Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>FY22 results for <a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a> were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).</li>
<li>With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months. </li>
<li>With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a &gt;15% dividend yield conservatively and 25% of the market cap in cash.</li>
</ul>


FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months. 
With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a &gt;15% dividend yield conservatively and 25% of the market cap in cash.


Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash

<ul>
<li>Beauty services in Hong Kong will pick up from the 21st of April 2022 post the reopening, due to pent-up demand and the disbursement of <a href="https://www.consumptionvoucher.gov.hk/en/newround.html" target="_blank" rel="noopener">Consumption Vouchers</a> by the government. </li>
<li>Despite losing three months of H1 2022 and a month of H2 2022, we believe that <a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a>  is still trading at 5.4x PE FY22e.</li>
<li>With an 80% payout ratio, the dividend yield is alluring at 16.4%. Net cash represents 38% of market capitalization. A year of uninterrupted operations implies a 3.8x PE. </li>
</ul>


Beauty services in Hong Kong will pick up from the 21st of April 2022 post the reopening, due to pent-up demand and the disbursement of Consumption Vouchers by the government. 
Despite losing three months of H1 2022 and a month of H2 2022, we believe that Water Oasis (1161 HK)  is still trading at 5.4x PE FY22e.
With an 80% payout ratio, the dividend yield is alluring at 16.4%. Net cash represents 38% of market capitalization. A year of uninterrupted operations implies a 3.8x PE. 


Water Oasis: A Double From Here, Brace for the Re-Opening of Hong Kong

<a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a> is a micro-cap gem with the potential to provide a solid return over the next few months owing to a resurgence in beauty treatment in Hong Kong.  We believe the stock can easily double over the next 6 months due to the following catalyst:<ul>
<li>
Improved earnings outlook: With over 2.5 months of shutdowns in H1, we believe that the company is primed to grow its revenue and profitability in H2 2021. We forecast 450 mn HKD of revenue in H2 ( up from 315 mn HKD in H1 ), enabling the company to grow its profitability easily to 134 mn HKD in FY21 placing at 5.6x FY21.</li>
<li>
Huge margin of safety with cash representing 56% of the market capitalization: We believe this will provide ample buffer for the company to do M&amp;A as well as payout dividends.</li>
<li>
Great Dividend Payout Ratio Exceeding 80%: The company's dividend payout ratio exceeds 80% (at the very minimum), which implies a 14.3% dividend yield. </li>
<li>
Opportunity for M&amp;A: We believe with the state of the industry as beaten down as it is, the opportunity for M&amp;A is good, and the company has completed one transaction that we believe will be accretive. </li>
</ul>Risks<ul>
<li>Another Outbreak of Covid in HK which could result in shutdowns of their facilities.</li>
<li>This is a microcap and the company's investor communication is less, so it could take time for the story to play out.</li>
</ul>

Water Oasis (1161 HK) is a micro-cap gem with the potential to provide a solid return over the next few months owing to a resurgence in beauty treatment in Hong Kong.  We believe the stock can easily double over the next 6 months due to the following catalyst:

Improved earnings outlook: With over 2.5 months of shutdowns in H1, we believe that the company is primed to grow its revenue and profitability in H2 2021. We forecast 450 mn HKD of revenue in H2 ( up from 315 mn HKD in H1 ), enabling the company to grow its profitability easily to 134 mn HKD in FY21 placing at 5.6x FY21.

Huge margin of safety with cash representing 56% of the market capitalization: We believe this will provide ample buffer for the company to do M&amp;A as well as payout dividends.

Great Dividend Payout Ratio Exceeding 80%: The company's dividend payout ratio exceeds 80% (at the very minimum), which implies a 14.3% dividend yield. 

Opportunity for M&amp;A: We believe with the state of the industry as beaten down as it is, the opportunity for M&amp;A is good, and the company has completed one transaction that we believe will be accretive. 
Risks
Another Outbreak of Covid in HK which could result in shutdowns of their facilities.
This is a microcap and the company's investor communication is less, so it could take time for the story to play out.


