Equity Bottom-Up: LG Energy Solution, Meta Health Limited, Pagseguro Digital Ltd, Rakuten Bank, Sappe Pcl, NTT (Nippon Telegraph & Telephone), Nu Holdings Ltd, Ecovyst and more

• The Nikkei reported today on rumblings between Korean battery suppliers and their American customer OEMs. 
• The crux of the dispute is about technology access and risks of technology leakage which are normal in the scheme of things.
• However, expiring LFP patents which we have flagged are likely to result in this dispute going badly for battery suppliers.

For our next Corporate Webinar with Meta Health Limited (MCOM SP), we are glad to welcome Dr. Vas Metupalle, Chief Medical Officer and Dr. Bernard Ng, Executive Director at 5Digital, Meta Health’s fully-owned healthcare platform company.

In the upcoming Webinar, Dr Vas and Dr Bernard will share a short company presentation, after which they will engage in a fireside chat with Smartkarma Analyst, Sameer Taneja. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 5 April 2022, 17:00 SGT.

Meta Health was previously known as Metal Component Engineering and was founded in 1987 in Singapore. With consistent focus on quality and engineering innovation, the company has expanded its customer base by serving MNC, EMS, and SME globally. Meta Health recently diversified into the healthcare technology and services industry with investment into GainHealth Pte. Ltd., a direct-to-consumer and high-growth omni-channel health and wellness platform. The Company is vertically integrated with licensed clinics with pharmacy, online self-branded ecommerce portals, and product placements on regional ecommerce portals.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Our negative recommendations from December – especially Paytm – worked better than our positive ones, given 1Q22 market conditions; we see much value in payment companies but we remain selective
• Based on our screens, we continue to favour Mastercard in the megacaps, we stick with PagSeguro and Getnet, adding Nexi which looks very oversold, despite its fundamental headwinds
• We take Paytm off the sell list, but we remain negative on DLocal on its very demanding valuations, and we add Kakao Pay to the negative list

• We have put together the historical financial data for Rakuten Bank going back to FY14 as reported by parent Rakuten Group, which uses IFRS and is on a December year-end
• As a separate company, Bank looks more local using J-GAAP accounting and a March year-end. So when the IPO filing comes our data will need to be updated/converted
• As we discussed last week, the IPO of Rakuten Bank could help surface the value of fintech assets although heavy losses for the mobile business keep us on the sideline

• We reiterate our BUY rating for SAPPE with a target price of Bt32.0 based on 22xPE’22E,close to its five-years average trading range and average of Asia-ex Japan consumer staple sector
• SAPPE is beverage exporter with 65% of sales from oversea. In 2021, logistic cost surged to Bt341m (+251%YoY) as it provides a freight contract for distributors and pass most
• Average container freight decreased to US$8800 per 40ft box in March 2022 from it peak at US$10,000 per 40ft box in Sep 2021. We believe freight rate to continues 

• JTower (4485 JP) has signed a deal to buy 6,002 DoCoMo towers for ¥106bn validating its long term growth potential and its central position as Japan’s infrastructure-sharing company
• The headline numbers are maximums and could take years to realize as JTower grows to the scale required
• Conversely it is not a large deal for DoCoMo but the first mobile tower sale/leaseback transaction in Japan highlights an industry shift towards more efficient capital deployment

• Nubank remains challenged, in our view, based on rising customer acquisition costs (especially in its Mexican and Colombian expansions), high capital absorption and maturing consumer credit portfolios adding to delinquencies
• Banco Inter has a better balanced portfolio than Nubank with its mortgage book, which should mean lower hurdles on delinquency and capital consumption, although customer acquisition costs remain clear headwinds
• The two Brazilian digital banks’ premium valuations are hard to justify on growth potential; our research models’ base assumptions show that Nubank shares, in particular, trade on very rich valuations

• We are initiating coverage of Ecovyst (ECVT) with a Buy Rating and $18 target
• ECVT has gone through a transformation in aligning the Company for growth and free cash flow generation that has yet to receive much investor attention
• ECVT is experiencing growth from its ecoservices solution for renewable fuels, specifically renewable diesel