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In today’s briefing:
- L’Occitane (973 HK): FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected
- Dekon Food and Agriculture Group IPO – Ebbs and Flows of Cycle Have Hurt Profitability
- Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment
- Morning Views Asia: Meituan
- YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
- Meituan: Earnings to Weaken Further
- Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways
- [Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore
- Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues
- 2024 High Conviction: Underwriting Prudential’s Investment Case into 2024
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L’Occitane (973 HK): FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected
- L’Occitane (973 HK) reported FY1H24 (fiscal year ending March 31) results yesterday after market, with net profit down 45% yoy.
- The sharp drop in earnings is mainly due to a 48% yoy increase in marketing costs, as well as increased finance costs.
- The company maintained the FY24 outlook of 17% topline growth and an operating profit margin of 12% (FY1H24: 7.2%).
Dekon Food and Agriculture Group IPO – Ebbs and Flows of Cycle Have Hurt Profitability
- Dekon Food and Agriculture Group (DFAG CH) is looking to raise up to US$128m in its Hong Kong IPO.
- Dekon Food and Agriculture Group (DFAG) is a vertically integrated livestock farming enterprise in China.
- In this note, we will look at past performance, and share our thoughts on valuation.
Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment
- Perfect Medical Health (1830 HK) results showed 7% revenue growth and 10% YoY profit (27% YoY adjusted profit for subsidies) growth in H1 FY24.
- The company declared a 14.2 cent/share interim dividend. H2 dividends usually are higher, so we expect a 32-35 cent dividend for FY24.
- This is another dividend-yielding gem, trading at 12.0x PE FY24e, a 9% dividend yield, and 15% of the market cap in cash and investments with a >50% ROE.
Morning Views Asia: Meituan
Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.
YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
- YSB would be added to KraneShares CSI China Internet ETF.Cornerstone investors could opt to cash out directly,taking advantage of improved liquidity, which means even they’re not optimistic about YSB’s prospects.
- YSB’s profit margin is disappointing. It would be hard for YSB to deliver decent profits in the end. This business does not make money. YSB is also short of money.
- Since going public, YSB’s share price has been on a rollercoaster, which has deviated from the fundamentals, but it should be pointed out eventually stock prices will return to fundamentals.
Meituan: Earnings to Weaken Further
- Meituan (3690 HK) ‘s 3Q2023 revenues beat estimates while OP for the quarter was well below consensus estimates.
- There were clear signs of slowdown in earnings growth due to macroeconomic challenges and weaker demand. 4Q earnings are expected to decline further.
- Meituan’s share price went down by about 11% following its earnings announcement as slowdown in core local commerce and weakening earnings have concerned investors.
Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways
- Improved transparency from management is an important positive. Additional disclosures were included on entity IRR in the results presentation (attached, not previously disclosed).
- Profitability target for the consolidated ecommerce businesses moved forward to H2 FY24 from H1 FY25. Significant narrowing of trading losses in H1 FY24 to $36m from $256m in H1 FY23.
- As management ‘commit to highlight value where and when possible’, we think an IPO could very well be on the horizon.
[Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore
- MNSO reported C3Q23 revenue in line with our estimate/consensus, and non-GAAP operating income in line with our estimate.
- However, stock fell 14% over two days, mainly on concern of slowdowns in overseas distributors;
- Based on our channel checks, overseas distributor inventory has always been a problem, more so when heightened US interest rate pricking the consumption bubble in developing markets.
Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues
- Sino-Synergy Hydrogen Energy Technology (9663 HK) (SHET) is looking to raise around US$200m in its Hong Kong IPO.
- SHET is a hydrogen fuel cell company in the PRC focusing on research, development, production and sales of hydrogen fuel cell stacks and hydrogen fuel cell systems.
- In this note, we will look at the company’s background and talk about valuations.
2024 High Conviction: Underwriting Prudential’s Investment Case into 2024
- Pru is currently trading below its embedded value, with the valuation assigning a negative value for the group’s new business profits.
- Given its quality franchise across all key markets in Asia and continued strong new business recovery (to pre-Covid levels), this doesn’t seem to make sense at all.
- We would continue underwriting the investment case of Pru in the coming year, with the stock offering significant upside potential.