In today’s briefing:
- China Education Group (839 HK): Impressive 1H22 Result, Positive Takeaways from Call
- Lasertec – A Miss At Stratospheric Valuations But That Isn’t Even The Biggest Problem
- Meituan Shuts Community Group Buying in Beijing – A Late Realisation That Profits Are Not Easy
- Advantest (6857 JP): Orders Unsustainable, Cyclical Risk High
- Donki: New Formats, More Growth
- Clinuvel Pharmaceuticals (CUV AU): A Profitable Growth Story, With Sustainable Long-Term Future
- Intel 1Q22: Unexplained Optimism
- Brazil Banking Data to February in 12 Charts – Consumer NPLs Worsened Further Pushed by Higher Rates
- BBVA – Mexico Is the Motor for Further Capital Distribution
China Education Group (839 HK): Impressive 1H22 Result, Positive Takeaways from Call
- China Education Group (839 HK) demonstrates resilience amid market concerns on policy uncertainties by posting a 40.5% growth in 1H22 reported net profit and 20.1% growth in adjusted net profit.
- Higher education segment saw 44% profit growth and strengths will sustain into 2H22. Weaker secondary vocational and global education segments will witness a sharp recovery, based on latest application statistics.
- CEG has secured increase in tuition and quota in the coming school year, and this will boost FY23 outlook. It opts for an Rmb500m buyback, instead of paying interim dividend.
Lasertec – A Miss At Stratospheric Valuations But That Isn’t Even The Biggest Problem
- Lasertec’s 3Q disappointed as revenue of ¥16.6bn materially undershoot consensus estimates of ¥26.6bn but given quarterly volatility in deliveries and acceptances that is understandable.
- What is more concerning is the emerging picture of gross margin decline which the company had previously warned about.
- Given inflated valuations these small negatives together with no guidance raise could drive a continued correction.
Meituan Shuts Community Group Buying in Beijing – A Late Realisation That Profits Are Not Easy
- Caixin reported on Wednesday that Meituan (3690 HK) has shut down community-group service (Meituan Select) in Beijing following news that the company plans to shut down operations in loss-making cities.
- Community-Group buying (CGB) became popular in China in 2020 and Meituan entered the market in 3Q2020 and continues to spend heavily on the biz.
- The market became heavily competitive in the form of price war, which attracted regulatory scrutiny and led to large players like Alibaba and JD.com opting out of the market.
Advantest (6857 JP): Orders Unsustainable, Cyclical Risk High
- The recent surge in IC test equipment orders is unsustainable. Only service orders maintain a positive trend.
- After peaking this fiscal year, sales and profits are likely to show double-digit declines. When earnings might hit bottom is not clear, but cyclical gearing is high.
- Earnings could rebound in 2 or 3 years, but visibility is poor. Don’t forget that Advantest has dropped into the red three times in the past 20 years.
Donki: New Formats, More Growth
- PPI has begun roll out of new, specialty food stores designed to slot into a variety of shopping malls.
- On the surface, these stores look like mini-Don Quijote stores, emphasising low prices and a dazzling density of product, but focused on sweets, liquor, cosmetics, or a combination.
- Expansion will help reach new customers, reduce the expense of opening new stores, and help with building scale for private brands.
Clinuvel Pharmaceuticals (CUV AU): A Profitable Growth Story, With Sustainable Long-Term Future
- Clinuvel Pharmaceuticals (CUV AU) has sole marketed drug, Scenesse, approved in the U.S. and Europe for the treatment of a rare skin disorder that causes extreme sensitivity to light.
- Scenesse revenue jumped 65% y/y in H1FY22, due to increasing patient demand. With the re-opening of expert centers, treatment has largely normalized in Europe.
- Clinuvel has rich pipeline, to develop pharmaceutical products to treat a range of indications and non-prescription healthcare solutions to individuals in the wider population.
Intel 1Q22: Unexplained Optimism
- Inline quarter, though margins continue to decline on market share loss and ramping new nodes.
- Intel is overly optimistic about PCs rebounding in the 2H; 2021’s 15% growth is not sustainable.
- Intel maintained its full year revenue guidance and increased its EPS despite lowering 2Q’s guidance. This implies an acceleration in the back half. We find that overly optimistic
Brazil Banking Data to February in 12 Charts – Consumer NPLs Worsened Further Pushed by Higher Rates
- Brazil’s consumer credit quality trends to February deteriorated further relative to the previous month, despite corporate credit quality improving marginally
- System loan growth was 16.6% for the twelve months to February which was slightly faster than the YoY rate for January (16.4%), totally due to the stronger consumer loan growth
- The BCB is in the latter stages of its benchmark rate hiking cycle, which impacts credit quality, especially in consumer categories; still, Brazilian banks should benefit from higher loan spreads
BBVA – Mexico Is the Motor for Further Capital Distribution
- Mexico continues to be the key contributor to BBVA group, with the offer for Garanti minorities set to increase BBVA’s share of higher risk higher reward returns from emerging markets
- The revised offer to Garanti minorities is still 10%+ cheaper in Euro terms than at the time of its 4Q21 announcement, with a modest hit of 34bps to CET1 ratio
- We see BBVA as an attractive value play in select emerging markets and Spain, with its well-established digital offerings as a driver for sustained premium returns and premium capital distribution
Related tickers: China Education Group (0839.HK), Lasertec Corp (6920.T), Meituan (3690.HK), Advantest Corp (6857.T), Pan Pacific International Holdings (7532.T), Clinuvel Pharmaceuticals (CUV.AX), Intel Corp (INTC.O), Banco Do Brasil Sa (BBAS3.SA), Banco Bilbao Vizcaya Argentari (BBVA.MC)
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