In today’s briefing:
- Rex 1H22 Results: All Eyes on Recovery in Oman; Trading on 8.3% Dividend Yield
- JD.com (9618 HK): 2Q22, Growth Tumbled, But Lockdown Eased, 20% Upside or More
- JD Logistics (2618 HK): Surged After 2Q22 Result, Still an Upside of 39%
- JD Health: Slowdown in User Growth Is No Big Concern
- Sido Muncul (SIDO IJ) – Opportunity in Adversity
- Fitipower: Large % Market Cap as Cash Makes for Acquisition Target Price Support
- HCG: Scaling Up Well
- TMT Quick Hits: Palo Alto Networks, Farfetch, Netflix
- CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
- Pinduoduo: A Beat Likely in 2Q22, But Medium-Term Consensus Is Still Hung Up On Old Assumptions
Rex 1H22 Results: All Eyes on Recovery in Oman; Trading on 8.3% Dividend Yield
- Rex reported a disappointing set of results mainly due to continued struggles in Oman. While Oman production was well over 10K bpd in 1H21 it deteriorated every month in 1H22.
- Revenue was 99.45M USD (+31%) but we estimate it would have been closer to 149M USD if the Yumna field wouldn’t have stopped producing for almost 70 days in 1H22.
- YTD stock is -23% and can only reverse if management proves Oman is ready to rebound. Dividend payments will start on a quarterly basis as of October 2022.
JD.com (9618 HK): 2Q22, Growth Tumbled, But Lockdown Eased, 20% Upside or More
- The revenue growth rate fell to 5% in 2Q22 due to the lockdown in Shanghai and Yangtze delta.
- However, freezers became popular in June and July because of the experience during the lockdown.
- We believe the stock has an upside of 21% based on EBITDA, but the upside can be significant if based on sales-related ratios.
JD Logistics (2618 HK): Surged After 2Q22 Result, Still an Upside of 39%
- Revenue grew by 20% YoY in 2Q22 with supply chain revenue up by 11% YoY and other revenue up by 42% YoY.
- The company was not impacted by lockdown, because the main business is to provide solution to delivery companies.
- We still believe the stock will has an upside of 39% after the surge on the day next to the result day.
JD Health: Slowdown in User Growth Is No Big Concern
- JD Health reported 1H2022 results. Revenue increased 48.3% YoY to RMB20.2bn (vs consensus RMB19.4bn) while managed to report a small OP of RMB60m (0.3% of revenue) for the period.
- Excluding share-based payment expenses, JD Health reported an OP of RMB1.0bn vs RMB564m in the same period a year ago, resulting in an OPM of 5.1% vs 4.1% in 1H2021.
- The growth in annual active user account growth has declined during 1H2022, however, it was mainly due to decrease in marketing spend.
Sido Muncul (SIDO IJ) – Opportunity in Adversity
- Sido Muncul recently released its 1H2022, which reflected some impact from inflationary pressure impacting the purchasing power of its customer base, especially for herbal products.
- The company’s food and beverage division and notably energy drinks saw some impact from a slowdown due to consumers taking a longer Lebaran break this year but saw strong exports.
- Sido Muncul (SIDO IJ) saw a sharp correction post its numbers but we would expect some recovery in 1H2022 and a resumption of growth in FY2023 plus valuations are attractive.
Fitipower: Large % Market Cap as Cash Makes for Acquisition Target Price Support
- We had a call with Fitipower management to understand the company’s latest situation in light of its weak share price and light analyst coverage.
- Compared to the overall semiconductor industry, Fitipower’s inventory status is exceptionally better than the industry median and thus the company will be under less pressure in the coming quarters.
- Fitipower has a large T$12bn net cash position, equivalent to 48% of its market cap. For 2022E, we expect T$4.5-5bn in EBITDA, which is about 18-20% of its market cap.
HCG: Scaling Up Well
- Over the last 5Y, HCG had been in expansion mode. However, since the last year or so, HCG has been consolidating its presence.
- As a result, revenues and profitability are scaling up as new centers are inching towards maturity. FY23 is poised to be a strong year.
- While HCG has been consolidating, it is not compromising on growth. Aided by technology upgradation, growing brand awareness and digital initiatives, mature centers continue to see robust growth.
TMT Quick Hits: Palo Alto Networks, Farfetch, Netflix
- Palo Alto Networks produced an impressive FY4Q22 earnings, blowing out billings growth and showing an impressive display of “platformization”…only trades 8x forward revenues for 25-30% revenue and FCF growth.
- Farfetch finally acquired Yoox Net a Porter, after over a year of speculation. Deal is excellent for FTCH, gives them a monopolistic position in lux ecommerce.
- Netflix’s Gray Man yet another example of the company’s inability to create compelling big budget movies.
CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
- Our earnings projections for China Tourism Group Duty Free Corp Ltd (1880 HK) are 14% and 18% below market consensus respectively. We think these are more realistic expectations.
- At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x – the average for top consumer discretionary names.
- Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.
Pinduoduo: A Beat Likely in 2Q22, But Medium-Term Consensus Is Still Hung Up On Old Assumptions
- Based on the correlation between revenue and China’s online retail sales, we estimate Pinduoduo (PDD US)’s Q2 revenue to beat consensus by around RMB 2.4bn.
- Our cost estimates translate the above revenue to an OP of RMB 4.0bn in 2Q22 compared to RMB 3.6bn for consensus.
- Even though consensus seems to have over-corrected its 2Q22 assumptions, it is still hung up on old assumptions for the medium term.
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