In today’s briefing:
- India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy
- Koei Tecmo – Potential For a Breakdown
- Fanuc (6954 JP) | Orders Slide as Automation Slows
- Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- Z Holdings (Buy) – FY22 Should Be Brighter
- Omron – Better IAS Results Conceal Healthcare Segment Underperformance
- Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- Hyundai Glovis: Increasing Pressure by the Carlyle Group & Minority Shareholders to Improve Value
- Ryman Healthcare (RYM NZ): Strong Base Business Is Outshined by Regulatory Overhangs
India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy
- This insight focuses on private unicorns backed by Sea Ltd (SE US) , Walmart (WMT US) , Softbank Group (9984 JP) & Prosus NV (PROSY US)
- Growth would require new and even larger investments across the Internet Sector.
- Reliance and Tata’s retail plans are likely to challenge even giants like Amazon and Flipkart.
Koei Tecmo – Potential For a Breakdown
- Koei Tecmo’s earnings yesterday were on the strong side with 4Q OP beating by 28.7% despite a 1.79% miss at the top line.
- Thus, the typical pattern of heavy expensing of development costs in 4Q was missing and combined with some one offs could make hurdles for next year high.
- With the stock struggling to gain positive momentum and few clear positive catalysts on the horizon we remain negative.
Fanuc (6954 JP) | Orders Slide as Automation Slows
- Machine tool orders are losing momentum given the geopolitical risks and shortage of materials
- Margins are also order pressure given soaring materials and transportation costs
- FY3/23 OP guidance misses consensus, but it is not conservative. We expect the share price to head lower
Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- FY Mar-22 sales and profits exceeded guidance, as expected. New orders declined slightly in 4Q but remained above sales.
- Unfortunately, Disco has decided to stop disclosing orders and the order backlog. A cynic would say this signals the peak of the cycle.
- 1Q guidance looks conservative. That should be no surprise and no catalyst for the stock price. Shipments of blade dicers are forecast to decline by 10%. Beware.
Z Holdings (Buy) – FY22 Should Be Brighter
- The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
- It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
- We are posting updated company forecasts/estimates including a separate table for PayPay
Omron – Better IAS Results Conceal Healthcare Segment Underperformance
- Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa.
- In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality.
- At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.
Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Despite a dead cat bounce in Robomachine coming through as we suggested Fanuc’s 4Q OP missed consensus estimates by 14%.
- Guidance was strong however with revenue guidance of ¥825.5bn materially above consensus’ ¥797.7bn.
- This continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning.
Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
- It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
- The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.
Hyundai Glovis: Increasing Pressure by the Carlyle Group & Minority Shareholders to Improve Value
- With the Carlyle Group taking a 10% stake in Hyundai Glovis, we believe there could be increasing pressures including through higher dividends and buybacks to return capital to shareholders.
- Hyundai Glovis is likely to get re-rated going forward, driven by profitable expansion into LNG and hydrogen transport, online used car sales platform, and more favorable shareholder return policies.
- Hyundai Glovis’ recent contract with Tesla to ship cars out of China is another positive sign on the growing importance of Hyundai Glovis in the Asian vehicles shipping market.
Ryman Healthcare (RYM NZ): Strong Base Business Is Outshined by Regulatory Overhangs
- Ryman Healthcare (RYM NZ) is expected to see pent-up demand, with the gradual re-opening of New Zealand. Long-term demand environment is expected to be positive, due to favorable macro tailwind.
- However, the company is facing regulatory risk. One of its sites in Australia has ongoing litigation risk. Possibility of renewed COVID-19-related restrictions can not be overruled.
- While Ryman has long-term growth engines, these overhangs may limit the near-term upside potential of Ryman shares.
Related tickers: Sea Ltd (SE.N), Koei Tecmo Holdings (3635.T), Fanuc Corp (6954.T), DISCO Corp (6146.T), Z Holdings (4689.T), Omron Corp (6645.T), Fanuc Corp (6954.T), Workman Co Ltd (7564.T), Hyundai Glovis (086280.KS), Ryman Healthcare (RYM.NZ)
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