In today’s briefing:
- BABA: Timing Is Ripe to Build Positions
- Toshiba – Worse Than Even We Thought
- Lasertec(6920): Tailwinds Intensify – From ASML Outlook Upgrade to Lower Inflation
- Softbank Group Q2 22 Results Reaction: Alibaba Gains Offset VF Losses but Buybacks Over
- Rakuten (Neutral) – Q3 22 Results Reaction: Mobile Subscriber Losses as Free Users Flee
- Starbucks Opens its 6,000th Store in China
- Reminder: Earnings Quality Short Candidates: Moderna, Sonos, Knowles, Juniper Tech
- Indian Banks Screener to September-End 2022: Credit Delinquency in Check, for Now
- Qualcomm Inc: Collaboration With Renault & Other Developments
- ASRT: Asserting a Low Valuation
BABA: Timing Is Ripe to Build Positions
- Company fundamentals have been and will continue to be the single most critical driver for BABA’s share price, although strong US dollar and geopolitics may complicate the situation.
- Expect BABA’s bottomline to reverse an eight-quarter down trend in coming September quarter on the back of disciplined capex and cost cutting, despite a challenging macro environment still pressuring topline.
- Importantly, investors have yet fully appreciated the improving competitive landscape thanks to regulation and rivals’ maturing businesses. See 30% upside in 6-12 months. Ripe timing to buy.
Toshiba – Worse Than Even We Thought
- Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted.
- While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted.
- It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.
Lasertec(6920): Tailwinds Intensify – From ASML Outlook Upgrade to Lower Inflation
- ASML pre-released their updated view on demand and capacity – ahead of Nov 11, 2022 Investor Day – BETTER THAN EXPECTED
- Inflation now past peak and semi/tech likely see sustained bid. Even better for those names that are monopolies in the EUV space = ASML and Lasertec
- Remain bullish Lasertec despite the recent rally. Better earnings and order outlook, and multiples to drive share price
Softbank Group Q2 22 Results Reaction: Alibaba Gains Offset VF Losses but Buybacks Over
- Alibaba driven gains largely offset record losses from Q1 although this has been widely expected as were updates on the timing of ARM’s IPO from FY22 (Mar23) to calendar 2023
- With Q2 losses, Vision Fund is clearly in the red for the first time since Q4 19 driven by downside for both public and private investments
- Buybacks are over and what appears to be renewed macro enthusiasm is offset by a stronger yen and a low discount to NAV
Rakuten (Neutral) – Q3 22 Results Reaction: Mobile Subscriber Losses as Free Users Flee
- Financial results were largely as expected with good news in fintech on a return to double-digit revenue growth but continued steep losses in mobile
- Mobile subscriptions fell by 280K (-9% over two quarters) as users of free plans churned off keeping YoY growth to 2%
- The company is keen on the potential once platinum band spectrum is available but that is up to two years away
Starbucks Opens its 6,000th Store in China
- While the world moves on from the events of 2020 and the pandemic fades through the rear-view mirror, a cluster of fallout still clings to Starbucks, the world’s largest coffee retailer.
- The operational stress of the pandemic, as well as concerns over in-store safety1 , catalysed demand for unionisation in the company’s most integral market, the United States.
- Since the first store won its union vote in Buffalo, New York, in December 2021, over 330 stores in 38 states have filed for an election, yielding more than 250 successfully unionised stores.
Reminder: Earnings Quality Short Candidates: Moderna, Sonos, Knowles, Juniper Tech
- This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.
- They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts. When the company’s issues become well-known, there is often multiple compression as well as a rerating.
- These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings. This week: Moderna, Sonos, Knowles, Juniper Tech
Indian Banks Screener to September-End 2022: Credit Delinquency in Check, for Now
- Our Indian bank profitability and credit quality screens, in terms of credit quality metrics to end-September 2022, continued in a constructive vein, although pre-provision profitability trends generally softened
- The solid macro-economic backdrop has supported credit quality to September-end, as the declining NPA ratios and cost of risk show; yet India may be approaching peak level for its macro-indicators
- Much good news is discounted by the macro and easy credit conditions; we are negative on State Bank of India and ICICI Bank, but we remain positive on HDFC Bank
Qualcomm Inc: Collaboration With Renault & Other Developments
- Qualcomm delivered a mixed set of results as its revenues were higher than the market expectations as a result of a solid chipset business performance and good execution of its diversification and expansion plan.
- The management is working towards transforming Qualcomm from a wireless communications provider for the mobile industry to a provider of linked processors for the intelligent edge.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
ASRT: Asserting a Low Valuation
- ASRT reported third quarter revenue that were down from the second quarter due to ASRT deciding to remove Indocin from the Government’s voluntary 340b pricing program
- The addition of Sympazan gives ASRT a new asset in growing revenue and adjusted EBITDA in 2023
- ASRT reported third quarter revenue of $34.2 million compared to our estimate of $31.6 million. We were expecting ASRT’s commentary related to Indocin would yield lower revenue than it did.
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