Daily Brief Equity Bottom-Up: Softbank (9984 JP): The NAV Discount High Offers an Investment Opportunity and more

• The announcement of JPY500bn share buybacks is a positive for SoftBank group minority shareholders, and confirms the positive impact of the emergence of Elliott as an activist shareholder
• The combination of the big weighting of Arm Holdings in the group’s equity value and the impact of the appreciating JPY has driven the NAV discount to very high levels
• Much bad news seems priced in following the market turbulence; we remain positive on Softbank shares as they trade at a historically high 57%+ discount to the estimated NAV

• Our NAV analysis of SK Square suggests NAV of 15.6 trillion won or 115,605 won per share, representing 48% higher than current share price.
• SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix. SK Square’s share price has declined by 27% since reaching its recent peak on 11 July. 
• SK Square had excellent results in 2Q 2024, driven by improving results of its affiliates including SK Hynix. 

• Bearish sentiment in Hong Kong declined during the carry trade sell off.
• Low Volatility, High Dividend and Value factors have continue to be profitable strategies in Hong Kong.
• Pop Mart International Group L (9992 HK) , Techtronic Industries (669 HK) and Giant Biogene (2367 HK) all reported solid operating and financial news leading to BUY recommendations.

• Strong Q2 performance: Asics delivered impressive profit growth and margin improvement, exceeding expectations with operating profit surging 119% YoY to 25 billion yen.
• Market share gains: Asics continues outpacing Nike across key regions, with strong growth in Japan, Europe, China, and the US, driven by Sportstyle and Performance Running.
• Bullish outlook, limited upside: Recent guidance revision and current FX rates cap near-term gains; stock trades at 19x NTM EV/EBIT with 15% upside to fair value.

• Following our recent insight Shortlist of High Conviction Philippines Equity Ideas, two companies featured Ginebra San Miguel (GSMI PM), and DigiPlus Interactive (PLUS PM) reported stellar Q2FY24 earnings. 
• DigiPlus Interactive (PLUS PM) trades at 7x PE FY24, with a 5.8% dividend yield, >40% ROCE, and tremendous scope for growth after its 300%/400% Revenue/PAT growth Q2.
• Ginebra San Miguel (GSMI PM) trades at 9x FY24 PE, a 5% dividend yield, 19% of the market cap in cash, and 35% ROCE with teen growth in CAGR revenue/profits. 

• In this insight, we discuss the recent share cancellation at S.M. Entertainment, valuations, and the launch of a new British boy band in August 2024. 
• Dear Alice boy band will start its promotion with the broadcast of “Made in Korea: The K-Pop Experience” on BBC One and BBC iPlayer on 17 August.
• We are cautiously positive on Dear Alice band. Unlike most aspiring boy bands, Dear Alice has a HUGE advantage of launching the band on the BBC through a TV show.

• In H1 2024 Profits and cash flow grew year over year
• Overall, operations tracking in line with previous guidance with some cost savings
• The key is the copper price which is closer to bottoming

• Ball Corporation reported its second quarter 2024 earnings, depicting a strategic navigation through a mixed market landscape, facing both headwinds and tailwinds across its various regional operations.
• The company’s global beverage can shipments and aerosol shipments experienced growth rates of 2.8% and 5.6% respectively, indicating strong demand for sustainable aluminum packaging solutions—an area in which Ball continues to cement its leadership.
• This growth, however, came amidst varying regional dynamics, from exceeding expectations in North America and EMEA to confronting challenges in South America, particularly due to economic volatility in Argentina.

• GoTo (GOTO IJ)“‘s 2Q2024 reflected an ongoing focus on growth as the company invested in both its On Demand Services and its Fintech segments driven by its product-led initiatives.
• The company’s growth was driven by the mass market, subscription products, and premium offerings such as express deliveries, which helped to boost both frequency and retention on the platform. 
• GoTo will continue to benefit from the service fee from Tokopedia, which can be used to drive its core ODS and Fintech businesses. The stock overhang is a temporary drag.

• Red Five sold 412 million shares acquired through the process of merging with Silver Lake, making a tidy profit of 30 million
• The move gives Red Five nearly $500 million in cash and bullion with no debt, providing significant flexibility for the company
• Len’s discussion in the Diggers presentation indicated that this was a medium-term strategy with potential action by June 2025 for evaluating and dealing with the shares

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