Daily Brief Equity Bottom-Up: TSMC Chairman to Retire and more

• Chairman 69 years old Dr. Liu will retire and 70 years old CEO Dr. Wei will step up. What story do we believe? Will TSMC to regain its strong outperperformance?
• Positive impacts: we expect Arizona fab equipment move-in and ramp up might be further delayed if no subsidies are granted; two teams competing to one voice/team/direction.
• Three risks: 1. Dr. Wei at his age of 70 without a strong management backup; 2. Dr. Wei might make a wrong decision deeply; 3. absolute power corrupts.

• Google Search trends for Tokyo Disneyland and DisneySea in recent months point to potential vulnerabilities in Oriental Land’s FQ3 performance.
• Tokyo Disneyland’s rising ticket prices have narrowed the cost gap with Shanghai and Hong Kong Disneyland, potentially leading to a loss of customers to its counterparts.
• Should Oriental Land (4661 JP) shares fail to surpass its recent peak in January next year, we think shares could undergo a rather substantial correction.

• Asagami Corporation (TYO 9311) owns 3 warehouses on Tokyo Harbor with land carried on its books at ¥7.9 billion.
• These properties alone are likely worth closer to ¥29.5 billion.
• These assets account for less than half of the company’s land assets, but are worth multiples of the current market cap of just ¥7.16B.

• We see Ueda’s pause on lifting its negative rates policy as temporary, and we expect that this policy change could occur as early as January
• Despite this monetary pause in tightening and the fall in 10Y JGB yields, we are encouraged by the rise in long term loan yields in the BoJ data to October-end
• We reiterate our positive views on Resona, Mizuho, MUFG and Concordia

• China East Education (667 HK) is interesting as it is probably the only education company with no debt. Net cash amounted to Rmb2.1bn, or 42% of its market capitalisation. 
• Earnings have bottomed out and the marginal YoY decline in 1H23 is due to upfront costs for staff recruitment. Its vocational education focus also faces fewer regulatory risks.
• We consider it a potential privatisation candidate at 0.8x P/B. Its major shareholders owned 75% of the company, leaving a free float of less than HK$1.4bn.

• While the profitability of Stylam Industries (SYIL IN) is growing healthily (>30% YoY) in H1 FY24 due to margin expansion, revenues are trending at -4.5% YoY.
• The company became net cash in H1 FY24 (73 crore INR)  and zero gross debt. A strong balance sheet would aid in the company’s expansion plans. 
• Trading at 23x/18x FY24e/25e, we see strong growth ahead for the company as it cements its position as one of India’s top laminate export players. 

Games Workshop Group (GAW) has signed an agreement with Amazon Content Services, a subsidiary of Amazon.com, to prospectively develop GAW’s intellectual property (IP) into film and television content and to grant associated merchandising rights, initially focused on the Warhammer 40k universe. The partnership follows the announcement in December 2022 when management said an agreement had been reached in principle. Although the content will mainly be focused on GAW’s Warhammer 40k, Amazon has the option to develop other IP within GAW’s fantasy universe following the initial release. The first year has been set out as a period for creative discussions, after which the agreement will go ahead if both GAW and Amazon sign off on the creative guidelines.

• Ricegrowers Limited, trading as SunRice (ASX:SGLLV), has released its H1 FY24 results, delivering RaaS adjusted EBITDA of $69m (+68%) and adjusted NPAT of $33.3m (+107%), both well above RaaS estimates of $57.6m and $25m respectively.
• Divisionally the key surprise was International, delivering adjusted EBITDA of $33m, 125% above the PCP and 57% above RaaS estimates on the back of increases scale and reach, price increases and lower freight costs.
• Operating cash flow was the strongest since H2 FY18 despite a high tax payment as working capital improved from lower receivables and inventory reductions. 

• We recently caught up with management to congratulate James Colquhoun on his promotion to CEO.
• We also got a good update on the business as well as some early indications of trends and management focus for 2024.
• As indicated on the 3Q23 earnings call, new member growth is continuing at a healthy clip and management expects to close 2023 at around 800k members.

• The market seems “not excited” with fruquintinib’s FDA approval.We analyzed the potential reasons behind.Beyond boosting market sentiment when license-out deal is announced initially,its practical impact on valuation could be limited.
• HUTCHMED’s financial performance is good. The deal with Takeda helps to relieve cash-flow pressure. We think HUTCHMED is a relatively safe bet for investors as eventual breakeven is drawing near.
• If based on conservative calculation, market value of about US$1,455-2,055 million is a good place to long.When market value is higher than US$3,500 million, it’s time to consider taking profits.