In today’s briefing:
- Fast Retailing: Earnings Preview
- Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit
- Shipping Corporation of India Land & Assets Ltd.: Demerger and a Value Bet
- Shenzhou Intl (2313 HK): Higher Visibility Into Restocking Cycle
- Update on active Ideas
- RPSG Ventures: FMCG Business Is Scaling Up Well | BPO Business Is Recovering
- China Resources Beer Holdings (291.HK) Starts 2024 with a Bang!
- Abercrombie & Fitch Co: Initiation of Coverage – Its Enhanced Product Differentiation & Expansion Responsible For The Recent Growth? – Major Drivers
- Symbotic Inc. (SYM): Fast Growing AI-Powered Warehouse Automation Supplier
Fast Retailing: Earnings Preview
- While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
- Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
- Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.
Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
- A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
- The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored.
Consolidation in the Med-Tech Sector? Eiken and Hogy to Benefit
- The med-tech sector is ripe for consolidation. Smaller players like Hogy Medical (3593 JP) , and Eiken Chemical (4549 JP) exhibit sub-par growth and lagging valuations
- Activist investors like ValueAct Capital, Dalton and Asset Value have recognized an opportunity for growth and potential M&A
- Both Hogy and Eiken trades at a deep discount to larger domestic peers and stand to benefit the most from any consolidation
Shipping Corporation of India Land & Assets Ltd.: Demerger and a Value Bet
- Discover SCILAL’s debut in the stock market after demerger form Shipping Corp Of India (SCI IN), its strategic disinvestment, and the hidden value within its diverse asset portfolio.
- Real Estate Assets in company and future outlook by management of SCILAL over the years going forward.
- The market value of assets is twice more than the book value. Value bet but can take longer time to monetize the same.
Shenzhou Intl (2313 HK): Higher Visibility Into Restocking Cycle
- Shenzhou Intl Group Holdings (2313 HK) reported 2023 results yesterday. 2H23 continued to be weak, with sales down 6% yoy. Net profit grew 10% yoy in 2H23.
- Most importantly, the company sounded quite bullish on 2024 during the results briefing, which greatly improves the visibility in the order recovery thesis of the company.
- I continue to believe that Shenzhou is the best proxy for gaining exposure to the global sportswear sector, especially given the improved visibility now.
Update on active Ideas
- I mentioned Noah holdings as a trade to buy before earnings since I anticipated an announcement of significant capital returns.
- This has worked out well with over $2 in dividends announced. Half of that dividend will be recurring.
- So I sold out all of my shares at just under $12. This was never a high conviction investment, but merely a trade. Marking it as a 18% return.
RPSG Ventures: FMCG Business Is Scaling Up Well | BPO Business Is Recovering
- With around 3.4% QoQ CC revenue growth in Q3FY24, the BPO business, Firstsource Solutions (“Firstsource”), is recovering back to normal, after seeing cyclical dip over the past couple of years.
- The FMCG business is scaling up well. Q3FY24 revenues came in at INR 135cr, a growth of around 12% QoQ, led by festive season demand. YoY growth was 17%+.
- The Sports business reported muted revenues in Q3FY24 as currently the revenue stream is dominated by the IPL event which typically happens in the March to June period.
China Resources Beer Holdings (291.HK) Starts 2024 with a Bang!
- Full -year 2023 results and 2024 forecasts indicate business going to plan
- The Baijiu division, key to a rerating, grew sales 50% y/y in the first two months of the year
- The beer division continues to reap the benefits of its premiumisation strategy
Abercrombie & Fitch Co: Initiation of Coverage – Its Enhanced Product Differentiation & Expansion Responsible For The Recent Growth? – Major Drivers
- Abercrombie & Fitch Co.
- emerged from 2023 with significant achievements, marking it as a defining year for the company.
- The brand witnessed a 15.8% increase in sales, reaching $4.28 billion, which not only represents its second highest annual sales level in history but also a testament to its robust growth strategy.
Symbotic Inc. (SYM): Fast Growing AI-Powered Warehouse Automation Supplier
- Symbotic is a warehouse automation technology leader and offers end-to-end AI-powered robotic and software platform for supply chains.
- SYM’s hi-tech platform forms its deep competitive moat underpinned by significant R&D spend of $800 million and 575 issued or pending patents.
- Our positive outlook for SYM is underpinned by its hi-tech platform , a large TAM, robust order backlog ($23.2B) and its JV deal with Softbank that opens a large market.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
