In today’s briefing:
- Alibaba (9988 HK) Pre-Earnings: Will See Growth Again, At Least 43% Upside
- Nexon (3659) | More Buybacks in the Pipeline
- Yokogawa Electric (6841 JP): High Energy Prices Point to Further Upside
- Intel Vs. TSMC & ADR Monitor: TSMC to Build New High-End Fab In Arizona, Premium Bounce Potential
- Shanghai Pharmaceuticals (2607 HK): Stable Core Business; New Drug Approvals to Accelerate Growth
- Keepers Holdings: Stellar Q3 2022/ More to Follow in Management Call on 16th November
- PPIH: Combating Cost Inflation Through Personal Brands Growth
- Tencent (700 HK) Earning Preview: To Stop Decreasing in 3Q22, and an Upside of 67%
- An Interview with Flashlight Capital Patners CEO Lee Sanghyun on KT&G
- Disney 4Q2022: Cord Cutting Exacerbating DTC Losses
Alibaba (9988 HK) Pre-Earnings: Will See Growth Again, At Least 43% Upside
- We believe the revenue growth will recover from zero in 1Q23 to 4% YoY in 2Q23.
- We believe the operating margin will improve in the following two years because the company is cutting unprofitable businesses.
- We set an upside of 43% according to other retailing giants’ price / sales ratios.
Nexon (3659) | More Buybacks in the Pipeline
- Nexon is our top pick within the Japanese Gaming Sector
- We see continued strong growth in revenue driven by existing game franchises in addition to new pipeline opportunities
- Nexon is cash rich, debt free and is returning more and more money back to shareholders
Yokogawa Electric (6841 JP): High Energy Prices Point to Further Upside
- Strong 1H orders and the second upward revision to guidance this fiscal year have lifted the share price to a new high.
- The energy shortage and high energy prices should continue to drive demand for Yokogawa’s oil, gas and power related industrial control equipment. Demand from other users is also rising.
- Valuations suggest 15% to 20% additional upside potential for the share price. Recession or a strengthening of the yen could put this at risk, so watch the order flow.
Intel Vs. TSMC & ADR Monitor: TSMC to Build New High-End Fab In Arizona, Premium Bounce Potential
- TSMC is planning to build a second Arizona fab that could produce its highest-end 3nm chips, according to the WSJ.
- TSMC ADR Premium Impact: The TSMC ADR premium is near zero, and increased U.S. investor enthusiasm could lead to a significant bounce for the premium.
- INTC vs. TSMC Impact: News flow could favor TSMC over Intel over the next few days, at least until a November 14th conference Intel will be attending.
Shanghai Pharmaceuticals (2607 HK): Stable Core Business; New Drug Approvals to Accelerate Growth
- Shanghai Pharmaceuticals Holding (2607 HK) reported strong result for the first nine months of 2022, with revenue increasing 8.5% to RMB174.6B. Notably, total revenue growth accelerated to 13% in 3Q22.
- With a leading market positioning and nation-wide distribution network, the company is well-positioned to benefit from the sector tailwinds. Easing of restrictions will provide a major impetus to the company.
- The company has been improving its innovative drug pipeline. It has 42 innovative products in its pipeline, six of which are in pivotal studies.
Keepers Holdings: Stellar Q3 2022/ More to Follow in Management Call on 16th November
- The Keepers Holdings, Inc. (KEEPR PM) reported strong Q3 2022 revenue growth of 48.6% YoY and profit growth of 47.8%, led by strong growth in all categories of spirits.
- The stock trades at 8.2x FY22e/6.7x FY23e (numbers exclude the incremental earnings from its 50% stake in W&H, which we estimate could at least add 7-8% to our numbers).
- We will get more color from the post-results call on the 16th of November 2022 (aftermarket).
PPIH: Combating Cost Inflation Through Personal Brands Growth
- Pan Pacific International Holdings (7532 JP)’s 1QFY23 was broadly in line with consensus estimates with revenue and OP of ¥473.7bn (consensus: ¥473.8bn) and ¥23.9bn (consensus: ¥23.8bn) respectively.
- Personal brands growth and Asia expansion are driving up PPIH’s margins while most companies in the consumer sphere are failing to pass down cost inflation.
- With signs of OP moving to the pre-UNY acquisition level, we think that there’s an upside to the company’s medium-term guidance and consensus.
Tencent (700 HK) Earning Preview: To Stop Decreasing in 3Q22, and an Upside of 67%
- We believe Tencent’s revenue will stop declining in 3Q22 and bounce back thereafter.
- We believe FinTech will grow fast, but online game will still be stagnant.
- We expect Tencent will have an upside of 67% for year end 2023.
An Interview with Flashlight Capital Patners CEO Lee Sanghyun on KT&G
- This past week, I had an interview with Lee Sanghyun, the founder and CEO of Flashlight Capital Partners (FCP) which is currently an activist investor on KT&G Corporation (033780 KS).
- Our interview focused on five key issues including valuation, buyback & dividends, ginseng business spin-off, investment horizon, and aligning management’s interests with those of its shareholders.
- FCP’s shareholder return plan is to 3x higher than the one currently proposed by the company. For further details, see FCP’s website https://flashlightcap.com/.
Disney 4Q2022: Cord Cutting Exacerbating DTC Losses
- Across the board miss as DTC losses peak, park margins weaken, and linear likely to fall off a cliff.
- Big FY2023 guide down on revenues (HSD vs. LDD previously) and OI growth (HSD vs. ~25% consensus previously).
- Disney profitability lower for longer as macro headwinds on parks, accelerating cord cutting, and pushed out D+ profitability means OI likely down $2B in both FY23-24.
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