In today’s briefing:
- Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- BFI Finance Indonesia (BFIN IJ) – Back on an Even Keel
- Asian Dividend Gems: Tingyi Holding
- First Run of Global Semis’ Guidances to Tell Early Signs of Recovery
- Takeda: Guidance Lowered Due to Setbacks in Clinical Trials but Pipeline Development Continues
- Vinda International (3331 HK): Business Recovering As Expected
- US Banks – Office Exposures, Interest Spread Trends to 3Q23
- Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted
- Japanese Banks – Stay the Bullish Course
- Intel. Beat & Raise Sends Shares Soaring After Hours
Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
- While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
- Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.
BFI Finance Indonesia (BFIN IJ) – Back on an Even Keel
- BFI Finance‘s 3Q2023 results reflected the lingering impact of May’s Malware incident which interrupted collections but this situation has now been remedied and the company can resume rebuilding its book.
- 4Q2023 will likely see further write-offs but an improvement in credit costs but the company will remain cautious on building its book with a full recovery expected in 2H2024.
- BFI Finance remains the best-quality multi-finance company in Indonesia, with a low cost of funds and a differentiated target market of used 4W and 2W non-dealer loans. Valuations are attractive.
Asian Dividend Gems: Tingyi Holding
- Shares of Tingyi Holding are oversold. It has high dividend yield and attractive valuations. Its core instant noodles and beverage businesses are turning around this year.
- The consensus expects DPS of HKD 0.62 for Tingyi in 2023 which would suggest a dividend yield of 6.1%. Tingyi Holding’s dividend yield averaged 5% annually from 2018 to 2022.
- Tingyi’s “Master Kong” instant noodle is one of the best known brands in China. The company is also one of the largest producers and distributors of beverages in China.
First Run of Global Semis’ Guidances to Tell Early Signs of Recovery
- We see early signs of recovery in PC and smartphone markets, stable server market (strengths in AI server, stable in non-AI server market), but weaknesses in automotive and industrial.
- We expect the PC semi market recovery of more than 10% y/y in 2024/2025, driven by inventory rebuild and silicon contents increase by adding AI into PC.
- We expect the smartphone semi market recovery of 7-8% y/y in 2024/2025, driven by inventory rebuild and adopting 3nE foundry node. But, Huawei/HiSilicon will take some of the growth.
Takeda: Guidance Lowered Due to Setbacks in Clinical Trials but Pipeline Development Continues
- Takeda’s 2QFY03/2024 revenues increased 4.1% YoY beating consensus estimates by 6%. However, Takeda reported an operating loss of ¥49.3bn for the quarter due to impairment losses.
- As we expected, recent setback in some of Takeda’s clinical trials have led to write-downs and triggered a downward revision to full-year profit guidance.
- There has been excessive price reaction to these setbacks, however, Takeda continues to progress with its pipeline development with some newly launched drugs showing great potential.
Vinda International (3331 HK): Business Recovering As Expected
- Vinda International (3331 HK) announced 3Q23 results, with net profit up 37% yoy as margins started to recover.
- Reported sales growth picked up speed, growing at 8% yoy (vs. 4% growth in 1H23), and 12% at constant exchange rates (vs. 10% growth in 1H23).
- More importantly, gross margin recovered quarter-on-quarter from a 0.2ppt decline in 2Q23 to a 2.3ppt increase in 3Q23.
US Banks – Office Exposures, Interest Spread Trends to 3Q23
- US Banks’ office credit exposures represent a big part of the sector’s credit quality concerns, given the decline in office space occupancy and rising interest rates
- Industry data shows that bank funding costs are rising fast, and 3Q23 bank spread trends are mixed; banks with greater mortgage exposure are potentially at greater risk of narrowing spreads
- We stick with Capital One for its high lending spreads, negligible mortgage exposure and limited office credit exposure with high coverage; Capital One also has healthy overall NPL coverage
Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted
- Total sales remained weak in September, dropping 3.5% YoY. In 1H of FY Mar-24, sales were down 4.3%. Month-to-month, though, they have been trending sideways.
- Die Components have been holding up best, followed by Factory Automation. The VONA e-commerce business has been more volatile, but still shows a lack of traction.
- Operating profit dropped 31% in 1H, but management is guiding for a 23% increase in 2H. This looks optimistic, but most of the bad news should be in the price.
Japanese Banks – Stay the Bullish Course
- So far in 4Q23, Japanese banks’ share prices have registered a mixed performance, in part due to the unsettled global market conditions; yet the Japanese bond yield curve keeps steepening
- We assess the top twelve Japanese commercial banks by market capitalisation, and we believe that Japanese banks remain good value with, a rare thing, improving fundamentals
- Ahead of the September results, we stick with our buys on Resona, Mizuho and SMFG; Resona has lagged deserving to re-rate further, and we add Hachijuni to our buy list
Intel. Beat & Raise Sends Shares Soaring After Hours
- Q323 revenues of $14.2 billion, some $800 million above the guided midpoint, down 8% YoY but up 10% sequentially.
- Current quarter revenue guided up QoQ to $15.1 billion at the midpoint, shares up 10%
- Intel is betting big on a return to a 300 million unit PC TAM. Is this realistic?
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
