In today’s briefing:
- Sea Ltd: More Downside Risk at Earnings
- Dowa – Dear Market, You’re Kinda Going The Wrong Way
- Mazda – Guidance Is Actually MORE Conservative Than Peers
- MUFG (8306 JP) – BigBank BigBuyback But A Bit Pricey Vs SMFG
- Conviction Call Recruit: All Good Things Must Come to an End
- Freee: Strong User Growth and Improvement in Profitability; Shares Are a Lot Cheaper
- Cisarua Mountain Dairy (CMRY IJ) – Yoghurts, UHT Milk, and Proteins in One Basket
- Recruit (6098 JP) | Too Conservative on Labour Outlook
- BeiGene Ltd (6160.HK/BGNE.US/688235.CH) – Valuation Remodeling if the TIGIT Project Fails
- Honda – Unnecessarily Conservative But…
Sea Ltd: More Downside Risk at Earnings
- Sea Ltd (SE US) reports 1Q22 results tomorrow and we expect results to follow the overall sector’s trend of weak revenue growth but lower losses.
- Consensus 1Q22 revenue expectation was lowered in the last three months but there’s still a bit more downside due to Free Fire’s struggles.
- The biggest risk is the remaining three quarters of 2022 and the next year as consensus revenue seems too bullish with estimates of 42% revenue CAGR through 2021-23.
Dowa – Dear Market, You’re Kinda Going The Wrong Way
- Dowa missed at the PTP line by 4.5% and guided for just ¥55bn in ordinary profit for FY23 vs. consensus at ¥68bn.
- That drove the stock down 13% today making it give up all the gains it had made since early December.
- While the reaction might be understandable on the misses if this were trading expensively, it is 0.74x book.
Mazda – Guidance Is Actually MORE Conservative Than Peers
- Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue.
- Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless.
- We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.
MUFG (8306 JP) – BigBank BigBuyback But A Bit Pricey Vs SMFG
- Mitsubishi UFJ Financial (MUFG) (8306 JP) announced results today. Operating Income +0.8%, Operating Earnings +45.9%, Net Profit +45.5% to ¥1.13trln.
- The forecast for Mar23 is for a “target” of Net Income of >¥1trln. The DPS for Mar23 is set at ¥32 vs ¥28 last year and ¥25 the year before.
- And MUFG announced both the delay of the closing of Union Bancorp sale to calendar H2, and a big buyback of ¥300bn.
Conviction Call Recruit: All Good Things Must Come to an End
- Recruit Holdings (6098 JP) reported 4Q and full-year FY03/2022 results today. Revenue grew 23.9% YoY to JPY759.9bn while OP more than doubled to JPY45.4bn during 4QFY03/2022.
- Full-Year revenues grew 26.5% YoY to JPY2,871.7bn which was about 3.0% above the upper range of guidance (JPY2,700-2,800bn) while OP of JPY378.9bn was within the guidance of JPY350-380bn.
- Though full-year results were strong, 4QFY03/2022 results show that the company’s earnings have begun to weaken with normalisation of recruitment and staffing markets with Covid conditions easing off.
Freee: Strong User Growth and Improvement in Profitability; Shares Are a Lot Cheaper
- freee (4478 JP) reported 3QFY06/2022 results on Friday. Revenue grew 35.7% YoY to JPY3.65bn (vs consensus JPY3.63bn) driven by strong growth in paying users.
- Operating losses declined to 18.5% of revenues during the quarter from 24.0% in the same period a year ago.
- The company’s shares moved up by about 9% at the end of Friday’s close following its earnings announcement.
Cisarua Mountain Dairy (CMRY IJ) – Yoghurts, UHT Milk, and Proteins in One Basket
- Leading dairy and premium foods player Cisarua Mountain Dairy continued to demonstrate its resilience during 1Q2022 despite some omicron disruption, and rising pressure from raw materials.
- Growth will be driven this year through capacity expansion and a focus on expanding distribution channels, especially through general trade and Miss Cimory MCM.
- Management remains confident in the growth outlook and will potentially raise prices in 3Q2022 to offset inflationary pressures although powdered milk prices have already stabilized. Top consumer staples pick.
Recruit (6098 JP) | Too Conservative on Labour Outlook
- FY3/22 EBITDA rose 96% driven by the recovery in the global labour market. Macro conditions suggest the coming year will be less exciting
- EBITDA is expected to rise just 2% this year, adjusting for changes in stock-based comp
- However, the 32% decline in the stock price YTD suggests the market is on top of the weaker outlook. We see 40% upside to the stock price
BeiGene Ltd (6160.HK/BGNE.US/688235.CH) – Valuation Remodeling if the TIGIT Project Fails
- With Roche’s failure of several clinical trials on TIGIT project tiragolumab, the market’s future expectations on this target have discounted. Investors may need to get prepared in advance.
- Ociperlimab means a lot to BeiGene. If ociperlimab fails, BeiGene would have no big catalyst for a long time. BeiGene’s label of superior global R&D capability + potential BIC doesn’t hold water.
- Without ociperlimab, BeiGene’s valuation could fall back to about RMB60 billion to RMB80 billion. If the valuation is finally in line with Innovent, it would be no surprising.
Honda – Unnecessarily Conservative But…
- Honda 4QFY22 was mixed with revenue of ¥3,876bn (-0.7% vs. consensus) and OP of ¥200bn (+33.1% vs. consensus).
- The company’s FY23 guidance was weak projecting just ¥16,250bn (-2.2% vs. consensus) in revenue and OP of ¥810bn (-15.1% vs. consensus).
- Those numbers are laden with Honda conservatism, but we nevertheless foresee smaller potential beats by Honda than for peers.
Related tickers: Sea Ltd (SE.N), Dowa Holdings (5714.T), Mazda Motor (7261.T), Mitsubishi UFJ Financial (MUFG) (8306.T), Recruit Holdings (6098.T), Recruit Holdings (6098.T), BeiGene Ltd (6160.HK), Honda Motor (7267.T)
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