In today’s briefing:
- Alibaba (BABA): 3Q22, Transforming Missions Going Under Slow Quarter
- Iwatani – Hydrogen Getting Interesting Again and This Is the Best Play
- Lawson Expands into Takeaways
- Pacific Basin Shipping (2343 HK): Strongest Ever Year
- Kalbe Farma (KLBF IJ) – Rebalancing Growth
- Marui: 70% of Tenants to Be Non-Merchandise
- NetEase (NTES): 4Q21, Better than Expectation
- Hyosung TNC: 10x Increase in Dividends Per Share
- ERW: Expect Continued Losses in 2022
- Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine – Buy into the Sell-Off
Alibaba (BABA): 3Q22, Transforming Missions Going Under Slow Quarter
- BABA’s app, SDTao, has been taking active users from Pinduoduo.
- We believe BABA’s physical store chain, Freshippo, will go public.
- We believe BABA will stop investing in unprofitable Ele.me as it underperforms Meituan.
Iwatani – Hydrogen Getting Interesting Again and This Is the Best Play
- Japan continues to move forward with preparing for the shift to a hydrogen economy with new developments in both rail and hydrogen production.
- The efforts to produce hydrogen through artificial photosynthesis are particularly interesting given the potential to reduce hydrogen costs drastically.
- While Toyota is of course involved in the efforts, the key beneficiary for the hydrogen economy remains Iwatani.
Lawson Expands into Takeaways
- Lawson will begin offering made-on-demand meals direct from its convenience stores.
- Suitable stores are being renovated to include in-store kitchens, with 100 planned for this time next year and 1,000 by 2025, with delivery handled by companies like Uber Eats.
- Most other chains offering made-to-order meals are small, so Lawson could well take a large share of this growing market.
Pacific Basin Shipping (2343 HK): Strongest Ever Year
- Impressive result with underlying net profit reached US$698m in FY21, up sharply from loss of US$19.4m a year ago. Net gearing dropped to 7% with record-high ROE of 58%.
- With 48-64% of Handysize and Supramax days covered at TCE slightly below FY21 level, it has well secured FY22 profitability, with upside from higher rate in rest of this year.
- We expect ROE to be over 30% for FY22, making its 1.3x P/B not expensive, especially with an improved balance sheet. Dividend yield of 14% for FY22 is another attraction.
Kalbe Farma (KLBF IJ) – Rebalancing Growth
- Kalbe Farma (KLBF IJ) released a reassuring set of results with sales growing +13.6% and net profit by +12.5% in 2021, with growth coming from prescription drugs and distribution
- 2022 should see growth picking up across all of its divisions with recovery for consumer health and nutritionals plus its digital strategies are starting to make a difference.
- Kalbe Farma trades in 22.8x FY22E PER and 21.0x FY23E PER versus its 5-year average forward PER of 26.3x forward PER, making it look attractive at current levels.
Marui: 70% of Tenants to Be Non-Merchandise
- Marui Group (8252 JP) is increasingly ethereal, shifting further away from selling merchandise through tenants.
- While seen as a shop building operator, Marui is still true to its service origins as a consumer finance business.
- Now even its shop buildings are increasingly devoted to non-stuff with the company aiming for 70% of tenancies to be selling things other than merchandise by 2025.
NetEase (NTES): 4Q21, Better than Expectation
- Revenue grew strongly due to the new game, Harry Potter.
- We believe NTES has confidence in the growth of cloud music.
- We believe the stock has an upside of 32% for the year end 2022.
Hyosung TNC: 10x Increase in Dividends Per Share
- Hyosung TNC announced 50,000 won in DPS in 2021, up 10x from 2020. This is likely to reverse the recent declining share price trend in the past several months.
- Hyosung TNC’s current dividend yield is 10.5%, representing one of the highest dividend yields in Korea. Dividend payout in 2021 was 28%.
- We believe Hyosung TNC is well positioned to outperform KOSPI in 2022.
ERW: Expect Continued Losses in 2022
- Excluding extraordinary items, ERW’s 4Q21 normalized loss was at Bt371m, the eighth consecutive quarter loss, due to operations under EBIT breakeven.
- 4Q21 negative EBITDA declined to -Bt29m compared to -Bt30m in 4Q20 and -Bt243m in 3Q21 backed by recovering overall hotel operation.
- Lockdown easing and launching ‘Rao Tiew Duay Kan phase 3’ program during 4Q21 resulted in improving occupancy rate (ex. Hop INN segment) to 30% up from 25% in 4Q20
Hitachi Ltd. (6501 JP): Assessing Exposure to Ukraine – Buy into the Sell-Off
- Hitachi is evacuating more than 7,000 GlobalLogic employees from Ukraine to other countries, but IT workers are mobile and these may have more work due to cyber attacks.
- Hitachi Construction Machinery and other Hitachi Group divisions do some business in Ukraine, but we expect the impact of the crisis to be manageable and temporary.
- Hitachi Ltd shares are down 25% since November and the P/E ratio is near the bottom of its historical range.
Related tickers: Alibaba Group (BABA.N), Iwatani Corp (8088.T), Lawson Inc (2651.T), Pacific Basin Shipping (2343.HK), Kalbe Farma (KLBF.JK), Marui Group (8252.T), NetEase Inc (NTES.O), Erawan Group (ERW.BK), Hitachi Ltd (6501.T)
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