In today’s briefing:
- Meituan (3690 HK): Strong Bottom Line Growth Will Prove to Be Short-Lived
- Sun Hung Kai Properties (16 HK): After Excessive Price Correction, Why I Think It Is a Bargain! BUY
- Updated NAV Analysis of Doosan Corp Amid IPO of Doosan Robotics
- Tuhu Car (途虎) Pre-IPO: Why Sedan Owners Choose Tuhu
- Nongfu Spring (9633 HK): Tea Revenue Up by 60%, 40% Upside, Buy
- Intel’s Meteor Lake Chips Could Make It ‘Cool’ Again; Will Enable Mass Market Adoption of AI PCs
- Yaizu Suidankagaku (2812) | An Odorous Deal
- Classys (214150 KS): Beautiful Growth Story Continues; No Sign of Slowing Down
- WDFC: A Squeaky Quarter Preview
- Stocks Pivoting to Sustainable Solutions Lead STI in 2023 YTD
Meituan (3690 HK): Strong Bottom Line Growth Will Prove to Be Short-Lived
- The street’s expectations for Meituan’s bottom line have gone too pessimistic for 2023 while in the meantime too optimistic for 2024 and beyond.
- Besides the macro weakness, we see the company’s growth increasingly be constrained by the business model itself, resulting in only 14% CAGR for bottom line over 2023-25 by our calculation.
- We take investors’ indifference to Meituan’s strong bottom line growth for 2023 as a signal they are discounting the sharp deceleration kicking in from 2024. Stay neutral.
Sun Hung Kai Properties (16 HK): After Excessive Price Correction, Why I Think It Is a Bargain! BUY
- After announcing full year results, one investment bank revised down share price target excessively (we will look at reasons). On Monday, HSBC also announced adjustment of mortgage rate cap
- These 2 events caused a sell-off in the property sector, SHKP, in particular, was down 10% and trading at HKD80 per share. We think it is overdone
- At this valuation, market is pricing in super bearish scenario. At 0.38x P/B, I think it is a bargain to buy now. It is a value trade.
Updated NAV Analysis of Doosan Corp Amid IPO of Doosan Robotics
- Our updated NAV analysis of Doosan Corp (000150 KS) suggests implied market cap of 3.6 trillion won or target price of 217,392 won which is 47% higher than current price.
- To value Doosan Corp, we have assumed a market value of 2.8 trillion won for Doosan Robotics (454910 KS).
- The sharp increase in share price of Doosan Corp today (up 28%) is likely to have been a reflection of the initial strong demand for Doosan Robotics IPO.
Tuhu Car (途虎) Pre-IPO: Why Sedan Owners Choose Tuhu
- We contacted drivers here in Shanghai and asked about their experience at Tuhu stores.
- Franchised stores are well positioned in the aftermarket and Tuhu is the largest store chain among them.
- However, Tuhu sets high standards for workshops, but average standards for mechanics.
Nongfu Spring (9633 HK): Tea Revenue Up by 60%, 40% Upside, Buy
- The growth rate of total revenue accelerated to 23% YoY in 1H23 from 15% YoY in 2H22 and 9% YoY in 1H22.
- Tea revenue grew by 60% YoY in 1H23 as the company caught the fashion of sugar free.
- We believe the stock has an upside of 41% for yearend 2024.
Intel’s Meteor Lake Chips Could Make It ‘Cool’ Again; Will Enable Mass Market Adoption of AI PCs
- Intel’s upcoming Meteor Lake family of chips will include a new specific component specifically for running AI processes locally on PCs.
- Meteor Lake will enable mass market adoption of AI PCs by providing a platform for developers to create more advanced AI PC applications than are currently possible.
- Meteor Lake’s launch could start by end-October. Intel’s Innovation conference September 19-20th will likely add visibility. Intel’s potential supports a Long thesis for Taiwan’s PC supply chain.
Yaizu Suidankagaku (2812) | An Odorous Deal
- The Board of YSK has recommended that shareholders accept a TOB for the company’s shares
- Although a 35% premium to the undisturbed share price, the deal is not particularly generous to long-suffering shareholders
- Activist investor, Minami Aoyama, has been buying a significant stake in YSK. Will the deal go through?
Classys (214150 KS): Beautiful Growth Story Continues; No Sign of Slowing Down
- Classys (214150 KS) reported solid performance in 2Q23, with revenue and operating profit growing 40% and 52%, YoY, respectively, mainly driven by consumables sales in both domestic and overseas markets.
- Despite increase in advertising and R&D expenses, operating profit margin expanded 370 basis points to 50.4%. Net profit increased 34% YoY to KRW18.6 billion.
- With 1H23 revenue of KRW84.9 billion, Classys is on track to meet 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.
WDFC: A Squeaky Quarter Preview
- WDFC faces continued headwinds with consumer spending remaining limited and distillate prices going up.
- We doubt WDFC would be able to raise prices with higher input costs since their customers were already trying to avoid the last series of price adjustments.
- The consumer is picking where they are spending their finite capital. In recent months it has become clear the consumer is not willing to invest in maintenance around the home
Stocks Pivoting to Sustainable Solutions Lead STI in 2023 YTD
- With global focus to a lower carbon and more climate resilient future, multiple Singapore-listed stocks have continued to press ahead with pivots to sustainable energy which include solar and wind assets, or more fuel-efficient transportation solutions.
- To support the global energy transition, it aims to grow net profit contribution from its sustainable solutions portfolio to 70% by 2025.
- In 2022, Sembcorp Industries renewables capacity grew 60% to 9.8GW and Sembcorp Industries commissioned Southeast Asia’s largest energy storage system in six months.
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