In today’s briefing:
- Indiamart Intermesh Ltd- Forensic Analysis
- Tencent Increases Its Investment in Medical and Healthcare
- GMO Q2 2022 Quarterly Letter
- Nintendo (7974) | Beware of Cycles
- Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday
- Rakuten: Two Consecutive Quarters of Narrowing Mobile Losses Could Change Price Momentum
- Mitra Adiperkasa (MAPI IJ) – Universally Retail
- Vipshop: Rebound in Chinese Apparel Sales Should Trump Conservative Management Guidance
- Summers Value Partners Q2 2022 Investor Letter
- Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook
Indiamart Intermesh Ltd- Forensic Analysis
- IndiaMart (INMART IN)‘s annual report analysis highlights some of the issues that should not be overlooked.
- In addition to changes in important disclosures, the company still continues to see less flow-through of deferred income into revenues.
- On the assets side, it should be noted that the strategic investments are yet to show any promise, while fixed assets show some concerns including non-verification, disposals, etc.
Tencent Increases Its Investment in Medical and Healthcare
- Tencent known to outspend its peers on strategic investments, has made only around 80 investments and acquisitions so far this year compared to more than 200 deals done in 2021.
- Tencent’s vast investment portfolio has attracted regulatory scrutiny and it’s the market’s belief that Tencent was asked to divest some of its stake in other leading tech players in China.
- However, over the last few months, Tencent has been increasingly investing on companies operating in the medical field.
GMO Q2 2022 Quarterly Letter
- Equity investors in countries with overvalued currencies have two ways to lose and those with undervalued currencies have two ways to win.
- Today’s strong USD looks, in the end, to be our currency and our problem.
- Keep an eye out for dangerously destructive economic policies, but don’t use that as an excuse to avoid the asset class entirely.
- The yen and euro are at their cheapest levels in decades and hedging emerging market equities would be an expensive proposition even if the currencies weren’t generally cheap versus the USD.
Nintendo (7974) | Beware of Cycles
- Nintendo’s stocked recently popped on two positive developments – Splatoon 3 sales set a record for a Switch game & Nintendo Direct announced the release date of Legend of Zelda
- Switch life cycle is coming to an end. The cycle had been extended by Covid and supply issues for Sony PS5
- Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower
Nanya Tech: Valuation Backtest Implies Upside, Potential Catalyst Thursday
- We estimate that Nanya Technology has the highest level of net cash as a percent of its market cap in its history and it is trading well below 1x PBV.
- The median 6-month total shareholder return has been 40.5% for instances since 2012 when Nanya Tech has traded below 1.0x PBV.
- Micron’s results this Thursday will provide color on Nanya’s outlook and could be a catalyst.
Rakuten: Two Consecutive Quarters of Narrowing Mobile Losses Could Change Price Momentum
- Rakuten’s Mobile losses have held back its share price over the last few years, but it is finally starting to show some improvements with costs shrinking sequentially in 2QFY22.
- However, most investors seem to have overlooked this QoQ drop thinking that it is driven by the impact of seasonality.
- With the loss of subscribers in the previous quarter seeming temporary, we are expecting revenue growth through ARPU expansion to more than offset Rakuten Inc (4755 JP) Mobile’s cost growth.
Mitra Adiperkasa (MAPI IJ) – Universally Retail
- Mitra Adiperkasa (MAPI IJ) has proved itself with flying colours during the pandemic and continues to do so as mobility resumes, with offline sales recovering but digital remaining firm.
- The company continues to build out its newer brands such as Boots, Footlocker, Sketchers, DigiMAP, and Lego, with 161 store openings in 1H2022 and more to come in 2H2022.
- Mitra Adiperkasa is starting to ramp up its regional presence in Vietnam and the Philippines especially, which represents a future growth driver. Valuations are attractive despite the recent run up.
Vipshop: Rebound in Chinese Apparel Sales Should Trump Conservative Management Guidance
- Following a contraction in Chinese apparel sales since 3Q21, and similar negative GMV and product revenue growth for Vipshop, we have witnessed a recovery to growth since June.
- Current sell-side forecasts are, however, still for a -10.8%y/y contraction in product revenue for Vipshop in 3Q22f, followed by a -4.4% contraction in 4Q22f which seems overly pessimistic.
- Given the conservative nature of near-term top-line growth expectation, and management guidance, the probability for positive earnings surprise seems high.
Summers Value Partners Q2 2022 Investor Letter
- Summers Value Partners is a boutique value manager that uses a focused, long-term approach to investing in areas of the market where most managers are unwilling or unable to participate.
- The Summers Value Fund LP (“the Fund”) returned -25.9% net in the first half of 2022.
- The majority of our decline took place in the first quarter as we were too slow to react to the Fed’s decision to increase interest rates and shrink its balance sheet to cool the over-heated economy.
- The next stage of the bear market will most likely involve lower corporate earnings due to a more challenging businessclimate and reducedaccess to capital.
Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook
- Caregen Co Ltd (214370 KS) is a niche biotech company, with focus on biomimetic peptide-based cosmeceuticals and medical devices targeting anti-aging industry. The company has a large addressable market opportunity.
- Despite the negative impact from the re-spread of COVID-19, Caregen reported 4% y/y growth in total revenue in H1 2022, with operating profit margin expanding 260bps.
- Caregen’s COVID-19 nasal spray is in phase 1 trial. FDA has registered Caregen’s health functional food to control blood sugar as a new dietary ingredient (NDI).
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