In today’s briefing:
- Oriental Land: Google Search Signals Potential Miss; Guidance Could Challenge Consensus Optimism
- China Internet Weekly (23 Oct 2023): AAPL, Alibaba, JD.com
- Bandhan Bank: Not Yet, Not Yet! (2Q24 Update)
- Xinhua Winshare (811 HK): Still the Place to Be
- LRCX. China, DRAM Tailwinds Driving Modest Recovery
- Axis Bank – Loan Mix Improving Dramatically | Strong ALM | Credit Costs Likely to Narrow Sharply
- Australia Real Estate: Long Goodman Group GMG and Short DEXUS DXS Pair Trade
- Porsche: Entering The World Of Luxury
- Intuitive Surgical (ISRG US): Mixed Q3 Result; Encouraging Procedure Growth Is the Key Positive
- Sitoy (1023 HK): Deep Value ~50% of Mkt in Cash, 4x PE and 12.5% Dividend Yield
Oriental Land: Google Search Signals Potential Miss; Guidance Could Challenge Consensus Optimism
- During 2QFY24, Tokyo Disneyland and Tokyo DisneySea both saw a QoQ decline in Google search interest.
- This suggests to us that there might be an earnings miss when Oriental Land (4661 JP) reports its FQ2 results on October 30, 2023.
- Additionally, there are potential downside risks to both FY24 and medium-term consensus projections following a revised FY24 guidance announcement.
China Internet Weekly (23 Oct 2023): AAPL, Alibaba, JD.com
- Apple fired five employees of China App Store for corruption.
- Yonghui follows Alibaba’s Freshippo outlets to open discounted stores this year.
- JD.com sued 44 companies and 3 persons for abusing JD’s trademark.
Bandhan Bank: Not Yet, Not Yet! (2Q24 Update)
- In its recent result, Bandhan Bank Ltd (BANDHAN IN) did not report the kind of improvement in asset quality in its core Microfinance segment that we were hoping to see.
- Fresh slippages into overdue accounts did not slow down as anticipated; NPA levels remained elevated; Loan growth is below the target run-rate.
- We anticipate the recovery to be drawn out, and hence suggest keeping patience. But we maintain our long-term valuation of Bandhan Bank unchanged at 2.1x FY25e P/BV, implying +56% upside.
Xinhua Winshare (811 HK): Still the Place to Be
- The recent pullback in the share price of Xinhua Winshare (811 HK) is overdone, and it is now on attractive 4.5x PER, 6.7% yield, and 0.46x P/B.
- It has minimal exposure to economic slowdown and global geopolitical tension. There is solid revenue growth and margin expansion in 1H23, and demand is totally domestic and resilient.
- Net cash amounted to 109% of its share price and this has not yet included Rmb2.2bn of equity investment on hand. Still, it is expected to generate ROE of 12%.
LRCX. China, DRAM Tailwinds Driving Modest Recovery
- Q323 revenues of $3.48 billion, ahead of guidance and up 8.6% sequentially
- December quarter guidance of $3.7 billion at the midpoint suggests ongoing recovery
- However, still-declining services revenue indicates that all other headwinds remain in place
Axis Bank – Loan Mix Improving Dramatically | Strong ALM | Credit Costs Likely to Narrow Sharply
- Loan mix is improving, away from non-INR loans, asset mix is improving with less RIDF bonds, and bank is seeing an expanding LDR.
- Loss loans and doubtful loans are in major decline, they are less important to total NPLs, and still credit costs were high in 1Q24, likely overly conservative.
- Credit growth is now at 22.6% YoY from 14.9% YoY one year ago, with consistent acceleration. With just 6% loan share, growth can remain high.
Australia Real Estate: Long Goodman Group GMG and Short DEXUS DXS Pair Trade
- In this insight, we explore the potential trade idea to Long GMG and Short DXS, among Australia REITs
- We propose this trade on the back of long-term attractive thematic and strong fundamentals of logistics sector and continued weakness of office sector, as well as company specific drivers
- GMG focuses on logistics and is a fund manager, and will continue to be strong. DXS is primarily driven by Sydney office market, which is facing multiple headwinds
Porsche: Entering The World Of Luxury
- Porsche is one of the world’s most successful luxury automotive manufactures, specializing in high-performance sports cars, SUVs, and sports limousines
- The investment case revolves around Porsche’s continued sustainable structural growth, electrification, best-in-class technology, luxury nature, and sustainability capabilities
- The stock price is trading near its IPO price of September 2022, at a 25% discount to summer highs.
Intuitive Surgical (ISRG US): Mixed Q3 Result; Encouraging Procedure Growth Is the Key Positive
- In 3Q23, Intuitive Surgical (ISRG US) recorded 12% YoY revenue growth to $1.74B, driven by growth in da Vinci procedure volume and an increase in the installed base of systems.
- 3Q23 procedure growth was 19%, versus 20% in 3Q22 and 22% in 2Q23. Systems revenue declined 11%, due to higher number of systems placed under lease and lower China demand.
- The company now expects 2023 procedure volume growth of 21–22%, up from previous estimates of 20–22%. Significant material supply chain disruptions or hospital capacity constraints are not expected.
Sitoy (1023 HK): Deep Value ~50% of Mkt in Cash, 4x PE and 12.5% Dividend Yield
- We examine the value proposition of Sitoy Group Holdings (1023 HK) trading at 4x PE with a 12.5 % dividend yield ( assuming a sustainable 50% payout ratio ).
- The company has 400 mn HKD net cash and real estate worth 690 mn HKD on its balance sheet. This compares favorably with its 840 mn HKD market cap.
- The major drawback of investing in the company is its track record, which shows a steadily declining revenue trend and a fluctuating ROCE (currently 11%).
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