Water Oasis - Micro Cap Gem with Great Return Potential

<ul>
<li>After going ex-dividend in June, <a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a> corrected and has remained rangebound at the 1.35-1.45 HKD/levels due to negative sentiment on HK/China.</li>
<li>We expect FY23 results to be reported in late November/early December. We expect an increase of 19%/85%  in Revenue/PAT with a 16-cent dividend for FY23 (11.4% dividend yield).</li>
<li>Stock trades at 7.6x/6.2x PE FY23e/24e, a dividend yield of 11.4%/14% FY23e/24e with 25% of the market capitalization in cash. </li>
</ul>


After going ex-dividend in June, Water Oasis (1161 HK) corrected and has remained rangebound at the 1.35-1.45 HKD/levels due to negative sentiment on HK/China.
We expect FY23 results to be reported in late November/early December. We expect an increase of 19%/85%  in Revenue/PAT with a 16-cent dividend for FY23 (11.4% dividend yield).
Stock trades at 7.6x/6.2x PE FY23e/24e, a dividend yield of 11.4%/14% FY23e/24e with 25% of the market capitalization in cash. 


Water Oasis: FY23 Earnings a Preview, Trades at 11% Yield Post Correction

<ul>
<li>We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety. </li>
<li>Our top picks are <a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">Perfect Medical Health (1830 HK)</a>, <a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a>, <a href="https://www.smartkarma.com/entities/taste-gourmet-group-ltd" target="_blank" data-smartkarma-citation="entities:27339:1" rel="noopener">Taste Gourmet (8371 HK)</a>, <a href="https://www.smartkarma.com/entities/uchi-technologies-bhd" target="_blank" data-smartkarma-citation="entities:10723:1" rel="noopener">Uchi Technologies (UCHI MK)</a>, and <a href="https://www.smartkarma.com/entities/the-keepers-holdings-inc" target="_blank" data-smartkarma-citation="entities:23003:1" rel="noopener">The Keepers Holdings (KEEPR PM)</a>.</li>
<li>We expand our list coverage into <a href="https://www.smartkarma.com/entities/multi-bintang-indonesia-pt" target="_blank" data-smartkarma-citation="entities:11651:1" rel="noopener">Multi Bintang Indonesia (MLBI IJ)</a>, <a href="https://www.smartkarma.com/entities/delta-djakarta-tbk-pt" target="_blank" data-smartkarma-citation="entities:5585:1" rel="noopener">Delta Djakarta (DLTA IJ)</a>, and <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> as quality high ROCE names worth looking at.</li>
</ul>


We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety. 
Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.


Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety - August 2023

Hong Kong

Water Oasis Group Limited distributes exclusively ~H2O+ brand skin-care products in Hong Kong, Macau, Taiwan and China. The Company also operates spa centers under the Oasis Spa, Oasis Beauty, and Oasis Beauty Homme brand names.

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Water Oasis (1161 HK)

Water Oasis: 5.2x FY23 PE with >15% Div Yield and 25% of the Mkt Cap in Cash

Water Oasis is a recovery play on HK beauty services; the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the...

Sameer Taneja

Water Oasis: A Double From Here, Brace for the Re-Opening of Hong Kong

Despite losing three months of H1 2022 and a month of H2 2022, we believe that Water Oasis (1161 HK) is still trading at 5.4x PE FY22e with a...

Sameer Taneja

Water Oasis - Micro Cap Gem with Great Return Potential

Water Oasis is a micro-cap gem with a 5.5x FY21 multiple and 56% of the market capitalization in cash with a potential 14% dividend yield

Sameer Taneja

Water Oasis: FY23 Earnings a Preview, Trades at 11% Yield Post Correction

Water Oasis is a cheap beauty play in HK. Post its recent correction, it trades at 7.6x/6.2x PE FY23e/24e, a dividend yield of 11.4%/14% FY23e/24e...

Sameer Taneja

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety - August 2023

We cover our top picks in our high ROCE coverage list. Perfect Medical, Taste Gourmet, Water Oasis, Keepers Holdings, Uchi Technologies, Multi...

Sameer Taneja

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