Smartkarma Daily Briefs

C.H.
Robinson had a disappointing result in Q1 and it failed to meet the revenue expectations and earnings expectations of analysts.
They believe that an increased digitization and automation are critical components of providing an improved client experience and operating leverage.

eBay Inc.: An Interesting Set Of New Initiatives That Could Help Crush The Market – Key Drivers

Despite ongoing macroeconomic challenges, eBay generated better-than-expected results across all major financial and operational indicators including revenues and earnings. eBay’s growth is particularly noticeable in its targeted categories, which had low single-digit year-over-year growth.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Old Dominion Freight Line Inc.: Is The Bad Result A Sign Of Trouble Or A Bargain? – Major Drivers

Old Dominion Freight Line produced a highly disappointing set of results as a result of the persistent downturn in the local economy and the volume decline.
The revenue decline and slight deterioration in Old Dominion’s operating ratio caused the earnings per diluted share for the quarter to decline by 0.8% to $2.58.
We give Old Dominion Freight Line an ‘Underperform’ rating with a revised target price.

PACCAR Inc.: Renewed Growth

PACCAR had a strong first quarter and the company achieved revenues and net income that were well above market expectations, driven by strong demand for trucks, parts, and financial services.
PACCAR’s management attributes this growth to its investments in new truck models, global expansion, and the strong performance of PACCAR Parts.
PACCAR Financial, the company’s financial services arm, also had an excellent quarter, achieving a pretax income of $149 million, similar to the same quarter of last year.

Teradyne Inc.: Crushed The Market With Solid Results – Key Drivers

Teradyne had a strong first quarter and delivered an all-around beat.
Its revenues were $618 million, which was $28 million higher than its mid-point estimate as well as analyst expectations.
The company’s adaptable business strategy allowed it to convert increased revenue and profit from Semiconductor Test’s improved component availability in Q1.

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May 13

Daily Brief Event-Driven: Timing Stub Trade on Amorepacific Group with a Key Passive Inflow Event Coming Up and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Timing Stub Trade on Amorepacific Group with a Key Passive Inflow Event Coming Up
HUUUGE Ushio (6925) Buyback
Silver Lake And Genesis Duke It Out For St Barbara’s Flagship
HSTECH Index Rebalance: Float & Capping Changes Lead to US$768m Two-Way Trade
CK Asset Holdings/Civitas Social Housing: Recommended Offer

Timing Stub Trade on Amorepacific Group with a Key Passive Inflow Event Coming Up

By Sanghyun Park

AmoreG has been closely moving relative to Amorepacific Corp (090430 KS) over the past few months, but starting from mid-April, it rapidly entered a downward diversion phase.
It appears to have experienced greater sensitivity towards the recent tensions in Sino-Korean relations, possibly due to its higher price correlation with the Chinese market.
The issue lies in the timing of entry aimed at reversion, and there may be one upcoming passive inflow event that we should pay attention to in this regard.

HUUUGE Ushio (6925) Buyback

Ushio Inc (6925 JP) reported earnings on 11 May, with revenue +17.6% on the year, OP +21.4%, and NP +8.7% on the year. Div was unchanged at ¥50/share.
Forecasts are for revenue +7.4%, OP -21.2%, and NP -27% (¥90.6/EPS). But importantly, the company also announced a HUUUUUGE Buyback.
Buying ≦20mm shares (17.0%) spending ≦¥30bn from 29May2023 to 10May2024. That’s 13.3% at the 12 May close. How this will work is unknown. There’s less detail than one would want.

Silver Lake And Genesis Duke It Out For St Barbara’s Flagship

By Shifara Samsudeen, ACMA, CGMA

After abandoning its reverse merger, St Barbara (SBM AU) confirmed it will sell its flagship Leonora gold project to Genesis Minerals (GMD AU) for $600mn (cash and GMD scrip).
That transaction appeared all stitched up, until Silver Lake Resources (SLR AU) gatecrashed the party with a non-binding proposal for the Leonara asset. SBM’s board rejected the competing proposal.
SLR has now tweaked terms to address SBM concerns. Back in SBM’s court. GMD has matching rights if SBM sides with SLR.

