In today’s briefing:
- Sea Ltd (SE US) – Leaning Towards Profitability and Sustainability
- Sony – EV Partnership Is Excellent for Sony but Highlights Honda’s Struggles
- Minth (425): Margin Contraction
- HSBC – Underwhelming Continues
- IQiyi: Huge Drop in Operating Losses Despite Flat Revenues; Path to Profits Becoming Clear
- EGCO: Undemanding Valuation and Bright 2022 Outlook
- Hino – Some Uncertainty, Probably an Overreaction, But Still Not Worth Bottom Fishing
- Progyny (PGNY US): Stellar Q4 Results; 2022 Guidance Reiterated on the Back of Business Recovery
- Brazil Banks: Our Picks on Asset Sensitivity and Credit Quality Are Itaú Unibanco & Banco Do Brasil
Sea Ltd (SE US) – Leaning Towards Profitability and Sustainability
- Sea Ltd (SE US) results were in line but given a slow down in gaming and bearish guidance partly with India ban on FreeFire, the stock was sold off aggressively.
- Strong performance from e-commerce and digital financial services was ignored, with improving take rates in core markets and comments on impending profitability overlooked, with hardly a mention in press commentary.
- The risk for Sea Ltd (SE US) is squarely on the upside with valuations now looking attractive, trading at a discount to MercadoLibre (MELI US) despite its broader footprint.
Sony – EV Partnership Is Excellent for Sony but Highlights Honda’s Struggles
- Sony and Honda announced today they would form a strategic alliance in the mobility field.
- Honda will be responsible for manufacturing and after sales while Sony will handle imaging, sensing, telecommunication, network and entertainment technologies.
- This helps Sony maintain its asset light model and is also positive for Honda but we do feel that it makes Honda look a little lost in the changing world.
Minth (425): Margin Contraction
- Aluminum is Minth Group Ltd (425 HK) biggest raw material.
- The war that spiked the commodity price does not show any sign of ending soon therefore margin contraction is expected.
- Get out or short it if you are a hedgehog.
HSBC – Underwhelming Continues
- Disappointment with HSBC appears to be the norm rather than the exception
- Quarterly profit halved from earlier quarters, suggesting earlier quarters inflated
- Low yield cash assets do not appear to be falling, while funding costs just starting to rise
IQiyi: Huge Drop in Operating Losses Despite Flat Revenues; Path to Profits Becoming Clear
- IQIYI Inc (IQ US) reported 4Q and full-year 2021 results on Tuesday. Revenue for the quarter declined 0.9% YoY to RMB7.39bn (vs consensus RMB7.31bn).
- Operating losses for the quarter was RMB975.2m (vs consensus RMB1.33bn), about 13.2% of revenues compared to RMB1.31bn (17.5% of revenues) in 4Q2020.
- IQiyi’s ADRs jumped 21.5% at the end of Tuesday’s close as the company mentioned that it expects quarterly non-GAAP operating break-even as soon as possible.
EGCO: Undemanding Valuation and Bright 2022 Outlook
- Yesterday analyst meeting came out in a positive tone.We maintain the BUY call based on a target price of Bt220.0 derived using DCF methodology (WACC 9.8%, TG 1%), implying 11.0xPE’22E.
- Expect the 1Q22 recurring profit to improve YoY and QoQ on the back of profit recognition from investments in Linden, APEX (USA, 2Q-4Q21). Moreover, seasonal better electricity sales should offset
- The company maintains the CAPEX plan of Bt30bn for 2022, targeting new renewable energy project additions. We expect EGCO to add around 1,000MW to portfolio in 2022
Hino – Some Uncertainty, Probably an Overreaction, But Still Not Worth Bottom Fishing
- Hino announced during market hours that it was being probed for falsifying exhaust data prompting a 14.8% drop in the stock price.
- At its press conference the company revealed that up to 116k vehicles were affected and roughly 35% of domestic production would be halted.
- Some uncertainty remains and valuations after the fall are reasonable rather than exceedingly cheap so we would be hesitant to bottom fish here.
Progyny (PGNY US): Stellar Q4 Results; 2022 Guidance Reiterated on the Back of Business Recovery
- Progyny Inc (PGNY US) shares are bouncing off their lows following strong Q4 results and guidance reiteration. Continued stellar growth amid large and underpenetrated TAM call for strong upside potential.
- After impacted by Omicron in December, business activity has rapidly recovered to normal levels this year. Management has guided for 50% y/y revenue growth for 2022.
- For 2022, Progyny added 85 new clients, with 1.2 million covered lives, which will be its long-term growth driver. The company is well-positioned for 70% revenue CAGR during 2021–2024.
Brazil Banks: Our Picks on Asset Sensitivity and Credit Quality Are Itaú Unibanco & Banco Do Brasil
- Banco do Brasil is the clear value pick among LatAm banks, with sound credit quality and capital metrics as well as positive asset sensitivity on a delayed basis
- Itaú Unibanco is the most asset sensitive of the Brazilian banks, with its large consumer exposure, and it shows positive trends in terms of asset quality
- Santander Brasil has greater credit quality headwinds than peers and is the least asset sensitive of the big four peers, with Bradesco’s positive asset sensitivity repricing more slowly
Related tickers: Sea Ltd (SE.N), Sony Corp (6758.T), Minth Group Ltd (0425.HK), HSBC Holdings (HSBA.L), iQIYI Inc (IQ.O), Electricity Generating (EGCO.BK), Hino Motors Ltd (7205.T), Itau Unibanco Holding Sa (ITUB4.SA)
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