In today’s briefing:
- Euglena (2931 JP) | Flying High on Sustainable Aviation Fuel
- Meituan Aligns Itself with Common Prosperity Measures but What Will Happen to Profitability?
- Tencent: Investments up as Valuations Drop, Room for Another Significant Special in Specie Dividend
- Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors
- INTUCH: ADVANC’s Healthy Outlook Makes INTUCH Attractive
- Sino Biopharmaceutical (1177.HK) – Three “Golden Eggs” and the Risks Behind
- Rakuten (4755 JP) | Time to Cover the Shorts
- NTGR: Discounting to a Router
Euglena (2931 JP) | Flying High on Sustainable Aviation Fuel
- Euglena could be the most important sustainable aviation fuel company in Japan and a world leader in using micro algae as a feedstock
- The company looks set to become the largest provider of SAF in Japan by 2025
- Assuming the company can hit its commercial SAF production target, we think the stock could easily double
Meituan Aligns Itself with Common Prosperity Measures but What Will Happen to Profitability?
- Nikkei reported that Meituan intends to pay better compensation to small-and-medium restaurants and to delivery workers to prove that the company is in line with Beijing’s common prosperity measures.
- As Shanghai is under strict Covid lockdown, Meituan has seen a sharp rise in demand for grocery deliveries, however, margins are expected to be thin due to additional costs.
- The company has been under tremendous pressure to improve its cost structure and is undertaking 10-20% job cuts across all its business units.
Tencent: Investments up as Valuations Drop, Room for Another Significant Special in Specie Dividend
- Tencent’s increase in investment acquisition activity has coincided with a general weakness in equity prices and valuation levels.
- Tencent management’s assessment of the fair value of its listed investee holdings, of RMB982.8bn on 31 December 2021, equates to roughly 27.4% of its market cap.
- The market value of Tencent’s investee holdings in more-mature, Chinese-listed, internet-orientated holdings equates to roughly 9% of its current market cap.
Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors
- Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
- We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar.
- Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.
INTUCH: ADVANC’s Healthy Outlook Makes INTUCH Attractive
- We initiate coverage of INTUCH with a BUY rating, based on our TP of Bt82 derived from 18.9% discount from SOTP valuation, implying 22.3xPE’22E.Despite ADVANC’s strong earnings growth in 2022-24
- Benefit from ADVANC’s top-of-industry performance. ADVANC to gain from better 5G infrastructure and ARPU reversal.
- ADVANC’s enterprise business will grow rapidly between 2022-24. THCOM has negligible impact on overall performance.
Sino Biopharmaceutical (1177.HK) – Three “Golden Eggs” and the Risks Behind
- As the “the king of generics”, Sino Biopharmaceutical (1177 HK) is lucky to have three “golden eggs”(Entecavir, Anlotinib, CoronaVac) to contribute huge performance over the years.
- The promotion of VBP and fierce competition make Sino Biopharmaceutical’s products lose pricing power. Due to little revolutionary technology/slow product iteration/weak R&D, it’s unlikely to have another Anlotinib level asset.
- The Company’s development mode, the mindset of management, and other concerns could be more serious problems, causing investors to distrust the management level and preventing it from getting high valuation.
Rakuten (4755 JP) | Time to Cover the Shorts
- We have a non-consensus Bullish call on Rakuten and see over 60% upside to the share price
- The key driver will be a recovery in the Mobile Business
- We expect losses to gradually improve as roaming fees and customer acquisition costs start to decline
NTGR: Discounting to a Router
- NTGR spent the Q12022 reducing channel inventory of lower priced wireless routers, but there is still a lack of catalyst for consumers to upgrade after buying a router in 2020
- NTGR’s balance sheet makes the stock look attractive at current levels, but the first quarter has too many variables to push us off the sidelines
- During the first quarter of 2022 it was visible the degree of discounting NTGR had undertaken in the channel to remove lower priced wireless routers, or sub $299 price point
Related tickers: Euglena Co Ltd (2931.T), Meituan (3690.HK), Tencent (0700.HK), Air China Ltd (H) (0753.HK), Intouch Holdings (INTUCH.BK), Sino Biopharmaceutical (1177.HK), Rakuten Inc (4755.T), Netgear Inc (NTGR.O)
Before it’s here, it’s on Smartkarma
