In today’s briefing:
- Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation
- Anta Sports (2020 HK): Strong 3Q23 Update
- Suruga Bank – Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ
- SBI Life: Best Bet to Play the Indian Life Insurance Sector – Initiating Coverage.
- Postcard from Kolkata | Can Old Habits Die Easy?
- Quick Look – Lifull (2120 JP)
- Vedanta Resources: $3 Bn Bonds Maturity Is Just the Tip; the Iceberg Is Nearly $11 Bn.
- Auctus on Friday – 13/10/2023
- Asian Dividend Gems: Koentec
- Ansell Ltd (ANN AU): Worst Not Over Yet; Unfavorable Macro Backdrop Persists; Bleak FY24 Guidance
Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation
- Seven & I Holdings (3382 JP)‘s FQ2 OP exceeded consensus by ¥2.0bn (1.3%), but with FH2 revenue guidance lowered by ¥95bn, the overall outlook appears discouraging.
- The company’s shares fell by 5%, underperforming Topix by 3.8%, indicating investor concern about US growth and departing from activist proposals despite a ¥2.0bn earnings outperformance.
- If overseas investors who supported ValueAct’s proposals begin to exit, Seven & I could face substantial downside risks in the near term.
Anta Sports (2020 HK): Strong 3Q23 Update
- Anta Sports Products (2020 HK) announced a set of strong 3Q23 operating data yesterday after market close.
- Both Anta and Fila brands performed well in a challenging macro environment in China in 3Q23, with 3Q22 being a high base.
- Another bright spot is that other brands outside of Anta and Fila grew 45-50% yoy in 3Q23, with Descente up 40-45% yoy and Kolon up 65-70% yoy.
Suruga Bank – Loans Down A Lot, Deposits Up Sharply, Cost/Income Up to 74%, Credit Costs +47% QoQ
- The bank is seeing high growth in cash and deposits, with loans in decline, and the composition moving more toward government and corporate loans
- ALM does not appear strong, and without any easy way to reduce operating costs, the bank is now seeing cost/income surge to 74%
- Credit metrics on surface may appear fine, but the 47% QoQ rise in provision costs, suggests to us provisions were cut too much last year, and now there is normalization
SBI Life: Best Bet to Play the Indian Life Insurance Sector – Initiating Coverage.
- SBI Life leads the Private Life Insurers in India in terms of market share, thanks to exclusive access to Banca channel of the largest bank in the country.
- SBI Life has been one of the best-performing life insurers in terms of growth as well as margin expansion among peers in recent years, which we expect to continue.
- SBIL is our primary pick in the Indian Life Insurance space with an upside of ~24% and its relatively cheaper valuations offers a margin of safety to cover near-term risks.
Postcard from Kolkata | Can Old Habits Die Easy?
- We visit the ‘City of Joy,’ Kolkata, to understand the state of the industry, focusing on microfinance and the status of lenders concentrated in the region.
- Multiple factors argue for a cyclical bottom for lenders operating in West Bengal and Assam.
- We have been positive on Bandhan Bank Ltd (BANDHAN IN), but it is a play on cyclicality rather than a complete turnaround & transformation of its habits.
Quick Look – Lifull (2120 JP)
- Company Profile: LIFULL runs the LIFULL Home’s real estate website.
- Compared to its main rival, whose strategy is focused mainly on the quantity of listings, LIFULL’s aim is to achieve greater quality, as measured by the percentage of inquiries that lead to sales for professional real estate clients.
- While others primarily charge a fixed fee for listings, LIFULL charges a combination of fixed fees and incentive fees based on the number of inquiries received for a listing.
Vedanta Resources: $3 Bn Bonds Maturity Is Just the Tip; the Iceberg Is Nearly $11 Bn.
- Market concern on company’s redemption of Bonds of $ 3 bn in 2024
- Liquidity gap for company is much larger estimated at nearly $11 bn
- Company needs to raise long term funds and/or divest assets to raise the required amount
Auctus on Friday – 13/10/2023
- Pulsar Helium (PLSR CN)C; target price of C$0.90 per share: Additional acreage should increase the size of the prize – Pulsar has signed a lease with a private mineral rights holder to expand the area of the company’s Topaz helium project.
- The additional mineral rights are within a 6.2 mile radius of the Topaz discovery and cover a total of 2,840 gross acres (1,049 net acres).
- OMV (OMV AG): 3Q23 update – 3Q23 production was 364 mboe/d.
Asian Dividend Gems: Koentec
- We are starting a new series called “Asian Dividend Gems.” We plan to write about outstanding companies in Asia with high dividend yields (5% to 20%).
- The first company in this series is Koentec. From 2018 to 2022, its dividend yield averaged 5.2% and its dividend payout averaged 80.8%. The current dividend yield is 7%.
- Koentec is a leading Korean company that provides industrial waste incineration, steam production (utility), and waste landfill services.
Ansell Ltd (ANN AU): Worst Not Over Yet; Unfavorable Macro Backdrop Persists; Bleak FY24 Guidance
- Ansell Ltd (ANN AU) reported 11% YoY decline in revenue to $1,655M in FY23. Healthcare business experienced significant customer destocking through FY23, leading to 21% YoY decline in segment revenue.
- Ansell has outlined an investment program to improve productivity and accelerate digitalization for total cost of $70–85 million. The program calls for production as well as job cut.
- Strong headwinds in the glove sector are expected to continue as the global oversupply situation persists. Ansell expects FY24 adjusted EPS to be $0.92–1.12 (down 3–20% YoY).
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