In today’s briefing:
- Conviction Call Recruit – Strong Results; Earnings Weakness Begins to Show Up and Down More Than 15%
- Toshiba – Decent 3Q Means Downward Revision Was Probably Unnecessary
- DBS Group Holdings – Weak Print, But Credit Improves
- SMC – Consensus Estimates Ignore Potential Down Cycle
- Rakuten (Neutral) – Q4 21 Results Reaction: Hard to Look past Mobile Losses
- JASIF: Attractive Dividend Yield with Inflation Hedge
- Huadong Medicine Co Ltd (000963.CH) – The Medical Cosmetology Business Is the Key Breakthrough Point
- Green World FinTech Service: A Fintech Company in Taiwan with Rock-Solid Fundamentals
- Affirm FY Q2 2022 Earnings Review: Leading BNPL Player Maintains Its Hyper-Growth Trajectory
- Freee 2Q: OP Beat Wipes Out Concerns on Mid/Large User Growth and Profitability
Conviction Call Recruit – Strong Results; Earnings Weakness Begins to Show Up and Down More Than 15%
- Recruit Holdings (6098 JP) reported its 3QFY03/22 results today and reported a revenue growth of 22.0% YoY to ¥746bn (vs consensus revenue of ¥706.6bn, 5.6% beat).
- OP increased 61.5% YoY to ¥110.6bn with an OP beat of 10.1%. Adjusted EBITDA grew by 54.1% to ¥134.8bn compared to ¥87.5bn for the 3rd quarter last year.
- Though 3Q results was strong, earnings weakness begins to show up with normalisation of recruitment activities. Stock is down more than 15% since we made our conviction call short.
Toshiba – Decent 3Q Means Downward Revision Was Probably Unnecessary
- Toshiba’s 3Q results were relatively strong with revenue beating by 2.8% and OP beating by 18.3%.
- Given typical profit patterns and Toshiba’s new 4Q revenue guidance, FY OP would likely be close to ¥190bn so the downward revision from ¥170bn to ¥155bn looks unnecessary.
- Toshiba also set March 24th as the date for its EGM to vote on the two-way split, simultaneously recommending against 3D’s proposals.
DBS Group Holdings – Weak Print, But Credit Improves
- DBS reported a weak set of 4Q21 results of SGD 1.4 bn, down SGD 307 mn (18.1%) linked quarter and driven by negative operating jaws;
- While provisions weren’t reversed this quarter, reserves should still be shored up in the neighborhood of SGD 1.1 bn – amounting to about a half quarter of operating results; and
- Three transactions in the span of a year is too much. DBS needs to focus on improving its own legacy issues before taking on those of other financial institutions.
SMC – Consensus Estimates Ignore Potential Down Cycle
- SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend.
- Reported revenue and OP were 8.0% and 8.3% higher than consensus estimates and drove SMC to revise up FY22 revenue and OP guidance respectively to ¥715bn (+2.1%) and ¥228bn (+4.6%).
- The main concern remains a momentum peak, however, and a decline in YoY growth does not help.
Rakuten (Neutral) – Q4 21 Results Reaction: Hard to Look past Mobile Losses
- The core eCommerce and Fintech segments posted good results for the quarter but that will certainly get lost in the discussion on mobile
- Mobile operating losses exceeded $1bn in Q4 and whilst management is guiding to losses bottoming out in Q1 22, the magnitude of improvements remains undefined
- Rakuten Mobile capex is on par with incumbents and will remain unchanged in FY22
JASIF: Attractive Dividend Yield with Inflation Hedge
- We initiate coverage of JASIF with a BUY rating at a target price of Bt12.10, derived from a DCF methodology (WACC=9.6%, g=0%), implying 1.1xPBV’22E. The story:
- Stable and secured earnings will support an attractive dividend yield of 9% for the next 10 years.
- The fund’s financial performance is secured by long-term contracts with TTTBB, a leading internet provider in Thailand.
Huadong Medicine Co Ltd (000963.CH) – The Medical Cosmetology Business Is the Key Breakthrough Point
- Huadong Medicine (000963 CH)’s traditional core businesses are facing great pressure due to VBP and medical insurance negotiation, which is difficult for Huadong to establish its long-term core competitiveness.
- Despite the fierce competition in medical cosmetology industry, the entry of medical cosmetology equipment field is a wise step, helping Huadong form the most complete layout among competitors.
- In terms of whether Huangdong could achieve business transformation successfully, the future performance of medical cosmetology business is the key breakthrough point.
Green World FinTech Service: A Fintech Company in Taiwan with Rock-Solid Fundamentals
- Green World Fintech Service is a fintech company in Taiwan with one of the most rock-solid fundamentals among all Asian fintech companies.
- It had 39% and 122% CAGR growth in sales and operating profit, respectively from 2017 to 2020. Its operating margin improved from 4.9% in 2017 to 28.9% in 1Q-3Q 2021.
- Nonetheless, our valuation analysis suggests a base case valuation of 15.9 billion TWD and implied price per share of 1,076 TWD, which is 8% below current price.
Affirm FY Q2 2022 Earnings Review: Leading BNPL Player Maintains Its Hyper-Growth Trajectory
- Total revenue jumped to $361M, 77% YoY, and the number of active merchants reached a record of ~168,000 in FY Q2 2022.
- The number of active consumers skyrocketed by 150% YoY to 11.2 million, and GMV more than doubled year-over-year in reporting period.
- Growth of key operating and financial metrics was driven by the strong holiday season, adoption of Shop Pay Installments, and partnership with Amazon.
Freee 2Q: OP Beat Wipes Out Concerns on Mid/Large User Growth and Profitability
- freee (4478 JP) reported 2QFY06/2022 earnings today. Revenue grew 38.5% YoY to JPY3.31bn, marginally below consensus revenue of JPY3.47bn.
- Operating losses for the quarter was JPY544m (16.4% of revenues vs 17.8% in 2QFY06/2021) which was well below consensus operating loss of JPY673.1 (19.4% of consensus revenue.
- Though revenues fell slightly below consensus, we think 2Q results have eased some of the concerns we had over freee’s acquisition of Ninja Sign and its path to profits.
Related tickers: Recruit Holdings (6098.T), Toshiba Corp (6502.T), DBS (DBSM.SI), SMC Corp (6273.T), Rakuten Inc (4755.T), Jasmine Broadband Internet Infrastructure Fund (JASIF.BK), Huadong Medicine Co Ltd A (000963.SZ)
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