In today’s briefing:
- Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
- Record Fund Ownership in Six Taiwanese Companies
- Elecon Engineering Co. Ltd- Forensic Analysis
- Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns
- Huawei Quietly Debuts Flagship Smartphone in Effort to Ride Sales Wave
- Lixil (5938 JP): Levered Business Facing Cyclical & Secular Headwinds & Continued Mkt Share Pressure
- Alibaba Group Holding Limited: Making Huge Strides In AI Which Could Prove A Growth Catalyst! – Key Drivers
- AppLovin Corporation: A Laser-Focused Strategy That Is Paying Off Big Time! – Major Drivers
- Evergrande EV Unit Reports Vehicle Deliveries and Narrower Loss
- [Xiaomi(1810 HK, SELL, TP HK$8.2) Update]: Huawei’s Impact on Xiaomi Will Be Meaningful in 2024
Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
- Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
- Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up.
- Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.
Record Fund Ownership in Six Taiwanese Companies
- Delta Electronics and Wiwynn Corp among 6 Taiwan stocks at their highest levels of fund ownership among active Emerging Market funds.
- The combined weight in these 6 stocks has aggressively moved higher to 1.2% from less than 30bps in 2018.
- All stocks enter the top 15 most widely held companies in Taiwan, but potential for further buying is clearly there.
Elecon Engineering Co. Ltd- Forensic Analysis
- Elecon Engineering (ELCN IN) (EECL) is one of the renowned manufacturers of Gears, often used in Industrials.
- The company has gathered operational momentum in the last few years, coupled with debt reduction.
- However, its balance sheet still has some concerns that are important. This relates to unaudited subsidiary, fixed asset disposals, write offs and ECL policy and large RPTs.
Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns
- Bank Rakyat Indonesia (BBRI IJ) continues to be the key and unique proxy for micro and ultra-micro lending in Indonesia, with 1H2023 reflecting its increasingly strategic positioning in the space.
- Microloans now account for 48% of loans and of this higher-yielding Kupedes microloans make up an increasingly larger portion, as it diversifies its KUR exposure.
- The bank is set to see improving returns in 2H2023, with loan growth expected to pick-up and NIMs should also improve. 2.6x PBV with an ROE of 20.0% is attractive.
Huawei Quietly Debuts Flagship Smartphone in Effort to Ride Sales Wave
- Huawei Technologies Co. Ltd. launched a new flagship smartphone on Tuesday, in a discreet fashion and ahead of schedule, said to be powered by a self-developed chip that can rival the speed of 5G handsets, as the tech giant tries to shrug off the impact of U.S. sanctions and capitalize on robust quarterly sales growth in China.
- The company began offering the Mate 60 Pro at 6,999 yuan ($962) in its stores and online around noon, without prior advertisement other than an open letter that cited the early launch as a celebration of its Mate series reaching 100 million units in cumulative shipments.
- The company gave no detail about what kind of system-on-a-chip (SoC) the smartphone uses and whether the handset is compatible with 5G wireless networks.
Lixil (5938 JP): Levered Business Facing Cyclical & Secular Headwinds & Continued Mkt Share Pressure
- 2/3 of sales face secular decline in housing demand/shrinking population and the other 1/3 facing weak housing environment due to rising rates
- Competition from private label and weak trends and ratios exist
- The valuation does not seem to reflect the risks highlighted
Alibaba Group Holding Limited: Making Huge Strides In AI Which Could Prove A Growth Catalyst! – Key Drivers
- Alibaba Group Holding Limited managed to exceed expectations in terms of revenue and earnings.
- Their team’s efforts to create a thriving ecosystem and realize technology-driven innovation methods also show promising results.
- The overall sales growth for the Alibaba International Digital Commerce Group was 41%, and the retail division had revenue growth of 60% year over year.
AppLovin Corporation: A Laser-Focused Strategy That Is Paying Off Big Time! – Major Drivers
- AppLovin Corporation managed to exceed the revenue and earnings expectations of Wall Street.
- The Software Platform sector achieved significant revenue of $406 million, which reflects an increase of 28% over the previous year.
- With $334 million in sales from apps and $61 million in adjusted EBITDA for the second quarter, the company had an 18% margin.
Evergrande EV Unit Reports Vehicle Deliveries and Narrower Loss
- The electric-vehicle unit of defaulted property developer China Evergrande Group reported that in the first half of 2023 it delivered 760 cars and its net loss narrowed by almost half from a year earlier to 6.87 billion yuan ($942 million).
- China Evergrande New Energy Vehicle Group Ltd.’s revenue jumped more than fivefold to 155 million yuan, mainly from mass production and delivery of its flagship model, the Hengchi 5, starting last October.
- The electric-car company has been plagued by production delays and setbacks since touting its first Hengchi model as early as 2019 and pledging to rival Tesla within three to five years.
[Xiaomi(1810 HK, SELL, TP HK$8.2) Update]: Huawei’s Impact on Xiaomi Will Be Meaningful in 2024
- Users are enthusiastic about the return of 5G Huawei smartphones, and thus we expect sales volume of Huawei devices to improve.
- If the combined share of Huawei+ Honor can reach 30/32% we estimate Xiaomi’s current 12.5% share of the China smartphone market could decline 0.8/1.3ppts, respectively.
- We maintain Xiaomi’s SELL and HK$ 8.2 TP, implying 26x FY23 PE. The increase in CY23 EPS reflects lowered OPEX, improved gross margin due to the impact of IC oversupply.
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