In today’s briefing:
- Kirin: Off of Myanmar & Off to a Good Start
- Safie – Baby Thrown Out With the Bathwater Number Two
- W Scope (6619): Improved and Price Is Moving
- Dechra Pharmaceuticals (DPH LN): Recent Sell-Off Is a Buying Opportunity; Fundamentals Remain Intact
- SJM Holdings Ltd: A Bet on Macau Recovery Against a Moody’s Downgrade Poses Dilemma for Investors
- China Southern Airlines (1055 HK): A Tough Start
- KEX: Price War Still Go on for the at Least Until 2nd Half of 2022
Kirin: Off of Myanmar & Off to a Good Start
- Earlier this week, Kirin Holdings (2503 JP)’s board decided to withdraw from all the businesses in Myanmar urgently.
- With the Myanmar JV issue out of the way and asset write-offs mostly complete, we think Kirin’s normalised EPS will grow at a CAGR of 11% through 2021-24.
- This puts Kirin on 9.4x 2024 EPS, limiting the down side risk to the bare minimum.
Safie – Baby Thrown Out With the Bathwater Number Two
- Safie reported 2021 results on Monday and beat slightly with revenue 1.6% above guidance and an operating loss of ¥76m, better than guidance of a ¥225m loss.
- The stock is rated neutral by the sell side despite offering perhaps the best growth prospects in Japan and demonstrating numerous signs of exceptional management.
- We consider the name to be potentially Japan’s best growth story in the small cap space.
W Scope (6619): Improved and Price Is Moving
- W Scope Corp (6619 JP) share price has severely underperformed Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)in the last 5 years.
- Its business has picked up followed by the ability to pare debt down and potentially lower shipping costs that will expand margin.
- It trades at 1.8x PBR, cheaper than Samsung SDI and LG Energy solution although more expensive than Showa Denko but W Scope’s operational number has been phenomenal.
Dechra Pharmaceuticals (DPH LN): Recent Sell-Off Is a Buying Opportunity; Fundamentals Remain Intact
- Dechra Pharmaceuticals (DPH LN) shares corrected around 25% from its recent peak of GBX5,150 in late December, due to general market apathy toward high multiple stocks.
- Despite the extraordinary levels experienced in the prior year, Dechra maintained its double-digit revenue growth and reported constant currency revenue growth of 15% y/y for H1FY22.
- Long-Term fundamental growth story remains intact for Dechra. The company has also forayed into a new and niche therapy area through acquisition of one drug this year.
SJM Holdings Ltd: A Bet on Macau Recovery Against a Moody’s Downgrade Poses Dilemma for Investors
- Post CNY results point to the beginning of a sustainable recovery of the Macau gaming market, particularly in the mass segment where SJM has its greatest strength.
- The company’s new flagship Grand Lisboa Palace opened last July by phases and is expected to lead recovery of company fortunes in the out years.
- Moody’s downgrade not an immediate threat but still casts a shadow over out year’s performance when refis must be securely in place.
China Southern Airlines (1055 HK): A Tough Start
- While China Southern Airlines (1055 HK) saw passenger traffic up 17.3% in Jan, this is at the expense of higher capacity, leading to a 1.8pp YoY passenger load contraction.
- Its cargo traffic underperformed both CEA and Air China with a YoY decline; and this is disappointing in a period of time where airfreight rate is at record-breaking level.
- We see reduced local travel demand, higher operating costs, weaker cargo business, pressure on yield and higher base of comparison key challenges in 2022, and prefer Air China Ltd (753 HK).
KEX: Price War Still Go on for the at Least Until 2nd Half of 2022
- We anticipate KEX earnings performance to experience net loss for at least in the next two quarters while expecting to see market consolidation within the express delivery industry in Thailand
- First net loss since listed at Bt604m in 4Q21 pressured by aggressive price cutting strategy and cost arise from spare resources on labour and transportation. This resulted
- Report Bt47m net profit in 2021 (-98%YoY) due to a price war which resulted in a drastic fall in average selling price. (contracted 20-25%YoY in 2021)
Related tickers: Kirin Holdings (2503.T), W Scope Corp (6619.T), Dechra Pharmaceuticals (DPH.L), SJM Holdings (0880.HK), China Southern Airlines (1055.HK)
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