In today’s briefing:
- Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield
- Minor International (MINT TB) – More Than Just Revenge Tourism
- APAC Insurers Series (#1): A Hidden Gem in This Bear Market?
- Hisense Announced the Long-Awaited Equity Incentive Scheme
- Raise 2023 Forecasts Due to High Take Rate
- Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store
- November Brazil Bank Data in Charts – Household and Corporate NPL Metrics Broadly Worsening
- China Power International (2380 HK): Stepping up Transformation Strategy
- Zoetis Inc.: Initiation of Coverage – The Jurox Acquisition & Key Drivers
- DexCom Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield
- Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
- There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
- Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.
Minor International (MINT TB) – More Than Just Revenge Tourism
- Minor International (MINT TB) represents a unique combination of exposure to a diverse set of hotel and restaurant brands both in Thailand and globally making it a true recovery proxy.
- The company’s hotel portfolio is well-diversified geographically and across different segments giving it exposure to both tourism in Thailand and globally and to the recovery in business travel.
- Minor Food has also seen a strong recovery as revenge dining draws consumers to dine out. Overall valuations look attractive given expected growth rates over the next two years.
APAC Insurers Series (#1): A Hidden Gem in This Bear Market?
- The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
- Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds.
- Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.
Hisense Announced the Long-Awaited Equity Incentive Scheme
- Hisense announced the long-awaited equity incentive scheme on Jan 2.
- For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level.
- We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company.
Raise 2023 Forecasts Due to High Take Rate
- There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
- We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
- We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.
Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store
- Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important.
- In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
- Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale.
November Brazil Bank Data in Charts – Household and Corporate NPL Metrics Broadly Worsening
- In November most consumer NPL ratio categories, except credit cards, worsened with corporate delinquencies, especially in micro and SME, also deteriorating; the system NPL ratio is approaching its pre-pandemic high
- System loan growth continues to decelerate; +14.7% for the twelve months to November is a further reduction from the October rate (+15.7%), due to slower corporate and consumer loan growth
- New system credit spreads rose further MoM, and we expect average loan spreads to remain elevated into 2023; we favour Banco do Brasil, and are cautious on Santander Brasil
China Power International (2380 HK): Stepping up Transformation Strategy
- The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
- Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.
- Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC.
Zoetis Inc.: Initiation of Coverage – The Jurox Acquisition & Key Drivers
- This is our first report on animal health pharma major, Zoetis.
- Despite the world’s volatile external environment and economic unpredictability, Zoetis has performed well from a financial standpoint given to its varied durable portfolio and global reach.
- It delivered a 5% operating revenue increase in Q3, which reflected a decent yet below-par performance across its range of innovation-driven companion animal products, particularly in its overseas markets.
DexCom Inc.: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on medical device major, DexCom.
- Although DexCom anticipates that these primary care connections will be crucial to its long-term consumer goals, they also enable the company to serve the nation’s extensive insulin users.
- In addition, DexCom carried out its previously disclosed accelerated share repurchase program, buying roughly 550 million outstanding shares.
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