In today’s briefing:
- Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
- [Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
- Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
- Rohm (6963 JP): Gearing Up in the Downturn
- China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- Shiseido: Conservative Guidance Is Not a Cause for Concern as Shiseido Almost Always Overdelivers
- Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery
- Recruit (6098 JP) | A Soft-Landing?
- BRIS – Dominant
- [Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
- Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November.
- The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn.
- Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play.
[Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
- We expect Meituan to report 18% YoY topline growth in C4Q22, in line with cons. Our non-IFRS net margin est. is 1.9ppt higher than cons.
- In-Store would be impacted by Douyin’s category expansion and deepening penetration in lower-tier cities.
- We downgrade Meituan to SELL and cut TP to HK$137 due to pressure from competition for in-store.
Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
- On Tuesday last week, short-video app Douyin announced that it plans to offer its food delivery service in more Chinese cities expanding its current trial in Beijing, Chengdu and Shanghai.
- Following this, on Wednesday last week, Meituan announced that it plans to recruit 10,000 workers in 1Q2023 across a number of its business divisions including technology development and customer services.
- Though we don’t expect Douyin’s entry into food delivery to have large impact, increased competitive pressure and headcount increase would drag down Meituan’s profitability in the near-term.
Rohm (6963 JP): Gearing Up in the Downturn
- Rohm is increasingly an automotive semiconductor maker. Its business should hold up reasonably well in the downturn and grow significantly in the long term.
- Capital spending risks excess capacity in the coming year, but sets the stage for long term growth. Possible investment in Toshiba a positive.
- Weak quarters ahead. Buy on weakness for the long term.
China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
- New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue.
- Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.
Shiseido: Conservative Guidance Is Not a Cause for Concern as Shiseido Almost Always Overdelivers
- Shiseido Company (4911 JP)’s share price is down more than 4% today following a mixed 4Q22 with revenue missing consensus by 2.1% but OP beating by 31.7%.
- A lot of optimism was baked in the medium-term plan, but 2023 OP guidance (¥60.0bn) was ¥17.5bn below consensus expectations.
- Nevertheless, we think this shouldn’t worry investors too much as Shiseido has outperformed initial guidance by an average of ¥17.0bn over the past 3 years.
Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery
- For H1FY23 Thomson Medical Group Limited (TMG SP)‘s revenue increased 27% to S$184M. The growth was mainly attributed to the increase in overall patient loads and higher average bill sizes.
- Despite increase in operating expenses, Thomson Medical reported a 46% YoY increase in operating profit to S$45.2M, leading to 340 basis point improvement in operating profit margin to 24.6%.
- Thomson Medical expects its existing and new business lines to grow and is therefore cautiously optimistic of its business prospects in the current financial year.
Recruit (6098 JP) | A Soft-Landing?
- Recruit’s Q3 results are unlikely to move the market. Full year guidance slightly above consensus estimates
- Much of the bad news on the labour market and interest rates is now discounted in current valuations
- We remain bullish. At 23x PE the stock is trading at a deep discount to its historical 30x
BRIS – Dominant
- Relatively newly formed, increased free float, dominant Shariah market share
- All 9 peer Shariah banks combined have less branches than BRIS
- 57% market share of Shariah lending, where growth is highest
[Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
- We estimate that Weibo’s top line/bottom line would be 1.3%/9.0% vs cons., as the continuous cost-saving measures offset the impacts of temporary disturbance caused by reopening.
- We remain optimistic about Weibo’s rebound in 1H23 as the macro improves, with top line/bottom line beating cons. by 2.2%/5.5% in 2023.
- Reiterate BUY rating and raise TP to US$ 26.9, implying 11.7X PE in 2023.
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