In today’s briefing:
- Taiwan Apple Ecosystem Monitor: Two Potential Event Trades into Apple Earnings
- Nihon M&A: Earnings Miss, No Indication of a Business Turnaround Yet
- Cisarua Mountain Dairy (CMRY IJ) – Yoghurt Sticks and Meatballs
- Narrative and Numbers | Sula Vineyards (SULA IN) | FY23
- Taiwan Tech Weekly: Wave of Taiwan Earnings Plus AMD & Apple; AI Accelerating DRAM & PC Recovery
- M3: Weak Earnings and Overseas Business Further Slows Down
- Oriental Watch (398 HK): Strong Data Points for H1 FY24, 14% Yield + >50% Mkt Cap in Cash
- [SMIC (0981 HK, BUY, TP HK$26) Target Price Change]: Pricing Power Courtesy of Export Restrictions
- Simplex Holdings (4373) – Firing on All Cylinders and Targeting Long- Term Growth
- Scotiabank: Overlooked Risks Discussed
Taiwan Apple Ecosystem Monitor: Two Potential Event Trades into Apple Earnings
- Apple will report its earnings on August 3rd, 14:00 PDT. We highlight two potential trades into the Apple earnings event.
- Quanta Computer has massively outperformed Apple due to investors latching on to its AI-server growth story. One can consider to Long Apple / Short Quanta into the Apple earnings event.
- Hon Hai, Flexium, and Zhen Ding have all lagged Apple’s shares yet generate significant revenue from Apple. One can Long a basket of the three into Apple’s earnings.
Nihon M&A: Earnings Miss, No Indication of a Business Turnaround Yet
- Nihon M&A reported 1QFY03/2024 results on Friday. Both revenue and OP decreased 9.1% and 52.5% YoY to ¥8.2bn (vs consensus ¥9.8bn) and ¥1.7bn (vs consensus ¥3.6bn) respectively.
- M&A sales decreased yet again in 1Q as the company is struggling to improve revenue per transaction despite there being an increase in the no. of transactions.
- We think the company may not be able to achieve full-year target given declining per transaction revenues and falling other businesses.
Cisarua Mountain Dairy (CMRY IJ) – Yoghurt Sticks and Meatballs
- Cisarua Mountain Dairy (CMRY IJ) remains one of the most interesting and dynamic staple players in Indonesia, with a leading position in yoghurt and growing strength in consumer foods.
- CMRY continues to achieve strong top-line growth of +21% in 1H2023, with consumer foods driving growth and 50% of sales but we expect dairy to see better performance in 2H2023.
- Cisarua Mountain Dairy (CMRY IJ) continues to invest in marketing through digital channels, including TikTok. Valuations remain attractive relative to its growth prospects, with more than 20% 3-year EPS CAGR.
Narrative and Numbers | Sula Vineyards (SULA IN) | FY23
- Sula Vineyards (SULA IN) is one of the leading wine producers in India.
- Focus on premiumization, market leadership, and industry prospects are attractive.
- However, high working capital, recent resignations, and customer concentration along with market’s high valuations make it a watch-list candidate.
Taiwan Tech Weekly: Wave of Taiwan Earnings Plus AMD & Apple; AI Accelerating DRAM & PC Recovery
- Wave of earnings this week — AMD, Qualcomm, Apple internationally… and Delta, Advantech, Innolux, Winbond, Realtek, plus others in Taiwan.
- We visited Micron’s A3 fab in Taiwan; SK Hynix gives strongest comments yet on Memory turn-around; Long Nanya Tech on DRAM turn-around.
- Intel results readthrough: PC cycle improving and could be accelerated by AI-demand… We continue to see Elan Micro as a laggard play on rallying PC names.
M3: Weak Earnings and Overseas Business Further Slows Down
- M3 Inc (2413 JP) reported 1QFY03/2024 results on Friday. Revenue increased 0.7% YoY to ¥57.4bn (vs consensus ¥58.1bn) while OP decreased 3.7% YoY to ¥18.0bn (vs consensus ¥18.1bn).
- Overseas revenue growth further slowed down to 5.3% despite the company expecting overseas business growth to help offset slowdown in pharma marketing business going forward.
- This proves that m3’s long list of M&A’s have not been really successful as we have not observed any meaningful growth from these new acquisitions.
Oriental Watch (398 HK): Strong Data Points for H1 FY24, 14% Yield + >50% Mkt Cap in Cash
- Oriental Watch (398 HK) cycled into favorable comps for April-June 2023 owing to COVID-related closures in China in 2022 for the same period.
- Another favorable data point was the Emperor Watch & Jewellery (887 HK) positive profit alert for H1 FY23 ( Jan-Jun 2023), where the company guided >100% net profit growth.
- Oriental Watch (398 HK) trades at 6.9x FY24e, with more than 50% of the market cap in cash and a ~100% payout ratio resulting in a 14% dividend yield.
[SMIC (0981 HK, BUY, TP HK$26) Target Price Change]: Pricing Power Courtesy of Export Restrictions
- We expect SMIC to report C1Q23 top-line and non-IFRS net income 2% and 16% vs. consensus, respectively.
- We suggest SMIC’s ability to supply sanctioned firms with 14/7nm nodes provides it with significant pricing power. We expect the decline in SMIC’s wafer ASP to slow.
- We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand. We maintain BUY rating and raise our TP to HK$ 26.
Simplex Holdings (4373) – Firing on All Cylinders and Targeting Long- Term Growth
- High earnings visibility – Q1 FY3/2024 results indicate a robust start to the year with record-high quarterly sales, orders, and backlog.
- We believe the company exhibits robust earnings visibility, which can be attributed to its adeptness in delivering high-value-added services within a highly competitive market, with its high-quality workforce and sufficient capacity.
- Aiming for long-term sustainable growth –whilst strong results are appealing, we are encouraged by the following which we believe will allow the business the sustain long-term growth
Scotiabank: Overlooked Risks Discussed
- Many analysts have a bullish outlook on The Bank of Nova Scotia’s stock, which is arguably warranted.
- But plenty of risk factors are being overlooked, and late payments are mounting with short-term retail obligations in particular focus.
- Scotiabank’s emerging market strategy could present compelling trend growth.
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