In today’s briefing:
- What Now For BEA After Elliott Walks?
- Monex – Downside Crypto Surprise
- HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- Komatsu – Strong but Mostly Priced In
- Sony – The Bungie Counterpunch
- Oriental Land: Price Reaction Unwarranted and There’s Significant Downside Risk in a Bear Market
- Koei Tecmo – Nice on the Surface But We Are Worried
- Bank Negara Indonesia (BBNI IJ) – Catching the Digital Wave
- IndusInd Bank – Stabilizing Somewhat
What Now For BEA After Elliott Walks?
- Bank of East Asia (23 HK) announced last Friday it intends to buy back 8.43% of shares out from Elliott Investment Management for HK$2.9bn ($373mn), paying HK$11.19/share.
- The share buyback is expected to result in a 6% increase in the consolidated net asset value per share.
- Conditions to the buyback appear straightforward. BEA is trading cheap at 0.3x P/B.
Monex – Downside Crypto Surprise
- Monex missed significantly at the PBT level with results of ¥1.01bn 73% below consensus of ¥3.77bn.
- This was a result of weak revenue and margins for the crypto business as advertising expense escalated into falling top line.
- The result is unlikely to do anything to reverse the recent downward trend of the stock and we recommend staying hedged.
HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate and blowing away clueless consensus’ ¥219.2bn.
- That the consensus high was just ¥231bn is an illustration of how poor the sell side understanding of HCM is compared to Komatsu.
- We expect more of the same going forward… strength from HCM and cluelessness from sell side analysts.
HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate and blowing away clueless consensus’ ¥219.2bn.
- That the consensus high was just ¥231bn is an illustration of how poor the sell side understanding of HCM is compared to Komatsu.
- We expect more of the same going forward… strength from HCM and cluelessness from sell side analysts.
Komatsu – Strong but Mostly Priced In
- Komatsu’s 3Q results hit revenue of ¥723bn (+12.5% QoQ, +30.1% YoY) and OP of ¥87.5bn.
- They beat consensus by 9.8% and 19.0% at the revenue and OP levels respectively.
- That puts it on track to hit the high end of our ¥305-325bn OP estimate for the FY but upside is relatively moderate compared to HCM.
Sony – The Bungie Counterpunch
- Sony has not taken long to respond to Microsoft’s purchase of Activision Blizzard.
- It is being reported that Sony will acquire Bungie, original developer of the Halo franchise as well as Destiny for $3.6bn.
- The cost effectiveness of this move stands in stark contrast to Microsoft’s acquisition and is significantly more targeted in its apparent goals, as usual.
Oriental Land: Price Reaction Unwarranted and There’s Significant Downside Risk in a Bear Market
- Oriental Land (4661 JP) positively surprised the market with 3QFY22 revenue surpassing the consensus estimate by more than 13% through gradual easing of limits imposed on park attendance.
- FY22 revenue and OP guidance were raised by ¥22.9bn and ¥16.6bn respectively despite expecting Q4 attendance to fall short of the original forecast through the new state of emergency measures.
- Nonetheless, we think Oriental Land is too expensive at 33.6x FY24 OP, especially considering that attendance is expected to fall short of the original forecasts in the fourth quarter.
Koei Tecmo – Nice on the Surface But We Are Worried
- Koei Tecmo delivered strong results with revenue of ¥18.1bn and OP of ¥10.7bn comfortably beating consensus of ¥16.2bn and ¥5.7bn respectively.
- OP guidance was raised from an absurdly conservative ¥24.5bn to a still conservative ¥31.5bn, below consensus at ¥33.6bn.
- While these results look broadly positive we are concerned that the recent sell off may continue.
Bank Negara Indonesia (BBNI IJ) – Catching the Digital Wave
- Bank Negara Indonesia (BBNI IJ) released a solid set of FY2021 results last week, with its PPOP coming in above consensus and guidance being met on all fronts.
- The bank’s loan mix is moving towards lower risk assets but cost of funds has fallen significantly at the same time plus its progress on digital banking is impressive.
- The bank’s increasingly digital credentials should lead to an upward re-rating of the bank’s valuations, which look attractive given the expected recovery in earnings and higher ROEs beyond 2022.
IndusInd Bank – Stabilizing Somewhat
- IndusInd reported FY 3Q22 bottom-line results improved 4.8% linked quarter, driven by stronger core revenues and a lower provision;
- NCOs remain elevated and show no sign of abating, and net new NPLs increased 31.6% annualized; and
- IndusInd’s reserve needs to increase closer to 75% with a shortfall of INR 30 bn – representing two quarters of pre-tax results.
Related tickers: Bank of East Asia (0023.HK), Monex Group Inc (8698.T), Hitachi Construction Machinery (6305.T), Hitachi Construction Machinery (6305.T), Komatsu Ltd (6301.T), Sony Corp (6758.T), Oriental Land (4661.T), Koei Tecmo Holdings (3635.T), Bank Negara Indonesia Persero (BBNI.JK), Indusind Bank (INBK.NS)
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