In today’s briefing:
- Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash
- MR D.I.Y. Group (MRDIY MK) – Unique in Malaysia
- Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea
- Keeper’s 50% Payout Ratio Makes The Yield Better and The Investment Exciting
- Dynasty Ceramic Pub (DCC TB) – Tiling Thailand with Large and Small
- Ono Pharmaceutical (4528 JP): Key Drugs On High Growth Trajectory; Pipeline Expands Beyond Opdivo
- AviChina Industry (2357 HK): Another Step in Restructuring
- More Profit for Donki as It Expands Private Label, Even Freezers
Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash
- FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
- With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months.
- With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the market cap in cash.
MR D.I.Y. Group (MRDIY MK) – Unique in Malaysia
- MR D.I.Y. Group (MRDIY MK) has continued to perform as coming out of the pandemic, offsetting inflationary pressures with selected price increases helping to stabilise margins.
- 4Q2022 should be strong with an upward normalisation of inventories, with a target for 180 new stores in 2022 and a further 180 stores in FY2023, fuelling future sales growth.
- MR D.I.Y. has a unique market position and strong brand in Malaysia, and Brunei and generates much higher ROEs than its regional peers hence justifying a premium valuation.
Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea
- Hotel Shilla is a key beneficiary of the end of the zero COVID policy in China and the end of the mask mandate in Korea.
- In the past several weeks, there has been a major shift on the highly stringent zero COVID policies in China which should have a positive impact on Hotel Shilla.
- In the next several quarters, we believe that there is a good chance that the company’s results exceed the consensus expectations, driven by millions of tourists from China to Korea.
Keeper’s 50% Payout Ratio Makes The Yield Better and The Investment Exciting
- The Keepers Holdings (KEEPR PM) set a new precedent of paying out 50% of its earnings. If sustained, the yield for FY22e/FY23e will be 6.6%/8.4%.
- The move has made The Keepers Holdings (KEEPR PM) a growth/dividend yield stock with mid-teens profit growth and a forward yield >6% (~10% cash as % of mkt cap).
- The catalyst for the company will arise from its strong Q4 2022 earnings. The management has already indicated the growth trajectory is similar to the prior quarters.
Dynasty Ceramic Pub (DCC TB) – Tiling Thailand with Large and Small
- Dynasty Ceramic Pub (DCC TB) is Thailand’s leading ceramic tile manufacturer with a large portion of sales in the mass market as well as upcountry, diversifying sales.
- The company continues to build new capacity and is moving into the porcelain tile business to cater for the higher-end market where it will compete with Chinese imports.
- Dynasty Ceramic Pub (DCC TB) is a high-quality play on the economic recovery in Thailand, with a good governance reputation. Valuations look reasonable plus a dividend yield of over 6%.
Ono Pharmaceutical (4528 JP): Key Drugs On High Growth Trajectory; Pipeline Expands Beyond Opdivo
- Ono Pharmaceutical (4528 JP) is an innovation driven pharmaceutical company, with major focus on oncology. Opdivo, Forxiga, and Orencia are the top three products, together contributing ~75% of product revenue.
- While the competition intensified, use of Opdivo for malignant tumors was expanded to first-line treatment for NSCLC, esophageal cancer, and gastric cancer, resulting in FY22 sales of ¥112.4B (+14% y/y).
- Ono’s second largest drug Forxiga is also on a double-digit growth path. The company has been expanding its pipeline beyond Opdivo by reinforcement of in-house research and in-licensing activities.
AviChina Industry (2357 HK): Another Step in Restructuring
- AviChina Industry & Tech (2357 HK) announced plan to consolidate helicopter business by disposing Changhe Aircraft and Harbin Aircraft to its subsidiary Avic Helicopter (600038 CH).
- AviChina can achieve synergy at its helicopter business, realise capital gains from disposal and enjoy higher valuations on these assets while maintaining its controlling ownership.
- The resultant increase in stake in Avicopter will further widen AviChina’s discount to its holdings in four listed A-share subsidiaries. Its current 66% discount is just too steep.
More Profit for Donki as It Expands Private Label, Even Freezers
- Pan Pacific International Holdings (7532 JP)’ Don Quijote stores rebounded strongly from Covid, despite the lack of inbound tourists, reflecting the hard work done to update stores and merchandise.
- This innovation continues and Don Quijote stores recently even began offering several new private brand cosmetics ranges and new electronics, including a new small footprint freezer.
- The company expects 15% of domestic sales from private brands alone but rising to 25% in the near term, with significant upside for operating profits.
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