In today’s briefing:
- Li Ning (2331 HK): No Positive Catalysts In Sight
- Edelweiss: Ripe for Re-Rating
- HKEX (388 HK) – Exceptional Cost Controls, New Revenue Streams, Quarterly Profit Momentum
- Nihon M&A: Not Many Catalysts to Move the Stock Price Up
- Mitra Keluarga Karyasehat (MIKA IJ) – Well Adjusted For a Rapid Recovery
- MercadoLibre’s Bullish Run Continues
- Axonics (AXNX US): Large Underserved Market And Superior Portfolio Ensure Multi-Year Growth
- Chinese Semiconductor Beneficiary
- Nesco: FY24 Earnings on Track to Be Strong
- Fortinet Inc.: Launch Of Data Center Firewalls With AI Support & Other Major Developments
Li Ning (2331 HK): No Positive Catalysts In Sight
- Since my bearish insight on August 11 (Li Ning (2331 HK): Low Quality Earnings Beat), Li Ning’s share price has declined by 27% in less than 2 months.
- Anta’s share price on the other hand has been flat during the same time frame (Anta Sports (2020 HK): Most Resilient In Industry Down-Cycles).
- In this insight, we look at if there are now any positive catalysts on the name, given the steep share price decline.
Edelweiss: Ripe for Re-Rating
- Edelweiss reported a strong Q1FY24 earnings led by its asset management and ARC businesses. In particular, the asset management business is scaling up well for Edelweiss.
- In the ARC business, Edelweiss saw strong recoveries during Q1FY24. Also, gradually, Edelweiss is scaling up the retail ARC business.
- The credit business continues to see reduction in the wholesale loan book AUM. Asset quality remains stabilized and the co-lending model is helping Edelweiss to grow well.
HKEX (388 HK) – Exceptional Cost Controls, New Revenue Streams, Quarterly Profit Momentum
- HKEX (388 HK) announced strong results, defying some worsening trends in volume, new listings, with quarterly profit growth rising from 11% to 28% to 34% YoY from 4Q22 to 2Q23
- Cost controls have been key to 31% 1H23 profit growth, with 0% growth depreciation, amortization, financing costs, and taxation, which can continue to support profit delta
- Revenue growth of 18-19% YoY in each of the past 2 quarters is partly driven by new revenue streams, which can offset some weaknesses in traditional metrics
Nihon M&A: Not Many Catalysts to Move the Stock Price Up
- Nihon M&A Center’s share price has dropped more than 50% YTD despite several news media outlets reporting that there has been a surge in M&A activity among Japanese companies.
- At the same time, the Japanese government also issued new guidelines to promote more M&A activities in the nation to boost competitiveness.
- The no. of M&A transactions for the company has continued to grow however, value per transaction has been on a declining trend suggesting these deals are smaller in size.
Mitra Keluarga Karyasehat (MIKA IJ) – Well Adjusted For a Rapid Recovery
- Mitra Keluarga (MIKA IJ) is in the midst of a recovery not yet reflected in headline numbers as the effects of inflated COVID revenues fade and core business takes off.
- The company is a key beneficiary of the new health bill allowing foreign doctors to practice in Indonesia given its best-in-class hospitals located in affluent catchment areas.
- Mitra Keluarga Karyasehat continues to expand its hospital network, increase treatment intensity, and digitalise its operations. Valuations are attractive given the highest returns amongst its peers, with recovery in motion.
MercadoLibre’s Bullish Run Continues
- Despite MercadoLibre’s non-benchmark status, ownership among active EM managers has reached new highs.
- MercadoLibre has been the beneficiary of significant manager rotation over the last year, with 131 funds increasing weights and 29 opening new positions.
- MercadoLibre is now the 8th largest holding on an average weight basis and has recently overtaken AIA Group as the largest overweight stock position across all regions.
Axonics (AXNX US): Large Underserved Market And Superior Portfolio Ensure Multi-Year Growth
- Axonics (AXNX US) believes that the U.S. sacral neuromodulation market is now worth of ~$800M, which is poised to double over the next five years to $1.6B.
- The company has been reporting superior revenue growth since 2020. Axonics raised 2023 revenue guidance to $358M, up 32% YoY. The company has become adjusted EBITDA positive in 2022.
- With superior product portfolio in terms of patient satisfaction, longer product life, and smaller size, Axonics is the stronger player in the U.S. duopoly sacral neuromodulation market.
Chinese Semiconductor Beneficiary
- ACM Research is a bit of an oddball stock. It’s a US listing of a Chinese company, with 82% ownership of the Chinese subsidiary.
- The US listing is the parent company and has been in the crossfire of US-China trade tensions for years.
- It is probably the best Chinese Semicap company and has real orders with multinational companies, notably SK Hynix.
Nesco: FY24 Earnings on Track to Be Strong
- Q1 tends to be a seasonally weak quarter for the exhibition business (BEC) and as a result, the revenues declined on a QoQ basis.
- However, in YoY terms, BEC revenues grew 75%+ and exceeded pre-COVID levels, i.e. the revenues are up 7% vs that in Q1FY20.
- The IT Parks business saw marginal improvement of 1% QoQ growth suggesting that the occupancy level is steady. Occupancy is 97% in Tower 4 and 82% in Tower 3.
Fortinet Inc.: Launch Of Data Center Firewalls With AI Support & Other Major Developments
- Fortinet Inc. delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
- Their quarter was marked by impressive total revenue growth of 26%, driven primarily by solid service revenue expansion exceeding 30% for the second consecutive quarter.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
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