In today’s briefing:
- Netflix 1Q22: Willfull Ignorance
- Nidec – Weakness Should Be Understood but Downside Risk at Earnings Remains
- Keyence (6861 JP) | 3 Reasons to Ignore Inflation and Rising Rates
- Hail The Simple Banks
- Kakao Bank: Headwinds in Transition to Endemic & Overhang from Stock Options Conversion into Equity
- Roche Holding (ROG SW): Despite Patent Cliff Growth Momentum to Continue Backed by New Launches
- IRDM: Expanding Use Cases
- HMPRO: Expect Strong Earnings Growth YoY in 1Q22
- EPG: Expect Earnings to Remain at High Base, but Growth Is Limited
- TPL: Not High Enough, Raising Estimates
Netflix 1Q22: Willfull Ignorance
- Netflix management came off as unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years.
- Competitive responses sounded half baked: increasing price to deter password sharing and launching advertising tiers…in 2 years?
- The viability of the longterm growth algorithm and 10 year DCFs that Netflix investors have leaned on for years has been rightfully vaporized.
Nidec – Weakness Should Be Understood but Downside Risk at Earnings Remains
- Consensus expectations for Nidec have drifted towards more reasonable levels in the last few months and a guidance miss is now baked in.
- However, our data analysis suggests that while revenue may exceed consensus expectations OP could miss.
- Guidance on the other hand could be strong, but with multiples elevated that does not mean there is upside risk here.
Keyence (6861 JP) | 3 Reasons to Ignore Inflation and Rising Rates
- The stock has been hit by rising inflation and interest rates. Now is the time to buy
- Keyence is well placed to weather the storm given it has pricing power, high margins, and low capital intensity
- The P/B valuation of 6x is now back to a normalised range and the stock trades at a discount to global peers.
Hail The Simple Banks
- There are many simple domestic banks that can shine in a complex world
- Outside of the largest banks in many regions, there are uncovered gems
- This lessor known bank in Philippines has seen dramatic profit growth
Kakao Bank: Headwinds in Transition to Endemic & Overhang from Stock Options Conversion into Equity
- Efforts to normalize people’s lives to pre-COVID levels are likely to be a big negative on Kakao Bank as it could slow down the demand of its non-contact fintech services.
- One of the near-term concerns on Kakao Bank is that there could be more than 1 million shares that could be sold by insiders that recently exercised their stock options.
- We expect a further downside (20-25%) on Kakao Bank due to lofty valuations, ending social distancing measures, and potential selling by insiders that recently converted their stock options into equity.
Roche Holding (ROG SW): Despite Patent Cliff Growth Momentum to Continue Backed by New Launches
- Roche Holding AG (ROG SW) is well-positioned for single-digit revenue growth, as strong uptake of new products is offsetting revenue loss from patent expired products due to biosimilar competition.
- New drugs, especially Hemlibra, Ocrevus, and Tecentriq are on a high growth trajectory, which is expected to continue, with no dependency on the COVID-19.
- Recently, Roche received FDA approvals for two new ophthalmology products. Both of them have potential blockbuster sales opportunity. Two more drugs are expected to be launched this year.
IRDM: Expanding Use Cases
- IRDM is benefiting from continued need for satellite connectivity for a growing list of applications. IRDM reported first quarter results where the Company’s billable subscribers rose sequentially
- Commercial Internet of things (“IOT”) subscribers remains the growth catalyst for the business even though there are more voice and data customers activating service in the first quarter
- IRDM’s IOT service has an expanding use case. During the first quarter earnings call the topic of drones and unmanned aircraft was frequently mentioned
HMPRO: Expect Strong Earnings Growth YoY in 1Q22
- With a limited upside to our target price and concern over decreasing people purchasing power following a rise in inflation, we downgrade our recommendation from BUY to HOLD
- We expect HMPRO to report 1Q22 net profit at Bt1.49bn (+9%YoY, -16%QoQ),
- YoY growth will be supported by solid demand for WFH products, government stimulus scheme (Shop Dee Mee Khuen in Jan –15 Feb 2022), and solid revenue growth from Mega Home
EPG: Expect Earnings to Remain at High Base, but Growth Is Limited
- We reiterate BUY rating for EPG but trim down target price to Bt12.60, (Previous TP:14.30) derived from 21xPE’FY23E, (5-year average) or 90% premium to materials sector. We reduce PE multiple
- Expect the company to post 4QFY22 (Jan-Mar) core profit at Bt398m (+7%YoY -2%QoQ)
- Solid demand for automotive-parts in Thailand and Australian. Concern over rising raw material remain under control at least in the next two quarter
TPL: Not High Enough, Raising Estimates
- TPL utilizing an unhedged strategy for its oil and gas royalties is set to announce first quarter results that should exceed expectations
- Higher energy prices and more production should result in TPL reporting oil and gas royalties materially higher than the fourth quarter.
- The increase in production benefits TPL’s water business. Oil producers need water during the fracking process. TPL’s water source is closer to producing oil wells
Related tickers: Netflix Inc (NFLX.O), Nidec Corp (6594.T), Keyence Corp (6861.T), Iridium Communications (IRDM.O), Home Product Center (HMPRO.BK), Eastern Polymer Group (EPG.BK)
Before it’s here, it’s on Smartkarma
