In today’s briefing:
- Sea Ltd: Shopee’s Exit from India Could Be the Final Nail in the Coffin
- Mazda – A Buy As The Yen Weakens With The BOJ Trapped
- Minth (425): Hop On
- Meituan: Better-Than-Expected 4Q2021 but Risks Remain
- PVR & Inox Merger | Leveraging COVID Impact to Gain Dominance in Indian Multiplex Market
- Yum China (YUMC.US/9987.HK): Expand Share Repurchase Program to Buffer COVID Impact
- KKP: Growth and Dividend Plays
- Xinjiang Goldwind (2208 HK): Positive Messages from Post-FY21 Call
- HDC Hyundai Development: Permanent Business License Cancellation or Temporary Business Suspension?
- Hutchmed China Ltd (13.HK/HCM.US) – Big but Not Strong
Sea Ltd: Shopee’s Exit from India Could Be the Final Nail in the Coffin
- Shopee, the e-commerce arm of Singapore-based Sea Ltd (SE US), announced today that they are shutting down operations in India due to global market uncertainties.
- We feel this could turn even the most hopeful followers of Sea Ltd as they must be running out of angles to justify their bullish calls on the company.
- We think, Sea Ltd shares could easily fall below the pre-COVID level once it starts losing these ardent followers.
Mazda – A Buy As The Yen Weakens With The BOJ Trapped
- With the BOJ being forced to step in to hold 10 year rates under 0.25% today the yen is under increasing pressure.
- There are naturally a variety of stocks which are likely to benefit from this multi-decade breakout of the yen dollar.
- Mazda is one of the best plays here in our view and we lay out the rather simple case below.
Minth (425): Hop On
- Share price sell-off is overdone as the prospect of the war worsening is less likely.
- Channel checks have shown that EV sales remain upbeat despite the war.
- The long-term prospect to participate in the growing EV industry through battery housing and body parts remain intact.
Meituan: Better-Than-Expected 4Q2021 but Risks Remain
- Meituan (3690 HK) reported 4Q2021 results on Friday. Revenue grew 30.6% YoY to RMB49.5bn (vs consensus RMB49.0bn) and reported operating losses of RMB5.0bn vs RMB2.9bn in 4Q2020 (vs consensus RMB7.0bn).
- Since 2Q2022, Meituan’s revenue growth has started decelerating with demand for online and food and grocery deliveries has been slowing down.
- Meituan’s 4Q2021 results were better than expected but we expect the company’s earnings to remain under pressure with new regulation on food delivery commission and resurgence of Covid-19.
PVR & Inox Merger | Leveraging COVID Impact to Gain Dominance in Indian Multiplex Market
- PVR Ltd (PVRL IN) & Inox Leisure (INOL IN) announced a stock merger. The merger would be in a ratio of 3:10, creating the largest multiplex company in India.
- Synergies include more bargaining power, better F&B margins and more ad revenues
- Thanks to COVID’s impact, the merger may not require approval from CCI.
Yum China (YUMC.US/9987.HK): Expand Share Repurchase Program to Buffer COVID Impact
- Yum China Holdings, Inc (YUMC US) board has expanded share repurchase program by $1bn to total $2.4bn amid the tougher operating environment due to Omicron outbreak.
- Omicron outbreak spread widely in March across China, Yum China saw its March first 2-week SSSG is down 20% year-over-year and 1Q22 operating profit will likely be down 40-50% year-over-year.
- We continue to think Yum China is the best-run restaurant chain in China. It has resilient business model to navigate through pandemic. Risk/reward is more compelling to own Yum China.
KKP: Growth and Dividend Plays
- We initiate coverage of KKP with a BUY rating and a target price of Bt79. Our valuation is derived from a Gordon growth model (ROE 13.5%, growth 2%),implying 1.2x PBV’22E
- Steady growth ahead on continued lending growth and a potential reduction in credit costs
- Resilient asset quality and high loan loss reserves against NPLs
Xinjiang Goldwind (2208 HK): Positive Messages from Post-FY21 Call
- FY21 result of Xinjiang Goldwind (2208 HK) is healthy, though behind expectations due to impairments. We see them not recurrent into FY22, and this should be positive to earnings.
- Management sees some margin decline for WTG segment but the expectation of over 30% volume growth should offset the impact. Orderbook is secured at 16,874.4MW.
- Growth in power servicing is the bright sport with target revenue growth for 50%. Goldwind also plans to also add 0.5-1GW of generating capacity annually at wind farm development segment.
HDC Hyundai Development: Permanent Business License Cancellation or Temporary Business Suspension?
- On 28 January, the government (Ministry of Land, Infrastructure and Transport) announced that it has recommended the heaviest punishment of the cancellation of the construction license for HDC Hyundai Development.
- Seoul city government said it will make a decision on the fate of HDC Hyundai Development within six months.
- Rather than a complete, permanent cancellation of the company’s business license, a more likely scenario is about 6 to 12 months of temporary business operation suspension, in our view.
Hutchmed China Ltd (13.HK/HCM.US) – Big but Not Strong
- For the three commercialized products (fruquintinib, surufatinib and savolitinib), they are facing challenges from different aspects.
- The lack of blockbuster products and promising targets indicates that Hutchmed’s current pipeline does not have core competitiveness, which means Hutchmed’s position in the industry is not in first echelon.
- In fact, Li Ka-shing’s positioning and original intention for Hutchmed is not on innovative drugs. So, big but not strong has always been the pain point of the Company.
Related tickers: Sea Ltd (SE.N), Mazda Motor (7261.T), Minth Group Ltd (0425.HK), Meituan (3690.HK), PVR Ltd (PVRL.NS), Yum China Holdings, Inc (YUMC.N), Kiatnakin Bank (KKP.BK), Xinjiang Goldwind Science & Technology H (2208.HK)
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