In today’s briefing:
- Our High Conviction Asia Based Gaming Stocks Signal Buy on the Dip Entry Points
- Silicon Wafers. SUMCO Sounds The Alarm As Inventory Continues To Climb
- Tencent: Domestic Gaming Returns to Growth
- SK Telecom: Three Key Catalysts
- Tencent (700 HK): Raise Margin Estimates After 3Q23 Results, 30% Upside, Buy
- Freee 1Q: Earnings Beat; Qualified Invoice System to Further Drive Earnings
- Silergy (6415.TT): Silergy Expect to Grow Slightly in 4Q23F.
- Taste Gourmet Q2 2023, Far Better Than Expectations 5.3x PE, 27% Mkt Cap In Cash, 9% Yield
- Terumo Corp (4543 JP): Record High Revenue and OP in H1FY24; Better Profitability Expected in H2FY24
- XPER: Scaled for Growth
Our High Conviction Asia Based Gaming Stocks Signal Buy on the Dip Entry Points
- Our review of the three stocks here reveals considerable run room ahead as revenue recovery in Asia gaming is outpacing forecasts.
- These companies have proven resilient after taking big hits during covid crisis.
- Balance sheets are stronger, revenue rising, margins improved–much of this not as yet reflected in valuations.
Silicon Wafers. SUMCO Sounds The Alarm As Inventory Continues To Climb
- Global silicon wafer area shipments declined 10% QoQ in Q323 but customer inventory remains at historical highs and is showing no signs of declining
- SUMCO’s Operating Profit forecasted to fall by ¥8.6 billion QoQ in Q423
- The company vowed to make “substantial” production cuts in a bid to bring their inventory situation under control.
Tencent: Domestic Gaming Returns to Growth
- Tencent (700 HK) ’s 3Q2023 revenues fell marginally below consensus, however, OP beat consensus estimates. Domestic games returned to growth after a flat quarter in 2Q2023.
- Both Online Advertising and Fintech businesses have seen strong increase in top line with GPM approaching new highs for the two businesses.
- Though Tencent’s earnings show a recovery, we would remain cautious given the slowdown in Chinese economy and Tencent failing to make into new game approval list since July 2023.
SK Telecom: Three Key Catalysts
- In this insight, we discuss three key catalysts that are likely to positively impact SK Telecom in the next several months.
- The current gap between SK Telecom’s 2023 expected dividend yield (6.6%) and US 10 year treasury note (4.47%) is 2.13%.
- The gap between SK Telecom’s dividend yield and US 10 year treasury note yield could widen to 3-4%+ in 2024, making SK Telecom’s dividend yield more attractive.
Tencent (700 HK): Raise Margin Estimates After 3Q23 Results, 30% Upside, Buy
- Advertising, international game, and Fintech grew by two digits, but domestic entertainments were stagnant.
- The gross margins of all business lines improved and admin expense as percentage of total revenue decreased.
- We believe the stock has an upside of 30% for the year end of 2024.
Freee 1Q: Earnings Beat; Qualified Invoice System to Further Drive Earnings
- Freee KK (4478 JP) ’s 1QFY06/2024 results beat consensus estimates. Introduction of qualified invoicing system in October has resulted in strong corporate user growth for the company.
- Upfront investment in selling and marketing has helped freee onboard a large no. of corporate clients prior to the introduction of the new invoice system.
- Freee expects selling and advertising spending to decline going forward which should help the company reach break-even in FY06/2025E.
Silergy (6415.TT): Silergy Expect to Grow Slightly in 4Q23F.
- The inventory adjustment of consumer electronics products is nearing completion and industrial products will end later.
- Silergy Corp (6415 TT)‘s short-term growth momentum comes from the demand of new smartphone, while its long-term growth momentum comes from the automotive, new energy and high-performance computing area.
- In 1H24, the pro forma gross profit margin can be maintained at around 50%.
Taste Gourmet Q2 2023, Far Better Than Expectations 5.3x PE, 27% Mkt Cap In Cash, 9% Yield
- Taste Gourmet (8371 HK) reported Q2 profits 25% over our expectations at 30 mn HKD (81% YoY), led by net margin expansion to 11.2% (vs. our expectation of 8.8%)
- The net cash of 133 mn HKD represents around 27% of market capitalization, which is used to increase the restaurant count in HK from 42 to 48 QoQ.
- The company declared a 5.5 cent interim dividend (Vs. 4.8 cents last year). We believe they can declare a 12.5/13 cent dividend for FY24 (March-End)
Terumo Corp (4543 JP): Record High Revenue and OP in H1FY24; Better Profitability Expected in H2FY24
- In H1FY24, Terumo Corp (4543 JP)‘s revenue increased 10% YoY to ¥443.9B, mainly driven by a 13% YoY growth in C&V business, due to strong global demand of catheter products.
- Revenue from TIS (catheter) segment reported 12% YoY growth to¥176.5B, driven by a 12% YoY growth in overseas business, with EU and China being the main drivers.
- Terumo has reiterated FY24 guidance, which implies significant improvement in operating profit in H2FY24 due to the realization of the full effect of global price revision and cost cutting initiatives.
XPER: Scaled for Growth
- XPER reported third quarter results in line with our forecast and reaching an inflection point in revenue where the operating leverage of the business becomes visible.
- Ahead of the results, there had been worries over XPER’s exposure to consumer electronics and pay TV industries that could cripple revenue growth.
- XPER reported third quarter revenue of $130.4 million compared to our forecast of $130.9 million. Adjusted EBITDA reached $9.3 million compared to our forecast of $9.2 million
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