HSTECH Index Rebalance: Float & Capping Changes Lead to US$768m Two-Way Trade

By Brian Freitas

There are no constituent changes for the Hang Seng Tech Index (HSTECH INDEX) in June but there are some free float changes and a bunch of capping changes.
Estimated one-way turnover is 3.2% leading to a one-way trade of HK$3bn (US$384m). There are 3 stocks with over 1 day of ADV to trade.
Trip.com (9961 HK) has over 1x ADV to buy from Hang Seng Tech Index (HSTECH) trackers. The stock is also an add to the Hong Kong Hang Seng Index (HSI).

CK Asset Holdings/Civitas Social Housing: Recommended Offer

By Jesus Rodriguez Aguilar

Property developer/investor CK Asset Holdings made a 80p/share (+1.425p dividend) cash takeover offer for value-destroyer Civitas Social Housing REIT, implied equity value £485million, 44% premium and 26.7% discount to NAV.
Before offer announcement, Civitas traded at 50% discount to NAV, 8.1% dividend yield (covered <1x). Although my fair value estimate (dividend discount model) is 83p, shareholders will likely cash in.
Spread is 1.26%/3.91% (gross/annualised, assuming all payments by 11 September for simplicity). Readacross: Triple Point (SOHO LN), at 49% discount/NAV, 10.1% dividend yield (covered 0.92x), could also be a target.

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May 13

Daily Brief Equity Bottom-Up: Smartkarma Flash Webinar | SBI Shinsei Privatisation by SBI Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Smartkarma Flash Webinar | SBI Shinsei Privatisation by SBI Holdings
Takeda: Conservative Guidance Is Not Something to Worry Too Much About..
[JD.com (JD US, SELL, TP US$30) Target Price Change]: Painful Transition Continues Amid Margin Beat
[JD Health (6618 HK) Rating Change]: Strong Profitability Likely Achieved Margin Reversal
SUMCO Q1’23 Revenues of ¥109.9 Billion, -6.4% QoQ but up 10% YoY. Q2’23 Flat QoQ
Softbank (9984 JP): Private Company Valuations Still in Question
[Luckin Coffee Inc. (LKNCY US) Company Update]: Is Cotti Coffee Charles Lu’ NeXT Computer?
XL Axiata (EXCL IJ) – Convergence Blast-Off
Dr. Reddy’s Laboratories (DRRD IN): Q4FY23 Result- Sequential Decline in Key Parameters
IMMR: Optionality to Cash

Smartkarma Flash Webinar | SBI Shinsei Privatisation by SBI Holdings

By Smartkarma Research

In this upcoming flash webinar, Insight Provider Travis Lundy will discuss the recent privatisation offer from SBI Holdings (8473 JP) for SBI Shinsei Bank (8303 JP). Japan’s SBI Holdings Inc said last Friday that it would take SBI Shinsei Bank private by launching a 154.2 billion yen (US$1.14 billion) tender offer, at 2,800 yen per share. Travis will go over the background and opportunities ahead of Monday’s Japan trading hours.

The Webinar will be hosted on Monday, 15 May 2023, 07:30 SGT.

Register for the Webinar here

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

Takeda: Conservative Guidance Is Not Something to Worry Too Much About..

Takeda reported FQ4 and full-year FY03/2023 results. Reported revenue increased 9.5% YoY to ¥956.2bn (vs consensus ¥938.6bn) and OP of ¥88.6bn (vs consensus ¥144.5bn) vs an operating loss in 4QFY03/22.
Full-Year revenue and OP increased 12.8% and 6.4% YoY to ¥4.0trn and ¥490.5bn respectively. While reported revenue beat guidance and consensus, OP fell slightly below these two.
Takeda Pharmaceutical (4502 JP) ’s FY03/2024E guidance is too conservative as we think that the company has been careful not to disappoint investors if it fails to meet its own target.

[JD.com (JD US, SELL, TP US$30) Target Price Change]: Painful Transition Continues Amid Margin Beat

By Shawn Yang

JD reported 1Q23 revenue in-line vs. cons., while non-GAAP net income beat cons and our est. 99% and 74%, respectively.
It’s early to say whether JD is getting out of the puddle, as (1) revenue grew just 1.4% YoY in 1Q23, (2) the effect of its management change remains uncertain.
We maintain SELL, but raise JD’s 2023 non-GAAP net margin from prior 3.2% to 3.34%, and raise TP to US$ 30.

