Daily Brief Equity Bottom-Up: Kakao Pay: Worsening Profit Margins Due to Heightened Competition and more

• We believe the added threat from Apple Pay has been one of the reasons for the worsening profit margins and lower than expected sales growth of Kakao Pay in 2Q23. 
• After the poor earnings results in 2Q 2023,the consensus is likely to reduce Kakao Pay’s sales estimate in 2024 by 3-5% and positive operating profit to be postponed to 2025. 
• We continue to be Bearish on Kakao Pay due to its high valuations, likelihood of consensus earnings downgrades, heightened competition, and concerns about continued profit margin weakness.   

• HK inno.N (195940 KS) recorded impressive sequential improvement in 2Q23 result, while YoY comparison is negatively impacted by high base due to one-off cervical cancer vaccine revenue recorded in 2Q22.
• In 2Q23, revenue increased 11% QoQ to KRW204B and operating profit grew 172% QoQ to KRW15B. Growth was mainly driven by a 19% QoQ growth in K-CAB domestic revenue.
• HK inno targets KRW1T K-CAB revenue by entering 100 countries globally by 2028. The company is adding new growth engines such as IV fluids products, MSD vaccine, and biosimilars.

• Intel Corporation delivered a positive result and managed an all-around beat last quarter, demonstrating ongoing financial improvement and validating its market approach.
• As per the management, Intel’s ability to successfully implement all of its process and product roadmaps is restoring consumer trust in the company.
• We give Intel Corporation a ‘Hold’ rating with a revised target price.

Founder Securities Co. Ltd.’s third-largest shareholder, China Cinda Asset Management Co. Ltd., is selling 2% of the brokerage’s stock worth 1.2 billion yuan ($166 million).

The share sale is to meet Cinda’s needs for corporate operations, Founder Securities said Monday night in a statement.

China Cinda, the nation’s biggest state-owned bad-debt manager, plans to sell as many as 165 million shares of Founder Securities between Aug. 23 and Feb. 22, 2024, through centralized bidding, the brokerage said.

• JEV announced its first boiler sales order which will support a district heating system of a prominent university.
• This morning, Jericho Energy Ventures Inc. (JEV:TSXV, OTC:JROOF) announced that it has signed its first boiler sales order with a prominent Western University to support its district heating system.
• Additionally, last week, JEV announced a collaboration with a leading alcoholic beverage company to conduct a study using the DCC boiler.

• Strategic shifts continue to reap rewards–IDHoldings’Q1 FY3/2024 performance demonstrated a continuation of the robust results experienced in FY3/2023, with DX remaining the core demand driver.
• Business segment sales in System Management, IT Infrastructure, and Cybersecurity, Consulting, and Training grew strongly YoY, demonstrating that the company’s efforts to remodel its business have been successful to better support and serve its customers.
• We have kept our earnings estimates unchanged for FY3/2024 and beyond, with the expectation that high-margin DX demand will continue, driving continued profitability improvements in the business.

• EDG reported assay results for four drill holes at the Eagle Zone, intersecting high-grade mineralization to a downhole depth of 284m, extending the down-dip plunge by ~180m.
• This morning, Endurance Gold Corporation (EDG:TSXV) provided an update on the ongoing exploration program at its Reliance Gold Project and assay results for four of the deepest holes drilled to date in the Eagle Zone.
• The assays summarized in Table 1, are from the first four holes drilled to test the downdip extensions of mineralization at the Eagle Zone.

Worldwide Healthcare Trust (WWH) has two co-managers, Sven Borho and Trevor Polischuk, at global healthcare specialist OrbiMed. They are very optimistic about the fundamentals for the healthcare sector. The managers are encouraged by high levels of industry innovation, increased clarity around US drug pricing, which removes a long-term overhang, and the acceleration in M&A, which historically has been an important driver for the performance of healthcare stocks. WWH’s results have already benefited from the recent acquisitions of three of its biotech holdings at meaningful premiums to their pre-bid share prices, as pharma companies seek to bolster their revenues and pipelines ahead of an upcoming major patent cliff. The managers are particularly bullish on the prospects for emerging (smaller-cap) biotech stocks as these have experienced the worst and longest period of underperformance in their history. WWH has recently had a 10:1 share split to make the company more accessible for smaller investors.

• Comcast Corporation delivered an all-around beat in the most recent quarterly result.
• Total revenue increased, driven by ongoing operating leverage at the company’s high-margin Connectivity & Platforms business as well as significant growth at studios and theme parks.
• Residential connectivity revenue increased with growth in domestic broadband, wireless revenue, and international connectivity.