In today’s briefing:
- Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
- WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M
- Ramayana Lestari Sentosa (RALS IJ) -A Challenging Transformation Process
- Sa Sa Intl (178 HK): Revival Well on Track
- Ushio (6925 JP): Preparing for the Next Growth Cycle
- Nanya Tech: Sharply Worse Margin Performance Than Micron & SK Hynix, But Supports Memory Recovery
- Aeon Keeps Working After High Profit Growth
Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
- Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
- MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
- This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.
WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M
- WFC is seeing net interest income growth rate decelerate sharply from 29% YoY in 2Q23 to 8% YoY in 3Q23. Its deposit costs rose from 23bps to 192bps YoY
- CRE NCO’s rose to USD93m in 3Q23 from reversals in 3Q22. Its CRE non-accruals rose to USD3,863m in 3Q23, vs USD2,507m in 2Q23, vs USD853m in 3Q22
- Mortgage, Auto, CRE loans are down QoQ and YoY. C&I loans, its largest loan bucket are down 0.9% QoQ. Total gross loans declined USD5.5bn QoQ, now down USD13bn from peak.
Ramayana Lestari Sentosa (RALS IJ) -A Challenging Transformation Process
- Iconic Indonesian mass-market department store retailer Ramayana Lestari Sentosa (RALS IJ) has struggled with sluggish growth this year, especially over Lebaran but management remains confident in some recovery in 2H2023.
- The company embarked on transformation pre-pandemic but COVID put a brake on this change and forced a number of stores to close and resurrection has begun again but slowly.
- Ramayana is taking a conservative approach this year, opting not to expand its store network as anticipates weakened purchasing power but pre-election spending could provide a boost. Valuations are attractive.
Sa Sa Intl (178 HK): Revival Well on Track
- Market expectation for FY23/24 earnings of Sa Sa International Hldgs (178 HK) is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.
- Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months.
- Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained.
Ushio (6925 JP): Preparing for the Next Growth Cycle
- Ushio is making substantial investments in it core light source technologies, sacrificing short term profit for long-term growth potential.
- Geared to rising demand for EUV mask and IC package lithography, bio-medical equipment, and solid-state light sources. Digital cinema business rebounding from COVID.
- Selling at 21x current EPS guidance, 12x management’s FY Mar-26 EPS target and 0.9x book value. Upside potential to book value while waiting for confirmation of forecast recovery.
Nanya Tech: Sharply Worse Margin Performance Than Micron & SK Hynix, But Supports Memory Recovery
- Nanya Technology’s results missed expectations last week, showing a sharp decline in margin, underperforming the recent results performance of Micron & SK Hynix.
- The company was more conservative on a pricing recovery outlook for its memory ASPs than Micron & SK, due to lacking DDR5 DRAM products and lacking High Bandwith Memory DRAM.
- Nevertheless the company is cautiously reporting an improving environment and improved customer inventory levels, hence we believe the result still implies an improving memory industry pricing environment into year end.
Aeon Keeps Working After High Profit Growth
- As outlined in previous reports, Aeon has been working hard to streamline its vast retail empire but also rethinking the fundamentals of retailing for each major format it operates.
- The results are now coming through with a big increase in operating profits in 1H2023, up 23% on last year.
- There is real momentum now, and the new online supermarket business is central to its ambitions to create the first true national FMCG business.
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