In today’s briefing:
- Alibaba: Daniel Zhang Shown The Door, Jack Ma Back In The Game
- MUFG (8306) – Biggest JPN Bank, Lowest LDR at 48%: Most Bonds | ROE Surge to 12% May Be Sustainable
- [Week 2] Namaste India 🙏 | Paytm (PAYTM IN) | Withdrawing Disclosures
- Intel Foundry Chief Unveils His Strategy
- IHI (7013) | Brace for a ¥130b Charge
- Haitian Flavouring (603288 CH): Weakening Moat With Further Derating Likely
- US Judge Rules Favorably for Okada Manila Dispute with Former Spac Partner
- Recruit Holdings: Weakening Job Markets and New Pricing Model to Impact HR Tech Further
- Dollar General Corporation: Activist Interest Looms After Recent Drop! – Major Drivers
- [KE Holdings (BEKE US, BUY, TP US$24) Update]: Our View of Gradual Property Recovery into 2024
Alibaba: Daniel Zhang Shown The Door, Jack Ma Back In The Game
- News broke yesterday that Daniel Zhang is no longer leading Alibaba (ADR) (BABA US)‘s Cloud Business unit.
- The statement from Alibaba’s current chairman, in which he mentions that Zhang would “switch to a different approach and continue to fight alongside us at Alibaba” raises skepticism.
- We also think that the $1.0bn Alibaba committed to a technology fund could be seen as a form of compensation to ensure Daniel Zhang’s silence.
MUFG (8306) – Biggest JPN Bank, Lowest LDR at 48%: Most Bonds | ROE Surge to 12% May Be Sustainable
- The biggest Japan banks by assets, in spotlight as near ending of negative interest rates, with lowest LDR, so highest bonds, cash, can see major benefit from YCC relief
- Years of low ROE at 5-7% seem behind MUFG now with 12-17% in past two quarters, where leverage is not out of control, with cost improvements key
- Loss loans down 29% over past two years, can support low credit costs, which dropped sharply from 81bps to 15bps from 3Q23 to 1Q24, possibly moving to reversals
[Week 2] Namaste India 🙏 | Paytm (PAYTM IN) | Withdrawing Disclosures
- Life is good for the NIFTY Index (NIFTY INDEX) at 20K. Strong domestic sentiment is likely to continue.
- Paytm (PAYTM IN) posted strong operating metrics for August, but this will be the second last update as the company moves to quarterly disclosures for reasons not completely justified.
- Other Ideas discussed include Poonawalla Fincorp (POONAWAL IN) , Dabur India Ltd (DABUR IN) and Landmark Cars along with upcoming IPOs.
Intel Foundry Chief Unveils His Strategy
- It’s a “show me the money” versus a “build it and they will come” approach
- New fab construction will be based solely on customer commitments.
- It’s a curiously cautious plan and highly unlikely to succeed
IHI (7013) | Brace for a ¥130b Charge
- IHI’s share price has declined 16% on news that Pratt & Whitney would need to ground more planes due to problems with its PW1100 turbofan engines
- IHI has a 15% share of the revenue and risk from this program. The new engine was expected to be a major earnings driver over the next several years
- We believe that IHI will be forced to revise down OP guidance to a loss. The bigger impact could be on FCF and future capex plans.
Haitian Flavouring (603288 CH): Weakening Moat With Further Derating Likely
- Foshan Haitian Flavouring & Food (603288 CH), the largest condiment player in China is facing structural weakening of moat from a changed operating environment post-COVID.
- Both catering and home consumption segments are faced with structural growth pressures that are difficult to solve for the company.
- Expect further earnings weakness and derating in valuation multiple in the near term.
US Judge Rules Favorably for Okada Manila Dispute with Former Spac Partner
- Japan’s Universal Entertainment’s Okada Manila casino unit removes another obstacle to its long quest to transform into a NASDAQ traded IPO.
- Judge rules that Okada is free of any obligations to US Space 26 Capital Partners.
- UE’s goal to take the casino public, despite expectations that the Spac will appeal, is likely to move forward toward identifying a new partner.
Recruit Holdings: Weakening Job Markets and New Pricing Model to Impact HR Tech Further
- The job openings in the US declined to 8.827m in July 2023, marking the lowest since March 2021, and falling well below projected 9.465m job openings for the month.
- On the other hand, web traffic on Recruit Holdings (6098 JP) ’s job platform Indeed has declined in July compared to June 2023 while it has improved slightly on Glassdoor.
- HR Tech segment’s top line growth declined 9.1% YoY in 1QFY03/2024 and the company has shifted into a new pricing model which we think would further impact segment’s growth.
Dollar General Corporation: Activist Interest Looms After Recent Drop! – Major Drivers
- Dollar General Corporation’s results were a major disappointment as the company failed to meet Wall Street’s revenue and earnings expectations.
- Due to higher average borrowing amounts and interest rates, interest expense climbed to $84 million in Q2 from $43 million in Q2 of last year.
- Dollar General has experienced a significant drop in its stock value this year, sparking speculation about potential activist investors eyeing the company.
[KE Holdings (BEKE US, BUY, TP US$24) Update]: Our View of Gradual Property Recovery into 2024
- We think the mild recovery is driven by the delayed orders in Jul. and Aug, thus expect transaction volume to be flattish MoM in Sep.
- We think the recovery is on-track and expect Oct. volume to begin recovery and expect more meaningful rebound in Mar.-Apr. 2024, supported by 1) strong leading indicators from property agents,
- 2) refer to the recover trajectory in 2014-2015. We maintain the stock as BUY rating and maintain TP at US$24/ADS.
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