In today’s briefing:
- Tencent: Meta Challenges Ahead
- NetEase (NTES) Pre-Earnings: Exploring Overseas Market
- Yaskawa – Increasingly Positive on Robotics but Still Too Early… Except…
- Base Inc: Down, But Not Down Enough
- China Shineway Pharmaceutical (2877.HK) – Uncertainties Cloud the Outlook
- LG Innotek: One of the Most Attractive Fundamentals in the Korean Stock Market
- AKR Corporindo (AKRA IJ) – Chemically and Industrially Enhanced
- GULF: 4Q21 Earnings Grew from INTUCH Profit Share
- UMC (UMC.US; 2303.TT): Although It Could Be ~1% ASP Changed Only, but the Price Is Lifted in 2Q22.
- TOP: Capital Increase Within 2022
Tencent: Meta Challenges Ahead
- China Banking and Insurance Regulatory Commission warned on Friday against fund-raising and investment products related to the metaverse concept given the speculative nature of these investments.
- The Office of the United States Trade Representatives (USTR) announced on Thursday that e-commerce sites operated by Tencent have been placed on US government’s “notorious markets” list of entities.
- Tencent’s shares have dropped 5.2% during today’s trade following speculation that fresh regulatory crackdowns are possible following the warning on metaverse.
NetEase (NTES) Pre-Earnings: Exploring Overseas Market
- NTES is exploring overseas market by starting studios and selling games.
- We believe NTES has the experience in dealing with the license suspension for new games.
- We believe the stock has an upside of 48% for year end 2022.
Yaskawa – Increasingly Positive on Robotics but Still Too Early… Except…
- We spoke to Yaskawa today to understand recent trends and the detailed outlook on demand going forward.
- There were no major surprises with the company still relatively positive on demand remaining strong across the board though only robots seem to offer strong growth potential.
- Profitability for robots should also improve going forward creating a nice story, but valuations are still too dear.
Base Inc: Down, But Not Down Enough
- Both management and consensus seem to think that BASE Inc (4477 JP) will be able to maintain the COVID-19 growth trajectory beyond the COVID affected years.
- However, investors seem more circumspect with shares currently trading around 90% below the peak level.
- With the company likely failing to meet revenue targets and losses expanding exponentially, we think Base Inc could fall another 25-30% towards the pre-COVID level.
China Shineway Pharmaceutical (2877.HK) – Uncertainties Cloud the Outlook
- Driven by favorable policies on TCM and COVID-19 under control, the performance recovery would be a good signal, making the FY2021 performance worthy of expectation.
- The expansion scope of VBP on TCM and the concerns on TCM injection products cast doubts on China Shineway Pharmaceutical (2877 HK)’s outlook.
- Due to the uncertainties, we choose to be conservative about the Company’s outlook at the current stage.
LG Innotek: One of the Most Attractive Fundamentals in the Korean Stock Market
- Lg Innotek (011070 KS), a leading global producer of optical electronic parts, has one of the most attractive fundamentals in Korea.
- LG Innotek has become one of the critical suppliers for Apple’s smartphones. For example, LG Innotek accounted for more than 70% of the camera modules used for Apple’s iPhone 13.
- In the intermediate term, LG Innotek is expected to benefit from higher demand for metaverse related cameras, 3D sensing modules, and autonomous vehicle cameras.
AKR Corporindo (AKRA IJ) – Chemically and Industrially Enhanced
- AKR Corporindo (AKRA IJ) paints an optimistic finish to 2021, with indications of +20-30% QoQ growth for both chemical and fuel distribution in 4Q2021.
- The outlook for FY2022 looks equally promising for the distribution business, with a ramp-up of retail fuel distribution plus a strong pipeline of demand for its JIIPE industrial estate.
- AKR Corporindo (AKRA IJ) remains an interesting industrial proxy for the recovery of the overall Indonesian economy trading at a significant discount to its historical average.
GULF: 4Q21 Earnings Grew from INTUCH Profit Share
- The 4Q21 net profit rose to an all time high of Bt3.0bn (+65 YoY, +92% QoQ). excluding FX and other extraordinary items the recurring profit was Bt2.7bn (+120% YoY,+19% QoQ)
- The result came out better than our expectation, The 2021 net profit rose to a record high of Bt7.8bn (+79% YoY), 14% above our forecast.
- The 4Q21 earnings growth was due to 1st time revenue recognition from GSRC power project – Unit 2 and equity income from INTUCH.
UMC (UMC.US; 2303.TT): Although It Could Be ~1% ASP Changed Only, but the Price Is Lifted in 2Q22.
- To our understanding, UMC and Samsung have dealt the 28nm wafer demand and have lifted 28nm wafer price in 2Q22.
- We think it’s possible to lift the wafer price again in 2H22 if TSMC decides to further lift wafer price recently.
- Entering the 5G era, there could be more demand in several aspects, like data storage, data transmission and processing, smartphone, and PC/NB upgrade and etc.
TOP: Capital Increase Within 2022
- The BOD approved TOP’s recapitalization plan which includes 1)disposal of GPSC stake (by 2Q22) and 2) capital increase (within 2022). The proceeds will be used for repaying bridge loans raised
- The company will raise around Bt22.4bn by sale of its 10.78% stake in GPSC. And around Bt12-to-14bn by equity offering of up to 239.2m newly issued shares with green shoe
- Positive view on recapitalization plan, given the investment in CAP will provide an entry to high potential Olefin’s business segment. Also,We see the net EPS dilution to be below 5%
Related tickers: Tencent (0700.HK), NetEase Inc (NTES.O), Yaskawa Electric (6506.T), BASE Inc (4477.T), China Shineway Pharmaceutical (2877.HK), Lg Innotek (011070.KS), AKR Corporindo (AKRA.JK), Gulf Energy Development Public Company (GULF.BK), United Microelectron Sp Adr (UMC.N), Thai Oil Pcl (TOP.BK)
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