In today’s briefing:
- APAC Airline Sector – Cost Inflation Management Differentials Crucial as Cargo Yields Normalise
- Taiwan Tech Weekly: Taiwan AI Names Rebound; Memory Crashes; Look for Nvidia Hedges
- Daiichi Sankyo (4568 JP): Strong Start of FY24; Partnered Oncology Drug Candidate Hits First Goal
- High Conviction Update: Sonoscape (300633.CH) – Stock Price to Rebound After Temporary Headwinds
- Pal Group’s 3Coins: Coining It
- Pinduoduo (PDD US): Growth Cadence Matters
- OCBC, CapitaLand Investment, UOBKH Lead Buyback Tally
APAC Airline Sector – Cost Inflation Management Differentials Crucial as Cargo Yields Normalise
- We publish a detailed update on the APAC airline sector, featuring ANA, Cathay Pacific, JAL, Korean Air, Qantas and Singapore Airlines, addressing cargo yield normalisation, and unit cost inflation.
- We see 24% upside to consensus EBITDAR for JAL in FY24 to March 2024, and 24% downside risk at Singapore Airlines based on our detailed analysis and quarterly earnings bridges.
- We expect earnings at most carriers to decline in calendar 2024 versus 2023 as the combination of cargo yield normalisation, fuel price pressure, and further capacity restoration prompt margin declines.
Taiwan Tech Weekly: Taiwan AI Names Rebound; Memory Crashes; Look for Nvidia Hedges
- Taiwan AI names rebounded strongly after having previously suffered declines. Nevertheless, many names have outperformed Nvidia and could be good hedges vs. a Long Nvidia position.
- Nanya Tech crashed after the market reacted to Micron’s weaker than expected near-term guidance. We believe the negative reaction to Micron is short-sighted. Please see our piece.
- Delta Thailand crashed vs. Delta Taiwan after the parent sold a stake in the Thai subsidiary. We continue to believe Delta Taiwan offers substantially better value.
Daiichi Sankyo (4568 JP): Strong Start of FY24; Partnered Oncology Drug Candidate Hits First Goal
- Daiichi Sankyo (4568 JP) reported a 25% YoY revenue growth in Q1FY24, mainly driven by oncology drug Enhertu. The company reiterated FY24 guidance, with revenue and operating profit growing double-digit.
- Daiichi Sankyo’s drug candidate datopotamab deruxtecan demonstrated statistically significant and clinically meaningful progression-free survival benefit in certain types of breast cancer patients in pivotal phase 3 trial.
- Enhertu is well-positioned for geography and indication expansion as well as market share gain. Strengthening oncology portfolio and rich late-stage pipeline entail significant growth opportunity for the company.
High Conviction Update: Sonoscape (300633.CH) – Stock Price to Rebound After Temporary Headwinds
- Sonoscape maintained strong growth momentum in 23H1. Profit margin further improved. The Company has entered a stage where scale effect has emerged. However, declining contract liability balance raised our concern.
- Japanese companies setting up factories in China would shake competitive landscape of the domestic market. The anti-corruption campaign could lead to “unexpected impact” on performance in 23H2.
- We lowered 2023 revenue forecast to RMB2 billion. After negative factors are fully priced in, share price would rebound.
Pal Group’s 3Coins: Coining It
- Pal Group posted record sales in FY2022 partly because fashion retail recovered but mostly because of it has a huge hit on its hands: variety store 3Coins.
- Cheap variety stores have always been popular and are becoming even more so as prices rise and people spend more on the home.
- 3Coins has doubled sales in 2 years but expects continued strong growth going forward. With fashion sales also improving, Pal Group is one of few solid bets in lifestyle retailing.
Pinduoduo (PDD US): Growth Cadence Matters
- We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.
- While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.
- Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.
OCBC, CapitaLand Investment, UOBKH Lead Buyback Tally
- OCBC, CapitaLand Investment, UOBKH lead buyback tally OCBC led the share buyback consideration tally, buying back 1.2 million shares at an average price of S$12.74 per share, followed by CapitaLand Investment, which bought back two million shares at an average price of S$3.03 per share.
- This was due mainly to the increase in revenue from hotel operations of S$34.7 million and rental of investment properties of S$2.3 million.
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