In today’s briefing:
- Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash
- Calbee – Price Hikes Are Appealing to Institutional Investors
- Samsung C&T: Soundly Beat Consensus Operating Profit Estimates by 68% in 3Q 2022
- CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles
- Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend
- Johnson Hitachi (JCHAC IN) | Losing Its “Cool”
- CyberAgent (4751) | World Cup Boost for Abema
- Sinotrans (598 HK): Showing Its Sustained Resilience
- Spotify 3Q22: Another TikTok Victim?
- Zhifei Biological Products (300122.CH) – More Downside Ahead, with Untenable Logic in HPV Vaccine
Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash
- We remain cautious on Oriental Watch (398 HK) despite the recovery in sales in June this year. Wealth destruction in financial markets could impact sales in the short term.
- Having said that, the stock is extremely cheap at 6.7x FY23 earnings (-32% YoY from FY22), with more than one bn HKD in cash (60% of market capitalization).
- With a generous payout ratio of >100%, the stock trades at >17% yield. We believe the company will dip into cash reserves to maintain a high yield.
Calbee – Price Hikes Are Appealing to Institutional Investors
- Japan’s largest snacks maker, Calbee Inc (2229 JP) is raising prices by 10-20% for almost 75% of its product range.
- These price hikes have boded well with institutional investors with a vast most of them deciding to up their stake in the company following the first price hike announcement.
- While institutional-investors bet on earnings growth over long-term through regular price revisions, we think there could also be short and medium-term gains as OP growth turns positive after many years.
Samsung C&T: Soundly Beat Consensus Operating Profit Estimates by 68% in 3Q 2022
- Samsung C&T had outstanding results that soundly beat consensus estimates in 3Q 2022.
- Samsung C&T generated operating profit of 796.8 billion won in 3Q 2022, up 465% YoY and 67.7% higher than the consensus estimates.
- The strong growth of sales and operating profit was led by the biologics, construction, fashion, and resort businesses.
CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles
- CyberAgent Inc (4751 JP) reported 4QFY09/22 financial results after the market closed on 26th. Revenue for the quarter decreased 1.9% YoY to JPY 176.2bn vs consensus revenue of JPY 175.5bn.
- OP declined 50.8% YoY to JPY 13.2bn vs consensus JPY 16.0bn (miss of 9%) due to decline in profits from gaming business. OPM declined to 7.5% from 14.9% in 4QFY09/21.
- CA’s earnings have come under pressure with absence of new hit game titles. Media segment continues to see strong growth and FIFA World Cup is only a one-off boost.
Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend
- Ultrajaya Milk Industry & Trading‘s last set of results reflected both the recovery in sales as mobility improved as well the pressure from rising packaging and imported milk powder prices.
- Both whole milk powder and skimmed milk powder prices have declined by around 30% from the peak in April this year, which should help to underpin better margins in 2H2022.
- Ultrajaya Milk Industry & Trading has increased its advertising and promotional spending to take advantage of improved mobility, with strong growth momentum likely to persist in 2H2022 and into FY2023.
Johnson Hitachi (JCHAC IN) | Losing Its “Cool”
- Our channel interactions continue to suggest, Johnson Controls-Hitachi Air Conditioning India (JCHAC IN) will not be able to recover market share over the next two years.
- More disappointment in line with what we have seen in Q2 remains a strong probability.
- Other annual report concerns also warrant attention, best to AVOID in spite of a sharp correction in stock price.
CyberAgent (4751) | World Cup Boost for Abema
- CyberAgent’s stock price could fall after releasing very weak guidance for the coming fiscal year
- We would buy into any weakness as we see CyberAgent well placed to benefit from the structural growth of the Digital Ad market
- We expect losses in ABEMA TV to shrink further next year and think the whole Media segment can break-even, driven by betting platform, Winticket
Sinotrans (598 HK): Showing Its Sustained Resilience
- Sinotrans (598 HK) delivered sustained healthy earnings in 3Q22, with reported profit rose 32.7% and recurring one up 13.2%. They are resilient given the adverse market environment.
- Gross margin expansion and higher gross profit showed that lower freight rate has not had significant impact on profitability. DHL-Sinotrans’ contribution also recovered sequentially.
- It cancelled the 0.62% of shares that it bought back, providing enhancement to forward EPS. The 9M22 result equals 91% of full-year consensus, suggesting room for earnings upgrade.
Spotify 3Q22: Another TikTok Victim?
- MAUs beat, margins miss, guidance weak. Where / when is the operating leverage?
- Podcasting business took a restructuring charge this quarter, not bullish for the business meant to expand gross margins.
- TikTok reportedly readying a new streaming music app… not good.
Zhifei Biological Products (300122.CH) – More Downside Ahead, with Untenable Logic in HPV Vaccine
- Due to the lack of competitiveness, Zhifei’s self-developed products cannot contribute solid performance to make up for the shrinking revenue of HPV vaccines when more competing products gradually launched.
- The real potential of HPV vaccine market in China is not as big as imagined. So, the companies involved have the problem of inflated market values.
- Due to low demand of COVID-19 vaccine/negative impact of pandemic on HPV vaccination, Zhifei’s revenue YoY growth could be 10%-20%; Net profit YoY growth could be negative in 2022.
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