In today’s briefing:
- Toyota’s BIG Buyback Via Tender Offer from Banks & Insurers
- The Beat Ideas: Garware Technical Fibre- A Niche Technical Textile Player
- Kakao Group Founder Kim Beom-Su Gets Arrested – What’s Next?
- Nidec (6594)| Q1 Beat, but Some One-Offs
- Anhui Conch (914 HK): Turnaround in Sight
- Prosus (PRX-NA): Profitable Growth, Elevated Discount
- [Earnings Review] Schlumberger Beats Estimates as International Operations Shine
- Inside NVIDIA’s China Play: Going Beyond U.S. Export Controls To Win Big In China!
- Narrative and Numbers | Trent Ltd (TRENT IN) | FY24
- [Earnings Review] Halliburton Dips as North America Slowdown Hits Q2 Revenue
Toyota’s BIG Buyback Via Tender Offer from Banks & Insurers
- With FY23 earnings in May, Toyota Motor (7203 JP) announced a ¥1trn buyback (410mm shares, 3.04%). Given shares were ¥3,599 the day before, it meant fewer shares or a Tender.
- Like Honda (who hadn’t bought pre-offering), Toyota hadn’t bought back in the first couple of months. We knew there was bank and insurer overhang. That overhang lasts for years.
- Today, Toyota announced an “organised” 410mm share ¥1trln Tender Offer Buyback. Several financial institutions have announced plans to tender. This provides guidance on supply/demand for the rest of the year.
The Beat Ideas: Garware Technical Fibre- A Niche Technical Textile Player
- Garware Technical Fibres (GTFL IN) focuses on value-added products and has increased R&D investment significantly, with substantial growth in sports nets and geo-synthetics.
- The company’s strong export market presence, high-margin profile, and diversification will improve the margins in the future.
- With refocus on the domestic market and growing demand for value-added products, Garware Technical Fibres (GTFL IN) is poised for significant growth with capex coming online.
Kakao Group Founder Kim Beom-Su Gets Arrested – What’s Next?
- As a result of the arrest of Kim Beom-Su, the near term impact on the Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao Games) is clearly negative.
- Given that this is a highly publicized event, it is likely that this legal case will be PROLONGED and finally decided by the Supreme Court which could take several years.
- Some of the scenarios include Kakao Group selling partial stakes in Kakao Bank and SM Entertainment but this is likely to get dragged on, resulting in further uncertainty.
Nidec (6594)| Q1 Beat, but Some One-Offs
- Nidec reported Q1 OP of ¥60b, above the consensus of ¥53b. However this also included a gain from the consolidation of Nidec PSA
- The key earnings driver was small precision motors, which are benefiting from recovery in HDD market and new earnings from cooling systems from AI Servers
- We revise up our full year forecasts but do not believe the share price will react strongly to the “beat.” Maintain bullish view on valuations
Anhui Conch (914 HK): Turnaround in Sight
- We believe Anhui Conch is near the end of a prolonged downturn. Earnings should have bottomed out in 1Q24, with highly visible sequential Q/Q improvements throughout the rest of 2024.
- The recovery is not demand-driven but cost-led as implementation of new national standards resulting in higher production costs led to industry-wide price-hikes, benefiting Anhui Conch the low-cost producer.
- We see mild rebound in cement demand in 2025 will pave the way for further price hikes, reinforce the company’s earnings recovery and catalyze valuation expansion.
Prosus (PRX-NA): Profitable Growth, Elevated Discount
- The removal of their cross-holding structure has had a negligible effect on the respective discounts to NAV for Prosus NV (PRX NA) and Naspers (NPN SJ).
- We have seen a remarkable turnaround in Prosus’s operating performance during FY2024 and the market will focus on whether the new CEO can achieve his ambitions for “profitable growth”.
- The open-ended share repurchase program will continue as long as the discount remains “elevated”.
[Earnings Review] Schlumberger Beats Estimates as International Operations Shine
- Schlumberger’s revenue grew 12.9% YoY and beat estimates by 0.7%, while its net profit rose by 7.65% YoY and beat estimates by 2.9%.
- Revenue from North America grew 3% sequentially but fell 6% YoY due to lower drilling activity in the US.
- Management expects low single-digit sequential revenue growth in Q3 2024 and free cash flow in H2 2024 to be higher than in H1 2024.
Inside NVIDIA’s China Play: Going Beyond U.S. Export Controls To Win Big In China!
- NVIDIA Corporation, a titan in the semiconductor industry, has been at the forefront of artificial intelligence (AI) innovation, primarily due to its cutting-edge GPUs that power everything from deep learning algorithms to complex simulations.
- As the company approaches its earnings report, investors are keenly observing the performance of its AI-driven products amidst a backdrop of global market dynamics and regulatory challenges.
- The company’s recent advancements, such as the “Blackwell” chip series, promise significant improvements in processing speed and efficiency.
Narrative and Numbers | Trent Ltd (TRENT IN) | FY24
- Trent Ltd (TRENT IN) is a leading retail company in India known for its diverse range of fashion and lifestyle brands like Westside and Zudio.
- With its own labels, operating efficiencies, and leverage at work, Trent has been able to expand its margins substantially.
- We anticipate the strong operational performance to continue. We believe it will take a couple of years for peers to catch up to Trent’s execution prowess.
[Earnings Review] Halliburton Dips as North America Slowdown Hits Q2 Revenue
- Halliburton’s Q2 revenue rises by 0.6% YoY, held back by an 8% YoY decline in revenue from North America. It missed its revenue estimates by 1.9%.
- Strong performance from the international operations more than offset the slowdown in North America. Revenue from international markets rose 8% YoY.
- For 2024, Halliburton forecasts a 10% YoY increase in international revenue, while North American revenue is expected to decline by 6-8% YoY.
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