In today’s briefing:
- Sony – Guidance Upgrade
- Paypal: Guess It Wasn’t Just a Pig Through a Python…But Is This a Compounder on Sale?
- Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term
- Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress
- Lasertec – Overvaluation Even More Phenomenal Than the Business
- Aisin – Toyota Production Plan Indicates Further Upside
- Denso – Slightly Disappointing Margins but It’s All About the Production Ramp
- Chiyoda – Momentum Turn Could Be Around the Corner
- China Evergrande Group – Tug of War
- M3: Covid Related Trials and Vaccination Programs Drive Earnings; Core Business Growth Slowing Down
Sony – Guidance Upgrade
- Sony posted a strong quarter on the back of resilient margins in gaming and stellar performance in the pictures segment.
- Guidance was raised to ¥1.2trn above the top of consensus at ¥1.185trn but results will likely be around ¥1.3trn, a little below the ¥1.37trn we called in early 2021.
- Next year should see further growth and we expect firm performance going forward.
Paypal: Guess It Wasn’t Just a Pig Through a Python…But Is This a Compounder on Sale?
- FY22 revenue guidance which was lowered in 3Q (from 20% to 18%) was lowered again (to 15-17%) and is below the company’s medium term targets it issued a year ago.
- FY22 EPS guidance was lowered to ~$4.60-4.75 (1.6% yoy at midpoint) vs. $5.24 consensus.
- We think PYPL comes in at $5 and returns to 20% EPS growth in 2023, putting it a ~20x trough forward P/E multiple today.
Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term
- With momentum behind defensive/semi defensive names in the Japanese market, Pan Pacific International Holdings (7532 JP)’ seems to have one of the best risk reward ratios among Japanese retail players.
- PPI’s undervaluation is visible in valuation multiples across the board with all multiples trading near the past 10-year low level.
- Thus, we would buy PPI with a target of 40% upside in the short term.
Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress
- Q3 21 in-line for revenue but well ahead for EBITDA on solid advertising growth leading to an upgrade in management’s full-year EBITDA target.
- Operational results were encouraging with double-digit gains in ad sales and 7% eCommerce growth despite strong year-ago comps.
- Impairment losses for equity associate Demae-Can sting but the overall story is positive.
Lasertec – Overvaluation Even More Phenomenal Than the Business
- Lasertec has been the darling of the SPE sector over the last few years, rising a 122x from mid-2016 to the peak at the start of this year.
- With a commanding position for EUV inspection systems and its new ACTIS systems on deck the excitement is understandable.
- The valuations though are not, and the share price has now clearly started to break down.
Aisin – Toyota Production Plan Indicates Further Upside
- Aisin’s 3Q revenue of ¥1,004bn (+13.1% QoQ, -4.3% YoY) and OP of ¥54bn (5.4% OPM) reassured investors and the stock closed 4% higher.
- Revenue was 1.7% higher than consensus estimates while OP was 4.9% lower but Aisin maintained guidance.
- The real story is the production ramp from here however and risk-reward for Aisin remains phenomenally skewed.
Denso – Slightly Disappointing Margins but It’s All About the Production Ramp
- Denso announced 3QFY22 during market hours today posting revenue of ¥1,426bn and OP of ¥97bn.
- Reported revenue was 4.2% higher than the consensus estimates while OP was 17.8% lower.
- The market reacted negatively to the weak OP print but we think the focus should be all on the upcoming volume ramp.
Chiyoda – Momentum Turn Could Be Around the Corner
- Chiyoda’s 3Q numbers weren’t especially surprising nor impactful as the company continues its recovery.
- We have been detailing for some time how current valuations look depressed and upside risk was present from the capital structure.
- Now we believe that revenue trends are improving to the extent that they may put a floor under the stock.
China Evergrande Group – Tug of War
- Aggressive foreclosure of Evergrande assets suggests a sea change in how mainland China is handling real estate company defaults – especially with foreign creditors;
- Creditor China Cinda’s involvement on the seven-member risk management committee and the appointment of a Cinda senior executive is an alarming conflict of interest; and
- 4Q21 earnings season will be huge tell for mainland Chinese NPLs which likely peak at 20% of total loans.
M3: Covid Related Trials and Vaccination Programs Drive Earnings; Core Business Growth Slowing Down
- M3 Inc (2413 JP) reported 3QFY03/2022 results on Wednesday. Revenue grew 16.0% YoY to JPY56.5bn (vs consensus JPY54.3bn) while OP grew 22.4% YoY to JPY22.6bn (vs consensus JPY20.6bn).
- The company for the first time provided information on its US&EU businesses. Pharma marketing & research generates a majority of revenues followed by clinical trials in these regions.
- M3 also has acquired MirVracha, a website providing marketing support services to pharmaceutical companies in Russia. MirVracha has approx. 400k members, around 60% of all physicians in the country.
Related tickers: Sony Corp (6758.T), Paypal Holdings (PYPL.O), Pan Pacific International Holdings (7532.T), Z Holdings (4689.T), Lasertec Corp (6920.T), Aisin Seiki (7259.T), Denso Corp (6902.T), Chiyoda Corp (6366.T), Evergrande (3333.HK), M3 Inc (2413.T)
Before it’s here, it’s on Smartkarma
