In today’s briefing:
- Astra International (ASII IJ) – Rewarding Investors for an Extraordinary Year
- Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside
- Varun Beverages Ltd- Forensic Analysis
- What to Check at Coupang Earnings Call Tomorrow
- IQiyi: Upbeat 4Q Is Only Temporary
- Meta Platforms: Even More Bullish
- Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead
- Arwana Citramulia (ARNA IJ) – Capacity-Driven Future
- Sheng Siong (SSG SP): Slowing Sales. Dividend Yield Not Rewarding Enough
- Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know
Astra International (ASII IJ) – Rewarding Investors for an Extraordinary Year
- Astra International’s results reflected its exposure to commodities, especially coal, through heavy equipment and mining through United Tractors (UNTR IJ) but most divisions booked growth as the economy recovered.
- The company’s core auto and financing business made much more than half of its profits and also contributed to its growth with a slower performance from agri-business and construction.
- Astra International (ASII IJ) announced a generous 85%-dividend payout to reward investors for its coal exposure in 2022, implying a 10% dividend yield. Valuations remain significantly below historical averages.
Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside
- Investors have completely ignored “The New MCG”. If management can hit EBITDA targets, we see over 50% upside for the stock
- Rapid cost cuts of Y135 billion will be a catalyst for the share price
- Transformation to leaner, more focused group with strategic growth in EVs, hydrogen, semicon and health
Varun Beverages Ltd- Forensic Analysis
- Varun Beverages Ltd (VBL IN) is engaged in manufacturing, selling, bottling and distribution of beverages of Pepsi brand.
- It operates mostly in India but also looks after, Sri Lanka, Nepal, Zambia, Morocco and Zimbabwe, as per franchisee agreement with PepsiCo India.
- Key forensic concerns include unusual accounting with respect to containers, trend in discounting, advances to a related entity, etc and some governance alarms.
What to Check at Coupang Earnings Call Tomorrow
- We first check whether additional cost savings have been achieved in the center and whether there has been any deterioration in short-term liquidity due to the hasty pursuit of automation.
- Then, we check the soundness of new businesses such as quick commerce, which boasts delivery within 30 minutes but carries the risk of deteriorating short-term profitability.
- Lastly, we check how seriously Coupang’s real estate cost structure has deteriorated and assess the risk that this could lead to devaluation by potentially undermining Coupang’s growth premium.
IQiyi: Upbeat 4Q Is Only Temporary
- IQIYI Inc (IQ US) ‘s share price is up 30.8% YTD primarily driven by upbeat 4Q2022 results. The main highlight was strong increase in members alongside improvement in OPM.
- The company’s aggressive cost cutting measures have helped reach operating profits, however, we don’t think this is sustainable given user growth depends on content.
- We expect iQiyi’s 1Q2023E results to be strong driven by the launch of The Knockout series, however, further cutting down costs will impact the company’s long-term prospects.
Meta Platforms: Even More Bullish
- The recently announced Meta Verified could generate an incremental $2.2B in revenues.
- Incremental layoffs being reported could amount to $5B in incremental savings this year.
- Between the two reports, we could easily see 10% upside to EPS.
Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead
- The convenience store sector was one of the worst hit by a downturn in sales during the early pandemic, but all three major chains have implemented changes and improvements.
- Results for the first three quarters of FY2022 show that the big companies are almost all trading above 2019 levels already.
- While top line growth at home will be increasingly hard to come by in a saturated sector, innovations will help boost same-store sales a little and profit a bit more.
Arwana Citramulia (ARNA IJ) – Capacity-Driven Future
- Arwana Citramulia released a solid set of numbers for FY2022 but we expect growth to continue for the next two years driven by new capacity in higher margin products.
- The company’s new capacity will be focused on expanding its porcelain tile business but it will also expand its higher-margin DigI UNO ceramic product, which will be positive for margins.
- Arwana Citramulia (ARNA IJ) remains a top-quality and high-growth industrial choice in Indonesia. Valuations are attractive with a single-digit PER and high teens EOS growth for the next two years.
Sheng Siong (SSG SP): Slowing Sales. Dividend Yield Not Rewarding Enough
- Sheng Siong reported a notable decline in same-store sales and operating profits (ex-one off income) for 6M/FY Dec2022 even as it marginally increased annual dividend payout to 70.5%.
- With Singapore’s 10-year Gov. bond yields at 3.34% (vs. sub1%, 3 years ago), dividend yield players like Sheng Siong (SSG SP) may not offer attractive risk-reward at current levels.
- Sheng Siong has traded at dividend yields ranging 3%-3.9% over past 3 years, mostly at a premium to Gov. bond yields. Given muted dividend growth potential, stock faces downside risk.
Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know
- Share buybacks and stock-based compensation also will be an important part of the upcoming earnings release.
- GAAP operating profitability will be in the spotlight as the company lays off a significant amount of its workforce.
- The level of share buybacks will be a key part of Salesforce’s growth strategy.
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