In today’s briefing:
- Singapore Exchange – No Real Progress
- Vanguard (5347.TT): 8″ Capacity Tightness with TSMC Standing Behind as Actionable
- Graftech: Encouraging Q4 2021, Stronger Pricing into 2022
- HDFC Ltd. – Lack of Conservatism
- HMPRO: Expect 4Q21 Earnings to Be the Highest of This Year
Singapore Exchange – No Real Progress
- SGX FY 1H22 core results were not robust, coming in at SGD 216 mn, improving just SGD 1.0 mn (0.5%) HOH and reflected weakened revenues;
- Derivatives revenue improved 3.4% HOH, resultant of slightly higher contract volumes, and higher rates and lower discounts. HKEX’s foray into the A50 will ultimately eat away at SGX’s business; and
- Significant strategic alternatives are needed at SGX, if it is to avoid being hollowed out by the HKEX.
Vanguard (5347.TT): 8″ Capacity Tightness with TSMC Standing Behind as Actionable
- In our estimate, Vanguard’s 4Q21 revenue/GM is NT$12.6bn/46.3%, and 1Q22 revenue/GM is NT$12.3bn/46.1% respectively.
- Vanguard has about 30% capacity utilized by TSMC’s foundry products. In technology deliverables, Vanguard also competes with TSMC for manufacturing excellence, which creates an internal competition.
- Vanguard has dealt with their clients to share the expansion cost. Certainly, there is almost no such trust-worthy partnership, except Vanguard who has TSMC to back up.
Graftech: Encouraging Q4 2021, Stronger Pricing into 2022
- GrafTech International Ltd (EAF US) Q4 2021 results demonstrated the company is well on track to an FY22 profit of over 520 mn USD, implying a 5x PE.
- Debt deleveraging remains a powerful theme in the story. With an average debt reduction of 400 mn USD a year, the company will be close to zero debt by 2023.
- We believe the company will also use its cash to buy back stock ( 159 mn USD authorized buyback or 6% of market capitalization ) and pay dividends.
HDFC Ltd. – Lack of Conservatism
- HDFC Ltd (HDFC.IN) [HDFC] reported FY 3Q22 results of INR 30.5 bn, decreasing INR 6.2 bn (16.9%) linked quarter basis reflecting a lack of dividends received;
- Given the INR 4.2 bn in NCO during FY 3Q22, net new NPLs increased INR 11.7 bn or 23.3% on an annualized basis; and
- We also find that HDFC’s reserve still needs shoring up by another INR 185 bn or over a year of PBT.
HMPRO: Expect 4Q21 Earnings to Be the Highest of This Year
- We maintain BUY rating for HMPRO with a target price to Bt16.10, derived from 35xPE’22E, or implying 40% premium to Thai Consumer Discretionary.
- We expect HMPRO to report 4Q21 net profit at Bt1.57bn (+2%YoY, +80%QoQ),thanks to stores sales recovery (SSSG at +10%YoY) supported by pent-up demand, demand from home renovation after a flood
- We foresee 2022E earnings to grow to Bt6bn close to pre-COVID levels (+16%YoY) supported by 1) a solid revenue growth at 4% close to Thailand GDP growth from re-opening stores
Related tickers: SGX (SGXL.SI), Vanguard Intl Semiconductor (5347.TWO), GrafTech International Ltd (EAF.N), HDFC Limited (HDFC.NS), Home Product Center (HMPRO.BK)
Before it’s here, it’s on Smartkarma
