In today’s briefing:
- Tencent (700 HK): Besieged Game Business
- Grab Earnings Preview: Recovery Ahead
- BDO Unibank – Ready to Run
- Phison (8299.TT): Insistence in NAND Flash Technology
- EASTW: Negative Tone Towards Long-Term Earnings Outlook
- China Everbright Water (1857 HK): Good New Project Flow Is the Key
- Brazil Banking Data to January-End in Twelve Charts – Consumer NPLs Reflect Higher Benchmark Rates
Tencent (700 HK): Besieged Game Business
- Short video has been taking time on site from game players.
- Main games are shrinking, but the authorities have not been granting license to new games.
- The authorities also banned Chinese players from playing with overseas game players.
Grab Earnings Preview: Recovery Ahead
- Grab (GRAB US) is currently trading at US$5.80 per share, more than 50.0% below its IPO price of US$13.06 per share.
- The company’s mobility business was severely impacted due to the pandemic and has not yet recovered to pre-pandemic levels. Grab is reporting 4Q2021E results on Thursday (03rd March).
- As most of the countries in the SEA region opens up economies with Omicron-related fears fading, we expect gradual recovery in mobility business which should help re-rate Grab’s shares upwards.
BDO Unibank – Ready to Run
- * BDO Unibank (BDO.PM) [BDO] reported 4Q21net income of PHP 11.0 bn, a PHP 1.0 bn (10.0%) linked quarter increase, driven by surprisingly positive operating jaws;
- The level of net new NPLs declined PHP 319 mn or 1.7% on an annualized basis which is a wonderful turn of events for BDO; and
- By our calculation, BDO’s reserves appear fine where they are provided credit quality doesn’t reverse course -suggesting earnings strength on the horizon.
Phison (8299.TT): Insistence in NAND Flash Technology
- We estimate Phison could reach NT$14.1bn sales and GM 25% outlook in 1Q22.
- For 2022, it stars with a good beginning for 5~10% NAND price lifted, and Phison’s insistence on NAND Flash controller technology and allied with AMD.
- Phison would maintain its solid dividend policy and it’s 80% in the past. It was ~NT$63 EPS in 2021.
EASTW: Negative Tone Towards Long-Term Earnings Outlook
- Regarding the concern over incapability of EASTW to extend concession water pipeline system belonged to the Treasury Department,we have concluded the impact under our base case scenario that the company
- 4Q21 net profit was at Bt184m (+16%YoY, -20%QoQ) while 2021 net profit reported at Bt1.1bn (+39%YoY), in line with our forecast and expectation.
- 4Q21 raw water sales volume reported at 59.3 million m3 (+1%YoY -6%QoQ). Tap water sales volume contracted to 23.0 million m3 (-5%YoY -6%QoQ).
China Everbright Water (1857 HK): Good New Project Flow Is the Key
- Full-Year earnings growth of 17% suggested a slowdown in 2H21, but this is mostly a result of higher base. A 3pp increase in dividend payout ratio also demonstrated management’s confidence.
- Focus should be on the positive new project momentum – 10 secured in 2H21, versus only 4 in 1H21. More special purpose bonds issuance should drive project pipeline.
- CE Water’s valuations are cheap at 0.43x P/B and 3.8x PER for FY22F. Its prospective dividend yield of 7.9% also provides an appealing income component.
Brazil Banking Data to January-End in Twelve Charts – Consumer NPLs Reflect Higher Benchmark Rates
- Brazil’s consumer credit quality trends to January deteriorated relative to the previous month, with corporate credit quality worsening only slightly
- System loan growth was 16.4% for the twelve months to January which was very similar to the YoY rate for December (16.3%), totally due to the faster consumer loan growth
- The BCB is in the latter stages of the benchmark rate hiking cycle, which is impacting credit quality, especially in consumer categories; nonetheless, Brazilian banks benefit from higher loan spreads
Related tickers: Tencent (0700.HK), Phison Electronics (8299.TWO), Eastern Water Resources Development and Management (EASTW.BK), Banco Do Brasil Sa (BBAS3.SA)
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