In today’s briefing:
- Keisei Electric: Results Unimpressive, Yet Investor Activism Appeal Remains
- Global Rice Market Disrupted: India’s Export Ban Sparks Chaos and Worries
- HDFC Bank: Steady ROA Despite NIM Compression Post Merger
- Tesla (TSLA) No Longer Prevails, a Dilemma and Touch Challenges Ahead
- Mayora Indah (MYOR IJ) – Classy Biscuits and Beverages
- CyberAgent: Gaming Shows Some Recovery but New Releases Yet to Shift Momentum for Games
- Korea Small Cap Gem #26: LF Corp – A Deep Value Play and the Lee Hyori Effect
- Silergy (6415.TT): The Revenue Could Be Upside Around 17% in 4Q23F.
- Duolingo Valuation Update: Year-End Profit Taking Is Likely As ARR Growth Is Slowing Down
- SiC as a Dog (Part 2)
Keisei Electric: Results Unimpressive, Yet Investor Activism Appeal Remains
- Keisei Electric Railway Co (9009 JP)‘s FQ2 earnings, released on October-31st, surpassed revenue and OP expectations, yet the company revised down its revenue and OP guidance by ¥8.8bn and ¥200m.
- Despite this, the share price has surged over 10% in recent days, likely influenced by activist investor Palliser Capital’s interest and a significant 30% increase in annual dividend guidance.
- However, during earnings, the company remained silent about the activist investor’s proposal to reduce its Oriental Land (4661 JP) ownership below 15%.
Global Rice Market Disrupted: India’s Export Ban Sparks Chaos and Worries
- India’s rice export ban triggers global market chaos, leading to panic buying and uncertainty in rice supply, affecting both India and Thailand.
- El Niño’s drought threatens Thailand’s rice production, adding to the crisis. Other Asian nations impose export bans, raising inflation concerns.
- Global rice prices rise, impacting vulnerable nations and sparking fears of a repeat of the 2008 rice crisis due to protectionist policies.
HDFC Bank: Steady ROA Despite NIM Compression Post Merger
- As highlighted in our prior notes, HDFC Bank (HDFCB IN) has been able to maintain its ROA and ROE despite NIM compression post merger.
- As the excess liquidity (related to the merger) recedes over the next 3-4 quarters, ROA and ROE should further normalize.
- HDFCB has been able to clock 5%ish QoQ growth across deposits and loans, allaying growth concerns on a larger base post merger.
Tesla (TSLA) No Longer Prevails, a Dilemma and Touch Challenges Ahead
- Tesla is facing a dilemma whether to aggressively cut price to boost shipment but lose margins or to keep price stable with a more moderated shipment growth like 10-20% y/y.
- Three challenges ahead: 1. Collapsing margin vs. rising margin for key competitors? 2. Cybertruck is selling at a loss, more margin downside? 3. Valuation reset for lower sales CAGR?
- Cautious on Tesla as its sales/earnings CAGR is falling below 20% with a rich valuation until we see cost cut on Cybertruck, FSD AI breakthrough, and low price model introduction.
Mayora Indah (MYOR IJ) – Classy Biscuits and Beverages
- Mayora Indah (MYOR IJ) saw a significant positive surge in profitability from lower raw material prices and lower operating costs in 3Q2023, which suggests it will beat its FY2023 guidance.
- The company continues to launch new variants in both biscuits and beverages with a slant towards premiumisation and is also more aggressively attacking export markets, where its brands are strong.
- Mayora Indah (MYOR IJ) is expanding factory capacity to fuel growth in 2024 but should also benefit from pre-election spending from 4Q2023. Valuations look attractive versus historical comparisons.
CyberAgent: Gaming Shows Some Recovery but New Releases Yet to Shift Momentum for Games
- CA reported 4Q and full-year FY09/2023 results today. 4Q revenue increased 5% YoY while OP dropped more than 50% during the quarter. Revenues beat consensus while OP fell behind.
- Games revenues further decreased YoY during the quarter (improved QoQ) while it managed to report an OP which was possible due to UMA MUSUME’s game anniversary.
- Though CA released a new game in September and few lined-up for release, until the company releases a hit title like UMA MUSUME, we expect the recovery to be slow.
Korea Small Cap Gem #26: LF Corp – A Deep Value Play and the Lee Hyori Effect
- Lf Corp (093050 KS) is the 26th company in our Korea Small Cap Gems series.
- LF Corp is one of the leading apparel companies in Korea which has a market cap of 411 billion won. LF Corp is trading at 0.3x P/B and 4x P/E.
- A key near-term catalyst is better than expected sales of the Reebok branded apparel that are promoted by the pop icon Lee Hyori.
Silergy (6415.TT): The Revenue Could Be Upside Around 17% in 4Q23F.
- Revenue was up 14.5% QoQ and down 31% YoY in 3Q23, but it could see an increase of about 17% QoQ and 3% YoY in 4Q23F.
- Silergy Corp (6415 TT) needs to increase another place to its Foundry source out of China and Taiwan.
- The Automotive segment is expected to show significant growth and is likely to reach double digits by the end of 2024F.
Duolingo Valuation Update: Year-End Profit Taking Is Likely As ARR Growth Is Slowing Down
- Duolingo shares have outperformed in 2023, with shares up ~115% over the year versus ~26% gain on the Nasdaq. The company priced its IPO at $102 a share in 2021.
- EdTech unicorn achieved the highest-ever MAUs and DAUs in 2QFY23, while paid subscribers reached 5.2M, ~7% of MAUs. Management raised top-line and profitability guidance for FY23.
- With a market cap of ~$7.4B on a fully diluted basis, Duolingo shares trade at ~13x and ~10x EV/Rev on my FY23/FY24 estimates, a significant premium to comparable companies.
SiC as a Dog (Part 2)
- The sickness in Silicon Carbide started at On semi.
- Let’s look through the results and see the drivers, the big deal, and what we should do about it.
- The market freaked out about Silicon Carbide, specifically On semiconductor, saying that automotive demand for the year will be weaker.
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