In today’s briefing:
- L’Occitane (973 HK): Sol De Janeiro Growth Taking Off
- Japan Tobacco High Conviction Call: Could Leave 2023 Guidance in the Dust
- Appier (4180) | The Ups and Downs
- UMC (2303.TT; UMC.US): The Early Signs Indicate the End of Inventory Correction.
- Oriental Watch: Gone Ex-Dividend, Higher Yield, But Sales Softening in The Short-Term
- Porsche: Q3 Results Confirm Investment Case
- GTX: Currency Overshadows Wins
- UOB – Net Profit Down 1.5% YoY, Credit Costs +126% YoY, Citi Costs ~5% of Profit, Expect Worsening
- Curexo Inc (060280 KS): Strong Growth in Medical Robot Prompts 2023 Guidance Raise
- GSK Inks Eye-Popping $2B-Plus Pact for Hansoh’s ADC – Is The “New Story” About to Begin?
L’Occitane (973 HK): Sol De Janeiro Growth Taking Off
- L’Occitane (973 HK) reported 2QFY24 operational update last night. Sales grew 17% yoy on reported currency, and up 25% yoy on constant currency.
- The bright spot of the release is the growth of Sol de Janeiro, the Brazilian-inspired premium body care brand, which grew 202% yoy in constant currency in the quarter.
- Sol de Janeiro has the highest EBIT margin among the 3 major brands of the company, at 24.6% in FY23, suggesting highly profitable growth.
Japan Tobacco High Conviction Call: Could Leave 2023 Guidance in the Dust
- Despite conservative 2023 guidance last quarter, Japan Tobacco (2914 JP) is primed to exceed expectations in the 3rd quarter of 2023.
- Despite no new domestic price hikes, Japan Tobacco’s volume recovery post-hikes is expected to help sustain the revenue and profit growth momentum.
- New price increases in the Philippines and the UK, coupled with last year’s hikes spillover, are expected to boost Japan Tobacco’s earnings; and the yen’s depreciation amplifies these gains.
Appier (4180) | The Ups and Downs
- Appier’s stock initially surged 20% following strong Q2 results but later declined 25%, influenced by small-cap stock volatility, AI-induced valuations, and e-commerce sensitivity.
- The AI company’s competitive position remains strong compared to Braze; the differing stock price performance and valuation suggests significant upside.
- Appier’s thesis remains intact and we expect the company to benefit from key trends in consumer marketing, first-party data and AI solutions.
UMC (2303.TT; UMC.US): The Early Signs Indicate the End of Inventory Correction.
- UMC believes that the early signs indicate the end of inventory correction for smartphones and PCs.
- The total wafer loading continues to decrease, but pricing for 12″ wafers remains firm. As a result, the average selling price (ASP) continues to increase slightly.
- The demand for strength lies in computing, thanks to the LCD controller, codec, Wi-Fi, touch IC controller, and communication applications driven by RFFE and networking IC.
Oriental Watch: Gone Ex-Dividend, Higher Yield, But Sales Softening in The Short-Term
- Oriental Watch (398 HK) went ex-dividend on the 4th of October. The stock gapped down more than what it paid out and now trades at 6x trailing PE.
- Cash at 1.1 bn HKD is greater than 50% of market capitalization, with a high trailing dividend yield of 16.2% and a rich history of paying chunky dividends.
- We monitor the sales environment for HK/China, which shows a reasonably good pick-up in HK but lackluster for China.
Porsche: Q3 Results Confirm Investment Case
- Q3 revenues were strong, 4.7% ahead of consensus expectations, and EBIT margin was slightly below at 17% vs. consensus expectations of 17.8%.
- Key positives are strong revenue growth, EBITDA in Automotive and FCF generation.
- Post the cautious conference call in Q2, a weaker EBIT margin in Q3 was somewhat expected.
GTX: Currency Overshadows Wins
- GTX continued to showcase its ability to generate free cash flow even though the Euro weakened sequentially. Ahead of the results, we had reduced our estimates citing the stronger Dollar.
- GTX held an investor day following the quarterly results highlighting how the variable cost structure allows the Company to maintain profitability and generate free cash flow
- GTX has introduced several new turbochargers for the light vehicle, commercial, and industrial markets. GTX used the investor day to introduce the GT80
UOB – Net Profit Down 1.5% YoY, Credit Costs +126% YoY, Citi Costs ~5% of Profit, Expect Worsening
- UOB (UOB SP) just released their 3Q23 results, with their IR documents attached below. Our interpretation of their numbers is less positive than their own presentation.
- Credit growth is faltering, with worsening NIM in QoQ, and with what appears to be topping out net interest income. Citi integration costs remain an issue.
- Underlying credit metrics with worse recoveries and worse new NPAs are not positive, nor is the 126% rise YoY in credit costs in 3Q23. Will this improve in 4Q23?
Curexo Inc (060280 KS): Strong Growth in Medical Robot Prompts 2023 Guidance Raise
- Curexo Inc (060280 KS) has been showing sales growth for five consecutive quarters since Q1 2022, mainly driven by the medical robot business, which accounts for nearly 50% of sales.
- In 2Q23, Curexo’s medical business sold 29 units and recorded highest quarterly sales of KRW9,744M (up 173% YoY and 15% QoQ), driven by strong demand in domestic and Indian market.
- Curexo raised 2023 sales guidance to KRW74 billion from KRW70 billion. Medical business is expected to sell 100 units and register revenue of KRW35 billion in 2023.
GSK Inks Eye-Popping $2B-Plus Pact for Hansoh’s ADC – Is The “New Story” About to Begin?
- The early-stage clinical data of Hansoh’s B7-H4 ADC showed good potential, thus attracting GSK’s attention. This would allow GSK to re-enhance the layout of ADC pipelines after its previous setbacks.
- However, if future clinical data fail to meet expectation, GSK could return the product to Hansoh. After all, US$85 million upfront is more likely to test the waters for GSK.
- Hansoh is already one step ahead of Hengrui in terms of internationalization. This short-term catalyst would no doubt help lift share prices, but the logic behind the rebound is shaky.
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