In today’s briefing:
- Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity
- Datamatics Global Services Ltd: Forensic Analysis
- Grab Holdings (GRAB US) – Risks and Rewards in 2024
- Nuvama: Stellar Start as an Independent Listed Entity
- XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence
- Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1
Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity
- Nike (NKE US) reported 2QFY24 results last week with a guidance cut, as the company cut FY24 full-year sales guidance to around +1%, compared to +mid-single-digit in the previous guidance.
- Shenzhou Intl Group Holdings (2313 HK) saw its stock drop by 8% the following day, given that Nike is Shenzhou’s most important customer, making up 30% of Shenzhou’s sales.
- Nike’s inventory is down another 14% yoy, and down high-single-digit compared to the previous quarter 1QFY24.
Datamatics Global Services Ltd: Forensic Analysis
- Datamatics Global Services (DATA IN) or DGSL has seen a good operational performance especially since F23, on the back of a difficult IT macro environment.
- Yet there are some discomforts on the forensic side, especially related to cash component. Low cash yield due to significant current account balances in subsidiaries raises alarm bells.
- We find opaqueness regarding some important disclosures including Ind AS 115- Revenues and Ind AS 116- Leases. Decision to increase remuneration cap size also leaves us perplexed.
Grab Holdings (GRAB US) – Risks and Rewards in 2024
- Grab Holdings looks set to move toward cashflow breakeven in 2H2024 having hit adjusted EBITDA breakeven in 3Q2023 as it successfully struck a delicate balance between growth and profitability.
- The sale of 75% of Tokopedia by GoTo may mean more intense competition in Indonesia as it focuses on online delivery services but Grab is well-positioned to deal with this.
- 2024 will see the potential completion of the Transcab deal plus a potential acquisition in food delivery increasing scale and competitiveness. Valuations are attractive relative to growth and financial position.
Nuvama: Stellar Start as an Independent Listed Entity
- Nuvama reported its first quarterly result since its listing, as a demerged entity. It reported strong growth across all its business segments.
- Wealth management revenues grew 30% YoY, adjusted for one-off accounting impact. Cyclical recovery in the capital markets segment further helped.
- Nuvama has potential to scale up rapidly and grow its profitability exponentially led by growth and operating leverage. At the current valuation, an investment in Nuvama has potential to triple.
XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence
- XL Axiata (EXCL IJ) continues to stand as the most direct way to play the data demand in Indonesia as well as being the most convergent of the listed telcos.
- Although it saw some seasonal slowdown in 3Q, the solid growth trajectory remains intact for this year with the completion of the Link Net restructuring driving convergence growth.
- XL Axiata (EXCL IJ) raised data prices again in November and will continue to ride the wave of price reparation over the coming quarters in a more rational pricing environment.
Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1
- Sinopharm’s 23Q1-Q3 results were below expectations. The main reason for weak performance was due to the anti-corruption campaign, which led to profound and rapid changes in fundamentals and policy end.
- In Q4, the impact of anti-corruption would weaken and traditional distribution business would recover.So, 23Q4 performance should be better than Q3, but 23H2 performance would still be worse than 23H1.
- We lowered our forecast for 2023 – Revenue and net profit could achieve single-digit growth. Due to the high base in 23H1, growth in 24H1 could still be under pressure.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
