In today’s briefing:
- China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
- Tokyo Electron (8035) | Huge Upside if Management Hit Targets
- Fujifilm: An Inspiring Transformation Story
- Kakao Corp: FTC Going After Chairman Kim Beom-Su’s K Cube Holdings
- Taiwan Dual-Listings: Premiums Bounced… And Have Now Declined Again
- Hang Seng Index, Alibaba, and Longfor Group
- MediaTek: Mid (Inventory) Cycle, Long-Term Growth Story Intact, Attractive Yield, and Multiples
- ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return
- ASML ADR: Initiation of Coverage – Business Strategy & Other Drivers
China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
- Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
- This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
- We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.
Tokyo Electron (8035) | Huge Upside if Management Hit Targets
- Tokyo Electron is a structural growth stock that has fallen by 31% YTD reflecting near term risks to growth and margins
- We believe that the digitization of society has only just begun and that data volumes will grow exponentially
- We analyse TEL’s core value drivers – revenue, margins, risk and reinvestment – and see 38% upside
Fujifilm: An Inspiring Transformation Story
- Established as a domestic photographic film manufacturing company, Fujifilm has successfully evolved into a healthcare company with majority revenue earned from medical and life science related businesses.
- Fujifilm is now a leading player in Bio CDMO market through a combination of acquisitions and in-house developed capabilities. The company has gained recognition among leading pharmaceutical companies.
- We think there is further upside to Fujifilm’s valuation multiples as the market still values the stock as an image/photography company and not in line with healthcare peers.
Kakao Corp: FTC Going After Chairman Kim Beom-Su’s K Cube Holdings
- On 15 December, it was announced that Korea’s FTC decided to refer K Cube Holdings (KCH) to the prosecution over alleged illegal execution of voting rights to Kakao companies.
- This could signal that the financial regulators may become more forceful in enforcing numerous other regulatory pressures on Kakao Corp and its affiliated companies to reduce their monopolistic business practices
- Our NAV valuation of Kakao Corp suggests NAV per share of 45,942 won, which is 17% lower than current price.
Taiwan Dual-Listings: Premiums Bounced… And Have Now Declined Again
- TSMC — Small premium currently, recent trading range appears unaffected by Buffett investment
- UMC — Bounced from discount to premium, now at a discount again
- ChipMOS — Bounced from discount to premium, now back to a decent discount
Hang Seng Index, Alibaba, and Longfor Group
- After the sharp rally comes the pause; almost all constituents and leading indices are forming an inside week or a weekly Doji (small or long body with very little difference in open and close levels) [based on mid-day Thursday].
- These two formations are a typical indication of market indecision.
- However, it is unlikely to be quiet for the rest of December.
MediaTek: Mid (Inventory) Cycle, Long-Term Growth Story Intact, Attractive Yield, and Multiples
- Although the overall channel and customer inventories have reduced aggressively by the end of 3Q2022, we are only in the middle of the inventory adjustment cycle.
- We’ve seen early signs of global inflation peaking, and an initial normalization in US dollar strength, which supports recovery in end consumer demand and channel inventory restocking by mid-2023.
- Current dividend yield and PE ratio indicate a meaningful margin of safety in valuation levels, with probabilities skewed towards positive surprise.
ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return
- The important thing is not whether the ROIC tool is used or not, but rather the risk-taking for investment and whether it resulted in sufficient returns.
- A change in the outlook for improving profitability is necessary for the stock price to rise, and furthermore, a compelling growth policy and capital allocation can also be effective.
- The fact that valuations have not risen sufficiently in the current situation infers that investors lack confidence in the path to improving profitability for each business.
ASML ADR: Initiation of Coverage – Business Strategy & Other Drivers
- This is our first report on ASML, a Dutch major focused on providing advanced semiconductor equipment systems consisting of lithography, metrology, and inspection related systems to memory and logic chipmakers.
- The company delivered outstanding results in the last quarter surpassing Wall Street expectations in terms of revenues as well as earnings.
- ASML’s management anticipates increased revenues in the fourth quarter as it resolves supply chain difficulties and shortens cycle times.
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