In today’s briefing:
- Sea Ltd: Another Sell-Off?
- Buy Country Garden Services on China Property Sector Recovery
- Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
- Suzuken Buyback (9987 JP) – The Best News In Years
- Palantir Inc: Major Drivers
- Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
- Apollo Hospitals Enterprise (APHS IN): Mixed 2QFY23 Result; Outlook Is Positive
- Block Inc (formerly Square Inc): Continuing Bullish Approach Towards Crypto
- Datadog Inc: The Cloudcraft Acquisition & Other Drivers
- Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
Sea Ltd: Another Sell-Off?
- The last leg of Sea Ltd (SE US)’s original bull thesis is about to break with Shopee’s revenue expected to start declining from 3Q22 onwards.
- However, a lower-than-expected operating loss, driven by cost-cutting could get the bulls excited for a short while following the 3Q22 results due later this week.
- With the business remaining unprofitable after cost-cutting, we think 3Q22 results could be another opportunity to profit on the short-side as the FV of Sea could be around $10bn EV.
Buy Country Garden Services on China Property Sector Recovery
- Chinese government outlined 16 steps to support the property industry on Nov 11
- The newly released measures clearly show that the government has reversed its attitude toward property industry, which may trigger the end of the downcycle.
- During the property sector rebound, Country Garden Services (CGS) can be a good investment. The company has a solid track record and shows attractive valuation.
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
- Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
- Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
- The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.
Suzuken Buyback (9987 JP) – The Best News In Years
- Suzuken Co Ltd (9987 JP) last Friday announced earnings which beat expectations and raised forecasts well above consensus. But Implied H2 did not change, suggesting full-year is lowballed.
- The company announced a buyback over 5 months, but today (Tuesday) announced a ToSTNeT-3 buyback for the full size (6% or so) that morning.
- It looks like insider selling, which in addition to being accretive would be bullish on a governance basis.
Palantir Inc: Major Drivers
- Palantir delivered a mixed set of results in the last quarter.
- Its $478 million in revenue surpassed Wall Street expectations but the company missed out on the earnings expectations of analysts.
- U.S. commercial business expanded for the ninth consecutive quarter, up 53% yearly.
Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
- China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
- The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK).
- CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges.
Apollo Hospitals Enterprise (APHS IN): Mixed 2QFY23 Result; Outlook Is Positive
- Apollo Hospitals Enterprise (APHS IN) recorded 14% y/y growth in revenue in Q2FY23. Occupancy in both the mature as well as new hospitals improved in Q2FY23 compared to prior quarter.
- Q2FY23 reported EBITDA declined 8% y/y to INR5.65 billion due to impact of 24/7 operating costs, which stood at INR1.74 billion (vs INR475 million in Q2FY22).
- In October, Apollo Hospitals entered into a definitive agreement to acquire 60% stake in Kerala First Health Services Limited, which offers Ayurveda medical services under the “AyurVAID Hospitals” brand.
Block Inc (formerly Square Inc): Continuing Bullish Approach Towards Crypto
- Block delivered a decent set of results with an all-around beat and good profitability during the last quarter.
- Its BNPL platform produced $150 million in gross profit in the third quarter, distributed between Square and Cash App.
- Inflows per active user have been improving in the third quarter compared to the first and second quarters and stable year over year.
Datadog Inc: The Cloudcraft Acquisition & Other Drivers
- Like most technology stocks, Datadog has also taken a massive beating in terms of its share price but its financial performance has been good.
- The company reported strong results for the third quarter and managed an all-around beat.
- Since customers continue to manage their companies with greater cost consciousness, the company observed current customer usage growth at similar levels as Q2.
Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
- In Q2FY23, Thermax (TMX IN) recorded strong revenue growth of 41% y/y to Rs20.8bn, driven by strong growth across all the three segments.
- The company bore the brunt of high raw material prices as EBIT margins saw a 900 bps decline y/y to 6.9%. However, EBIT margin improved 200 bps over Q1FY23.
- The order book of the company grew 46% y/y to Rs94.8bn. Order book is well diversified across sectors. Domestic orders comprised ~84% of the order book.
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