In today’s briefing:
- Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls
- Fushan Energy: Back to Interesting Levels
- Lupin Ltd (LPC IN): Muted Q1FY23 Results as The US Sales Dipped Significantly
- Indonesian Banks 2Q22 Screener; Stick with Bank Mandiri, and Negara Is Our Value Pick
- GTX: Turbocharged Free Cash Flow
Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls
- Bilibili reported 2Q2022 results yesterday. Revenue grew 9.2% YoY to RMB4.91bn (in-line with consensus), however, it declined 2.9% YoY sequentially driven by YoY decrease in revenue from mobile games.
- Operating losses for the quarter further widened to RMB2.2bn (vs consensus RMB2.1bn) which accounted for 44.6% of revenues compared to 33.8% in the same period a year ago.
- Bilibili Inc (BILI US) has taken several measure to improve its deteriorating profitability including headcount reduction, S&M cost cuts and close down of unprofitable businesses.
Fushan Energy: Back to Interesting Levels
- Shougang Fushan Resources (639 HK) is back to interesting levels after a correction in HK/China and now trades at 4.5x PE/1.3x EV-EBITDA FY22e and a dividend yield of 17%.
- With >50% of the market capitalization in cash (accounting for the dividend liability), there is an excellent margin of safety in the name.
- A further correction of coking coal prices by 20% from these levels to 1700-1800 RMB/ton would still have the stock trading at a >10% dividend yield.
Lupin Ltd (LPC IN): Muted Q1FY23 Results as The US Sales Dipped Significantly
- Lupin Ltd (LPC IN) reported muted Q1FY23 performance, with revenue declining 15% y/y and 7% q/q to INR36 billion. Revenue from North America is down 24% y/y and 29% q/q.
- Price erosion in the U.S. coupled with shelf stock adjustment on the higher trade inventory are creating a dent to the quarterly numbers.
- We would like to see a sustainable revival in the company’s North America revenue performance and margin improvement, before taking any position in the stock.
Indonesian Banks 2Q22 Screener; Stick with Bank Mandiri, and Negara Is Our Value Pick
- In 2Q22, the six Indonesian banks retain their strong capital adequacy ratios, healthy credit quality and good NPL coverage; yet we see select credit quality headwinds, especially in MSME credit
- We maintain our positive view on Bank Mandiri, with its attractive pre-provision profitability and healthy cost of risk, whilst trading on attractive multiples; we prefer Bank Negara to Bank Rakyat
- We await stronger signals from Bank Permata for its “turn around” potential, especially if management can improve credit quality, and keep lowering its cost of risk to boost returns
GTX: Turbocharged Free Cash Flow
- Garrett Motion (GTX) has elected to pay its quarterly dividend on its Series A Preferred shares in cash in lieu of stock.
- We believe this is a signal to investors on how the business has performed in the Q3 after GTX affirmed its full year adjusted free cash flow guidance in August
- The use of cash removes the compounding effect through issuing more shares, which would nullify the share buyback program GTX has in place
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