Daily Brief Equity Bottom-Up: Adi Sarana Armada (ASSA IJ) – Building on Pillars and more

• Adi Sarana Armada (ASSA IJ) continues to build on its three pillars of growth across transport, used car sales, and logistics including its leading last-mile delivery service under Anteraja.
• The company’s market-leading auto leasing business provides stable revenue and a source of used cars for the auction and online used car business under Caroline.
• Last-Mile delivery player Anteraja is already the largest revenue contributor and increasing profit driver, with significant upside through automation and scale. Valuations attractive after recent correction at 8.3x FY2022E EV/EBITDA.

• We recommend BUY for M supported by three main reason:1) a strong earnings recovery outlook in 2022-24,2) net cash position with upside from new M&A deal and LCS franchise fees
• Earnings is expected to turn positive and strongly QoQ improvement in 2Q22 We expect 2Q22 net profit to be at Bt444m (+64%QoQ), recovery from a loss of Bt99m in 2Q21
• Rising food costs are manageable   Most of costs are raw material costs and the major portion of food cost are pork and poultry.

For our next Webinar, we are delighted to welcome back Analyst Henry Soediarko, who will go through his latest stock picks in the ASEAN region, and offer his outlook for 2H 2022.

The webinar will be hosted on Wednesday, 20 July 2022, 17:00 SGT/HKT.

Henry Soediarko is a Long & Short Investment Ideas generator for Asian Equities with 10 years of experience in a Hedge fund focused on bottom-up ideas, searching out mispriced ideas and misunderstood investment theses. He provides on-the-ground insights in various Asian markets with a sway towards ASEAN. 

• The company will report Q1 earnings today. We think they will beat expectations
• The stock has been a poor performer so far this year, despite profitable growth
• BayCurrent is THE key beneficiary of Digital Transformation in Japan

• Hyundai Motor (005380 KS) launched its long-awaited Ioniq 6 on 14 July. This is the first EV sedan by Hyundai Motor.
• Ioniq 6 could be a big winner for Hyundai Motor. Among all the features of Ioniq 6, the driving range is the biggest improvement versus Ioniq 5. 
• The combination of attractive price, sleek design, and higher driving range is likely to result in a strong demand for Ioniq 6.

• Tatas are scripting India’s early journey in electric cars – Tata Motors Ltd (TTMT IN) accounted for 87% of the 8077 electric cars sold in Q1FY23 (1605 units in Q1FY22).
• The rapid roll-out of charging infrastructure across the country by Tata Power (TPWR IN) and the success of Tata’s electric car (compact SUV). Tata Nexon EV, are key factors. 
• Demand and infrastructure for electric cars seem to be in place but market growth is restricted by a lack of choice/adequate supply in the popular price range (<USD 20K).

• Maintain BUY for TISCO with a target price of Bt106.00.We like its high dividend payment and solid fundamentals.TISCO’s net profit was 6% better than expected at Bt1.85bn in 2Q22,up 11%YoY
• Despite lingering competition in the auto hire purchase market, loan growth would likely accelerate in 2H22 given an improvement in the chip shortage in the automotive industry. 
• Credit costs would likely stay low for the next few years to potentially offset negative impacts from muted fee income from the volatility in the capital market.

• Alkem Laboratories Ltd (ALKEM IN) earns 71% of total revenue from domestic business, which is the most important growth lever of the company. Domestic business revenue grew 29% in FY22.
• The company dominates the anti-infective segment, through its mega brands, with a market share of 12.9%. In the chronic segment, Alkem is growing fast to emerge as a significant player.
• Regular new product launches, including biosimilars, should continue to contribute to Alkem’s growth and fill portfolio gaps. Entry into new therapies would also be an important growth engine, going forward.