In today’s briefing:
- Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Kirin: With Myanmar in the Rear-View Mirror, an Additional 30% Upside Is Quite Possible
- Toshiba – Little Good News
- Rakuten (Neutral) – Q2 22 Results Reaction: Mobile Losses Narrow but Little Good News Beyond That
- Denso (6902) | No Reason to Be Uber-Bearish
- Revisiting Galaxy Digital Post 2Q Earnings
- Shakey’s Pizza: Q2 2022 Recovery Far Better Than Expectations, Management Guidance Extremely Bullish
- Pharmaessentia Corp (6446 TT): Key Marketed Drug Besremi Is Showing No Sign of Slow Down
- ACCO: Inflationary Headwind
- XPER: Ready for a Split
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
- We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
- But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically
Kirin: With Myanmar in the Rear-View Mirror, an Additional 30% Upside Is Quite Possible
- Kirin Holdings (2503 JP)’s 2Q22 normalized OP of ¥46.2bn from ¥500.3bn revenue was slightly above the consensus OP of ¥45.9bn from ¥500.8bn revenue.
- Kirin raised its 2022 revenue and normalized OP guidance by ¥40.0bn and ¥6.0bn respectively, due to the progress of profit improvement measures mainly in Coke-Northeast and Kyowa Kirin in 1H22.
- Meanwhile, Kirin is due ¥22.4bn from MEHL for the Myanmar JV. Even though this is not the fair value, receiving at least something is a bonus in our opinion.
Toshiba – Little Good News
- Toshiba reported 1Q results today missing at both the revenue and OP lines.
- While revenue was barely above consensus the company generate a ¥4.8bn operating loss rather than the ¥22bn OP consensus was projecting.
- 1Q is seasonally weak so the loss itself would not be concerning except for how widespread deterioration was.
Rakuten (Neutral) – Q2 22 Results Reaction: Mobile Losses Narrow but Little Good News Beyond That
- Mobile losses narrowed sequentially as expected but not by much as the company missed consensus and Redex expectations for profitability
- Rakuten also reported a 220K net subscriber loss in the quarter as point-chasing free users churned off when zero-yen tiers were cancelled but worringly, network coverage/capacity was also a factor
- If there is a silver lining, fintech businesses Rakuten Bank and Securities posted solid results and remain on pace to IPO but negative mobile sentiment is unlikely to change
Denso (6902) | No Reason to Be Uber-Bearish
- Denso started the fiscal year with an overly optimistic view of Toyota production – it is now too bearish
- Chip shortages and supply disruptions are starting to ease, making it easier for automakers to meet end demand
- We are bullish on the stock as we believe that Denso’s earnings will beat lowered guidance and valuations are at the bottom of the range
Revisiting Galaxy Digital Post 2Q Earnings
- Galaxy reported 2Q earnings this week and revealed a net loss of over $550 million, driven by realized and unrealized losses in both digital assets and investments.
- With $1 billion cash, Galaxy is now in “clean up” mode but could deploy cash for potential M&A. Management sounds cautious and favors asset management business over other proprietary segments.
- However, the current cost base run-rate looks high and despite undemanding stock valuation, we believe upside is capped.
Shakey’s Pizza: Q2 2022 Recovery Far Better Than Expectations, Management Guidance Extremely Bullish
- Shakey’s Pizza (PIZZA PM) reported a strong SWS of 77% YoY in H1 and 121% YoY in Q2 2022. Excluding Potato Corner (PC), recovery tracked >90% of 2019 levels.
- The management guided that ex-PC recovery was over 100% in May and July, and numbers will improve with a resurgence in people at work, resulting in an upside to SWS.
- We see margin upside as dine-in numbers are set to increase in H2 and the company beds down its PC acquisition; the stock trades at 16x/10x FY22/FY23e.
Pharmaessentia Corp (6446 TT): Key Marketed Drug Besremi Is Showing No Sign of Slow Down
- Pharmaessentia Corp (6446 TT) is on a robust growth path following the U.S. launch of its key drug Besremi for polycythemia vera (PV) in December 2021.
- The company has reported July net revenue of NT$348.5 million, an increase of 937% and 26% from July 2021 and June 2022, respectively.
- Besremi has further label expansion opportunity as the drug is undergoing clinical trials for additional indications including essential thrombocythemia (ET), myelofibrosis, and chronic hepatitis.
ACCO: Inflationary Headwind
- Strong back to school sell-in was not enough to offset the impact of a weaker Euro and slowdown in video game spending
- The weaker Euro to the US Dollar was expected in our numbers when we revised them in July. However, the drop off was more meaningful than expected
- The decline in video game accessory sales also put pressure on the quarter with ACCO now expecting a “reset” in the segment’s performance
XPER: Ready for a Split
- XPER is in the final stages of separating its IP business from its product business.
- The Company reported second quarter results in line with our updated estimates after announcing the purchase of Vewd Software and an IP license agreement
- XPER’s multiple revenue streams gives the Company the ability to grow free cash flow even though one segment could be lagging
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