Daily Brief Equity Bottom-Up: Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea and more

• Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.
• We expect the consensus to raise the company’s sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period. 
• Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. 

• Rakuten Bank is a clear beneficiary of the steepening yield curve in Japan, with its low LDR and healthy capital ratio
• Rakuten Bank’s LTM PE multiple of 11.4x, LTM PBV ratio of 1.5x and ROE of 13.8% makes it the best ROE to PBV ratio bank among its digital peers
• Rakuten Bank is also the lowest cost to serve Japanese digital bank; it is narrowing the PBV ratio discount gap with SBI Sumishin

• Li Ning (2331 HK) reported today a headline beat on 1H23 results, with sales up 13% yoy and net profit down 3% yoy.
• Both numbers are around 5% better than the already low market expectations. 
• However, a closer look at the results shows that the quality of the beat is low. 

• Sino Land is a developer in Hong Kong and China with both DP and IP rental business. 
• Sino Land has a net cash position of HKD41bn, its strong balance sheet makes the stock a defensive play
• Despite trading at attractive valuation (0.46x P/B), we see there is a lack of catalyst and the stock may remain as value trap

Pixium Vision recently announced that it has received a €3m bridge financing loan from shareholders Sofinnova (€1m) and Bpifrance (€2m), which extend its cash runway through to the end of November. The loan will bear interest at 12% pa and mature on 31 July 2023. The loan is a positive step and signal of confidence from these two institutional investors as Pixium works towards securing broader additional financing to bring it past the conclusion of the PRIMAvera European pivotal study, for which results are still anticipated in or around year-end 2023. We maintain our pipeline rNPV valuation of €140.1m but our equity valuation per pre-consolidation basic share is €0.90 (vs €0.92 previously) after adjusting for estimated H123 net debt.

SIGA has reported Q223 results, which came in largely as expected, and management has provided key operational highlights. Activity in the second half of the year has started to firm up with upcoming TPOXX deliveries (for H223) and better-than-expected international orders (offsetting IV orders that will likely be received in FY24). We maintain our FY23 product revenue estimate of $155m and note H223 management sales guidance of $143–158m. We await further clarity on PEP immunogenicity trials, which we believe are the next material catalyst. As we incorporate the reported quarterly results and slight shift in revenue mix for the balance of the year, our valuation adjusts to $1.24bn or $17.46 per share (vs $1.25bn or $17.53 per share previously).

• ARLO reported another quarter of net subscriber adds above expectations and putting the Company on a faster pace to achieve 3 million paying subscribers
• At the end of the June quarter, ARLO had annualized recurring revenue of approximately $200 million even though hardware revenue has remained at levels not seen in two years
• The recurring revenue model gave ARLO the ability to generate free cash flow in the Q2. This inflection point should solidify ARLO’s valuation on a recurring revenue basis

• In Egypt, 2Q23 WI production was 11,579 boe/d (guidance of 10.6-11.6 mboe/d) with 13 new wells drilled in 1H23. • As a result of this strong operational performance, VAALCO has increased the lower end of the FY23 production guidance range from 20.4-24.4 mboe.d to 22.4-24.3 mboe/d.
• With better drilling efficiency in Canada and Egypt, the FY23 capex guidance has been reduced from US$70-90 mm to US$65-75 mm.

• ________________________________________ ADX Energy (ADX AU)C; target price of A$0.08 per share: A high-quality industry partner in Austria to fund and accelerate Anshof development – ADX is farming out 30% WI in the Anshof discovery to MND.
• MND will also fund ADX’s share of drilling and completion costs of A$3.9 mm per well (total of A$7.8 mm for two wells).
• Kosmos Energy (KOS US/LN): 2Q23 results – 2Q23 net production was ~58 mboe/d.

Country Garden Holdings Co. Ltd., one of China’s largest property developers, said it expects to report a record, multibillion-dollar net loss for the first half, raising further concerns as the company slides deeper into a debt crisis.

Guangdong-based Country Garden estimated its net loss at 45 billion yuan to 55 billion yuan ($6.2 billion to $7.6 billion) for the first six months of 2023, compared with a net profit of 1.91 billion yuan a year ago, according to a Hong Kong exchange filing late Thursday.

The company warned July 31 that it would report red ink for the first half.