Daily Brief Equity Bottom-Up: Bangladesh Stock Picks | Quarterly Updates | OLYMPI and more

• Olympic Industries (OLYMPI BD) sustained and improved profitability despite the revenue drop. 
• Square Textiles (SQTT BD) faced challenges in FY23 but now seems to be turning around. 
• Bashundhara Paper Mills (BPML BD) saw a weak performance driven by lower profitability due higher interest rates on borrowings.

• FedEx Corp (FDX US) (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  
• Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    
• Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx’s historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk 

• We rate Japan Exchange as our 2024 high conviction buy in exchanges, for its attractive valuations, as well as its potential for increased market activity and big data revenue growth
• We believe that Japan Exchange is the exception to the rule that DM exchanges need to diversify their revenue bases, as it is under less de-regulatory pressure
• We also stick with Hong Kong Exchange as the deep value pick, as well as Deutsche Borse; we remain negative on Coinbase

• HCG reported a strong Q2FY4 with revenue growth of 16% YoY and 5.7% QoQ. EBITDA margin expanded 120bp QoQ to reach 17.8%.
• Emerging centers are scaling up well with revenue growing at 29% YoY in Q2FY24. Matured centers’ revenue also grew at a healthy pace of 13% YoY.
• HCG is continuing to upgrade infrastructure of existing hospitals. It added 3 robotic surgery machines across 3 centers. It operationalized 4 new LINACs and plans to install six more LINACs. 

• XPER is streamlining its operations by divesting its AutoSense and image sensing product lines to strategically refocus on the burgeoning entertainment sector
• XPER is selling AutoSense and the image sensor business to Tobii for $42.7 million plus a performance fee
• XPER estimates revenue loss from the divesture would be approximately $30 million with adjusted EBITDA moving up

The Brunner Investment Trust (BUT) has two co-managers, Christian Schneider (CIO global growth) and Julian Bishop (global growth specialist), who are supported by deputy managers Simon Gergel (CIO UK equities, UK dividend and value specialist) and James Ashworth (global growth specialist). BUT may be considered as a ‘fund for all seasons’ given its steady outperformance in recent years in widely different market environments. The trust’s NAV performance also stands out positively compared with its 12 peers in the AIC Global sector, ranking first over the last three years, second over the last five and fourth over one year. BUT’s dual mandate of both income and capital growth and its straightforward portfolio of listed global equities may be an ideal way for investors to gain exposure to overseas companies.

The Merchants Trust (MRCH) manager, Simon Gergel at Allianz Global Investors, has been at the helm for the last 17 years during a variety of market environments. He has remained true to his investment process, seeking high-quality companies with solid fundamentals that are trading on reasonable valuations. The manager is very encouraged by the current valuation backdrop as, in aggregate, the UK market is trading at the low end of its 20-year range and within the market there is a wide dispersion of valuation multiples. A large proportion of UK stocks, including those of quality businesses, are trading on forward P/E multiples of less than 10x, providing Gergel with a large pond in which to fish. His approach has proved successful with mid- and long-term outperformance of MRCH’s broad UK market benchmark. With the trust’s dual mandate of income and capital growth, it offers an attractive 5.2% dividend yield and has grown its annual dividends for the last 41 consecutive years.

• Ocean Power Technologies reported 2QFY24 revenue of $0.9 million, up 193% Y/Y from $0.3 million in 2QFY23, driven by sales of WAM-V autonomous vehicles, the contract with the Department of Energy (DOE), and an increase in strategic consulting services.
• The previous quarter had revenue of $0.2 million from leased boats.
• The company reported 2QFY24 gross profit of $0.5 million, compared with a profit of $39,000 in 2QFY23.