[JD Health (6618 HK) Rating Change]: Strong Profitability Likely Achieved Margin Reversal

By Shawn Yang

JDHealth (JDH) reported C1Q23 top line and non-IFRS operating profit 56% and 78% of our C1H23 estimates.
We now take a more positive view on JDH’s ability to at manage the issue at certain periods and certain areas;
We raise TP from HK$44 to HK$57 and rating to BUY. Possible risks include renewed margin pressure from prescription drugs

SUMCO Q1’23 Revenues of ¥109.9 Billion, -6.4% QoQ but up 10% YoY. Q2’23 Flat QoQ

By William Keating

Q1’23 revenues of ¥109.9 billion, better than forecasted, down 6.4% QoQ but up 10% YoY.
Q2’23 forecasted flat sequentially, no full year 2023 forecast provided
There’s a major headwind looming on the horizon for the broader silicon wafer segment…

Softbank (9984 JP): Private Company Valuations Still in Question

By Victor Galliano

4QFY22 saw the best result for the Vision Funds since 3QFY21; SVF private companies saw minimal valuation write-downs last quarter, and we suspect valuations may still be too optimistically marked
Masa’s debts to SoftBank stand at USD5.2bn in 4QFY22; in addition, the group’s credit risk exposure to troubled company WeWork was over USD1.1bn at fiscal year end and going higher
Softbank shares trade at a 46% discount to the stated NAV; with the Alibaba valuation “cushion” largely consumed, the potential Arm IPO is critical but private company valuations remain questionable

[Luckin Coffee Inc. (LKNCY US) Company Update]: Is Cotti Coffee Charles Lu’ NeXT Computer?

By Shawn Yang

Cotti Coffee has become a head-to-head competitor of Mixue’s Lucky Cup, and to a lesser degree, Luckin.
But what is behind Cotti’s agenda, in our view, is its founder Charles Lu’s aspiration to return to Luckin;
The biggest obstacle for Charles to repeat the playbook of Steve Jobs is Chinese security regulator’s refusal, so far, to allow franchised chain to list

XL Axiata (EXCL IJ) – Convergence Blast-Off

By Angus Mackintosh

XL Axiata reported a robust set of 1Q2023 results as the competitive environment remains rational allowing it to raise prices, whilst its convergence strategy is starting to gain traction.
XL’s convergence penetration grew in 1Q2023 but the key announcement was that Link Net will become a pure fibre player whilst the retail element of fixed broadband will fall under XL.
XL Axiata (EXCL IJ) has seen the MAUs for its digital platform reach 26m with increased user transactions and higher spending. Valuations remain attractive on 4.1x FY2023E EV/EBITDA.

Dr. Reddy’s Laboratories (DRRD IN): Q4FY23 Result- Sequential Decline in Key Parameters

By Tina Banerjee

Dr. Reddy’s Laboratories (DRRD IN) announced mixed Q4FY23 result, with revenue beating consensus and net profit missing expectations. Both revenue and net profit grew YoY but declined sequentially.
North America grew 27% YoY (but declined 17% QoQ) to INR25.3B, driven by new product launches, growing market share in certain existing products, and favorable Fx movement.
Revenue from India business increased 32% YoY and 14% QoQ to INR12.8B, driven by favorable price variance, new product launches including acquired/in-licensed products, and non-core brand divestments.

IMMR: Optionality to Cash

By Hamed Khorsand

IMMR reported first quarter results reflecting the slowdown in smartphone shipments and the benefits of the Company’s investing activity
Of the $150.3 million invested, at the end of March 2023, equity securities were $56.5 million of the portfolio compared to $53.3 million in December 2022
IMMR’s legal pursuit of patent infringing parties could become an option on the current valuation of the stock

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May 13

Daily Brief Macro: UK: Quarter Ends Low Again in Mar-23 and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

UK: Quarter Ends Low Again in Mar-23
Commodity and FX Impulse Moves
CX Daily: Grim Year For China’s Bankers, Brokers As Pay Slashed
TPW Advisory Friday Musings: It’s In Da Price

UK: Quarter Ends Low Again in Mar-23

By Phil Rush

UK GDP contracted by 0.3% m-o-m in Mar-23 as struggles in the services sector more than offset resilience in the industrial sectors.
This quarter is the fourth consecutive one to end on a low, so we are not worried about it or the carry-over effect. We still expect no Q2 GDP growth.
Surveys suggest upside risks to GDP growth, encouraging inflationary excesses to extend even further and sustaining hawkish policy pressures.

