In today’s briefing:
- Food & Life: Can’t Avoid Headlines For Too Long & Starting to Fall Back Towards The Rest of The Pack
- Buy Shenzhou on Margin Recovery
- Asia Gaming: Wynn Macau Poised to Move up as Balance Sheet Is Bolstered and Headwinds Begin to Ease
- Overearning Short Candidates: Builders FirstSource, IBM, Forward Air Co, Deere & Co.
- BOC HK – Negative Lending Growth, As Credit Costs Ratchet Higher?
- Credicorp (BAP US); Opportunity to Come from the Peruvian Political Crisis
- Elastic NV: Improvements To The Elastic Search Platform & Other Drivers
- Agnico Eagle Mines: The Real Money Printing Press
- Okta Inc: Improvements In The Okta Workforce Identity Cloud & Other Developments
- Snowflake Inc: Investment In OpenAP & Other Drivers
Food & Life: Can’t Avoid Headlines For Too Long & Starting to Fall Back Towards The Rest of The Pack
- Food & Life (3563 JP), best known for its affordable conveyor belt Sushi restaurant chain Sushiro, is looking to break out after dropping more than 60% in the last year.
- This breakout coincides with Sushiro’s overseas growth as the segment revenue and OP grew 27% and 108% QoQ respectively in the previous quarter.
- Given its tendency hit the headlines, mostly for the wrong reasons, risks rewards aren’t that great. Multiples have downside potential with Sushiro’s profitability falling towards peers.
Buy Shenzhou on Margin Recovery
- Gross margin is under pressure throughout 2022 but will recover in 2023
- Brands have been focusing on destocking and the inventory levels trend down
- Capacity is expected to grow by 10% to low teens y/y in 2023
Asia Gaming: Wynn Macau Poised to Move up as Balance Sheet Is Bolstered and Headwinds Begin to Ease
- Parent Wynn Resorts Ltd’s. REIT deal for its Boston property, proceeds of US$1.7b rings its balance sheet cash to US$4.4b.
- 3Q22 results earnings miss entirely due to China zero covid policy that could begin to ease earlier than anticipated by the market.
- At a P/E (ttm) of 8.44 the stock is yet to reflect a more positive tone of its strengthened balance sheet, 6.1% stake in the parent bought by an activist.
Overearning Short Candidates: Builders FirstSource, IBM, Forward Air Co, Deere & Co.
- This model seeks companies that are potentially “overearning”, defined as companies with unusually high margins relative to their own history or relative to the industry.
- The reasons for the margin increases are sometimes unsustainable or fraudulent. The critical judgement involves to what extent unsustainable margins are embedded in a company’s forecasts and/or the stock’s valuation.
- These shorts tend to have moderate to higher betas, higher valuations due to recent strong results and good short responses to subsequently disappointing earnings.
BOC HK – Negative Lending Growth, As Credit Costs Ratchet Higher?
- Credit costs at present are only 20bps of loans, these can move to 100bps or higher
- Population data even before 2H22 shows contraction, with negative implications
- Property prices are turning down even faster, which is banks’ loan collateral
Credicorp (BAP US); Opportunity to Come from the Peruvian Political Crisis
- The ousting of Peruvian President Pedro Castillo follows his failed attempt to dissolve Congress; Vice-President Dina Boularte was sworn in yesterday as the new first female Peruvian President
- Political instability is not uncommon in Peru, but an end to Castillo’s chaotic, market-unfriendly administration with its high turnover in ministerial posts should improve investor sentiment and encourage increased FDI
- When we screen Peruvian bell-weather Credicorp against its LatAm peers, we conclude that, although it is not deep value, it is attractive versus its own history and selected peers
Elastic NV: Improvements To The Elastic Search Platform & Other Drivers
- Elastic NV managed to deliver an all-around beat in the last result as it continues making progress across innovation.
- The company has recently announced innovations over the Elastic Search platform, the prominent data analytics platform for search-powered solutions for transforming the way organizations observe, search, and protect their data.
- This quarter, Elastic expanded business with RDD, the leading supply chain, print, packaging, and marketing solutions provider.
Agnico Eagle Mines: The Real Money Printing Press
- Agnico Eagle Mines has already delivered outstanding results in a period of less than 6 months.
- The risk profile of Agnico remains low with an exceptionally high dividend yield.
- The company appears very attractive in spite of the inflationary headwinds, according to the company’s chief executive.
Okta Inc: Improvements In The Okta Workforce Identity Cloud & Other Developments
- Okta is delivered a decent set of third-quarter results beating revenue expectations of Wall Street and delivering narrower than expected losses.
- Since the beginning of the year, Okta’s business with public sector businesses has grown by more than 65% thanks to outstanding successes in the worker and customer identity clouds.
- The management also unveiled improvements to the Okta Workforce Identity Cloud, enhancing its one control plane for managing identities across all business users and resources.
Snowflake Inc: Investment In OpenAP & Other Drivers
- Snowflake delivered yet another all-around beat as the company continues to achieve robust growth along with improved unit economics, operational profit, and free cash flow.
- Despite the weakening global macro context, Snowflake’s data strategy for contemporary businesses and institutions has helped it survive.
- Besides, the Snowflake Data Cloud continues to be well-received by major businesses and institutions.
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