In today’s briefing:
- Recent Dell & HP Results Provide Additional Clarity on Coming AI PC Wave
- China Internet Weekly (4Sep2023): Quarterly Results See Growing – BIDU, VIPS, ZTO, Giant, BEKE
- Japanese Cosmetics Ready to Blossom with Asian Visitors
- Bargain Sale at Sogo Seibu as Seven & I Finally Capitulates
- Moncler (MONC IM): Not Just A Fashion Down Jacket Brand
- Medipal Holdings (7459 JP): Started FY24 On a Strong Note with Accelerated Revenue
- Uchi Technologies: Q2 2023 Upgrade of Guidance a Positive
- SBI Sumishin Net Bank – Dramatic ROA Expansion, Steady & Strong, Profit & Loan Growth, ROE at 19%
- Elastic: Blowout 1QFY24 Earnings. Shares Popped ~20% On Heavy Volume
- 4Q Follow-Up – Ohba (9765 JP)
Recent Dell & HP Results Provide Additional Clarity on Coming AI PC Wave
- Dell and HP’s latest results indicate an improving PC industry environment in 2H23E, though weaker than expected China demand has softened initial expectations.
- A key take-away is that a major AI PC upgrade cycle is indeed on the horizon, with additional clarity now provided as to when and how it will unfold.
- A ‘step-change’ AI PC upgrade cycle will make the strength of the current near-term cycle recovery less relevant, and isn’t yet priced-in by the market.
China Internet Weekly (4Sep2023): Quarterly Results See Growing – BIDU, VIPS, ZTO, Giant, BEKE
- The Chinese economy looks weak according to the data from the statistics bureau.
- However, many big Chinese internet companies began to recover in Q2 as we mentioned in August.
- Here we list five recovering companies that investors may not pay attention to.
Japanese Cosmetics Ready to Blossom with Asian Visitors
- Despite expected increased demand from returning Asian tourists, Japanese cosmetics companies have been hesitant to revise their 2H 2023 inbound demand projections.
- We are long Kose Corp (4922 JP), Shiseido Company (4911 JP), and Pola Orbis Holdings (4927 JP), as consensus estimates look extra cautious and reasonable and appealing FY+2 valuation multiples.
- We view the risk of Chinese consumers boycotting Japanese cosmetics due to Fukushima wastewater release as relatively low.
Bargain Sale at Sogo Seibu as Seven & I Finally Capitulates
- Seven & I has finally sold Sogo Seibu to Fortress Investments.
- It will be pleased to have offloaded a loss-making format it never really understood but at a cost – it will write off more than ¥90 billion in loans.
- Fortress will immediately sell the land under Seibu Ikebukuro and some other assets to Yodobashi with suggestions of major redevelopment of both Ikebukuro and Shibuya.
Moncler (MONC IM): Not Just A Fashion Down Jacket Brand
- Moncler SpA (MONC IM) is an outstanding compounder with clear market leading position in luxury outerwear.
- Moat is increasing every year through relentless focus on brand building.
- We believe that Moncler deserves a higher PE multiple than its current 22x forward expected earnings.
Medipal Holdings (7459 JP): Started FY24 On a Strong Note with Accelerated Revenue
- Medipal Holdings (7459 JP) announced strong Q1FY24 result, with a 6% YoY revenue growth to ¥887B, driven by growth across all three business segments.
- However, operating profit declined 8% YoY to ¥12B, mainly due to increase in SG&A expenses. Driven by an extraordinary income of ¥3.3B, net profit jumped 35% YoY to ¥11B.
- The company has reaffirmed FY24 guidance, which calls for a 4.5% YoY revenue growth, flat operating profit, and a 9.3% YoY decline in net profit.
Uchi Technologies: Q2 2023 Upgrade of Guidance a Positive
- Uchi Technologies (UCHI MK) results significant highlight was an upgrade in USD revenue for FY23 from “flat” in Q1 2023 to “high single-digit growth” in Q2 2023.
- Operating margins expanded owing to the depreciating ringgit YoY/QoQ by 350/480 bps to 61.6%. Unfortunately, the increasing effective tax rate (3.5% to 23.7%) resulted in a 13.7% YoY PAT decline.
- With >60% ROCEs, 12x FY23e PE multiple, and a 7.2% dividend yield, this is a stock to keep on your watchlist.
SBI Sumishin Net Bank – Dramatic ROA Expansion, Steady & Strong, Profit & Loan Growth, ROE at 19%
- This is not a typo: SBI Sumishin Net Bank saw loans up 21% YoY in 1Q24, operating in Japan
- The bank has achieved cost scale, with acquisition cost per account a fraction of 2 yrs ago
- Credit quality remains exceptional, amongst best in Japan, with 0.06% NPL ratio in 1Q24
Elastic: Blowout 1QFY24 Earnings. Shares Popped ~20% On Heavy Volume
- Elastic NV (ESTC US) delivered a high quality beat and raise and reported a modest upside to revenue and profitability. The start of the fiscal year looked strong.
- The leading provider of search engine for enterprises and SMBs guided FY24 ahead of consensus estimates. I reiterate our Overweight rating on ESTC.
- The 1Q print was outstanding, with +17% y/y revenue growth, a record non-GAAP Op Margin of ~10% and FCF margin of ~13%.
4Q Follow-Up – Ohba (9765 JP)
- Since reporting its full-year results for FY23/5, OHBA shares have been rerated and its share price is up approximately 20% at the time of writing.
- In its five-year medium-term management plan ending in FY28/5, the company has set ambitious earnings targets (sales CAGR of 5.0%, operating profit CAGR of 7.0%) and a policy committed to capital efficiency (ROE 12%, ROIC 12%).
- In addition, the company has further strengthened its shareholder return policy (targeting a total return ratio of 60%), which has been one of the best among listed construction consulting companies, and this has likely driven the rerating to some extent.
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