In today’s briefing:
- Oriental Watch: Addressing the Rolex Acquisition of Bucherer
- Astra International (ASII IJ) – Crossing EV Boundaries
- Sea Ltd (SE US) – A Positive Catalyst from TikTok Shop’s Trouble
- Intel’s Deal With Tower Semi Is Basically A Rent-A-Fab Scheme
- Luckin’s New Moutai-Laced Lattes Create a Stir in China’s Coffee Wars
- Godrej Properties- Forensic Analysis
- NVIDIA Corporation: Monopolistic Position In Gaming & High-Performance Domain Keeps Fuelling Growth! – Major Drivers
- New Huawei Handset Selling Fast in China as Chip Speculation Swirls
- China Zheshang Bank- Substandard Loans 66% of NPLs from 21% | NCO’s Avg RMB7.5bn Vs RMB1.6bn In Past
- Hana Micron: Semiconductor Chips Packaging Company With Solid Fundamentals and FOMO Trading
Oriental Watch: Addressing the Rolex Acquisition of Bucherer
- Rolex acquisition of Bucherer signals the company’s intention to own retail distribution and gain access to what its competitors are doing, with the battleground currently being Europe.
- We believe it will take years for Rolex to digest this acquisition before foraying into other markets, but with a similar approach, potentially making Oriental Watch (398 HK) a target.
- Trading at 6.9x PE with 50% of the market cap in cash and a ~15% dividend yield, the company presents a great investment opportunity.
Astra International (ASII IJ) – Crossing EV Boundaries
- Astra International (ASII IJ) looks set to have another year of positive growth driven by strong performance from its Auto and 2W businesses and steady performance from United Tractors.
- The company’s move into the EV space has begun with 16 models hybrid or BEV models already launched, with 4W hybrid outperforming ICE given narrowing price differentials.
- Astra International (ASII IJ) continues to invest in core growth areas of the Indonesian economy, with a strong sustainability bent. Valuations are attractive versus history on 8.3x FY2024E PER.
Sea Ltd (SE US) – A Positive Catalyst from TikTok Shop’s Trouble
- Sea Ltd began to step on the gas in terms of promotions in 2Q2023, even warning of potential quarterly losses, mainly due to perceived threats in Indonesia from TikTop Shop.
- Reports that TikTok Shop will be banned in Indonesia will provide significant relief in terms of competition as it is targeted for unfair competition versus local MSMEs through cheap imports.
- Sea Ltd has also relaunched FreeFire in India, which could become a significant catalyst for the recovery of the gaming business. Valuations are attractive on both sales and earnings.
Intel’s Deal With Tower Semi Is Basically A Rent-A-Fab Scheme
- The agreement helps Intel fill up some long-underutilised fab capacity at their Rio Rancho, New Mexico facility
- Tower likely gets a bargain-basement opportunity to increase their percentage of 300mm wafer capacity
- Tower’s automotive business grew from 11% of revenues in 2022 to 19% of revenues in H1’23. Greater 300mm capacity will help them meet this demand once foundry starts to recover.
Luckin’s New Moutai-Laced Lattes Create a Stir in China’s Coffee Wars
- Luckin Coffee is creating a stir with an unusual offering to capture the attention of Chinese coffee drinkers: lattes with a nip of Kweichow Moutai’s baijiu.
- The coffee chain partnered with China’s luxury liquor maker Kweichow Moutai to launch an alcohol-infused coffee drink, the so-called “sauce-flavored latte,” referring to the popular savory notes of Moutai liquors.
- The tie-up between Luckin and Moutai, the maker of China’s national liquor baijiu, triggered a buying frenzy. Discussions about whether it is safe to drive after consuming the alcohol-infused drink topped China’s social media Monday with 430 million views.
Godrej Properties- Forensic Analysis
- Godrej Properties (GPL IN) is one of the large real estate developers in India. The company has diversified presence across four of the largest markets in India.
- Even though Godrej has strong booking pipeline, the company however faces trouble in generating cash historically.
- Its low ROCE, fragile earnings quality remains a concern. Other concerns include JV exposure, CWIP ageing along with few disclosure woes.
NVIDIA Corporation: Monopolistic Position In Gaming & High-Performance Domain Keeps Fuelling Growth! – Major Drivers
- NVIDIA Corporation delivered an all-around beat in the previous quarter.
- Notably, the Data Center segment experienced remarkable growth, driven by solid demand from prominent cloud service providers and major internet companies.
- In the quarter, Google Cloud and NVIDIA have recently introduced advanced AI infrastructure and tools.
New Huawei Handset Selling Fast in China as Chip Speculation Swirls
- Chinese consumers have been buying Huawei’s latest flagship smartphone faster than stores can keep up with online and in some parts of the country, sources tell Caixin, amid mounting speculation the telecom giant has been able to weather U.S. sanctions.
- Huawei Technologies Co. Ltd. began shipping the new Mate 60 Pro Sunday, several people familiar with the matter told Caixin, five days after the phone’s discreet launch.
- A number of distributors told Caixin on Monday that the Mate 60 Pro had immediately sold out upon delivery.
China Zheshang Bank- Substandard Loans 66% of NPLs from 21% | NCO’s Avg RMB7.5bn Vs RMB1.6bn In Past
- Credit metrics appear worse than headlines, with what may be inflated substandard loans now at 66% of total NPLs in 1H23 compared with 21% in 1H21, requiring low provisions
- High net charge-offs can partly explain this, but high growth from RMB1.6bn during 2H18/1H19 compared with RMB7.5bn during 2H22/1H23, shows major deterioration
- 2Q23 saw CZB take credit costs of RMB10.3bn or 2.48% of loans, far higher than most other periods, but there remains high volatility, where very high figures rarely repeat QoQ
Hana Micron: Semiconductor Chips Packaging Company With Solid Fundamentals and FOMO Trading
- Due to the sharp appreciation of Hana Micron’s share price this year, its valuation discount to companies such as HPSP has narrowed substantially.
- Samsung Electronics is one of the major customers of Hana Micron. Samsung recently reported that it has successfully secured the right to supply advanced memory chips to NVIDIA.
- We do not believe Hana Micron’s valuations are attractive right now. Rather than chasing after its shares, we would rather wait for its shares to retreat (20-30%) a bit.
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