In today’s briefing:
- Ihi (7013) | Multiple Engines for Growth
- Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies
- HK RE: Retail to Benefit from Tourism Recovery. Buy HLP 101 HK & NWD 17 HK on Attractive Valuation
- US Banks – Is System Deposit Flight Being Contained?
- Energy China (3996 HK): Tempting Risk-Return Payoff
- BeiGene (6160.HK/BGNE.US) 23Q1 – Qualitative Changes Are Taking Place
- PC Industry Monitor: Close Long Asus, Short Acer; Now Reverse the Trade and Long ACER Vs. Short Asus
- Taiwan Tech Weekly: Hon Hai Earnings; Long/Short Into Asustek Results; Quanta Tracking Apple Shares
- Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
- Shanghai Tofflon Science (300171.CH) 2022/23Q1 – It’s Better Not to Go Against the Trend
Ihi (7013) | Multiple Engines for Growth
- We look for the new MTP to present a growth outlook in the Aerospace division driven by a recovery in the civilian aircraft market
- IHI is a key beneficiary of structural growth themes of higher defense spending and energy transition
- We believe that the market has been overly concerned about a growth plateau. At 9x TEV / NTM EBIT, the stock is a bargain versus global peers
Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies
- Chinese authorities have begun to ban public opinion against non-state-owned companies.
- These actions were the opposite to what the authorities did in past years.
- We believe the authorities need non-state-owned companies to bail the unemployed young people out of the weak job market.
HK RE: Retail to Benefit from Tourism Recovery. Buy HLP 101 HK & NWD 17 HK on Attractive Valuation
- Hong Kong retail sales strongly rebounded 41% yoy in March
- During May Day Holiday (Apr 29 – May 3), there was 625k mainland visitors to Hong Kong, around 63% of pre-COVID level
- Among all RE sub-sectors, retail and residential will be the first to recover (already seeing recovery), office will be lagging and the last.
US Banks – Is System Deposit Flight Being Contained?
- Deposit outflows for 1Q23 in the most affected of the mid-sized US banks were in low double digits, much less severe than the deposit collapse suffered by First Republic
- In fact, since the end of 1Q23, some smaller banks have reported slightly positive deposit flows, and the recent usage of Fed and FHLB funding lines is not alarming
- We review a select group of mid-sized US banks focusing in on a number of key metrics; despite the challenging times, we like M&T Bank and Western Alliance
Energy China (3996 HK): Tempting Risk-Return Payoff
- China Energy Engineering (3996 HK) is a laggard in this round of “China style valuation” rally. With strong earnings and project backlog, there is good room to catch up.
- Its 1Q23 earnings growth is ahead of the infrastructure trio, and so as the new contracts signed. Moreover, it has a faster growth in overseas market.
- The 3-year EPS CAGR is projected at 16.3%, yet it just trades on 5x PER. Its ROE of 9.4% makes it attractively priced at only 0.4x P/B for FY23.
BeiGene (6160.HK/BGNE.US) 23Q1 – Qualitative Changes Are Taking Place
- A significant change in 23Q1 was not just a narrowing of net loss, but a sudden turnaround in sales profit under the rapid revenue growth, which was an important leap.
- BeiGene’s commercialization capabilities largely rely on high expense level that significantly deviating from the industry average, making eventual commercialization success more difficult. BeiGene is an “outlier” even among global peers.
- How to control expenses while ensuring sustained sales growth and long-term competitiveness is an important issue for BeiGene. If no new blockbuster product emerges ultimately, high valuation would not last.
PC Industry Monitor: Close Long Asus, Short Acer; Now Reverse the Trade and Long ACER Vs. Short Asus
- Acer shares slumped 7% in a day after the company missed analyst expectations. Acer has now underperformed Asustek since our March 21st Long Asustek vs. Short Acer recommendation.
- Despite the earnings miss, Acer management said it believed 1Q23 will be the trough for the business and metrics should be improving going forward.
- We believe one can consider reversing our Long Asustek vs. Short Acer Trade to become Long ACER vs. Short Asustek, and hold this trade through Asustek’s upcoming earnings results.
Taiwan Tech Weekly: Hon Hai Earnings; Long/Short Into Asustek Results; Quanta Tracking Apple Shares
- Major earnings this week including Hon Hai, Novatek, Wistron, Asustek, and more.
- We believe one can consider Long Acer vs. Short Asustek into Asustek’s results this week.
- Apple Suppliers — Quanta has tracked Apple’s success while others have lagged by a large margin.
Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
- Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
- The company has provided to shareholders an executive summary from the Frost & Sullivan Feasibility Study for its titanium powder project in Abu Dhabi which concludes that the project is feasible across technical, financial and market parameters, and supports the Chairman’s prior guidance to shareholders.
- Amaero is progressing an 827-tonne a year titanium powder facility in the United Arab Emirates which it expects to greenlight before the end of this financial year.
Shanghai Tofflon Science (300171.CH) 2022/23Q1 – It’s Better Not to Go Against the Trend
- Tofflon needs to go through a considerable period of adjustment after experiencing the high point of performance. Its “periodicity” is obvious, which means the performance high growth is not sustainable.
- The decline in growth rate of contract liabilities suggests that the future prospects is highly uncertain. Overall margins could continue to drop due to reduction in high margin overseas orders.
- Unless there’s a major catalyst, it’s difficult to see significant valuation boost in short term. Given the current downward trend in performance, valuation may continue to decline in the future.
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