In today’s briefing:
- AEM Holdings: 2H21 Revenue Acceleration to Continue into FY22. Fair Value Maintained at 8 SGD
- Alibaba: A Long Way Down Already and a Lot More to Go
- Softbank Group – Alibaba Remains the Key Share Price Driver as VF Diversification Stalls
- Indosat Tbk PT (ISAT IJ) – A Turnaround in the Making?
- Channel Insight #26 | M&M (Tractors), Bajaj Electricals (Murphy Richards), Havells
- Ujjivan Reverse Merger: Behind the Dull Response
- TASCO: Crude Price Hike to Pressure 2022 Earnings
- XPER: Growth Year on Track
AEM Holdings: 2H21 Revenue Acceleration to Continue into FY22. Fair Value Maintained at 8 SGD
- AEM (AEM SP) released record 2H21 results which indicate Intel Corp (INTC US) ramp continues as expected. Management expects more of the same in FY22.
- Intel Corp (INTC US) has a variety of issues but it will spend massive amounts of cash to keep up with rivals. AEM (AEM SP) remains a major beneficiary.
- Fair value unchanged at 8 SGD, or 78% upside from current 4.5 SGD share price.
Alibaba: A Long Way Down Already and a Lot More to Go
- Alibaba Group (9988 HK)’s 3QFY22 results was disappointing with the company’s revenue growing by 9.7% YoY, the slowest YoY growth since inception and missing the consensus revenue target by 1.3%.
- The situation appears far worse on the profitability side considering that OP (excluding impairment of goodwill) fell more than 34% YoY to RMB 32.2bn in 3QFY22.
- We feel there’s a lot more downside to Alibaba shares over the medium term as the company’s cash cows are starting to falter in these tough conditions.
Softbank Group – Alibaba Remains the Key Share Price Driver as VF Diversification Stalls
- Softbank Group (9984 JP) shares have fallen 46% since 31 March v a 52% decline for Alibaba Group (9988 HK) with little daylight between the two since August
- That reflects fading influence from Vision Fund which is shed $12bn in value Q4 to date and c. $30bn this fiscal year.
- The discount remains in the 50% range as tailwinds from the share buyback depend on a successful IPO of ARM, where the magnitude and timing remain uncertain
Indosat Tbk PT (ISAT IJ) – A Turnaround in the Making?
- Indosat (ISAT IJ)‘s recent results reflect a company going through a positive transition with sales up by +12.4% and EBITDA up +21.4% suggesting a turnaround in the making.
- The company’s acquisition of Hutchison’s 3 looks astute, removing an aggressive competitor, propelling into the number two slot, as well as providing potential operational and scale-related synergies.
- 2022 will be the company’s year of transition, with higher capex to realised synergies and keep improving the network quality. Valuations are appealing for long-term investors.
Channel Insight #26 | M&M (Tractors), Bajaj Electricals (Murphy Richards), Havells
- We interact with channels of Mahindra & Mahindra (MM IN) , Bajaj Electricals (BJE IN) & Havells India (HAVL IN) with an objective to understand sources of stress in rural India.
- Price increases, lack of savings and irregular rural cash flows are taking a toll on Tractor Sales.
- In durables, there are no signs of recovery, with lower prices being the only catalyst that would bring back volumes.
Ujjivan Reverse Merger: Behind the Dull Response
- Ujjivan Financial Services (UJJIVAN IN) had announced a reverse merger back in October 2021 where the holding company (Ujjivan FS) will be merged with Ujjivan Small Finance Bank (UJJIVANS IN).
- The share swap ratio given in the scheme of amalgamation clearly showcases a significant merger arbitrage opportunity.
- However, there has been no major interest in this very visible opportunity. We try to justify the market behavior.
TASCO: Crude Price Hike to Pressure 2022 Earnings
- Downgrade to SELL from HOLD rating and cut TP by 41% to Bt14, derived from 1.4xPBV’22E, Asia ex-Japan Materials sector. We believe the valuation remains demanding with the stock trading
- Its 4Q21 core profit was at Bt175m (-83%YoY,-71%QoQ), plunged due to narrow margin, following crude price surged and higher OPEX.
- Excluding extraordinary items, 2021 core profit was at Bt2.9bn, increased 9%YoY, attributed to better EBIT margin from lower SG&A-to-sales ratio
XPER: Growth Year on Track
- XPER is setting the course for revenue growth after reporting fourth quarter 2021 results. Aiding the process to revenue growth is an increase in baseline IP license revenue for 2022
- XPER disclosed it has signed a hybrid bonding IP licensing agreement with Micron Technologies (MU)
- XPER is broadening its presence in the automobile space. During the fourth quarter earnings call, XPER disclosed Toyota Motor (TM) will include HDRadio in all its car models
Related tickers: AEM (AEM.SI), Softbank Group (9984.T), Indosat Tbk PT (ISAT.JK), Mahindra & Mahindra (MAHM.NS), Tipco Asphalt (TASCO.BK), Xperi (TSRA.O)
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