In today’s briefing:
- Japan Tobacco 2022 High Conviction Update: Time to Double Down
- Sony – New PlayStation Plus Plans Illustrate Overwhelming Superiority Vs. XBox
- Nintendo – Take Profit
- Toyota – Feb Production Numbers Suggest The Corner Has Been Turned
- Sinotrans (598 HK): Record FY21, Takeaways from Post-Result Call
- Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value
- Onward: Moving to Showroom Stores and Click & Collect by 2024
- KBANK: Growth Remains Intact Despite Economic Headwinds
- Poplar Launches Unmanned Stores but Independence Still Under Threat
- First Local Aerospace & UAM (Urban Air Mobility) ETF in Korea
Japan Tobacco 2022 High Conviction Update: Time to Double Down
- It seems investors are starting to move past the fears of Japan Tobacco’s exposure to Russia and Ukraine with shares rising 6% following a steep decline alongside Russia’s Ukraine invasion.
- Meanwhile, we expect the company’s OP to continue trending upwards with the weakening yen helping the International Tobacco segment and price hikes benefiting the Domestic business.
- If OP reaches the 2014 level, we think Japan Tobacco (2914 JP) shares could go up around 90% to ¥4,000 per share over the next 12 months.
Sony – New PlayStation Plus Plans Illustrate Overwhelming Superiority Vs. XBox
- Yesterday Sony officially announced the new structure for its popular PlayStation Plus service with three tiers including some streaming options.
- The details had been mostly leaked already and there were no major surprises but pricing looked extremely reasonable.
- Below we compare the plans against Xbox Game Pass and explain why this demonstrates a far better understanding of the industry on Sony’s part.
Nintendo – Take Profit
- Nintendo is up 25.2% since we turned genuinely bullish on the name at the end of Nov.
- The weakening yen has helped significantly and should lead to a small overshoot on the dividend as well.
- However, they just announced a delay of the Breath of the Wild sequel and we think this is a good time to take profit.
Toyota – Feb Production Numbers Suggest The Corner Has Been Turned
- Toyota announced record overseas production in February putting up a data point to suggest supply chain issues are genuinely easing.
- March is likely to prove more challenging due to some production stoppages but the trend looks clear.
- That it comes at a time when the yen is weak and oil prices encourage hybrid demand is an additional boon for Toyota.
Sinotrans (598 HK): Record FY21, Takeaways from Post-Result Call
- Sinotrans (598 HK) has a record year in FY21 with recurring earnings increased 44% YoY. Margin for 4Q21 has shown some improvements against 9M21.
- Management is generally cautiously optimistic for this year, but also highlighted weaker visibility for the outlook given high base, sporadic COVID-19 outbreak and geopolitical uncertainties.
- We expect slower earnings growth in FY22, with e-commerce segment being the best-performing. We see lesser credit and asset impairments, and it is cheap at 3.7x PER and 10% yield.
Shenzhen Intl (152 HK): More Room to Realise Underlying Asset Value
- Shenzhen International (152 HK) posted 11% profit decline for FY21, with Shenzhen Airlines the main drag. Stripping this and one-off items out, its bottom line would have grown by 46.6%.
- Logistics growth pipeline is highly visible, and this adds to potential gains from logistics park transformation and strategic offload of matured and suitable projects through REIT or private fund.
- The stock remains a deeply undervalued asset play at just 0.48x P/B. Its willingness to share gains with investors has put its dividend yield at 10.4% on current share price.
Onward: Moving to Showroom Stores and Click & Collect by 2024
- Onward is proving adept at moving sales online even as its turnover drops dramatically as it restructures and slashes old stores – some 1,700 stores in two years.
- It now wants to integrate the remaining stores better with online and targets 50% of sales from e-commerce within three years.
- This won’t be enough to offset lost sales at department stores but should mean improving returns for long-term investors.
KBANK: Growth Remains Intact Despite Economic Headwinds
- We reiterate our BUY rating with a target price of Bt174. Our BUY call reflects (1) steady growth ahead from improving economic recovery; (2) adequate reserves against new NPLs
- Net profit will likely rise 6% YoY (+14% QoQ) in 1Q22 given higher net interest income from elevated loans and an improvement in cost to income ratio.
- We expect minimal impacts from S&P Global Rating downgrade from “BBB+” to “BBB”.
Poplar Launches Unmanned Stores but Independence Still Under Threat
- Poplar is one of the few remaining small CVS chains in Japan and is struggling.
- It is now trying a new format of mini stores to take merchandise to the customer.
- This may not be enough and it will likely cede more of its stores to Lawson.
First Local Aerospace & UAM (Urban Air Mobility) ETF in Korea
- On 29 March, Hanwha Asset Management launched the first local stocks-focused, aerospace & UAM (Urban Air Mobility) themed ETF named ‘ARIRANG iSelect Aerospace & UAM ETF’.
- The share prices of the 18 stocks included in this ETF are up on average 6% YTD, outperforming KOSPI which is down 7.8% in the same period.
- As of 30 March, iSelect Aerospace & UAM ETF had a market cap of 10.1 billion won which is likely to increase much higher in the coming months.
Related tickers: Japan Tobacco (2914.T), Sony Corp (6758.T), Nintendo Co Ltd (7974.T), Toyota Motor (7203.T), Sinotrans (0598.HK), Shenzhen International (0152.HK), Onward Holdings (8016.T), Kasikornbank PCL (KBANK.BK), Poplar Co Ltd (7601.T), Korea Aerospace Industries (047810.KS)
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