In today’s briefing:
- Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
- Sheng Siong (SSG SP): Another Resilient Quarter, Cash Pile Growth Continues
- China Catering Sector: Positioning for Interim Results
- Mizuho – Strong Balance Sheet Management & With Better Credit Metrics
- Asics (7936) | Q2 Preview; Guidance Revision
- CKA (1113 HK): A Strong Conglo, Focus on Capital Mgmt & Consistently Create Value for Shareholders
- Ono Pharmaceutical (4528 JP): Mixed Q1 Result; Guidance Reiterated; Buyback Plan Announced
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023
- ATNI: Leveraging the Network
- Lam Research Corp: 4 Major Drivers That Can Lam Research to New Heights! – Financial Forecasts
Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
- In April, Sekisui Jushi (4212 JP) announced lackluster earnings and unsurprising guidance after a year marked by higher costs. It also announced a small (2.5%) buyback, likely for cross-holdings.
- Yesterday, the company announced Q1 results, and a revision to their buyback programme (to buy 20.2% of shares out). This morning their 22+% (#1) shareholder Sekisui Chemical sold 18%.
- Forward PER dropped nearly 20%. The stock is still outrageously cash/securities-rich and if “re-levered” to zero net leverage would get a high 20s ROE. Hmmm…
Sheng Siong (SSG SP): Another Resilient Quarter, Cash Pile Growth Continues
- Sheng Siong (SSG SP) reported another resilient quarter with revenue growth at 4.7% YoY and profit growth flat, with annualized ROCEs at 27%.
- Net cash grew to 289 mn SGD (highest ever now at 12% of market capitalization). The company is expected to expand by 3-4 stores in FY23 for Singapore.
- While the stock is not cheap at 19x/18x FY23e/FY24e and 3.8% dividend yield, we see prospects for margin expansion in further quarters as execution remains high quality.
China Catering Sector: Positioning for Interim Results
- Positive profit alerts from both Jiumaojiu and Haidilao reflect strong gain in operating efficiency but also point to looming growth deceleration as brands mature.
- We see valuation more reasonable due to a combination of sector de-rating in 1H23 and higher visibility into earnings recovery post these profit alerts.
- Yum China remains best long-term play in China catering sector in our view. While both Haidilao and Xiabuxiabu present trading opportunity, we are still cautious about Jiumaojiu.
Mizuho – Strong Balance Sheet Management & With Better Credit Metrics
- Mizuho has well positioned for YCCC relief with its balance sheet management in 1Q24
- Less low yielding cash assets, higher loans, securities, shift into NCDs, from deposits
- Mizuho reports credit costs reversals and better credit metrics are clear in NPL detail
Asics (7936) | Q2 Preview; Guidance Revision
- Asics is due to report on 8th August. We expect another strong quarter and guidance revision
- Recent results from Nike bode well for Asics – declining inventories and strong top line performance in China
- We believe that higher operating margins will be the key stock driver and see 10% upside to fair value
CKA (1113 HK): A Strong Conglo, Focus on Capital Mgmt & Consistently Create Value for Shareholders
- CKA is a well diversified conglomerate with residential DP and IP (office and retail) in HK and China, with sizable business in UK (pubs) and infra assets in EU
- CKA focuses on capital mgmt (share buybacks, M&As, disposals), and consistently unlock value for shareholders. CKA is in net cash, its strongest balance sheet position for 20 years
- Valuation is extremely compelling. We recommend CKA as a long-term buy and hold for investors and traders
Ono Pharmaceutical (4528 JP): Mixed Q1 Result; Guidance Reiterated; Buyback Plan Announced
- Ono Pharmaceutical (4528 JP) recorded 13% YoY revenue growth to ¥120B in Q1FY24, driven by 12% YoY growth in product revenue. Royalty revenue grew 14% YoY.
- Revenue from Opdivo grew 11% YoY to ¥37.8B, due to expanded use in treatments for gastric cancer, esophageal cancer, urothelial carcinoma, etc. Revenue from Forxiga grew 34% YoY to ¥17.5B.
- For FY24, Ono continues to expect revenue growth of 6% to ¥475B. Operating and net profits are expected to increase 8% and 2% to ¥153B and ¥115B, respectively, for FY24.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
- We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.
ATNI: Leveraging the Network
- ATNI is in the last stretch of its capital expenditure spending plan and subscriber count is beginning to support the larger and faster network
- ATNI has grown the number of high-speed broadband and mobile customers, which is fueling the efficiency in the operating model.
- The transition away from wholesale wireless roaming to network management should further improve the operating structure of the business.
Lam Research Corp: 4 Major Drivers That Can Lam Research to New Heights! – Financial Forecasts
- Lam Research delivered a positive result and managed an all-around beat in the last quarter.
- Additionally, Lam Research experienced a decline in memory spending, particularly in the NAND segment, impacting its revenue concentration.
- Lam Research also announced its plans to advance India’s semiconductor workforce development goals.
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