In today’s briefing:
- Prosus: The More Things Change…
- Astra International (ASII IJ) – Increasingly Omnipresent
- Fanuc (6954) | Earnings Miss; Guidance Slashed
- Intel Results #1 Take-Away: Major Readthrough for PC Upgrade Cycle and Edge AI
- Taiwan Dual-Listings Monitor: TSMC Premium High & Short Interest Down; ASE Premium Precarious
- Delta Taiwan Vs. Thailand Monitor: Short Term Trade This Week on Delta Earnings; Or Pair Long/Short
- China Power International (2380 HK): A Major Move to Raise Clean Energy Exposure
- Kenvue (KVUE US): Q2 Result Beats Estimates; Initiated 2023 Guidance; J&J Launches Exchange Offer
- Cadence Design Systems Inc.: Shaping the Future of AI with its Unique Products? – Key Drivers
- [Nayuki (2150 HK, BUY, TP HK$9.3) TP Change]: Store Operating Profit Margin Improvement On-Track
Prosus: The More Things Change…
- Prosus looks to continue to cut its stake in Tencent by 2-3% every year to fund its open-ended share buyback program.
- Evidence would suggest that the buyback is set to continue at a relatively steady pace for the foreseeable future, which should support the discount to NAV going forward.
- The simplification of the shareholding structure, to remove the cross-holding, could sustainably reduce Prosus’ discount to NAV by roughly 10%.
Astra International (ASII IJ) – Increasingly Omnipresent
- Astra International (ASII IJ) released a solid set of numbers in 1H2023, with growth across most of its divisions from autos to heavy equipment, and infrastructure.
- 1H2023 was marked by a series of acquisitions across growth areas of the Indonesian economy including nickel, digital health, data centres, and classifieds.
- Astra International remains our top proxy pick for exposure to Indonesia, with recent acquisitions making the company all the relevant in new areas of growth.
Fanuc (6954) | Earnings Miss; Guidance Slashed
- Fanuc reported 1Q3/24 operating profit of ¥32.6 billion (-26.3% YoY), missing street expectations at around ¥43 billion
- Fanuc cut full year guidance for operating profit to ¥118 billion (-38% YoY), way below street estimates of ¥176 billion
- Turning bearish. We think the stock will essentially tread water given lack of catalysts over next 6-9 months and valuations
Intel Results #1 Take-Away: Major Readthrough for PC Upgrade Cycle and Edge AI
- Intel’s latest results imply a potential bottoming of its business & nascent turn-around; however the greater take-away is that the PC industry is heading into a major AI-driven up-cycle.
- PC industry inventories are now “healthy” and Intel’s Client Computing segment (PCs) showed the strongest QoQ revenue growth. Management is guiding for continued improvement next quarter.
- Edge AI will drive a major upgrade cycle for PCs worldwide and Intel’s new Meteor Lake chip could be a catalyst. Invest ahead of AI PCs having their “ChatGPT Moment”.
Taiwan Dual-Listings Monitor: TSMC Premium High & Short Interest Down; ASE Premium Precarious
- TSMC’s premium is trading at a historically high level after its recent results release, while ADR short interest has remained subdued.
- ASE’s ADR premium is at one of its highest levels in history, appears precarious in our view.
- ChipMOS premium near middle of range; the company will report results this week.
Delta Taiwan Vs. Thailand Monitor: Short Term Trade This Week on Delta Earnings; Or Pair Long/Short
- Delta Thailand has surged 22% in NT$ terms since our last piece, while Delta Taiwan rose only 6%. We see two potential trades here.
- Delta Thailand reported its results on 27 July and beat expectations by 22%. Delta Taiwan will release its results on August 1st with its analyst call at 15:00 Taiwan time.
- 1) Potential Long Delta Taiwan event trade into Taiwan earnings 2) Long Delta Taiwan vs. Short Delta Thailand based on the relative prices reverting back to their end June ratio.
China Power International (2380 HK): A Major Move to Raise Clean Energy Exposure
- The Rmb10.8bn acquisition of clean energy assets from parent by China Power International (2380 HK) is positive in raising its clean energy proportion to over 70% of total capacity.
- The drop in share price reflects concerns about elevation of gearing and the need for potential equity funding. However, even all equity financing scenario will only dilute EPS by 1%.
- We think its earnings quality will improve, balance sheet will be enhanced and profitability will be raised. Its 1H23 positive profit alert also showed a recovery in operational performance.
Kenvue (KVUE US): Q2 Result Beats Estimates; Initiated 2023 Guidance; J&J Launches Exchange Offer
- Kenvue (KVUE US) reported 5% YoY revenue growth to $4B in 2Q23, driven by continued demand of self-care portfolio, mainly consisting of cough, cold, and allergy, and pain care products.
- The company has guided for 4.5–5.5% revenue growth and EPS of $1.26–1.31 for 2023. Kenvue has declared a cash dividend of $0.20 for 3Q23.
- J&J is offering its shareholders the option to exchange shares for Kenvue’s at a 7% discount. The exchange offer is scheduled to close on August 18, 2023.
Cadence Design Systems Inc.: Shaping the Future of AI with its Unique Products? – Key Drivers
- Cadence exceeded the revenue and earnings expectations of Wall Street for the second quarter of 2023, resulting in year-over-year 14% revenue growth and 19% non-GAAP EPS growth.
- In terms of Generative AI, the customers of Cadence are adopting its chip, Generative AI portfolio, system, board, and package as they are achieving exceptional productivity benefits and quality results with these solutions.
- We give Cadence Design Systems a ‘Hold’ rating with a revised target price.
[Nayuki (2150 HK, BUY, TP HK$9.3) TP Change]: Store Operating Profit Margin Improvement On-Track
- Our 1H23 revenue estimate is 8.7% lower than consensus, and we expect 1H23 NPM at breakeven vs. consensus at 5%。
- Mainly because teahouse brands in China had suffered the intensified competition from the price war in Coffee industry.
- We maintain the stock as BUY rating as the margin improvement process is gradual showing effect, while we lower TP by US$2 to US$9.3 to reflect the intensified competition pressure.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
