In this briefing:
- 2019 Asia Selected Gaming Stock Outlook: Headwinds, Tailwinds and Our Top Picks for Entry Levels Now
- Infosys Ltd (INFO IN): Another Buyback Coming? Not a Bad Idea, but How Much It Can Really Help?
- Are US Stocks Still Expensive?
- India: Coal Availability Improves at Power Plants, but Utilizations Yet to Pick Up on Lower Demand
- Maruti Suzuki- Q2FY19 Results Update
1. 2019 Asia Selected Gaming Stock Outlook: Headwinds, Tailwinds and Our Top Picks for Entry Levels Now
Our review of ten Asian gaming companies forward prospects for 2019 yielded our top five picks. Two of those comprise this insight. Three more will follow in Part Two. There is, in our opinion, some disconnect between continuing macro headwinds in both the VIP and mass sectors and a more bullish tone based on a recent upside trend in Macau, strong results in the Philippines and Cambodia. Given the battering of the market in general, the already 8 month old bearish tone to the sector and the current pricing of the two stocks noted here, we see significant upside opportunity as we near the beginning of 2019.
2. Infosys Ltd (INFO IN): Another Buyback Coming? Not a Bad Idea, but How Much It Can Really Help?
As per reports, Infosys Ltd (INFO IN) may consider a proposal for a share buyback of $1.60 billion very soon. The buyback announcement is likely to be made on January 11 when the company board meets to consider the 3Q FY19 results. Before this, in November 2017, Infosys Ltd (INFO IN) had announced a buyback and spent Rs130 bn to buy a total of 113mn equity shares. This fresh buyback could be an important development and could be an important support for the stock, it is also sensible for other reasons.
There are no major acquisitions in recent times by Infosys Ltd (INFO IN) and if this is likely to be the trend for near future, share buyback is not a bad idea. The company is still struggling with some of the legacy issues and the priority as of now is to streamline the organic growth. We think Infosys Ltd (INFO IN) is also cautious with inorganic growth opportunities as the company had serious issues with acquisitions in the past. What could be another key driver behind this is that in valuation terms, Infosys Ltd (INFO IN) is not very expensive.
3. Are US Stocks Still Expensive?
There are striking parallels between 1929 and 2018.
The 1929 crash put a halt to a nine-year bull run on the market.
Up until October 1929, same as this year, market consensus was that asset prices could only go up from their current level.
As we mentioned in When the Tide Goes Out, Dominoes Fall, a decade of building up excesses meant a painful burst, back 79 years ago: between October of 1929 and September of 1932, eighty-nine percent of the value of stocks was erased and the market didn’t recover to its former peak until 25 years later.
Are we in a similar situation right now?
4. India: Coal Availability Improves at Power Plants, but Utilizations Yet to Pick Up on Lower Demand
In the first half of FY19, there has been a serious shortage of coal in several thermal power plants in India which was affecting as much as 25% of total capacity of power plants in India. However, it has improved considerably now. As per latest Ministry of Power data as on 23rd December 2018 for 124 plants, coal shortage has become zero in pit head plants and there are only 12 plants in non pit-head category with coal shortages. This change is a significant improvement in coal availability situation for power generation sector in India.
However, the utilizations have not gone up that much for power plants on a cumulative basis across the country. The average utilizations (Plant Load Factor or PLF) for overall India generation capacity was 62.6% for April to November 2018 period and this was 62.7% in November indicating no significant improvement. This virtually no improvement in power plants’ utilization could be linked to lesser demand for electricity because of change in weather conditions and also indicates that coal supply situation may not have improved that much.
Nevertheless, this will reduce the pressure from Power Plants and the sector on Coal India Ltd (COAL IN) for more supplies. However, we many not see much change in production and volumes for Coal India Ltd (COAL IN) which has seen a significant decline in recent months. Another implication is that when the overall demand for electricity comes down, the demand in spot market will also be lower accordingly. It is directly relevant for the merchant power companies and Indian Energy Exchange (IEX IN).
5. Maruti Suzuki- Q2FY19 Results Update
Maruti Suzuki’s Q2FY19 results were below our expectations. Sales grew by only 2% YoY in Q2FY19 led by a 3.7% increase in realization per unit. But the volumes declined by 1.5% YoY in the same period. We analyze the results.
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