In today’s briefing:
- China to Finally Allow Group Tours to Korea and Japan?
- AMD. Doubling Down On AI Acceleration
- Softbank (9984 JP): WeWork on the Brink and Other Factors
- CBA – The Applause Over Results Seem Misplaced, Considering Credit Metrics
- KPIT: Stellar Q1FY24 Earnings
- South Korean Banks Screen; Stick with Hana Financial (086790 KS)
- Taiwan Tech Weekly: U.S. Announces New Bans on Investment into Chinese High Tech Industries
- Fujifilm: Earnings Beat; Yet to Trade in Line with Healthcare Players
- [Coupang (CPNG US, SELL, TP US$14.4) TP Change]: Margin Beat Due to Higher 3P Spend on Ads and FLC
- Universal Entertainment: Pivoting Our Bullish Focus to Basic Verticals from Okada Casino Only
China to Finally Allow Group Tours to Korea and Japan?
- In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days.
- The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.
- Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.
AMD. Doubling Down On AI Acceleration
- AMD reported Q2’23 revenues of $5.4 billion, $100 million above the guided midpoint, flat sequentially but down 18% YoY, largely attributable to weakness in their client segment revenues.
- Q3’23 revenue of $5.7 billion at the midpoint, a modest 5.5% increase sequentially and ~2.5% YoY.
- AMD has a lot riding on its MI300 launch but can it really take a bite from NVIDIA’s lunch?
Softbank (9984 JP): WeWork on the Brink and Other Factors
- Softbank and the Vision Fund’s exposure to WeWork – estimated at USD1.8bn – look increasingly to be at risk of being written off
- Masa’s debts to SoftBank stand at USD5.1bn at 1QFY23 end and we believe that private company valuations are vulnerable, especially in the light of the recent Union Square Ventures write-downs
- Softbank shares trade at a 36% discount to the stated NAV; with Alibaba gone, the potential Arm IPO valuation is critical but SVF1 and 2 private company valuations remain questionable
CBA – The Applause Over Results Seem Misplaced, Considering Credit Metrics
- Credit cost surge in 1H23 is strangely tempered in 2H23 results, although still rising
- Despite rising credit costs, they remain at relatively low levels compared with history
- Data on credit metrics suggest to us that credit costs should have been higher in 2H23
KPIT: Stellar Q1FY24 Earnings
- KPIT reported a strong Q1FY24 with 7.1% constant-currency (CC) revenue growth and EBIDTA growth of 13.3% QoQ. EBITDA margin expanded by 90bp QoQ to end at 20%.
- KPIT is upbeat about the demand environment. OEMs are continuing to spend heavily on new technologies. KPIT itself is investing significantly in R&D, especially Generative AI.
- Deal wins was healthy at $190mm vs typical run-rate of $150mm+. The pipeline is also healthy across practices.
South Korean Banks Screen; Stick with Hana Financial (086790 KS)
- In our latest South Korean banks screener; we stick with quality play Hana Financial but remove contrarian call Industrial Bank of Korea, due to fast rising credit quality headwinds
- NPLs and precautionary quality credits continue on a rising trend, whilst Hana seems to be containing delinquency better than most
- Hana has a low PBV ratio relative to its premium ROE, high post-provision returns, a sound CET1 ratio and a healthy LDR; Kakaobank is one for the watchlist
Taiwan Tech Weekly: U.S. Announces New Bans on Investment into Chinese High Tech Industries
- U.S. has announced new bans on PE and VC investment into key Chinese tech industries.
- Elan Microelectronics, ChipMOS reported good results, two longs to consider as we still see upside.
- Apple earnings short-term trades update — We’re closing out both trades, one at a loss and one roughly flat.
Fujifilm: Earnings Beat; Yet to Trade in Line with Healthcare Players
- FUJIFILM Holdings (4901 JP) reported 1QFY03/24 results today. Both revenue and OP increased 5.6% and 5.2% YoY to ¥660.8bn (vs consensus ¥649bn) and ¥52.2bn (vs consensus ¥52.1bn) respectively.
- Materials segment’s earnings were negatively impacted during the quarter due to a stagnant semiconductor market, however, we expect segment’s earnings to improve with the completion of Entegris acquisition.
- Despite the company successfully transitioning into a healthcare player, Fujifilm is still trading in line with imaging/photocopy players and there is significant upside to the company’s current share price.
[Coupang (CPNG US, SELL, TP US$14.4) TP Change]: Margin Beat Due to Higher 3P Spend on Ads and FLC
- CPNG reported C2Q23 top-line, adjusted EBITDA, and GAAP net profit in-line, 45%, and 102% vs. our estimate, and 2%, 27%, and 49% vs. consensus, respectively.
- Product commerce EBITDA margin rose 2ppts QoQ, which offset the 126% QoQ increase to developing offerings losses, which rose due to increased investment in its Taiwan business.
- Given improved product commerce profitability, we raise our TP to US$ 14.4, but maintain SELL to reflect the impact of China e-commerce on CPNG.
Universal Entertainment: Pivoting Our Bullish Focus to Basic Verticals from Okada Casino Only
- We have been covering UE for five years principally because we were bullish about its intentions to bring its Manila casino business public.
- Our focus has shifted. We see the casino IPO as inevitable but we like the stock now because it has performed well in its core Pachinko and media businesses post-covid.
- If the Okada casino deal gest past current legal issues it would be a catalyst “bonus” to holders who come into the stock now, on a slight dip.
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