In today’s briefing:
- Softbank – Masayoshi Son’s Got Nothin’
- Toshiba – Underwhelming MTP With Execution Risk
- StubWorld: Unicom’s “Hs” Are Cheap
- Softbank Group – Q3 21 Results Reaction: ARM IPO Pivot Is the Big Reveal
- Highlights of LG Energy Solutions 4Q 2021 Earnings & Buy on Rumor/Sell the News Post MSCI Inclusion
- Nissan – Limited Upside Till Next FY Starts to Be Priced In
- Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- SMM – Bump to Guidance Supports Recent Share Price Rise
- Harmonic Drive – Good 3Q But No Guidance Revision
- China Three Gorges Renewables (600905 CH): Good, and Better Is Coming
Softbank – Masayoshi Son’s Got Nothin’
- It’s hard to believe but Softbank’s earnings briefing had even less of substance this time than usual, essentially amounting to an “innovative” unofficial roadshow for an Arm IPO.
- The termination of the Arm-Nvidia deal was made official and there was the usual TED talk for retail investors on LTV, NAV and the brand-new concept of computer chips.
- With portfolio performance since the start of this year as grim as expected there was little to cheer.
Toshiba – Underwhelming MTP With Execution Risk
- Toshiba’s second IR day produced little of extra value as details on its new MTP did not add anything particularly new.
- The company did a reasonable job of breaking down sources of growth and technological strengths but there were few immediate growth drivers.
- As prospects for strong growth look to be shifting further out an SOTP analysis does not favour Toshiba.
StubWorld: Unicom’s “Hs” Are Cheap
- Despite the recent share price gain, China Unicom (762 HK) is inexpensive with respect to parent China United Network (600050 CH) – its pseudo domestic A-share twin – and to peers.
- Preceding my comments on Unicom, are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Softbank Group – Q3 21 Results Reaction: ARM IPO Pivot Is the Big Reveal
- The ARM sale to Nvidia has been cancelled but Softbank is charging full speed ahead on an IPO
- That is unlikely to surface the value of a straight sale whilst the monetization rate at 15-20% would also be much lower
- We remain cautious even with a 50% discount as NAV depends on volatile tech valuations but today’s report provides some reassurance on ARM at least
Highlights of LG Energy Solutions 4Q 2021 Earnings & Buy on Rumor/Sell the News Post MSCI Inclusion
- NPS and other local pension funds have net purchased about 2.5 trillion won of LG Energy Solution shares from the IPO date to 8 February.
- Many investors are having a buying the rumor/sell the news strategy on LGES. As the timing of the news approaches near, the risk/reward outlook on LGES looks less favorable.
- LGES reported mixed results for its 4Q 2021 earnings. The company gave capex target of 6.3 trillion won in 2022, which was 57% higher than the consensus estimates.
Nissan – Limited Upside Till Next FY Starts to Be Priced In
- Nissan generated total revenue of ¥2,207bn (+13.8% QoQ, -0.8% YoY) and OP of ¥52.2bn in 3QFY22.
- The reported revenue was 0.9% lower than consensus estimates, while operating profit was ¥15bn higher.
- The company revised revenue guidance to ¥8,710bn (-1.0%) while OP was increased by ¥30bn to ¥210bn (+16.7%) but our start of year estimate of ¥250bn OP is on the cards.
Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- FY Mar-22 guidance was raised, but new orders were down in 3Q and both sales & operating are headed down in 4Q.
- 4Q is seasonally weak and long-term demand drivers such as 5G, IoT and auto electrification remain in place, but the timing of recovery is uncertain.
- The shares have dropped 21% since last September, to the low side but not the bottom of their 5-year P/E range. Look for an opportunity to buy for the long-term.
SMM – Bump to Guidance Supports Recent Share Price Rise
- Sumitomo Metal Mining delivered a strong 3Q with ¥73.7bn in current profit vs. consensus at ¥57.1bn.
- Guidance was raised from ¥266bn in current profit to ¥314bn although this is inflated by about a ¥74bn gain on Sierra Gorda.
- Nevertheless, valuations look cheap relative to earnings and imply a sharp commodity price correction which may not happen very quickly.
Harmonic Drive – Good 3Q But No Guidance Revision
- Harmonic Drive posted relatively good numbers in 3Q on account of strong SG&A controls but neglected to raise guidance.
- That looks conservative and backlog hit a new high, but valuations remain stretched.
- Ultimately we still see significant risk for next FY and expect guidance to be significantly weaker than consensus expects.
China Three Gorges Renewables (600905 CH): Good, and Better Is Coming
- China Three Gorges Renewables (600905 CH) (CTGR) has an splendid FY21 as it pre-announced result with a range of 46.5-53.1% growth in recurring profit, fuelled by generation and disposal gains.
- The first full-year contribution of many projects commissioned in 4Q21, which boosted a 28.4% QoQ surge in power generation, should underpin FY22 earnings – consensus forecast is expecting 41% growth.
- YTD, CTGR’s share price performed in line with Shanghai Composite Index (-6.1%), but its strong EPS CAGR of 22% for FY21-23 provides room for it to outperformed in medium term.
Related tickers: Softbank Group (9984.T), Toshiba Corp (6502.T), China Unicom Hong Kong (0762.HK), Softbank Group (9984.T), Nissan Motor (7201.T), Murata Manufacturing (6981.T), Sumitomo Metal Mining (5713.T), Harmonic Drive Systems (6324.T), China Three Gorges Renewables (600905.SS)
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