Daily Brief Equity Bottom-Up: Keepers Holdings (KEEPR PM) FY23: 30% YoY and more

• The Keepers Holdings (KEEPR PM) demonstrated a 5-year CAGR of 16%/25% revenue/profit growth with an ROE averaging 20%.
• FY23 surpassed our expectations with 17%/30% revenue and net profit growth. 4Q 2023 high season revenue and profit growth was an astounding 21%/75% YoY.
• The stocks trades at 6.9x/6.2x PE FY23/FY24e with a 7.5% dividend yield (assuming ten centavos/dividend based on FY23 earnings for FY24 and a 50% payout ratio). 

• Mitra Adiperkasa (MAPI IJ) has revealed more detail on the impact of boycotts stemming from the Gaza conflict on some of its brands, most notably Starbucks but also including Zara. 
• Management remains upbeat about the outlook for the expansion of new retail outlets across its brand portfolio in Indonesia and Southeast Asia but has reduced guidance for Starbucks. 
• Mitra Adiperkasa remains the best proxy for Indonesian retail with any weakness in the share price an opportunity, with valuations remaining attractive. 

• We explore Citibank’s upcoming division of CitiBanamex and the forthcoming legacy Banamex IPO; given the market’s premium PBV ratios, this should support the Banamex IPO valuation
• Sector trends to January show continued loan growth, but headwinds are building; rising funding costs are eroding credit spreads and credit costs are worsening, even though NPL coverage is healthy
• BanBajio generates an ROE of 28%+, whilst highly capitalized and on more modest multiples than Banorte; we stay cautious on Banorte, due to the growing risks to returns and valuation

• Sinopharm Group Co Ltd H (1099 HK) reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.
• Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.
• Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.

• Nitto Kogyo Corporation (Nitto Kogyo) is a leading manufacturer of distribution boards and panel boards for electrical and telecommunications infrastructure, as well as enclosures that house telecommunications and precision equipment.
• The company has 45 sales offices and nine factories in Japan, including the new Seto Plant, which will begin operating in spring, 2024, and is working to expand its business in ASEAN countries, with overseas production and sales bases in China, Thailand, and Singapore.
• In the renewable energy field, the company is focusing on EMS-related businesses such as solar power generation systems, EV recharging stations, and self-contained industrial solar power storage battery systems.

• The Supply/ Demand imbalance in tankers will persist for longer, supporting earnings
• A beneficiary of increased global tensions and higher oil and gas prices
• Proposed Stock option scheme incentives management in the right way

FY24 trading underpins Norcros’s compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. We believe that Norcros’s key strengths are underappreciated and that legacy issues have been resolved. Its rating is low at 5.6x FY24e P/E, which is attractive, especially when compared to its yield of 5.7% on its well-covered dividend. We retain our estimates and value the shares at 246p, implying c 40% upside.

EML Payments has entered into an agreement to settle all the outstanding deferred consideration payments relating to the acquisition of Prepaid Financial Services Group (PFS) for £15.0m/A$28.8m, which represents a £7.9m/A$15.2m discount to the originally agreed amount. This agreement concludes all outstanding actual and potential liabilities relating to the PFS acquisition in 2020. Combined with the agreed sale of Sentenial for A$54m, this substantially strengthens EML’s balance sheet and simplifies the group’s structure.

• ETU’s land package remains one of the largest (681km2) and most prospective in Ontario, sitting in a top mining jurisdiction in the world spanning 80km along the Porcupine-Destor Fault hosting >100Moz Au.
• The Company has laid out its 2024 exploration plans, highlighting a new focus to high-grade gold showings along the eastern extent of the Hawkins zone – a high probability target for resource growth.
• ETU remains to be one of the cheapest stocks and hosts one of the largest land packages amongst junior explorers.

Lowland Investment Company’s (LWI’s) unconstrained, multi-cap investment policy differentiates it from most peers in the AIC UK Equity Income sector. It offers investors broad market exposure, outside of the large, traditional ‘income stocks’ at a 13% discount to NAV. The underperformance of small- and mid-cap companies versus larger peers has slowed and a turnaround would be very positive for LWI. Portfolio returns are already benefiting from acquisition activity, spurred by low valuations, and LWI has been outperforming its benchmark for the past 18 months. Meanwhile, quarterly DPS is running at 4.9% above the previous year, an annualised rate of 6.4p, reflecting a prospective yield of 5.3%.