In today’s briefing:
- Xiaomi: Aggressive Spending on EVs as Smartphone Growth Slows Down
- Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2023
- Sinopharm Group (1099 HK): Strong 2022 Results; Double-Digit Top and Bottom-Line Growth to Continue
- PT Metrodata Electronics (MTDL IJ) – The Digital Transformer
- Indocement Tunggal Prakarsa (INTP IJ) – Building Through Sustainable and Digital Means
- Formula One Group: Initiation of Coverage – Major Partnerships & Other Key Drivers
- Prudential PLC: Initiation of Coverage – Expansion In Emerging Markets & Other Drivers
- Ally Financial: Comparisons To The Recently Failed Banks Are Inappropriate
- SDRL: Deal Is Done, Now for the Free Cash Flow
- Sino Biopharmaceutical (1177.HK) – The Positives and the Negatives
Xiaomi: Aggressive Spending on EVs as Smartphone Growth Slows Down
- Xiaomi Corp (1810 HK) ’s share price has been down more than 10% over the last 12-months with weakening of the company’s earnings particularly the smartphone business.
- Xiaomi’s entry into premium segment has not much helped its smartphone biz as it faces stiff competition from Apple and Samsung in the premium segment.
- The company spends aggressively on EVs to drive growth, however, with EV subsidies not renewed and intense competition, this may not help Xiaomi in the near term.
Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2023
- In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2023.
- The excessive gaps in the preferred and common shares of CJ Corp, Samsung Electronics, and LG Electronics could reverse in the next several months, in our view.
- We see some attractive longer-term opportunities for Amorepacific Corp, Doosan Fuelcell, LG Electronics, and Samsung SDI which have especially high discounts for the preferred shares versus their counterpart common shares.
Sinopharm Group (1099 HK): Strong 2022 Results; Double-Digit Top and Bottom-Line Growth to Continue
- Sinopharm Group Co Ltd H (1099 HK) reported strong 2022 results, with annual revenue exceeding RMB550B and net profit achieving 10% YoY growth. Growth was driven by pharmaceutical distribution business.
- EPS increased 10% YoY to RMB2.73, ahead of consensus of RMB2.64. The company has increased its final dividend to RMB0.82 per share from RMB0.75 per share in the prior year.
- With favorable industry tailwind and China reopening, consensus expects Sinopharm to report double-digit revenue and EPS growth through 2025.
PT Metrodata Electronics (MTDL IJ) – The Digital Transformer
- PT Metrodata Electronics had a strong finish to the year with FY2022 net profit growth of +14.1% YoY driven by both its ICT distribution and Solutions & Consulting (S&C) businesses.
- The S&C business continues to thrive on Indonesia’s ongoing digitalisation, especially in the financial sector with the advent of digital banking but also in the telecom and oil&gas sectors.
- PT Metrodata sees a slower outlook for the consumer outlook but strong momentum behind commercial sales and S&C as digitalisation continues, and new growth from the Public Sector. Valuations attractive.
Indocement Tunggal Prakarsa (INTP IJ) – Building Through Sustainable and Digital Means
- Indocement Tunggal Prakarsa (INTP IJ) released solid FY2022 results despite inclement conditions for the industry, as it utilised more low CV coal and alternative fuels and raised prices.
- The company now has much better access to cheaper DMO coal, which accounted for 60% of requirements in 2H2022, which provides a lower and more sustainable cost base for 2023.
- Indocement has continued to aggressively expand its distribution footprint across Indonesia in 2022, allowing it to access regional areas of demand. Valuations are attractive versus history.
Formula One Group: Initiation of Coverage – Major Partnerships & Other Key Drivers
- This is our first report on a global media and entertainment player, Formula One Group.
- Its fourth quarter result was mixed and the company surpassed the revenue expectations of Wall Street but missed out on meeting earnings expectations.
- The company introduced a new brand campaign in the quarter to demonstrate F1’s position in the sporting and entertainment worlds.
Prudential PLC: Initiation of Coverage – Expansion In Emerging Markets & Other Drivers
- This is our first report on Prudential, a major provider of life and health insurance.
- Prudential had a very strong quarter with 19% sales growth.
- Despite slower revenue recognition in the life insurance market, the company has been witnessing strong cash flows and returned over $800 million to shareholders in the latest quarter.
Ally Financial: Comparisons To The Recently Failed Banks Are Inappropriate
- Ally Financial has emerged as a potential target after the recent events in the banking sector.
- There are certain macroeconomic risks involved, but the company has changed dramatically over the past decade.
- There are also major differences between the recently failed banks and Ally Financial that need to be considered, according to the company.
SDRL: Deal Is Done, Now for the Free Cash Flow
- SDRL reported its long awaited fourth quarter results after the Company consummated the purchase of Aquadrill.
- It was in the Q123 when SDRL was able to generate revenue from its new Brazilian contracts making it more likely investors would minimize their interest on the Q4 results
- The purchase of Aquadrill provides scale to SDRL’s operations through a larger fleet size and being able to internally manage the Aquadrill fleet as contracts begin the expire
Sino Biopharmaceutical (1177.HK) – The Positives and the Negatives
- Sino Biopharm’s 2022 performance isn’t satisfactory, but the Company is gradually getting rid of the negative influence of VBP. We expect Sino Biopharm to achieve faster performance recovery than Hengrui.
- Most of Sino Biopharm’s innovative drugs are biosimilars and Me-Too products, which will face fierce competition once approved for listing. The revenue target of HK$100 billion by 2030 looks challenging.
- Corporate governance deficiencies and lack of the next big variety are the reasons why the market is reluctant to offer high valuation. The new CEO needs time to prove his ability.
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