In today’s briefing:
- Prosus: Finally, a Catalyst; Cash Flows, Capital Allocation, Should Limit Drop in Discount to NAV
- India Food Delivery – Bracing for Disruption (ONDC)
- Softbank Group – First Look at Q1 22 Performance
- J Front (3086) | Posts Strong Q1 Numbers as Thesis Plays Out
- Askul Corp – Q4 22 Results Reaction: Mixed as Growth Looks Appealing but Profits Light
- Starpharma Holdings (SPL AU): Ready to Fly High as Viraleze Anti-Viral Nasal Spray Relaunched in UK
- Qualtrics: Leading Pure-Play XM Provider. A Solid Risk-Reward Opportunity
- Shimadzu (7701 JP): Weak Yen Supports Guidance
Prosus: Finally, a Catalyst; Cash Flows, Capital Allocation, Should Limit Drop in Discount to NAV
- Prosus (PRX NA)’s announced open-ended share repurchase programme, funded by on-market sale of its Tencent shares, is a significant positive catalyst to reduce its discount to NAV.
- Continued operating losses will likely require funding through capital events, in the form of either asset sales or debt issuance.
- Cash flow requirements and continued concerns around capital allocation should limit the reduction in the discount to NAV.
India Food Delivery – Bracing for Disruption (ONDC)
- The near term impact of ONDC on OFD platforms like Zomato & Swiggy is limited, longer term they will have to move from platform to a network centric model.
- An external shock will be required to drive faster ONDC adaption as we have seen in the case of UPI.
- Logistics companies especially the ones with express capabilities are likely beneficiaries in case ONDC scales up rapidly.
Softbank Group – First Look at Q1 22 Performance
- Vision Fund’s public portfolio lost $10bn in Q1 marking the third time in four quarters that valuation losses were in the tens of billions
- Global tech weaness remains the main challenge as portfolio losses are matched with concerns on the private portfolio, especially ARM
- And worries about ARM also feed into leverage concerns as Softbank’s QoQ decline in reported LTV was driven by an ARM upgrade. Meanwhile, CDS prices are near all-time highs
J Front (3086) | Posts Strong Q1 Numbers as Thesis Plays Out
- J Front reported strong Q1 numbers with OP recovering to +¥7.5b from red ink a year ago
- The company is reaping the benefits of restructuring and better cost control
- A recovery in domestic consumption and the opening of borders will drive further appreciation in the share price
Askul Corp – Q4 22 Results Reaction: Mixed as Growth Looks Appealing but Profits Light
- Askul posted Q4 results that were largely in-line and issued FY23 targets that are robust for revenue growth (+6%) but accompanied by upfront investment
- Management also announced it would prepare subsidiary AlphaPurchase for a public listing although the timing has not been determined
- The miss on profitability guidance is not ideal but the acceleration of top-line growth is attractive
Starpharma Holdings (SPL AU): Ready to Fly High as Viraleze Anti-Viral Nasal Spray Relaunched in UK
- Starpharma Holdings (SPL AU) is an emerging biopharma company. The company has commercialized its flagship product Viraleze antiviral nasal spray in March 2021. It is now registered in 30+ countries.
- On June 30, Starpharma announced the relaunch of Viraleze in UK, one-year after its sales were paused temporarily in June 2021, thereby removing a major overhang on the share prices.
- Viraleze has shown strong potential to inactivate a broad spectrum of respiratory/cold viruses, including multiple variants of SARS-CoV-2 and influenza A and B.
Qualtrics: Leading Pure-Play XM Provider. A Solid Risk-Reward Opportunity
- Qualtrics International (XM US) is the largest XM provider and pioneer in Experience Management. The company was founded in 2002 by Ryan Smith, Jared Smith, and their dad, Scott Smith.
- In 2018, SAP acquired Qualtrics for ~$8B in an all-cash deal, one of the largest-ever acquisitions of a SaaS company.
- We view Qualtrics International (XM US) as well-positioned to continue to take market share with additional growth drivers such as new products and international expansion.
Shimadzu (7701 JP): Weak Yen Supports Guidance
- The weak yen should add several billion to operating profit this fiscal year, helping the company meet or exceed guidance.
- Medical Systems, which were once barely profitable, generated a 9.1% operating margin last year due to growing service revenues and a better product mix.
- The share price should continue to hold up in a declining market.
Related tickers: Prosus (PRX.AS), Softbank Group (9984.T), J Front Retailing (3086.T), Askul Corp (2678.T), Starpharma Holdings (SPL.AX), Shimadzu Corp (7701.T)
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