In today’s briefing:
- CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
- Discussing the Timing of the Samsung SDS Block Deal by Lee Seo-Hyun
- Tokyo Electron (8035) | MAGIC Drivers
- Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.
- Baidu (Bidu.US): AIGC to Bring More Potential and Empower Search Biz
- NTT (Buy) – Q3 22 Results Reaction: Mixed Quarter but Solid Mobile/Data Performance
- Oasis Corp IPO Preliminary Book Building Results
- Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation
- EQD | FXI US: Buying the Dip Using Options
- New Relic: Impressive 3QFY23. Profitable Growth Accelerated Driven By Efficiency Initiatives
CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
- CATL (A) (300750 CH) is looking to raise up to US$6bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, China Securities, Goldman Sachs, and UBS.
- The relatively large listing comes after the firm has been undertaking a series of capital raisings, since it’s A-share debut back in Jun 2018, to fund its expansion.
- In this note, we discuss GDR timelines, and the firm’s recent financial performance/valuations.
Discussing the Timing of the Samsung SDS Block Deal by Lee Seo-Hyun
- The term of Lee’s trust contract with Hana Bank is from February 2nd to April 28th, and the volume is 1.95% of SO, the total remaining quantity owned by Lee.
- The price movement on the day the previous block deals by the Lee family were executed was substantial. Of particular note is that SDS showed the most significant price impact.
- We should focus on the possibility that a block deal will come to the market much earlier, as SDS is in short-term overbought territory from a valuation perspective.
Tokyo Electron (8035) | MAGIC Drivers
- TEL 3QF23 operating profit -26% YoY to Y115b, beating analyst estimates
- Full year operating profit guidance revised up Y546->Y580b, ahead of Street estimates
- MAGIC – Metaverse, Autonomous mobility, Greentech, IoT, Communication Services – to drive long-term semicon demand
Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.
- Renesas Electronics (6723 JP) today reported full-year 2022 earnings with revenues 0.032% higher than the high end of guidance, which was better than consensus. OP was not as good.
- They have guided Q1 only, with revenues up 0.2-4.6%, and non-GAAP GPM -3.9% to 54.5%, and OPM -6.6% to 32.5%. But they also announced a Tender Offer Buyback.
- The buyback is smaller than I’d like, but the company has added cash despite last year’s tender offer and repaying bank borrowings. Lots to like here.
Baidu (Bidu.US): AIGC to Bring More Potential and Empower Search Biz
- We estimate that Baidu’s 4Q22 top line/bottom line would miss cons. by (1.6%)/(3.1%), mostly driven by the temporal disturbance of increasing COVID cases after reopening in Dec. 2022.
- However, we remain optimistic about 2023 outlook: 1) Baidu’s ads would be recovering quickly in 1H23 as macro improves, and 2) leading position in AIGC development gives Baidu more potential.
- Maintain BUY rating and raise TP to US$170, implying 17.2X PE in 2023
NTT (Buy) – Q3 22 Results Reaction: Mixed Quarter but Solid Mobile/Data Performance
- Segment results for DoCoMo and NTT Data were impressive as NTT plans to restructure both businesses start to bear fruit
- DoCoMo is also leading MNOs in moving past the impact of regulatory driven price reductions with Q3 service revenue largely flat YoY supported by 5G upsell and subscriber wins
- Rising utility costs have had a material impact on profitability for NTT East and West but management believes upside in other areas and cost discipline provides some offset
Oasis Corp IPO Preliminary Book Building Results
- The local media mentioned that the preliminary book building results of the Oasis IPO were terrible.
- Therefore, the company is likely to either materially lower the IPO price range or postpone the IPO altogether.
- Our base case valuation of Oasis Corp is target price of 24,847 won per share, which is 18.5% lower than the low end of the IPO price range.
Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation
- Krafton has announced a meaningful shareholder return policy including shares buyback, cancellation, and share based compensation in the next three years.
- The combination of improving shareholder return policy along with new games development and China’s opening up of its game industry to overseas game makers are likely to positively impact Krafton.
- Given Krafton’s current market cap of 8.9 trillion won, the estimated share buybacks of 713 billion won would represent 8% of market cap over three years.
EQD | FXI US: Buying the Dip Using Options
- Chinese equities have paused for breath this month underperforming most other global indices
- The outlook for the region remains strong as reopening strength gains momentum and the Government continue to announce new supportive measures
- We favour a buy the dip strategy and suggest using derivatives to play it
New Relic: Impressive 3QFY23. Profitable Growth Accelerated Driven By Efficiency Initiatives
- New Relic reported a solid quarter pushing shares up ~18% during the regular trading session as y/y revenue growth accelerated while gross margin and operating income continued to expand.
- We like New Relic’s fundamentals and transformation plan driven across the business. The company raised the outlook for FY23 revenue as 3QFY23 results exceeded guidance.
- New Relic invites investors to an Analyst Day in May, where the company will announce the FY24 financial plan details and give more color about the updated GTM strategy.
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