In today’s briefing:
- ZJLD Group (6979 HK): Direct Beneficiary Of Moutai Raising Ex-Factory Price
- Preview AEM Holdings: Loss-Making Quarter Ahead For First Time in 10 Years
- AMD Q323. MI300 >$2 Billion in 2024
- Japanese Banks – Nearing the Yield Curve Control End-Game
- GoTo Gojek Tokopedia (GOTO IJ) – New Initiatives Gaining Traction and Increasing Productivity
- STAN – Stage 2 Loans Surge | Expect Migration to Stage 3 Loans | Credit Costs Can Move 50% Higher
- DBS – Fines, Negative Loan Growth, Greater China CRE Risks, UOB & STAN & HSBC Illustrative
- Hanwha Corp: Updated NAV Analysis – Defense Assets Undervalued
- Shenzhen Intl (152 HK): A Big Step Forward
- China Minsheng Bank’s NII Decline Has Slowed for 3Q23, Asset Quality Stabilized For Now
ZJLD Group (6979 HK): Direct Beneficiary Of Moutai Raising Ex-Factory Price
- Late last night (near mid-night), Kweichow Moutai (600519 CH) shocked the market by announcing a direct price hike on its main Feitian 53 degree product by an average of 20%.
- The market had no expectation of such price hike as it was widely perceived that Moutai could not directly increase the ex-factory price due to regulatory pressures.
- Moutai’s Feitian ex-factory price is the key price leader for pretty much all other major Baijiu brand, directly benefiting ZJLD Group (6979 HK).
Preview AEM Holdings: Loss-Making Quarter Ahead For First Time in 10 Years
- AEM (AEM SP) will report 3Q23 results on 10/11/23. This will be the first loss-making quarter since 4Q14.
- We expect a loss as AEM will have to recognize the 26.7M SGD arbitration expense to settle with Advantest Corp (6857 JP).
- Investors will be looking for an early read on the FY24 outlook to determine if AEM’s stock has bottomed.
AMD Q323. MI300 >$2 Billion in 2024
- Q323 revenues of $5.8 billion, $100 million above midpoint, up 7.5% QoQ and up 4% YoY. Net income of $299 million, significantly up from $27 million in the second quarter.
- Forecasted Q423 revenues of $6.1 billion at the midpoint, up ~5% QoQ
- MI300 forecasted to hit > $2 billion in 2024 making it the fastest product ramp to $1 billion in the company’s history
Japanese Banks – Nearing the Yield Curve Control End-Game
- The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it
- 10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures
- We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure
GoTo Gojek Tokopedia (GOTO IJ) – New Initiatives Gaining Traction and Increasing Productivity
- GoTo Gojek Tokopedia’s 3Q2023 results were far more illuminating and encouraging than the last 2Qs, with more progress towards adjusted EBITDA breakeven, with much more colour on its new initiatives.
- The company’s focus on budget consumers and more affordable product offerings are already expanding its TAM and improving product density and productivity, speeding progress towards productivity.
- GoTo will continue to invest in growth, which may mean it misses its 4Q adjusted EBITDA breakeven target but it has reduced cash burn significantly giving it more breathing space.
STAN – Stage 2 Loans Surge | Expect Migration to Stage 3 Loans | Credit Costs Can Move 50% Higher
- Our focus is not on the decimation of earnings at Standard Chartered (STAN LN) but rather the granular detail of stage 2 and stage 3 loans
- There is tremendous growth in stage 2 loans in the quarter, which means the bank enters the quarter with a far higher pool that can migrate to stage 3
- Stage 3 remains markedly higher provisions, and the bank’s rise in credit costs is still fairly low, it can rise another 50% before hitting average rates
DBS – Fines, Negative Loan Growth, Greater China CRE Risks, UOB & STAN & HSBC Illustrative
- The MAS is not at all happy with the frequent digital banking services outages at DBS (DBS SP). There will be fines and higher required capital.
- The outlook for the home market lending is already poor, with negative loan growth in recent months. Probes of money laundering will likely make lending even more sparse.
- UOB (UOB SP) , Standard Chartered (STAN LN) , HSBC Holdings (HSBA LN) results are all illustrative of risks facing DBS (DBS SP) before results come out, especially credit costs.
Hanwha Corp: Updated NAV Analysis – Defense Assets Undervalued
- We provide an updated NAV analysis of Hanwha Corporation which is a holding company of the Hanwha Group. We argue that Hanwha Corp’s shares are trading excessively below its NAV.
- Hanwha Corp is down 10.5% YTD, underperforming Hanwha Aerospace (up 54.2% YTD). Hanwha Corp’s stake in Hanwha Aerospace is worth 1.9 trillion won (14% higher than Hanwha Corp’s market cap).
- Our NAV analysis of Hanwha Corporation (000880 KS) suggests NAV of 2.3 trillion won or NAV per share of 30,203 won which is 33% higher than current price.
Shenzhen Intl (152 HK): A Big Step Forward
- Shenzhen International (152 HK) has reached agreement with the government on the South China Logistics Park Phase I transformation and it will receive Rmb1.058bn compensation.
- The sum equals a significant 9% of SZI’s market capitalisation. The agreement also kick-started the project’s long-term contribution, which may provide an income stream lasting 3-5 years.
- The deal showcased SZI’s ability to realise the underlying value of its assets. The stock should not be valued on its earnings, and its 0.3x P/B is deeply undervalued.
China Minsheng Bank’s NII Decline Has Slowed for 3Q23, Asset Quality Stabilized For Now
- NII decline has slowed but the overall profitability is lacklustre
- Asset quality stabilized for now, real estate exposure remains a concern
- We believe the turnaround of the bank is still pretty far off.
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