In today’s briefing:
- Toshiba Tec – All-Time Highs
- Smoore (6969 HK): Expanding Market Sizes, Both Domestic and Global
- Daikin – Material Costs Look to Be Impacting Margins
- NTT (Buy) – Q3 21 Results Reaction: NTT Data Drives Beat and Raise with Dividend Boost
- China Everbright Environment (257 HK): Roaring in the Year of Tiger!
- State Bank of India – Rules Don’t Apply
- Subaru – Improvement in Margins Despite Revenue Decline
- Declining Business Short Candidates: Weight Watchers, Triumph Grp, Sprouts, Ormat Tech
- Bank Rakyat Indonesia (BBRI IJ) – MSME Marvel in the Making
- Korea Small Cap Gem #14: Samyang Tongsang
Toshiba Tec – All-Time Highs
- Toshiba Tec is one of our favourite small caps in Japan with a strong fundamental story and upside event risks from the Toshiba soap opera.
- The name was up 14.3% today despite middling earnings released mid-day on its designation as non-core by parent Toshiba.
- That puts it at an all-time high and within a whisker of ¥5,000 with the event risk now clearly visible.
Smoore (6969 HK): Expanding Market Sizes, Both Domestic and Global
- The growth rate of the Chinese e-cigarette market bounced up to 73% in 2021 from 7% in 2020.
- The global e-cigarette market increased by 23% in 2021, but Smoore is only good at vaping components.
- We conclude that Smoore has an upside of 86% for year end 2022.
Daikin – Material Costs Look to Be Impacting Margins
- Daikin 3Q results were mixed with revenue of ¥743bn (-2.2% QoQ, 21.3% YoY) looking strong but OP of ¥66.8bn, implying an OPM decline to 9.0% from 10.3% last quarter.
- Reported revenue was 6.0% higher than consensus while OP was 4.2% lower.
- The company revised its FY22 revenue guidance to ¥3,050bn (+4.1%) but OP was raised just ¥10bn to ¥310bn (+3.3%) which may disappoint.
NTT (Buy) – Q3 21 Results Reaction: NTT Data Drives Beat and Raise with Dividend Boost
- NTT has raised financial guidance by 1-2% on upside at subsidiary NTT Data
- A corresponding increase in the FY21 dividend from ¥110 to ¥115 provides a near-term reward for shareholders
- We are raising our target price from ¥3,600 to ¥4,000 and remain at Buy
China Everbright Environment (257 HK): Roaring in the Year of Tiger!
- The FY21 result of China Everbright Environment (257 HK) (CEE) should look impressive and we see improvement in cash flow to relieve market concerns on leverage and financial position.
- New project addition is solid over the last three months, adding about 5% to operational project portfolio. Strong special purpose bonds issuance in 4Q21 and 2022 will fuel pipeline momentum.
- Valuations look undemanding at 4.1x PER and 0.65x P/B for FY22F; and by maintaining payout ratio at c.30%, dividend yields are at attractive 6.4% and 7.4% for next 2 years.
State Bank of India – Rules Don’t Apply
- SBI results were highly managed in FY 2Q22, and going forward it’s difficult for anyone to take both these results and this bank very seriously;
- SBI reported FY 3Q22 results of INR 84.3 bn, improving INR 8.1 bn (10.6%) linked quarter. Volatility between loss provisions and operating expenses continued; and
- Net new NPLs accelerated 18.5% annualized, and SBI’s reserves are short INR 568 tn – over five quarters of pre-tax results.
Subaru – Improvement in Margins Despite Revenue Decline
- Subaru’s 3QFY22 missed consensus with revenue of ¥666bn (-5.8% QoQ, -22.3% YoY) and OP of ¥42.0bn (6.3% OPM) both looking weak.
- The reported revenue and OP were 11.2% and 2.8% lower than consensus estimates respectively.
- The company revised OP guidance to ¥100bn from 2Q’s ¥150bn which itself was lowered from ¥200bn but this should be the last of the bad news.
Declining Business Short Candidates: Weight Watchers, Triumph Grp, Sprouts, Ormat Tech
- Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
- Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
- Today we are flagging Weight Watchers, Triumph Grp, Sprouts, Ormat Tech .
Bank Rakyat Indonesia (BBRI IJ) – MSME Marvel in the Making
- Bank Rakyat Indonesia (BBRI IJ) booked strong growth in net profit in FY2021 beating its own guidance on most metrics and growing its exposure to MSMEs significantly.
- Loan growth to micro, ultra-micro & smaller corporate borrowers saw significant growth while its cost of funds came down and the cost of credit improved increasing profitability.
- With the increasing use of digital channels to grow its customer base and huge potential to cross-sell to 137m depositors, Bank Rakyat is a core holding amongst the Indonesian banks.
Korea Small Cap Gem #14: Samyang Tongsang
- Samyang Tongsang (002170 KS) is the 14th company in our Korea Small Cap Gems series.
- Samyang Tongsang’s net cash/market cap ratio is 124%, one of the highest among Korea companies with more than 100 billion won in market cap.
- Chairman Huh (age 84) still has a 20% stake in the company. There could be material changes to corporate governance if the ownership structure changes in a few years.
Related tickers: Toshiba Tec (6588.T), Daikin Industries (6367.T), NTT (Nippon Telegraph & Telephone) (9432.T), China Everbright Environment (0257.HK), State Bank Of India (SBI.NS), Subaru Corp (7270.T), Sprouts Farmers Market (SFM.O), Bank Rakyat Indonesia Persero (BBRI.JK), Samyang Tongsang (002170.KS)
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