In today’s briefing:
- Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True
- Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends
- JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.
- Alpha Generation Through Share Buybacks in Korea: 1Q 2023
- MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames
- SITC International (1308 HK): Still Not Easy to Find the Bright Spot
- Harvest Technology Group Limited – Approaching Cash Breakeven?
- Empire Energy Group Ltd – Another Step Closer on Carpentaria-2H Test Data
- Perfect Medical: China Operations Update, Suggests 100% Upside From Here
- Continental: +12% in Under Three Weeks. Strong Results. Take Profit.
Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True
- Following Jehoshaphat’s allegations that profits are inflated dramatically over a decade with manipulative accounting, Techtronic Industries (669 HK) has issued a rebuttal clarifying that the accusations are without any merit.
- TTI’s beyond comparison performance is due to world class brands such as Milwaukee, Ryobi and Hoover which have helped top line grow at 13% CAGR over the past 13 years.
- Nevertheless, we have assessed some of the company’s clarifications here which seemed too good to be true.
Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends
- Shougang Fushan Resources (639 HK) trades at 4.5x/5.1x FY22e/23e with 50% of the market cap in cash and a 17.8%/15.8% FY23e/24e dividend yield (based on an 80% payout ratio).
- Since our call in FY21, close to 64 cents of the share price (25% of the current share price value) has been returned as dividends making it a dividend machine.
- We forecast at least another 70 cents of dividend for H2 FY22 and FY23, bringing the dividend in 3.5 years to more than half the current share price.
JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.
- JD’s revenue growth rate reached its historical low in 2022, but we believe it will recover in following two years.
- JD’s operating margin hit its historical high in 2022 and we believe the improvement will continue.
- We believe EPS will grow by more than 100% in 2022 and the stock has an upside of 42%.
Alpha Generation Through Share Buybacks in Korea: 1Q 2023
- In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in 1Q 2023.
- We provide a list of 23 stocks in the Korean stock market that have announced share buyback programs in 1Q 2023.
- Some of the larger companies (with more than 1 trillion won in market cap) that have recently announced share buybacks including Celltrion Healthcare have been outperforming the market.
MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames
- What may appear duplicative asset segment in MGM actually spreads risk and improves overall margin of safety for both stocks.
- MGM China is a pure Macau play while MGM Resorts International is a strong bet on global reach of its gaming properties.
- Buying both is insurance against a possible recession downside because of the geographically and demographically diverse customer bases of both enities.
SITC International (1308 HK): Still Not Easy to Find the Bright Spot
- We stay bearish on SITC International (1308 HK) despite record net profit in FY22. The collapse in spot freight rate will take a toll on FY23 earnings.
- Management is also conservative on outlook, citing both demand and supply issues. It expects gross margin to return to pre-pandemic levels (17-20%) in the future, vs. 41.8% in 2H22.
- Market consensus is just too optimistic, projecting just 37% YoY decline in earnings for FY23. We believe actual earnings may be at least 18-27% lower than current street forecasts.
Harvest Technology Group Limited – Approaching Cash Breakeven?
- Harvest Technology Group Limited (ASX:HTG) licenses its proprietary video compression and encryption technology for low-bandwidth, high-latency applications needing secure real-time streaming video communication.
- The company delivers solutions for data transfer from anywhere via satellite or congested networks.
- Harvest offers a solution which enables real-time monitoring of remote locations, real-time feedback for field technicians, and secure video conferencing.
Empire Energy Group Ltd – Another Step Closer on Carpentaria-2H Test Data
- Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) and US oil/gas production assets.
- EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
- The NT energy basins are fast developing as strategic high-calorific gas bolsters for east coast Australia’s future domestic requirements, growing Gladstone LNG ullage and potential supply for Darwin’s expanding LNG export terminals, amid funding support from Territory and Federal governments.
Perfect Medical: China Operations Update, Suggests 100% Upside From Here
- Perfect Medical Health (1830 HK) released an operating update during market hours (see: Operations Update) that signaled China has turned around to almost normalized (pre-covid) revenues.
- While Feb is very late in the financial year (March End FY), and data turning around now does not move the needle for FY23e, it bodes well for FY24e profits.
- The stock trades at 14.7x/11.5x FY23e/24e PE(x) with a 7.2%/9.2% FY23e/FY24e dividend yield with net cash and LT investments at 14% of market cap), making this an exciting investment.
Continental: +12% in Under Three Weeks. Strong Results. Take Profit.
- 2022: Consolidated sales of €39bn (+16.7 percent); Adjusted EBIT of €2bn (+5.2 percent). CEO: We succeeded in reaching sales and earning targets for the year, “a respectable result”
- 2023: Conti expects higher earnings supported by sustained market recovery
- Our TP remains €86. Given the strong performance since our initial note, the recovery in margins being better understood and €1bn in headwinds in 2023, we recommend taking profit here
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