In today’s briefing:
- Escorts Kubota (ESCORTS IN) | Alarming Allegations by Dealers
- Taiwan Dual-Listings – TSMC Premium Continues to Decline, ChipMOS ADR Discount Widens
- US CHIPS Act: Long Intel Vs. Short TSMC or UMC?
- XL Axiata (EXCL IJ) – Following the Road to Convergence Fuelled by Data
- Snowflake FY2Q23 Earnings: High in the Hierarchy of Needs
- Helixmith (084990 KS): Overhang on Phase 3 Clinical Trial Uncertainty Got Removed
- Edelweiss: Credit Business Is Normalizing; Rest of the Businesses Are Scaling Up Well
- Sinotrans (598 HK): Still a Very Decent Performance
- Imugene (IMU AU): Clinical Trial Continued to Advance; Cash Position Still Strong
- Nike Inc: Innovation For The Pregnant Women Niche & Other Drivers
Escorts Kubota (ESCORTS IN) | Alarming Allegations by Dealers
- Escorts Kubota (ESCORTS IN) ‘s domestic market share as of FY22 stood at 10.3 % vs 12% in FY20 against the aspiration of 15% for FY22.
- Our interactions with various dealers across key northern and eastern states suggest caution and structural inability to regain market share loss.
- Post equity infusion, Kubota Corp (6326 JP) is probably in for more surprises than what it might have initially hoped for.
Taiwan Dual-Listings – TSMC Premium Continues to Decline, ChipMOS ADR Discount Widens
- TSMC’s ADR premium falls past the lower bound of its 3-year range
- All dual-listed Taiwan semiconductor companies have seen a decline in premiums or an increase in discounts.
- ChipMOS ADR’s discount to the company’s Taiwan listing widens further.
US CHIPS Act: Long Intel Vs. Short TSMC or UMC?
- Intel and Brookefield Asset Management recently announced that they intend to jointly invest US$30 billion into building Intel foundries in Arizona, leveraging on the US CHIPS Act.
- Although inflation and declining consumer demand continue to affect all chipmakers, U.S. strategic objectives and policies will set Intel on a new growth trajectory and competitive position in our view.
- A Long Intel/ Short Taiwan semiconductor strategy present a compelling opportunity. We prefer Long Intel vs. Short UMC, however, we expect Long Intel vs. Short TSMC to also be profitable.
XL Axiata (EXCL IJ) – Following the Road to Convergence Fuelled by Data
- XL Axiata 2Q2022 results reflected a better pricing environment and the success of its focus on high-quality service, with the highest data speeds, leading to higher subs and ARPUs.
- The company continues to migrate its subscribers to 4G, and build out its 4G BTS whilst shutting down its 3G towers, which should be positive for the quality of service.
- XL Axiata (EXCL IJ) should be seen as the leader in providing converged services in Indonesia, with the acquisition of Link Net accelerating its lead, which will boost long-term profitability.
Snowflake FY2Q23 Earnings: High in the Hierarchy of Needs
- Product revenues beat consensus by 7% and EBIT margins by 5%, while full year guidance was and margins were raised ~2% ahead of consensus.
- Fears of a consumption model driven slowdown (like Datadog) did not play out, and cRPO growth actually accelerated QoQ to 81%.
- Data sharing is picking up with larger customers, with 65% of $1M+ customers utilizing stable edges.
Helixmith (084990 KS): Overhang on Phase 3 Clinical Trial Uncertainty Got Removed
- Helixmith (084990 KS) shares have been sliding since end of June due to delay in receiving the recommendation from the U.S. data monitoring committee for its phase 3 clinical trial.
- On August 18, Helixmith received recommendation to continue phase 3 clinical trial of its lead candidate Engensis (VM202) for diabetic peripheral neuropathy, thereby removing the overhang.
- Engensis has attracted high interest from investors, as it is targeting a large addressable patient population of nearly 8.5 million in the U.S. alone, with high unmet medical need.
Edelweiss: Credit Business Is Normalizing; Rest of the Businesses Are Scaling Up Well
- Edelweiss’ credit business is now normalizing with GNPA at 2.5% and NNPA at 1.8%. Credit costs came in negative as asset quality is improving and excess provisioning is being normalized.
- Rest of the businesses continue to scale up well. Edelweiss is among the fastest grower in the mutual fund and insurance businesses. Wealth Management business continues to do well.
- At current valuation, Edelweiss is available cheap and as per our estimates, an investment in it has potential to more than quadruple by the end of FY25.
Sinotrans (598 HK): Still a Very Decent Performance
- Recurring profit for Sinotrans (598 HK) increased 16.4% in 1H22 and improved to 16.6% in 2Q22. The declaration of an interim dividend also highlights management’s confidence.
- We expect a pick-up in 2H22 as negative impact of the lockdowns faded. Also, contribution from DHL-Sinotrans should return to growth as international express regain momentum.
- Strong financial position should allow for higher dividend payout, and currently it is already yielding 10.4%. Its 3.6x PER and 0.4x P/B are cheap, especially relative to ROE of 11.3%.
Imugene (IMU AU): Clinical Trial Continued to Advance; Cash Position Still Strong
- Imugene Ltd (IMU AU) has recently dosed the first patient in cohort 3 in the phase 1 clinical trial of oncolytic virotherapy candidate, CHECKvacc for breast cancer.
- As at June 30, 2022, Imugene had cash balance of A$99.9 million, providing a runway to support its clinical pipeline and operations into 2025.
- As the clinical trials progressing, the company has appointed an experienced life sciences CFO.
Nike Inc: Innovation For The Pregnant Women Niche & Other Drivers
- Nike Inc had another stellar quarter and managed to surpass Wall Street expectations in terms of revenues as well as earnings with plenty of new innovations coming out.
- A new lifestyle show, Nike Spark Flynit, was launched that introduces the latest innovation of NIKE Running with the Spark cushioning system.
- This quarter, in Jordan, Luka Doncic debuted his anticipated signature shoe Luka 1, during the NBA Playoff.
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