In today’s briefing:
- Hong Kong Stocks Priced For Liquidation
- Yamazaki Baking: Profitability to Double Over The Next Few Years
- Closing the Gap Between LG Energy Solution & LG Chem Pair Trade
- Tencent (700 HK): Game Market Weak in 3Q22 and to Be Worse in 2023
- Delta Taiwan Vs. Thailand Monitor: Major Disconnect Post Thai Earnings, Trade Taiwan Into Earnings
- Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail
- Alibaba ADR: Initiation of Coverage – Business Strategy & Key Drivers
- IRDM: Orbiting Subscriber Growth
- IBM Corporation: Acquisition-Led Growth In The Cloud Market & Other Drivers
- Lam Research: Major Drivers
Hong Kong Stocks Priced For Liquidation
- With investors chucking in the towel and the HSI touching a thirteen-year low, it’s time for some old school perspective.
- This insight looks at Benjamin Graham’s Net Nets, (current assets less current liabilities), then subtract any debt not included in current liabilities. More simply, current assets less total liabilities.
- Graham would conclude these stocks are priced for liquidation. Stocks discussed include Sinopec Engineering (2386 HK), PC Partner (1263 HK), Linklogis (9959 HK), Antengene (6996 HK) and property service companies.
Yamazaki Baking: Profitability to Double Over The Next Few Years
- Yamazaki Baking (2212 JP)’s Q3 was mixed with revenue growing 5.6% YoY to surpass consensus by 3% but OP of ¥1.6bn was ¥650m below consensus.
- However, this was mostly priced-in, as shares are currently trading at the bottom end of the upward trend channel.
- With wheat prices down 23% from the peak, pressure from input price inflation should alleviate, resulting in margin upside in the fourth quarter.
Closing the Gap Between LG Energy Solution & LG Chem Pair Trade
- In this insight, we discuss a pair trade between LG Chem Ltd (051910 KS) (go long) and LG Energy Solution (373220 KS) (go short).
- LG Chem’s shares are trading at nearly 66% discount to its NAV which we believe to be excessive.
- Another major factor that could negatively impact LGES’ shares in the next several months is the end of the lock-up period for the company’s ESOA shares in about three months.
Tencent (700 HK): Game Market Weak in 3Q22 and to Be Worse in 2023
- In 3Q22, the game market size shrank in China and globally.
- The limitations on time spent on games by juveniles, imposed earlier by the authorities, severely impacted the domestic market.
- We believe the key impact for 2023 is the predictable license approval.
Delta Taiwan Vs. Thailand Monitor: Major Disconnect Post Thai Earnings, Trade Taiwan Into Earnings
- Delta Electronics Thailand shares rose sharply ahead of its earnings result, where profit beat expectations. Delta Taiwan shares fell the same day, thus we see an opportunity.
- Delta Taiwan to report on October 28th. Delta Taiwan is now smaller in market cap than its subsidiary despite earning substantially higher levels of net profit.
- 2023E growth expectations are relatively similar for both, supporting Delta Taiwan to revert vs. Thailand. Trade opportunity into the Delta Taiwan October 28th results.
Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail
- Melco Resorts & Entertainment will report 3Q22 results by November 11th. We expect sustaining recovery for its Manila and temporary Cyprus properties.
- Current valuations of the shares do not yet reflect some recovery expected from increased arrivals due to the re-opening of 4 China provinces and Shanghai, Sporadic closures happen.
- Threats of delisting fron last spring have significantly diminished as MLCO moved aggressively to meet NASDAQ concerns.
Alibaba ADR: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on global tech giant, Alibaba.
- The company is currently trading close to its 52-week low with its results just around the corner.
- Tmall GMV and Taobao experienced a percentage decline in the mid-single-digit in the last quarter.
IRDM: Orbiting Subscriber Growth
- IRDM put the emphasis on its quarterly report versus commentary on smartphones and drones using satellite connectivity. The third quarter results continued to show the ongoing growth in IOT subscribers
- IRDM’s service revenue has been trending higher with added maritime and IOT subscribers
- During the third quarter, IRDM added 7 thousand voice subscribers and 89 thousand IOT subscribers. The rate of voice customer additions can be lumpy depending on seasonality
IBM Corporation: Acquisition-Led Growth In The Cloud Market & Other Drivers
- IBM delivered an all-around beat with over $14 billion in revenue and tremendous growth throughout the portfolio resulting in a sharp recovery in its stock price.
- Technology continues to be a key source of competitive advantage, and there is still a healthy market for hybrid cloud and AI solutions.
- Consistent double-digit revenue growth at IBM Consulting, satisfying client demand for digital transformations.
Lam Research: Major Drivers
- Like most of its semiconductor peers, Lam has witnessed a strong correction after its earlier highs.
- It demonstrated its sustained strength in execution by surpassing the $5 billion revenue for the first time.
- It is ramping up output levels and has increased revenue by almost 10% compared to the previous quarter.
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