Daily Brief Equity Bottom-Up: Oriental Watch: Management Meet and more

• We met with the management of Oriental Watch (398 HK).  HK demand continues to be sluggish, while China sales were resilient with single-digit SSSG growth. 
• The company will continue with its conservative policy of not expanding as Rolex/Patek restrict watch supply. It will only foray into boutique expansions if KPIs on return/brands etc., are met.
• With its generous >100% payout ratio, the stock trades at a 15% dividend yield based on our estimated 6.9x FY23 PE, with >50% of its market capitalization in net cash.

• We estimate SEA’s 4Q22 revenue to be largely in line with cons., while non-GAAP net loss to be narrower than cons. 
• We see SEA to continue to experience challenges in top-line growth because of inflation, competition with TikTok, and weak performance of Free Fire. Yet, the losses will be better managed.
• We slightly raise SE’s TP by 6% to US$55 to reflect 4Q22’s margin beat, yet maintain SELL because of the mid-to-long-term challenges.

• Last week, Japanese dairy play Morinaga Milk Industry Co (2264 JP) acquired a soy-based food company in the US and a baby formula distribution company in Vietnam
• These acquisitions are in keeping with Moringa’s medium-term business plan (to Mar-2025) to achieve an overseas sale ratio of 13%, compared to 8.7% last year.
• 3Q23 results were also announced with 9M23 sales and operating profit of ¥405.2bn and ¥20.5bn, a change of +16.8% and -7.2% yoy.

• In its earnings update, troubled Aussie casino operator Star Entertainment (SGR AU) said revenue was down 1% on pre-COVID levels, and expects FY23 EBITDA of $330mn-$360mn vs A$525mn in FY19.
• But the big news was the possible $400mn to $1.6bn non-cash impairment charge in relation to disciplinary fines from regulators and new casino duties. 
• Shares tanked and are currently trading around a lifetime low. One for the brave or one to ignore?

• Pharmaessentia Corp (6446 TT) recorded revenue of NT$232M (+259% YoY) for its sole marketed product Besremi in January 2023. For 2022, Besremi reported revenue of NT$2.9B (+339% YoY).
• Thus far, Besremi received approval in US, EU, Switzerland, Israel, South Korea, Macao, and Taiwan. Besremi is expected to obtain approval in Japan and China in 2Q23 and 1Q24, respectively.
• Besremi is in phase 3 trial for essential thrombocythemia, which is a myeloproliferative neoplasm characterized by an overproduction of platelets in the blood resulting from a genetic mutation.

• We estimate JOYY’s 4Q22 top line/bottom line to miss cons. by (3%)/(12%), as TikTok’s influence in major market expands. 
• We suggest that a much slower recovery in 1Q23 does not bode well for its full year outlook. Our top line and bottom line are (2%)/(14%) lower than cons.
• Maintain SELL and cut TP to US$25.1, implying 12.8X PE in 2023.

• EDG is one of the highest grade at-surface discoveries in Canada with grade open along strike and to depth
• Simplistic gold camp in the making – Idyllic access to infrastructure, within 10km of another permitted operation, low permitting risk in comparison to the Golden Triangle
• Resource has potential to be several million ounces – Orogenic gold deposit confirmed over a 1.5km trend and gold anomalies spanning across the property Endurance Gold’s flagship Reliance Gold Project is the primary driver of our valuation for the Company as it is showing early-yet-strong signs of becoming a multi-million-ounce high-grade gold deposit with economical ounces just kilometers from another permitted gold operation.

For Q223, Target Healthcare REIT declared a second quarterly DPS of 1.69p, supported by inflation-linked rental growth and improving rent collection, which are in turn protected by fixed costs on 96% of borrowings. Yield widening across the broad property sector affected the portfolio’s property valuations, although the effect was significantly mitigated by the quality of Target’s portfolio and long-term, indexed leases.

• Thermo Fisher produced a solid set of results in the fourth quarter, with impressive growth in the low teens for the quarter and mid-teens for the entire year.
• The management saw a decent growth in industrial and produced significant year-over-year growth in the businesses of mass spectrometry, chromatography, and electron microscopy.
• Overall, we give Thermo Fisher a ‘Hold’ rating with a revised target price.

Deutsche Beteiligungs (DBAG) posted a 7% increase in NAV per share in Q123 (ending 31 December 2022), supported by a €23.9m positive effect related to the higher earnings of portfolio companies, mostly due to the shift from 2022 to 2023 budgeted earnings in their carrying values. This was further strengthened by €36.5m valuation tailwinds from higher multiples amid the rally in public equities in the last quarter of 2022, as well as the recognition of agreed disposal prices (most notably for BTV Multimedia). DBAG’s shares trade at a 6% discount to NAV, while historically they have traded at a premium (6% on average in the last five years), reflecting the value of the fund services business.