In today’s briefing:
- StubWorld: Wilmar Gains Ahead Of Adani Wilmar IPO
- Nidec – Machinery and Appliance, Commercial and Industry Segments Rolling Over
- Capcom – In-Line Results Could Drive a Re-Verse in Fortunes
- Softbank Group – ARM News, Vision Fund Weakness Highlight That Share Buyback Will Be Back Loaded
- Fanuc – Big Robot Beat Flops on the Margin Side
- Seven & I: Activist & Long Term Investors Riled Up Yet Again
- Contemporary Amperex Technology – King of the Overweights
- Tesla – Starting to Look Safe to Short
- China Banks – Credit Quality Snapshot Ahead of 4Q21
- Disco (6146 JP): Valuation Reasonable but Not Compelling
StubWorld: Wilmar Gains Ahead Of Adani Wilmar IPO
- Wilmar International (WIL SP) is coming up “expensive” on my stub monitor, yet still trades at a material 65% discount to NAV.
- Preceding my comments on Wilmar are the weekly setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold of at least 20%.
Nidec – Machinery and Appliance, Commercial and Industry Segments Rolling Over
- Nidec missed 3Q consensus as OP of ¥44.3bn came in 12.6% below consensus despite a 5.8% beat at the top line.
- The deterioration in profitability across the Existing Auto, Machinery, and Appliance, Commercial and Industry businesses is a significant concern.
- It also suggests that consensus expectations for 22.6% OP growth next year may prove highly optimistic.
Capcom – In-Line Results Could Drive a Re-Verse in Fortunes
- We had expected 3Q results for Capcom to be unsurprising given a lack of new titles and OP of ¥6.17bn was in line with consensus at ¥6.23bn.
- The launch of Monster Hunter Rise for PC did not go as smoothly as we hoped but the trend appears to be improving.
- All in all FY OP looks set to slightly beat consensus and guidance for better than double digit growth is likely in our view.
Softbank Group – ARM News, Vision Fund Weakness Highlight That Share Buyback Will Be Back Loaded
- Nvidia is reportedly close to throwing in the towel on the acquisition of ARM (although markets have assumed that outcome for awhile)
- Softbank can still monetize the asset through an IPO but most likely at a lower valuation and with much fewer proceeds
- We believe ARM was the primary source of buyback funds and with VF down $13bn QTD prospects for meaningful buybacks have been pushed out
Fanuc – Big Robot Beat Flops on the Margin Side
- Fanuc results were a little better than the in-line we expected on account of a big jump in Robot segment sales.
- Given relative margins however, the impact at the OP line was limited and Fanuc’s revised guidance is now just under consensus for the year.
- Much of the recent strength in FA and Robots looks unsustainable and we suspect this result may be taken negatively.
Seven & I: Activist & Long Term Investors Riled Up Yet Again
- Seven & I Holdings (3382 JP) has climbed above the June 2021 peak for the first time in seven months despite weaknesses in the overall market.
- Meanwhile, the Financial Times reported yesterday that 3 of the top 30 long term investors have requested Seven & I to get rid of underperforming businesses.
- Although the company brushed off previous attempts by activist investors, the pressure from long term investors could tip the scales and force Seven & I to focus on convenience stores.
Contemporary Amperex Technology – King of the Overweights
- In this analysis, we review allocations in Contemporary Amperex Technology among 3 sets of active China managers. MSCI China Funds, China A-Share Funds and Greater China Funds.
- We find that exposure in Contemporary Amperex Technology has risen to peak levels across all 3 investor sets, making it one of the largest overweight positions in China.
- Outside of dedicated China, we also see ownership growth among Global Emerging Market and Asia Ex-Japan active strategies.
Tesla – Starting to Look Safe to Short
- Tesla beat CapIQ consensus for 4Q slightly, beating by 3.3% at the OP level and 6.5% at the top line.
- Despite this, the reaction after hours was negative pointing to excessive froth in the name.
- With the collapse in momentum for low quality small caps it seems reasonable to us to expect Tesla to be next.
China Banks – Credit Quality Snapshot Ahead of 4Q21
- The China real estate situation remains challenging for banks credit quality, with more real estate developers in financial difficulties, with them either close to, or at default
- The macro-economic picture is challenged by China’s zero-Covid policy hurting supply chains, and PBOC is tightening liquidity despite the recent small cuts to reserve requirements and benchmark rates
- Before 4Q21 results, the larger cap banks’ credit quality snapshot shows that China Minsheng is very challenged, with Postal Savings Bank and China Merchants in strong positions
Disco (6146 JP): Valuation Reasonable but Not Compelling
- 3Q results were above guidance, as expected. Full-year guidance looks conservative, as usual. New orders ahead of sales, pointing to one or two good quarters ahead.
- Shares down 10% since the beginning of January. Valuation reasonable but not compelling given the risk of a cyclical peak in SPE demand this year.
- Uncertainty likely to keep the shares in a trading range.
Related tickers: Wilmar International (WLIL.SI), Nidec Corp (6594.T), Capcom Co Ltd (9697.T), Softbank Group (9984.T), Fanuc Corp (6954.T), Seven & I Holdings (3382.T), CATL (A) (300750.SZ), Tesla Motors (TSLA.OQ), Postal Savings Bank of China (1658.HK), DISCO Corp (6146.T)
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