In today’s briefing:
- Alibaba (9988 HK): 1Q24, Brilliant Result After Reorganization, 90% Upside
- Alibaba: A Quick Take on 1QFY24
- Smartkarma Webinar | High Conviction Trade Ideas in the US
- Keisei Electric (9009): The Chinese Are Back.
- Stylam Industries Q1 FY24: Slow Revenue Quarter, But Healthy Margin Expansion and 32% Profit Growth
- [Huitongda (9878 HK, SELL, TP HK$20.5) TP Change]: Downsizing Minority Interest Drive up Earnings
- LG H&H – A Key Beneficiary of the Return of Chinese Group Tours to Korea
- SMFG – Least Achieved of FY24 Forecast, With Lowest ROE of Mega’s & Less JPY Bond Leverage
- ECVT: The Earnings Normalcy
- Taste Gourmet : Strong Q1 FY24 In The Bag, H1 FY24 and Future Looking Solid
Alibaba (9988 HK): 1Q24, Brilliant Result After Reorganization, 90% Upside
- The revenue growth rate rose to 14% in 1Q24, compared to the past four stagnant quarters.
- All businesses continued to improve their margins, so that the general operating margin rose to 19% in 1Q24 versus 12% in 1Q23.
- We believe the re-organization is successful and the stock price is overly impacted. Buy.
Alibaba: A Quick Take on 1QFY24
- Alibaba (ADR) (BABA US)‘s 1QFY24 revenue and OP beat consensus by RMB 9.2bn and RMB 14.4bn respectively, possibly on the back of a successful 6.18 shopping festival.
- It looks like Alibaba Group Holding (9988 HK) has decided to abandon its New Retail Strategy and instead, put more effort into e-commerce, especially on popular platforms like Taobao and Tmall.
- Although this is a good-sign and could rally the stock short-term, we would still steer clear of Alibaba as we remain skeptical about the overall health of the Chinese economy.
Smartkarma Webinar | High Conviction Trade Ideas in the US
- In the next installment of our Webinar series, we go live with Smartkarma Insight Provider Andrei Zakharov
- He will be discussing some U.S. SaaS stocks, crypto mining companies as part of his High Conviction Trade Ideas in the US.
- He will also be sharing his insights into his high-conviction trade idea in biotech – oncology-focused company, Revolution Medicines.
The webinar will be hosted on Wednesday, 14 August 2023, 17:00 SGT/HKT.
Andrei Zakharov is the founder of independent equity research firm Algosun Global Limited, with broad professional experience at leading multinational banks Citibank and Morgan Stanley. Andrei has a respectable background in wealth advisory services for UHNW individuals, alternative energy buy-side research, in-depth analysis of pre-IPO technology unicorns, and portfolio management.
Keisei Electric (9009): The Chinese Are Back.
- The moment of truth is here, the Chinese are finally coming back to Japan.
- Keisei Electric Railway Co (9009 JP) is one of the biggest beneficiaries of increased tourist arrivals in Japan.
- It is trading at 0.04 PEG, a very low valuation considering its potential for producing large growth rate.
Stylam Industries Q1 FY24: Slow Revenue Quarter, But Healthy Margin Expansion and 32% Profit Growth
- Stylam Industries (SYIL IN) reported a good quarter on the profitability front, with PAT up 32.4% YoY but revenues down 4% YoY.
- Exports showed degrowth temporarily by 11% YoY due to a slowdown in Europe and other key markets, but the company guided an improvement in subsequent quarters.
- Trading at 20x/16x FY24e/25e, the stock is not a steal, but with a remarkable growth profile of 20-25% CAGR, we see tremendous potential as a multibagger for the company.
[Huitongda (9878 HK, SELL, TP HK$20.5) TP Change]: Downsizing Minority Interest Drive up Earnings
- We expect Huitongda (HTD) 1H23 revenue in-line with consensus, and non-IFRS NI 15.6% lower than consensus.
- The lower bottom-line is due to 1) product mix change result in lower gross margin; 2) higher impairment loss from account receivables due to its SME focused model.
- We maintain the stock as SELL. We raise TP by HK$2.5 to HK$20.5 to factor in the upward revision of NI from downsizing of minority interest.
LG H&H – A Key Beneficiary of the Return of Chinese Group Tours to Korea
- In this insight, we lay out the thesis that LG H&H is likely to be one of the biggest beneficiaries of the return of Chinese group tours to Korea.
- LG H&H consistently generated more than 1 trillion won in operating profit from 2018 to 2021.
- We expect LG H&H to generate 1 trillion won or more in operating profit in 2024 and 2025, which would be 20-25%+ higher than current consensus estimates in this period.
SMFG – Least Achieved of FY24 Forecast, With Lowest ROE of Mega’s & Less JPY Bond Leverage
- SMFG achieved less of its FY24 profit forecast than peer megabanks; less upgrades
- SMFG reported a far lower ROE than peer megabanks & some worse financial metrics
- SMFG’s JPY bonds are only 0.88x of total equity; it is less leveraged than peer megabanks
ECVT: The Earnings Normalcy
- ECVT has gone from one maintenance issue at the beginning of the year to another that is expected to impact second half results and creates near-term headwind for investor sentiment.
- Maintenance and CapEx spending is likely to receive much of the scrutiny from investors after ECVT had two issues this year. However, they are unrelated, and one was from weather
- The sell-off in ECVT’s stock price after the quarterly results reflects investor anxiety over the business being able to generate free cash flow on a consistent basis
Taste Gourmet : Strong Q1 FY24 In The Bag, H1 FY24 and Future Looking Solid
- Taste Gourmet (8371 HK) reported its Q1 FY24 with revenues up 47% YoY and core profits up 349% YoY. We believe that the company will report stronger revenues in Q2.
- The restaurant count increased from 39 to 42 by the end of Q1 FY24 for HK. As of the latest date, the company has 46 restaurants in HK.
- The company also had 126.5 mn HKD of net cash at the end of Q1 FY24 (vs 118 mn HKD in FY23), almost 20% of the current market capitalization.
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