value (NAV).
Management estimates the company’s year- end 2022 pro forma proved reserves have a gross PV-10 value of ~$5.5 billion (~$4.8 billion net of asset retirement obligations [ARO]) based on oil and natural gas prices of $75/bbl and $3.50/Mcf.
Adjusting for March 31, 2023, balance sheet items, leaves an estimated NAV of ~$3.6 billion, or $28.38/share.
Earthstone Energy, Inc – Delaware Expansion Adds Quality Inventory
Earthstone announced an agreement to acquire Novo Oil & Gas Holdings LLC for $1.5 billion on June 15, 2023.
Concurrently, Northern Oil & Gas will acquire a pro rata one-third of the assets for $500 million from Earthstone, resulting in a net purchase price of $1.0 billion.
The transaction is expected to close in 3Q23 and will have an effective date of May 1, 2023.
Culp, Inc. – 4QFY23: Results Beat Estimates; Trends Improve in Mattress Fabrics
Beat expectations. After market close on June 28, Culp reported 4QFY23 results that exceeded expectations.
Total revenues were $61.4 million, beating our $54 million estimate and consensus of $55.5 million.
On the bottom line, the company’s EPS of ($0.38) beat our ($0.50) estimate and consensus of ($0.45).
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