In today’s briefing:
- Hong Kong F&B: Stock Screening As Social-Distancing Curbs Ease
- Softbank Group – Strong Dollar Impact Boosts Buyback Math Although Debt May Rise Too
- Nidec – Small Precision Motors and Automotive Concerning
- MediaTek (2454.TT): 1Q22 Results/ 2Q22 Outlook- 2Q22 Growth Outlook Could Be near Mid-Single Digits
- TME – ByteDance’s Launch of Music Streaming App to Add Further Pressure on Earnings
- Shiseido: Shanghai Lockdown Adds Pressure to Faltering Japanese Cosmetics
- Abbott Laboratories (ABT US): 2022 High Conviction Idea 1Q22 Review- COVID Testing Bonanza Continues
- Nidec (6594 JP) | The Second Coming of Nagamori
- Fosun Tourism (1992 HK): Well Geared Towards Global Travel Recovery
Hong Kong F&B: Stock Screening As Social-Distancing Curbs Ease
- Hong Kong’s hospitality industry has endured three years of upheaval, first with the democracy protestors in 2019, which slowed inbound, followed by the onset of Covid in early 2020.
- Beginning today, 21 April, the Government commenced the relaxation of most social distancing measures, to be eased over three phases.
- This evolving dynamic is welcome, yet the progress and recovery for many operators may be gradual.
Softbank Group – Strong Dollar Impact Boosts Buyback Math Although Debt May Rise Too
- The strong dollar has boosted Softbank’s predominantly dollar-linked asset value by 9% in yen terms (although reported net debt will also increase)
- Also relevant is a decrease in the dollar cost of its ¥1,000bn share repurchase which was $8.8bn when announced but costs less than $8bn at the current exchange rate.
- This has kept the share price up YTD and QTD despite weakness in the investment portfolio but tech weakness probably has more legs than dollar appreciation
Nidec – Small Precision Motors and Automotive Concerning
- Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn.
- This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view.
- Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.
MediaTek (2454.TT): 1Q22 Results/ 2Q22 Outlook- 2Q22 Growth Outlook Could Be near Mid-Single Digits
- Mediatek revenue was NTD$142.7bn in 1Q22, which was 32.1% YoY and 10.9% QoQ. It was higher than the prior high-end guidance of $NTD141.5bn.
- The 2nd quarter outlook could be slight growth of NTD$148.9bn/49.1% GM, which could be not much growth expected.
- The expectation of the 5G deployment could be a bit slower because of COVID-19 impact and slow down in China handset shipment.
TME – ByteDance’s Launch of Music Streaming App to Add Further Pressure on Earnings
- Several news media outlets report that ByteDance has launched a new music streaming service in China called Qishui Yinyue.
- Tencent Music (TME US) earnings have come under pressure with ending of exclusive music streaming licensing deals and increased regulatory pressure on its social entertainment biz.
- We expect TME’s 1Q2022E earnings to decline further with increased competition and drop in social entertainment.
Shiseido: Shanghai Lockdown Adds Pressure to Faltering Japanese Cosmetics
- The market position of Japanese cosmetics in China is weakening with Japanese exports declining around 5.0% YoY in January and February 2022.
- With Shanghai under a strict lockdown and the recovery of inbound demand taking more time than expected, it is possible that Shiseido Company (4911 JP) could downgrade its 2022 guidance.
- These forces could take Shiseido’s valuation multiples to the pre-2013 level, resulting in a downside of close to 30%.
Abbott Laboratories (ABT US): 2022 High Conviction Idea 1Q22 Review- COVID Testing Bonanza Continues
- Abbott Laboratories (ABT US) reported better-than-expected Q1 revenue and earnings, due to higher diagnostic revenue led by strong COVID-19 testing revenue. 2022 adjusted EPS guidance remains unchanged.
- In Q1, global COVID-19 testing-related sales reached to a record high of $3.3 billion, representing 28% of total revenue. COVID-19 testing revenue guidance was raised to $4.5 billion for 2022.
- Medical devices business reported double-digit organic revenue growth in the U.S. as well as international market, showing continued recovery in the elective procedures.
Nidec (6594 JP) | The Second Coming of Nagamori
- Nidec is the best stock in Japan to play the rising adoption of EVs
- The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale
- We think the company can hit its mid-term targets and see over 30% upside for the stock
Fosun Tourism (1992 HK): Well Geared Towards Global Travel Recovery
- Fosun Tourism (1992 HK) (FTG) is not a China play and, instead, it has excellent exposure to the global travel industry recovery particularly through its ownership in Club Med.
- 1Q22 showcased a very solid 306.6% rebound in business volume of resorts and tourism destination operations and tourism and leisure services and solutions business, and the trend will continue.
- We think Club Med’s exposure to overseas recovery, Atlantis Sanya’s ride on domestic demand and new resorts’ good position to capture China’s travel recovery are key drivers for FTG.
Related tickers: Cafe De Coral Holdings (0341.HK), Softbank Group (9984.T), Nidec Corp (6594.T), Mediatek Inc (2454.TW), Tencent Music (TME.N), Shiseido Company (4911.T), Abbott Laboratories (ABT.N), Nidec Corp (6594.T), Fosun Tourism (1992.HK)
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