In today’s briefing:
- Will the Chinese Government Rescue Soho China (Potential Write Down of Assets)?
- New Horizon Health-B: Ups Full Year Guidance by 20% Despite Pandemic
- SCC : Meaningful QoQ Recovery Expected in 2Q22
- China Traditional Chinese Medicine (570.HK) – Short-Term Performance Pressure Is Hard to Avoid
- Nidec (6594) | Q1 to Beat on Falling Raw Material Costs
- Tactical TMT 2Q Earnings Trading Idea: Short Tesla
- Tesla Q2 EPS Should Miss, But Beware of Musk’s Need for Strong Results
- DTAC : Better 2H22 Outlook from Tourism Recovery
- Tactical TMT 2Q Earnings Trading Idea: Short NFLX
- ATEN: US Dollar Factor
Will the Chinese Government Rescue Soho China (Potential Write Down of Assets)?
- We have a Negative view of Soho China, despite the stock trading at 0.2x P/B.
- The three biggest negative factors for the company include potential write down of assets, CFO being investigated for insider trading, and China’s emphasis on zero COVID policy.
- Two more significant concerning factors include 0.4 million people in China not able to withdraw their deposits and other large Chinese property developers defaulting on debt.
New Horizon Health-B: Ups Full Year Guidance by 20% Despite Pandemic
- New Horizon Health released positive profit alert last Friday. We speak with management post the profit alert.
- The company is expected to achieve 410.9% total revenue growth compared to a year ago in 1H2022, based on the middle point of guidance.
- The company has also achieved margin expansion thanks to a favorable change of mix to the high margin channel.
SCC : Meaningful QoQ Recovery Expected in 2Q22
- We maintain our BUY call with a TP of Bt445 based on 13.7xPE’22E,which is close to its 10-years trailing mean. We recommend investors to accumulate in light of 4% yield
- Solid QoQ improvement expected in 2Q22 core profit We forecast 2Q22 core profit at Bt9.2bn,decline 46%YoY but edge-up 19%QoQ.The YoY erosion is due to weaker assumed gross margin of 16.2%
- We foresee chemical unit’s profit to fall 63%YoY but to march up 8%QoQ with wider spreads. In our view, the QoQ uptrend is underpin by solid PVC spread (+41%QoQ), despite
China Traditional Chinese Medicine (570.HK) – Short-Term Performance Pressure Is Hard to Avoid
- China Traditional Chinese Medicine released unsatisfactory 2022H1 profit warning, which was mainly due to the poor performance on both revenue and cost side of its core business concentrated TCM granules.
- We analyzed the policy impact and business outlook. The Company’s performance would be under pressure in 2022. The VBP impact on concentrated TCM granules hasn’t shown up in financial reports.
- Overall, we are skeptical of the Company’s profitability in the long term, and its profit margin will struggle to support a significant expansion in valuation.
Nidec (6594) | Q1 to Beat on Falling Raw Material Costs
- Nidec share price has declined by 32% YTD on the temporary impact of inflation and lockdowns
- We expect a Q1 beat (tomorrow) as lower raw material input costs and the weak yen boost operating profits
- We are bullish on the stock at 31x forward earnings versus the 5-year average of 55x, especially as China accelerates policies to drive EV adoption
Tactical TMT 2Q Earnings Trading Idea: Short Tesla
- We think Tesla’s FSD narrative is ready to crack: head of autopilot departed, 200 employees fired, and no progress on FSD.
- Tesla has to guide down full year production and gross margin targets (for reasonable reasons…will this be ignored this time?)
- Ever increasing competition from the low end may eventually confine LT sellside DCF based estimates.
Tesla Q2 EPS Should Miss, But Beware of Musk’s Need for Strong Results
- We see Tesla’s Q2 GAAP EPS at $1.01, which is 34% below consensus estimates of $1.53.
- Tesla’s Q2 should be horrible given the lockdown of its Shanghai factory and huge startup costs at its 2 new factories, but beware of FSD revenue recognition.
- Elon Musk needs Tesla’s share price to be high, in light of how many shares he may need to sell if forced to buy Twitter. Q2 numbers could be “massaged”.
DTAC : Better 2H22 Outlook from Tourism Recovery
- We maintain our HOLD rating and TP of Bt47.60 based on DTAC’s tender offer price. Conference call came with negative tone, as management lowered its guidance on core service revenue
- 2Q22 core profit was below expectation 2Q22 net profit was at Bt1bn (-34% YoY, +38% QoQ), growing QoQ due to a one-time Bt1bn deductible granted by the NBTC
- Excluding extraordinary items, 2Q22 core profit should be at Bt573m, 33% below our forecast, declining both QoQ and YoY due to losses in subsidizing handset sales to attract subscribers.
Tactical TMT 2Q Earnings Trading Idea: Short NFLX
- Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.
- BBG was bullish on NFLX’s quarter recently, but we think misses the forest from the trees regarding ever ramping competition.
- Ad-Based Netflix subs *might* hit by end of 2022, but won’t move the needle for 18 months.
ATEN: US Dollar Factor
- The recent strength in the Dollar is likely to result in second half revenue ending up lower than anticipated
- ATEN generated 60% of its revenue in 2021 from outside the USA. The strength in the US Dollar is likely to result in revenue growing at a slower pace
- Our new estimates reflect the impact of a stronger Dollar on revenue and expenses. We are currently not expecting demand softness to push results lower
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