In today’s briefing:
- Cathay Pacific (293 HK, BUY, TP:9.90HKD): Decent Results, Stay the Course
- Contemporary Amperex Technology (300750 CH): Cheap Valuations on Negative Sentiments
- Innoscience Pre-IPO Tearsheet
- Nisshinbo Holdings (3105 JP): 1H FY12/24 flash update
- Sanyo Trading (3176 JP): Q3 FY09/24 flash update
- Tokyu Construction (1720 JP): Q1 FY03/25 flash update
- World Holdings (2429 JP): 1H FY12/24 flash update
- Harmonic Drive Systems (6324 JP): Q1 FY03/25 flash update
- MHH: Mastech Reports 6% Sequential Growth and Record Gross Margins Resulting in a 75% Increase in Non-GAAP EPS
Cathay Pacific (293 HK, BUY, TP:9.90HKD): Decent Results, Stay the Course
- 1HFY24 net profit declined -15% YoY to HK$3.4 billion, in-line with consensus
- Interim dividend of HK$0.20/share, at 38% payout ratio. Typically, Cathay pays 50% payout ratio, and we can expect final dividend to be much larger
- Maintain BUY with target price of HK$9.90 (+26% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP).
Contemporary Amperex Technology (300750 CH): Cheap Valuations on Negative Sentiments
- 2Q24 results were decent, with 13% YoY growth in net income to CNY12.4 billion, but share price continues to drift down as market fears western nations resistance to Chinese EVs
- Operationally, things are just fine , CATL will add 153GWh capacity in 2H24 across China, Europe, and the U.S.A. – and they are finding solution around the 2026 new tariffs
- Our fair value of CNY253 (+43% UPSIDE) is derived by 23x 2024 PE ratio, which is 1SD below its historical mean. CATL is currently trading at exceptionally low valuations
Innoscience Pre-IPO Tearsheet
- Innoscience (1992276D CH) is looking to raise up to US$300m in its upcoming HK IPO. The deal will be run by CICC, and CMB International.
- Innoscience is a Chinese-based manufacturer of Gallium Nitride (GaN) semiconductor products. It offers various types of GaN products, including GaN wafers, GaN discrete chips, GaN ICs and GaN modules.
- It tailors its solutions to customers in various industries such as consumer electronics, renewable energy and industrial applications, automotive electronics and data centers.
Nisshinbo Holdings (3105 JP): 1H FY12/24 flash update
- Sales fell JPY29.3bn (-10.9%) YoY; consolidation of Hitachi Kokusai Electric increased Wireless and Communications sales, TMD Group transfer decreased sales.
- Operating profit declined JPY5.3bn (-44.0%) YoY; increased in Wireless and Communications, declined in Micro Devices and Real Estate.
- Q1 FY12/24: sales JPY130.8bn (-9.2% YoY), operating profit JPY8.1bn (-36.1% YoY); Q2: sales JPY109.3bn (-12.8% YoY), operating loss JPY1.4bn.
Sanyo Trading (3176 JP): Q3 FY09/24 flash update
- Consolidated sales for cumulative Q3 FY09/24 increased 6.4% YoY to JPY95.9bn, marking a record high.
- Consolidated operating profit for cumulative Q3 FY09/24 rose 13.1% YoY to JPY5.9bn, with OPM improving by 0.3pp YoY.
- Recurring profit increased 30.2% YoY, driven by higher operating profit and growth in foreign exchange gains.
Tokyu Construction (1720 JP): Q1 FY03/25 flash update
- Q1 FY03/25 revenue was JPY55.3bn (-12.1% YoY) with an operating loss of JPY953mn and recurring loss of JPY482mn.
- Non-consolidated revenue was JPY51.3bn (-12.8% YoY) with gross profit at JPY3.5bn (-10.3% YoY) and gross profit margin at 5.7%.
- Non-consolidated orders totaled JPY40.6bn (+16.5% YoY) with Building Construction orders at JPY19.8bn (-9.2% YoY) and Civil Engineering orders at JPY20.8bn (-59.3% YoY).
World Holdings (2429 JP): 1H FY12/24 flash update
- Revenue increased to JPY110.8bn (+22.5% YoY), operating profit decreased to JPY2.4bn (-36.0% YoY), and net income fell to JPY737mn (-63.4% YoY).
- Products HR business revenue was JPY53.1bn (+10.8% YoY), segment profit was JPY1.2bn (-28.8% YoY), and exceeded initial targets.
- Real Estate business revenue was JPY13.6bn (-6.1% YoY), segment profit was JPY308mn (-75.6% YoY), with strategic acquisitions boosting rental income.
Harmonic Drive Systems (6324 JP): Q1 FY03/25 flash update
- Q1 FY03/24 sales declined 13.4% YoY to JPY13.0bn, with an operating loss of JPY238mn and net loss of JPY283mn.
- Orders increased 38.6% YoY to JPY7.4bn, driven by industrial robots and semiconductor production equipment, particularly in the Chinese market.
- The company targets FY03/27 sales of JPY90.0bn and operating profit of JPY15.0bn, with significant capital investment and R&D expenditure planned.
MHH: Mastech Reports 6% Sequential Growth and Record Gross Margins Resulting in a 75% Increase in Non-GAAP EPS
- Mastech Digital, based outside Pittsburgh, PA is an IT staffing business with a data and analytics, consulting, and project management service serving blue-chip customers in the US.
- Both businesses have been affected by the rapid decline in the economy and IT hiring as customers pull back.
- The company trades well below its peers and we expect stock price appreciation when it returns to growth aided by stock buybacks.
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