Daily Brief Equity Bottom-Up: Ryohin Keikaku: Expecting FY24 OP Guidance of ¥55.0bn and more

• Ryohin Keikaku (7453 JP) will announce FQ4 results on October 13th; we expect earnings to beat consensus by ¥2-3bn, potentially boosting stock performance.
• FY24 OP guidance at around ¥55bn could be a catalyst for significant upside potential in the short term.
• The current share price of approximately ¥1,800 per share supports an annual OP of roughly ¥30bn, indicating nearly 100% upside potential with FY24 guidance.

• On 10 October, Kiwoom Securities announced shareholder friendly policies. This could lead to Kiwoom Securities outperforming other major Korean securities companies in the next several months. 
• First, the company will return more than 30% of its net profit to the shareholders in the next three years through dividends and share buybacks/cancellations of treasury shares.
• In addition, Kiwoom Securities plans to cancel all 1.4 million treasury shares it currently holds, representing 5.3% of outstanding shares.

• Shenzhen International (152 HK) is well set to post a significant YoY and HoH growth in earnings in 2H23. Our discussion with the company confirmed this.  
• Profit from Yicheng Qiwanli is expected to be booked and there will be profit upside from REIT listing with logistics hubs at Hangzhou and Guizhou as underlying assets.
• Significant reduction in USD and HKD-denominated debt will reduce its exposure to foreign exchange losses as well as high interest rate, both will be reflected in 2H23.

• The results for Bank Of Queensland (BOQ AU) are illustrative of risks for the mainstream banks in Australia and market expectations
• Even with almost all residential mortgage loans, BOQ’s credit costs rose from AUD13m to AUD71m YoY and Pillar 3 data shows mortgage NPLs up nearly 10% in past 2 months
• Net interest income only +6% YoY and -8% HoH, with operating costs +8% YoY and fee income down, there is nothing core holding the P&L together

• Universal Vision Biotechnology (3218 TT) reported continued growth in 1H23, with revenue, operating profit, and net profit increasing 25%, 31%, and 31%, YoY, respectively. 
• Revenue from high-margin technical service grew 23% YoY, driven by increasing number of refractive and cataract surgeries performed in Taiwan. UVB dominates refractive market in Taiwan, with 50% market share.
• With dominant market positioning in Taiwan, re-opening in China, secular market tailwinds, and widening geographic presence, UVB is expected to report double-digit top and bottom-line growth through 2025.

Ahead of interim results covering the six months to 30 September 2023, to be published in November, Picton Property Income has published a portfolio and asset management update. The company expects the continued progress with a range of initiatives, across all sectors, including leasing, asset enhancement and non-core disposal, to be accretive to NAV and income. Ahead of the results, our forecasts are unchanged.

• PAGD successfully narrowed net loss. It seems that the Company doesn’t mind “sacrificing” revenue scale, which could be considered “a necessary price” to pay for the transition to 2B model.
• PAGD mainly rely on Ping An Group channels to acquire B-end and F-end users, but based on our calculation, PAGD would encounter an obvious growth ceiling at certain revenue scale.
• Although PAGD could achieve breakeven by divesting businesses with low strategic synergies and effective cost control, the Company’s long-term growth potential and prospects remain uncertain, leading to discounted valuation.  

1Spatial’s H124 results show robust revenue growth and continued improvement in the revenue mix, with recurring revenue growing by 24%. Investment in sales resource, inflationary pressures and FX compressed margins, but a strong pipeline for both renewals and SaaS products could drive revenues and margins in H2 and beyond. In particular, the market opportunity for both 1Streetworks and NG9-1-1 has the potential to be transformative. We have upgraded our revenue forecast but leave earnings largely unchanged. Good conversion of the SaaS pipeline could justify further revisions, which may not be reflected in the current valuation.

Newron has announced encouraging interim six-month data from its Phase II trial (study 014/015) of evenamide in 161 patients with treatment-resistant schizophrenia (TRS). The six-month interval data for treatment at all dose levels showed evenamide was well-tolerated and efficacious, with statistically significant responses (p-value <0.001) across the key efficacy measures (PANSS, CGI-S and LOF). The interim data also provide inputs for the potentially pivotal Phase III trial (study 003), which we expect to start in Q124. We note that one-year data was reported on the first 100 participants of study 014/015 in May 2023, and we now await the complete one-year data from the full 161-patient cohort, expected in Q124. If favourable, this could be a significant inflection point for the company.

FY23 trading has continued according to the early August update, demonstrating the benefit of two unrelated activities at Carr’s Group: the Engineering division’s strength countering the weakness seen in the Speciality Agriculture business. Both have underlying longer-term growth attractions to drive earnings, along with the recovery potential in the agriculture end-markets.