In today’s briefing:
- Japan Airport (9706): Not the Best Proxy for Japan Reopening.
- PT Avia Avian (AVIA IJ) – Painting Indonesia From Top to Bottom
- Indonesian Banks Screener; Bank Mandiri Is Our Top Pick
- 1QFY23 Revenue Growth Accelerated As Cloud-Driven Transformation Goes Well
- Life Opens Supermarket 4.0: A Hybrid Online-Offline Store
- Huadong Medicine Co Ltd (000963.CH) – A “Dark Horse” to Reverse Performance Dilemma
- Conch Environment (587 HK): Don’t Overly Bet on the Blue Sky Scenario
- Takashimaya to Close Tachikawa
- Shiseido (4911 JP) | Q2 Results Will Make Analysts Blush
Japan Airport (9706): Not the Best Proxy for Japan Reopening.
- Japan’s reopening has started and pre-departure and on arrival tests for vaccinated tourists have also been abolished.
- The beneficiary of this theme is less obvious for Japan Airport Terminal Co (9706 JP) while it is very obvious for Keisei Electric Railway Co (9009 JP) .
- Japan Airport is trading at a PBR premium to Keisei while the former has a higher debt than the latter.
PT Avia Avian (AVIA IJ) – Painting Indonesia From Top to Bottom
- PT Avia Avian (AVIA IJ) is the leading decorative paint and coatings player in Indonesia listing last December and trading 20% below its IPO price but with an institutional following.
- 1Q2022 results were weaker due to a high base last year but has seen a strong pick-up since. It has raised prices twice to offset higher raw material prices.
- PT Avia Avian is an interesting proxy for the recovery in the domestic economy together with the property market plus M&A could be a further catalyst this year.
Indonesian Banks Screener; Bank Mandiri Is Our Top Pick
- The six Indonesian banks have strong capital adequacy ratios, healthy credit quality and good NPL coverage; also, GDP recovery supports positive cost of risk trends and the bank earnings outlook
- We believe that Bank Mandiri screens best, with its attractive pre-provision profitability and steadily improving cost of risk, whilst trading on undemanding multiples versus peers; we also like Bank Rakyat
- We see Bank Permata as a potential “turn around” stock, especially if management can improve credit quality, and keep lowering its cost of risk to boost returns
1QFY23 Revenue Growth Accelerated As Cloud-Driven Transformation Goes Well
- Splunk Inc (SPLK US) , a leading American provider of machine-generated data platform and established software vendor, announced strong 1QFY23 earnings results.
- Total revenues grew to $674M, up 34% YoY, the highest revenue growth rate for the last 3 years. Cloud revenues jumped by 66%, reflecting customer adoption of the cloud platform.
- WSJ reported that Cisco made a $20B+ takeover offer for Splunk. However, no deal was on the table, but if talks resume, Cisco could pay $20B+, according to The NYT.
Life Opens Supermarket 4.0: A Hybrid Online-Offline Store
- Life opened a new, upscale supermarket last month in central Tokyo that is designed to process online orders as easily as serving in-store customers.
- The new store, replacing Mitsukoshi in Ebisu Garden Place, includes a backroom that acts as a dark store for online orders.
- This frees up space in the store for higher margin items like deli foods and is a sign of the supermarket’s intentions going forward.
Huadong Medicine Co Ltd (000963.CH) – A “Dark Horse” to Reverse Performance Dilemma
- The most recent two quarters have maintained positive growth. It is of great significance for Huadong, who once suffered a significant decline and now in a critical period of transformation.
- The large growth potential of medical cosmetology and industrial microbiology would be important driver for future development. It’s also wise to strike a balance between current performance and future strategy.
- Huadong’s revenue growth would be above 10% in next few years. It would have higher valuation than Imeik. Investors are advised to follow Huadong. It could be a “dark horse”.
Conch Environment (587 HK): Don’t Overly Bet on the Blue Sky Scenario
- The sharp plunge in share price of China Conch Environment Protection Holdings (587 HK) has not yet brought its valuations back to more reasonable levels and we see more downside.
- Its 10.1x PER for FY22F is at a significant premium over peer average. Even taking into account the impressive ROE, we still cannot find justifications for its high P/B multiple.
- Negative catalysts include overly aggressive expansion target, slower profit growth than rise in capacity and surge in gearing and finance costs – they will potentially lead to earnings disappointment.
Takashimaya to Close Tachikawa
- Takashimaya will close its store in Tachikawa early next year.
- This can be seen as a further sign of an improving outlook for a smaller department store sector.
- More closures will rid the sector of excess capacity and solidify positioning as a genuinely upscale format for the affluent.
Shiseido (4911 JP) | Q2 Results Will Make Analysts Blush
- Chinese lockdowns are taking their toll on Q2 sales. We expect the upcoming report to be much worse than the last
- Estee Lauder’s recent results suggest that travel retail will be a negative shock too
- We believe there is one large downgrade to full-year guidance and consensus numbers. Too early turn bullish
Related tickers: Japan Airport Terminal Co (9706.T), Bank Mandiri Persero (BMRI.JK), Splunk Inc (SPLK.O), Life Corp (8194.T), Huadong Medicine Co Ltd A (000963.SZ), China Conch Environment Protection Holdings (0587.HK), Takashimaya (8233.T), Shiseido Company (4911.T)
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