In today’s briefing:
- Advantest (6857 JP): 20% Potential Downside
- Taste Gourmet: What to Expect From the 2023 Results
- Aier Eye Hospital Group (300015.CH) 2022/23Q1 – The Era Belonging to Aier Has Come to an End
- Taiwan Tech Weekly: Another Major Earnings Week; Hon Hai Deal Exit? AMD Transfers Orders to Samsung
- Sinotrans (598 HK): Still Seeing Uncertainties Ahead
- Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand
- JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- SAP SE: Cloud Backlog Shoots Up But Is It Enough? – Key Drivers
- Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers
- Yerbaé Brands: 2022 Financials Beat Expectations
Advantest (6857 JP): 20% Potential Downside
- FY Mar-24 guidance – sales down 14%, operating profit down 37% – is not extreme compared with previous cycles.
- History shows that downturns at Advantest can last for two or even three years, not just one. Weak economic conditions add to this possibility.
- The share price has rebounded from the recent sell-off, but optimism is unwarranted. Historical valuation ranges suggest potential downside of 20% or more.
Taste Gourmet: What to Expect From the 2023 Results
- Taste Gourmet (8371 HK) will report FY23 (March YE) results on June 23rd. Channel checks indicate strong momentum in Q4 Vs. Q3 FY23.
- Based on our estimates of 72/112 mn HKD for FY23/24e, the stock trades at 8x/5x FY23e/FY24e with a 7.6%/11.9% dividend yield assuming a 60% payout ratio.
- The company has 114 mn HKD of cash (20% of market cap), which is earmarked for restaurant expansion by 6-10 outlets and dividend payout (50-60% of earnings) in HK/China.
Aier Eye Hospital Group (300015.CH) 2022/23Q1 – The Era Belonging to Aier Has Come to an End
- Aier’s performance slowed significantly in 2022, with revenue and net profit growth rates at their lowest in nearly a decade.Although performance rebounded in 23Q1, the growth rate lags behind peers.
- In front of increasing competition and difficulty of finding good acquisition targets, Aier’s poor operational capabilities and endogenous growth cannot support rapid growth. The beautiful story has shown obvious cracks.
- Future single-digit growth is inevitable. Aier is significantly overvalued due to problematic long logic. It should be noted that there would be four further holdings reductions for Aier this year.
Taiwan Tech Weekly: Another Major Earnings Week; Hon Hai Deal Exit? AMD Transfers Orders to Samsung
- Another major earnings week with AMD, Qualcomm, Apple, Acer, Winbond, Wistron, Micro-Star, and more.
- Hon Hai could terminate its investment deal in U.S.-based Lordstown Motors as per an exchange notice posted by Lordstown.
- AMD reportedly transfers some 4nm chip business to Samsung from TSMC.
Sinotrans (598 HK): Still Seeing Uncertainties Ahead
- While meeting expectations in 1Q23, Sinotrans (598 HK) has relied on a 105.2% surge in other income, mostly government subsidies. Without them, pre-tax profit would have dropped 21%.
- For most business areas, volume has come down YoY and QoQ, highlighting challenging operating environment. JV contribution, mostly DHL-Sinotrans, has also declined 11.5% YoY.
- While we like its long-term fundamentals and undemanding multiples, we have concerns on near-term headwinds and weakened earnings quality; and risks of profit downgrades.
Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand
- The ramp-up in public housing supply in Singapore could be an opportunity for Kimly Ltd to fast-track expansion given its outlets, food-stalls are mostly located in public housing blocks.
- Bigger F&B retail players like Kimly are better positioned versus others to weather the multiple headwinds faced by Singapore F&B retail sector today.
- Upcoming 1H FY2023 results can trigger an up move in the stock if the company reports a meaningful margin recovery. Current undemanding valuations reflect heightened investor concerns.
JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- We believe JD’s growth rate will continue to slow down and its margin will continue to improve in 1Q23.
- However, we also believe revenue growth will recover from 2Q23.
- We set a price target of HK$256, implying an upside of 85%. Buy.
SAP SE: Cloud Backlog Shoots Up But Is It Enough? – Key Drivers
- SAP delivered a highly disappointing set of results failing to meet the revenue expectations as well as the earnings expectations of Wall Street.
- The current cloud backlog and cloud revenue for S/4HANA increased by 79% which is why Q1 revenue increased by 9% overall.
- Their SaaS and PaaS portfolios continued to expand by 25%, with SaaS cloud revenue increasing by 22% and PaaS cloud revenue increasing by 45%.
Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers
- Philip Morris International’s Q1 results exceeded analyst expectations on the earnings front but were below par in terms of revenues despite some decent underlying momentum from IQOS, ZYN, and its combustible business.
- The company’s Q1 organic net revenues had solid growth.
- This highlights the ongoing strength of IQOS as a step-up in pricing but was somewhat mitigated by anticipated HTU inventory movement.
Yerbaé Brands: 2022 Financials Beat Expectations
- Yerbaé posted full-year 2022 financial results that beat our estimates.
- 2022 net revenue came in at $7.2M vs. our estimate of $6.8M, representing 19% YoY growth
- Gross margin came in at 59% in 2022 vs. our estimate of 58%
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