In today’s briefing:
- Alibaba Cloud: Exit of Senior Leadership Arouse Suspicion
- Byd (1211): Outperformer During Lockdown
- Korean Botox Players in Another Round of Patent Fights: Medytox (086900 KS) Sues Hugel (145020 KS)
- Energy China (3996 HK): Multiple Drivers for Bright Prospects
- Shijiazhuang Yiling Pharmaceutical (002603.CH) – Doubts About COVID-19 Drug and the Concerns Behind
- CDC Ends Public Transportation Mask Mandate & Will the World Follow Shanghai or Vice Versa?
- Hygeia Healthcare Group (6078.HK) 2021 Results – Solid Business Logic Comes with Policy Risk
- GLOBAL: Expect Earnings Increase QoQ from Seasonal Factor
- BEM: Expect to Report Five-Quarter High Net Profit in 1Q22
- SCGP: Elevated Product Prices to Drive Core Profit in 1Q22
Alibaba Cloud: Exit of Senior Leadership Arouse Suspicion
- Over the last year, we have highlighted some extremely damaging risks to Alibaba Group (9988 HK)’s cloud business.
- The exit of senior leadership, right before the data migration deadline and the cybersecurity deal reassessment, arouse suspicion.
- We suspect Alibaba could be using this “leadership reshuffle” to hide the reality of the Cloud business from investors.
Byd (1211): Outperformer During Lockdown
- BYD (1211 HK) is the most vertically integrated with its own chip manufacturing facility (BYD Semiconductor) and battery production unlike the rest of the Chinese auto OEMs.
- The lockdown may not last that long as the Chinese authority is reportedly seeking to create a white list to resolve the supply chain issue.
- It announced that Q1 22 net profit will range between RMB 650 to 950 million, an increase between 174% to 300% YoY which will make its forward PE cheaper.
Korean Botox Players in Another Round of Patent Fights: Medytox (086900 KS) Sues Hugel (145020 KS)
- Hugel Inc (145020 KS) dominates South Korean botulinum toxin market, with ~50% share. The company already has presence in China and aims to launch its product in Europe this year.
- Hugel’s ambitious target to enter into the world’s largest botulinum toxin market, U.S. is facing a big obstacle as Medy Tox Inc (086900 KS) filed a complaint against the company.
- Medytox’s U.S. business is uncertain after the ending of its exclusive licensing agreement with Abbvie Inc (ABBV US).
Energy China (3996 HK): Multiple Drivers for Bright Prospects
- We believe strong orders and backlog, increase in installed capacity and development of new business initiatives are the key drivers for brighter outlook of China Energy Engineering (3996 HK).
- Its new orders grew 51% YoY in FY21, with its backlog is enough to cover the revenue more than the next three years mean solid earnings security and visibility.
- Development of hydrogen energy and pumped storage businesses may take longer to contribute, but they also represent significant upside when enter into commercial launch.
Shijiazhuang Yiling Pharmaceutical (002603.CH) – Doubts About COVID-19 Drug and the Concerns Behind
- There are doubts about the efficacy of Lianhua Qingwen to treat mild cases of COVID-19 in China, leading to the plunge of Yiling’s share price.
- Fully evaluating the efficacy of Lianhua Qingwen requires larger double-blind randomized clinical trials. Data from other than double-blind controlled clinical trials are hard to be conclusive and can be controversial.
- Even if Yiling could escape unscathed from the controversy, Yiling’s achievements since 2020 in capital market may not have sustainability.Together with the potential risks, investors are advised to remain cautious.
CDC Ends Public Transportation Mask Mandate & Will the World Follow Shanghai or Vice Versa?
- On 19 April, the US CDC stated that the national mask requirement on public transportation is no longer in effect in the United States.
- The CDC lifting the mask mandate is a key catalyst and other major countries are likely to follow the US in the coming months.
- Will the world likely to become more like Shanghai and enforce even greater lockdown policies or will they become more like the US and drop social distancing and mask mandates?
Hygeia Healthcare Group (6078.HK) 2021 Results – Solid Business Logic Comes with Policy Risk
- Driven by the development mode of “organic growth + strategic acquisitions + cooperation with hospital partners”, Hygeia Healthcare Group (6078 HK) could rapidly expand nationwide, with solid business logic.
- Hygeia’s delicacy management and the strength in operation help the Company to break the limits of the expansion of private hospitals, helping shorten the time it takes to break even.
- However, the high uncertainties on policy and State’s attitude towards private hospitals cast shadow on Hygeia’s long-term prospects, but investors could still trade this stock in short term.
GLOBAL: Expect Earnings Increase QoQ from Seasonal Factor
- We reiterate BUY rating for GLOBAL with a target price of Bt25.0 based on 35xPE’22E, close to the average of the Thailand home-improvement subsector.
- We expect GLOBAL to report 1Q22 net profit at Bt967m (flat YoY, +30%QoQ).
- QoQ growth will be supported by high season quarter with a solid SSSG at+7.5%YoY in 1Q22 together with economic recovery as shown by Farm income Index was at Bt215 (+9%YoY)
BEM: Expect to Report Five-Quarter High Net Profit in 1Q22
- We expect the company to report net profit of Bt400m in 1Q22. (+1%QoQ+31%YoY), the highest level in the past five quarters.YoY expansion will be due to effective operating cost management
- Expect daily ridership to reach 70% of pre-COVID19 level by 3Q22, under assumption that there will be no major restriction measures induced by the virus outbreak. Furthermore, we expect ridership
- Earlier-Than-Expected bidding for Orange line will be the re-rating catalyst (previously expected to take place within 1H22). We estimate upsides from this project at Bt1.90 per share.
SCGP: Elevated Product Prices to Drive Core Profit in 1Q22
- Maintain BUY rating with a new TP of B66.00 (down 8% from previous TP),based on 30.8xPE’22E which is close to its -1SD of 3-years trailing average. We believe, SCGP’s 24%
- We expect 1Q22E core profit to be the bottom quarter at Bt1.7bn (-21%YoY,-21%QoQ). Excluding one-time gain from the acquisition of Go-Pak adjustment, its recurring profit should rise 23%QoQ.
- We believe earnings momentum to recover in 2Q22 onwards by raising product prices in wake of costs turbulence, but would drop YoY due to fall from high base.
Related tickers: BYD (1211.HK), Hugel Inc (145020.KQ), China Energy Engineering (3996.HK), Shijiazhuang Yiling Pharmaceutical (002603.SZ), Korean Air Lines (003490.KS), Siam Global House (GLOBAL.BK), Bangkok Expressway and Metro (BEM.BK)
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