In today’s briefing:
- Shimano (7309) | Six Reasons to Stay Bullish
- Lasertec (6920) | ASML Shrugs off the Tech Recession
- Shiseido: China Exposure, Potential Earnings Misses and Write-Offs Create Additional Downside Risk
- EVA Precision: Catalysts Galore, Lots to Look Forward to in FY23
- Tesla Q3 Earnings Preview–Beat Widely Expected Due to Musk’s Twitter Deal
- Shift: Strong Earnings with Compelling Valuation
- Tokyo Electron (8035 JP): Downturn Discounted but Maybe Not Its Duration
- India Channel Insight #45 | TTK Prestige, Symphony, Bajaj Electricals
- Netflix 3Q22: Coast Is Clear?
- S&P Hasn’t Priced a Recession In
Shimano (7309) | Six Reasons to Stay Bullish
- Shimano’s stock price declined by 5.8% today on a broker downgrade, citing a slowdown in Europe
- Shimano has zero debt, tons of cash, low capital investment requirements and pricing power = defensive business model
- We can think of six reasons to remain bullish on the stock
Lasertec (6920) | ASML Shrugs off the Tech Recession
- ASML, a key supplier of EUV semicon equipment, reported better-than-expected third-quarter sales and profit along with record new bookings
- CEO Peter Wennink said customers were focusing on plans to expand their long-term capacity, rather than the current economic slowdown and weakness in end-markets
- That should be music to the ears of Lasertec shareholders. The stock has plummeted 49% so far this year. Valuations are attractive
Shiseido: China Exposure, Potential Earnings Misses and Write-Offs Create Additional Downside Risk
- Shiseido Company (4911 JP)’s valuation multiples have come down a lot over the last year. However, they don’t seem genuinely cheap with FY+2 consensus EV/OP at 25.4x.
- Meanwhile, Shiseido’s position in the Chinese market is weakening and there are also risks such as earnings misses and write-offs.
- Thus, we think there’s more downside to Shiseido, whose share price may seem cheap after declining by more than 35% during the past 10 months of this year.
EVA Precision: Catalysts Galore, Lots to Look Forward to in FY23
- Post a 40% correction, Eva Precision Industrial Holdings (838 HK) is now at a PE of 9x/5.8x FY22/23e with a dividend yield of 3.0/5.1% FY22/23e (assuming a 30% payout ratio).
- The company has resumed buybacks since the 13th of October, purchasing 1.43 mn shares (0.08% of outstanding shares) over four trading sessions. We see this trend continue for two weeks.
- Catalysts here would come from solid earnings releases, strong order book-related announcements, and a potential to unlock value from the business.
Tesla Q3 Earnings Preview–Beat Widely Expected Due to Musk’s Twitter Deal
- Tesla will announce Q3 2022 earnings results after the US market close on October 19th.
- Given that CEO Elon Musk needs to sell more of his Tesla shares to fund his Twitter buyout by month end, the Street widely expects a huge earnings beat.
- Q3 fundamentals were weak for Tesla and orders in Q4 point to another delivery miss versus consensus. We recommend selling into any spike on a positive Q3 print.
Shift: Strong Earnings with Compelling Valuation
- Shift Inc (3697 JP) reported 4Q and full-year FY08/2022 results last week. Revenue increased 36.2% YoY to JPY17.9bn while OP increased 17.7% YoY to JPY 1.6bn during 4Q.
- Full-Year revenue and OP grew 41% YoY (JPY64.9bn) and 73% YoY (JPY6.9bn) beating its own guidance while both revenue and OP fell slightly below consensus estimates.
- Shift’s shares are down 14% YTD as the market excessively reacted to decline in margins which we think is unwarranted.
Tokyo Electron (8035 JP): Downturn Discounted but Maybe Not Its Duration
- Share price down 50% from its peak, discounting a downturn of historical magnitude.
- But history also suggests that the downturn might last two years, in which case it would be too early to buy.
- Impact of COVID lockdown fading. No impact from U.S. sanctions yet. Weaker guidance ahead, in our estimation.
India Channel Insight #45 | TTK Prestige, Symphony, Bajaj Electricals
- We speak to channels associated with TTK Prestige (TTKPT IN), Symphony Ltd (SYML IN) and Bajaj Electricals (BJE IN) with the objective to understand the current demand environment.
- Consumer sentiment is mixed, and channel restocking levels are similar to last year.
- Online giants like Amazon.com Inc (AMZN US) & Flipkart Online Services (1398508D IN) are at a risk with channel dynamics turning in favour of offline retail over the longer term.
Netflix 3Q22: Coast Is Clear?
- Netflix’s stock has outperformed the market by 25% over the past quarter on faith that the new advertising tier will unlock the next leg of the growth narrative.
- 3Q22 had two of its biggest hits ever – Stranger Things and Dahmer, Netflix beat its own guidance of 1M by only 1.4M…APAC added 1.4M, most from low ARPU India
- Pulling subscriber guidance is a yellow flag, as is the lack of details on how AVOD will be “neutral to positive” over time.
S&P Hasn’t Priced a Recession In
- Emotions run high in bear markets. Often times, it’s very difficult to post analysis because it doesn’t always follow consensus.
- But, the purpose of this newsletter is to be 100% transparent in my thinking which may not always be 100% popular.
- In this case, we are going to take a look at a historically accurate bottom indicator and run specific price targets on the S&P on a valuation perspective.
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