Daily Brief Equity Bottom-Up: Smartkarma Webinar | This Is Not A Webinar On Adani and more

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Travis Lundy as he gives us a quick rundown about what is the current situation that is happening with Adani Enterprises and where they are headed from this point on.

The webinar will be hosted on Wednesday, 1 February 2023, 17:00 SGT/HKT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

• We believe total revenue growth rate will accelerate from 4Q22 and grow by 9% in 2023.
• We believe the operating margin will be stable from 4Q22 to 2Q23, but the margin will climb up from 3Q23.
• We believe that EPS will increase by 16% and the stock will have an upside of 21%~44%.

• Inventory levels rose to highs in 3Q22 — Now increased margin pain may come through as we move through the latest earnings season.
• Forecasts still assume relatively strong margins vs. history and thus appear at risk of disappointment.
• Earnings forecasts, while assuming a down-cycle, are still assuming a relatively benign down-cycle.

• Two of the biggest department store chains in Japan, H2 O Retailing (8242 JP) & Isetan Mitsukoshi Holdings Ltd (3099 JP) are set to disclose FQ3 earnings this week.
• The ones with FQ3 ending in November, J Front Retailing (3086 JP) and Takashimaya (8233 JP) surprised to the upside with 6% and 8% price gains on earnings.
• Our analysis indicates that H2O Retailing & Isetan Mitsukoshi could deliver stronger FQ3 results. Thus, we would look to trade Japanese Department Stores before earnings this week.

• We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G
• NEC’s Network Services registered double-digit revenue and profit gains in Q3 on the back of growth in 5G equipment sales and IP income.
• We believe that the current share price (+4% over the past 12m) and valuation (10x PE, 0.8x PB) do not reflect the positive mid-term outlook

• Kasikornbank PCL (KBANK TB) remains one of Thailand’s top-tier banks with particular strength in SME lending and consumer lending making it a beneficiary of both consumption and tourism recovery. 
• The bank continues to grow its digital banking and business through its K PLUS app which now has more than 21m users, with multiple use cases and self-apply loan applications. 
• Kasikornbank remains a core holding for exposure to Thailand’s tourism-driven recovery through its SME exposure. Valuations are attractive with the bank trading at 0.7x FY2023 PBV and 8.3% FY2023E ROE. 

• Gujarat Ambuja Exports (GAEX IN) is an Agro Processing conglomerate having a diverse product profile across oil seeds, edible oil refining, maize and starch, cotton yarn, wheat processing, etc. 
• Our forensics primarily include the takeaways on MACPPL acquisition, its true rationale, accounting impact on the balance sheet and few disclosure errs.
• Other major takeaway relates to capex story and grey areas relating to the capacity size and timely completion, especially for its marquee plant in Malda.

• Bukalapak (BUKA IJ)  is one of Indonesia’s most differentiated digital economy players plus it is unusual in that it has one of the longest runways amongst peers at 15 years. 
• Despite operating a marketplace model, the platform uses this to generate traffic for its other businesses including its O2O Mitra Bukalapak business and its growing online speciality store business. 
• Bukalapak (BUKA IJ) also has strong ESG credentials, the most obvious of which is in the empowerment of MSMEs through its Mitra business. It is also making headway toward profitability.

• Nihon M&A Center (2127 JP) reported 3QFY03/2022 results. Revenue declined 9.9% YoY to JPY9.8bn (vs consensus JPY13.6bn) while OP dropped 21.9% YoY to JPY3.2bn (vs consensus JPY6.1bn).
• Though there had been an increase in the no. of transactions completed during the quarter, revenue declined due to price pressures.
• Share price has declined 22.8% during today’s trade due to weaker-than-expected earnings and we think full-year FY03/2022E guidance is too hard to achieve.

• This is our second Insight into Tobila Systems – the absolute dominator in the niche of fraud/spam call and message filtering services in Japan;
• We like the high-quality, unique assets owned by the company, although capital allocation appears to stand out as a wild card in our formula of long-term shareholder-value creation;
• At the current level, we would hold the shares firmly and wait patiently for more opportunistic offerings from Mr. Market to accumulate more shares.