Daily Brief Equity Bottom-Up: Who Will Now Fund Adani Enterprises’ Liquidity Gap? and more

• Rescinding of Rs 200 bn FPO deprives the company of much needed long-term funds
• Company has a liquidity issue as this analyst estimates its short term borrowing exceeds its short term borrowing limit and it requires long term funds to bridge the gap
• With foreign and private sector banks unwilling to increase exposure, the company needs to inject funds from founder entities, divest assets, reduce capex and improve working capital to infuse liquidity.

• Shimano’s Q4 results were on track, but management is guiding for a GFC-level slump in 2023
• Management cites macro concerns, but these are well-known, discounted, and already recovering…probably
• Shimano’s stock price is trading at 23x bearish guidance versus its historical average of 25x. 

• Q4 results largely met our expectations with modest improvements QoQ for mobile operating losses and decent growth for eCommerce and fintech
• A meaningful rebound for the mobile segment is more likely to fall in H2 as cost reductions take time to kick in 
• Results for eCommerce and fintech were more encouraging but less relevant as long as the mobile segment struggles.  We remain at Neutral

• Pentamaster Corp (PENT MK) specialises in the manufacturing of automated testing equipment (ATE segment) and the provision of factory automated solutions (FAS segment). 
• Pentamaster’s solid track record, exposure to structural trends (electric vehicles), profitability, cash generation and healthy balance sheet are attractive. The shares are up 12.9% YTD.
• However, the shares reflect this story and the valuation looks full compared to peers and historical multiples. We like the fundamentals and would be buyers of any prolonged weakness.

• Due to the recent news by the Malaysian government that aims to in-house the e-government service, My E.G. Services (MYEG MK) share price fell, similar to the 2018 event.
• Revenue from the Philippines business went up 5x and contributed up to USD 91 million, or around 52% of FY 2021 total revenue. 
• It gives a great opportunity for investors who believe in MYEG’s story to start building position.

• freee (4478 JP) reported 2QFY06/2023 results today. Revenue increased 35.3% YoY to JPY4,479m (vs consensus JPY4,469.5m) while operating losses for the quarter widened to JPY1,281m (vs consensus JPY1,574.5m).
• Both ARPU and no. of paying customers continue to increase and the company’s strategy of onboarding large corporates seems to pay off.
• Widening operating loss is no major concern as it is a matter of time before freee cuts down advertising and other costs given the expanding revenue base and excessive GPM.

• We have been bullish on Nagacorp for over three years. We long expected it to recover from covid damage on a pace propelled by rapidly easing travel bans.
• Annual results show dramatic increases in GGR across almost all customer segments.
• We see a return to double digit sales growth sustainable through the end of 1H this year.

• WuXi AppTec is facing how to keep high growth momentum under the high base of last year’s performance.If there’s no high growth point with certainty,high valuation is hard to sustain.
• The US wouldn’t stop tightening monetary policy until “it’s fully prepared”.Investors need to consider a situation that high interest rate environment is longer than expected,under which CXO remains in trouble.
• Market sentiment towards CXO has changed. We think CXO isn’t suitable for long-term hold but only for short-term trade in 2023. Buying low and selling high is a better strategy.

Dentsu reported record full-year headline results in FY22, which were bolstered by a final quarter in which the company delivered organic net revenue growth of 3.5%. Good progress continues to be made in Customer Transformation and Technology (CT&T), which grew 17.5% y-o-y and constituted 32% of revenues in the year. Management forecasts 4% organic revenue growth for FY23, reflecting the tougher macroeconomic environment. Guidance on the underlying operating margin in FY23 is for a retrenchment to 17.5% as investment is made to drive CT&T and support the One dentsu initiative. This is set to rebound to 18.0% in FY24 as the benefits start to flow through. Year-end net cash of ¥71.3bn and an appetite for leverage of 1.0–1.5x provides ample resource for both capex and M&A. Our FY23 estimates are under review.

• Gibson Energy’s revenues for 2021 increased to c$7.2bn recording a major percentage spike of 46.03% com- pared to revenues of 2020.
• Similar uptrend showed the main profitability indicators in 2021 (EBT, EATAM).
• Partial or total lifting of restrictive measures across the global economy in 2022 as well as an ongoing energy crisis, contributed to an increase in oil demand, setting the company on track to achieve record high profitability.