Commodity and FX Impulse Moves

By Untying The Gordian Knot

We review some charts, starting with commodities that are precariously close to signalling a breakdown.
The weakness became pronounced after China’s PPI, CPI, and the disappointing Aggregate Finance data (this needs a separate section).
If China’s recovery continues to be disappointing, then the deflation of exports and a long position on commodities will be a big problem for the rest of the world.

CX Daily: Grim Year For China’s Bankers, Brokers As Pay Slashed

By Caixin Global

Pay /In Depth: Grim year for China’s bankers, brokers as pay slashed
Border /: China resumes fast-lane services for cross-border travel
Audit /: U.S. audit watchdog finds deficiencies in first China inspection

TPW Advisory Friday Musings: It’s In Da Price

By TPW Advisory

Given the ever-thicker curtain of FUD (Fear, Uncertainty & Doubt) and the swirling cross currents of economic data here in the US and elsewhere we continue to lean on the markets themselves to tell us what’s happening – the old adage of: let the market tell us rather than we try to tell the market what’s happening.
We think the stock market in particular is telling us quite a bit these days, information that can be boiled down to the vernacular saying that we choose for today’s Musings: it’s in da price.
Today’s title came to me after yesterday’s close when I checked to see how the US regional banks had fared, using KRE as my proxy.

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May 13

Most Read: Aag Energy Holdings, SBI Shinsei Bank, ARTERIA Networks Corp, Ecopro Co Ltd, Toshiba Corp, Amorepacific Group, Ushio Inc, Horizon Construction Development, St Barbara Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan
AAG Energy (2686 HK): Curiouser and Curiouser
Smartkarma Flash Webinar | SBI Shinsei Privatisation by SBI Holdings
Marubeni & Secom To Launch Tender Offer for Arteria Networks (4423)
Delving into the Nature of the Legal Risks that Ecopro Is Facing After Yesterday’s Court Verdict
Toshiba – Earnings Preview 4QFY23
Timing Stub Trade on Amorepacific Group with a Key Passive Inflow Event Coming Up
HUUUGE Ushio (6925) Buyback
Horizon Construction Development IPO: Valuation Insights
Silver Lake And Genesis Duke It Out For St Barbara’s Flagship

2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan

A year ago, SBI Shinsei Bank (8303 JP)‘s new MTMP was to get from ¥35bn profit in FY22 to ¥70bn in FY24 including ¥55bn of organic profit, ¥15bn of synergies.
On Friday, SBI Shinsei announced FY22 would be ¥42bn instead of ¥35bn, despite higher interest rates. More aggressive lending and gains in subs were credited.
The MTMP calls for ¥70bn Profit in Mar-25 – ¥341 EPS so Friday’s close x 7.1x. The big picture takeout scenario remains intact and Real World Float is still small.

AAG Energy (2686 HK): Curiouser and Curiouser

AAG Energy Holdings (2686 HK) is one of those periodic (and rare) takeover situations that will likely be remembered for what went wrong rather than what went right.
A low-balled Offer (proxy advisors agree); perfunctory IFA analysis; a large, and silent, shareholder; and the postponement of the Scheme vote due to voting instructions not being “duly processed”.
A new Court Meeting has been confirmed for the 2 June. And now we have some odd CCASS movements which raise further questions.

Smartkarma Flash Webinar | SBI Shinsei Privatisation by SBI Holdings

By Smartkarma Research

The Webinar will be hosted on Monday, 15 May 2023, 07:30 SGT.

Register for the Webinar here

Marubeni & Secom To Launch Tender Offer for Arteria Networks (4423)

Marubeni (8002 JP) and Secom (9735 JP) today announced a Tender Offer to take private Marubeni’s subsidiary ARTERIA Networks Corp (4423 JP) at a 54% premium to the close.
Listed 4.5yrs ago, the company hasn’t grown hugely. Revenue growth is slow. EBITDA growth is flat. The takeout is 3.6x book, 7x estimated EBITDA, and about mid-teens PER. Without synergies.
The price is OK, not great. The Board rejected the final price because it was too low and didn’t include synergies, then accepted because the bidders wouldn’t go further? Hmmm…

Delving into the Nature of the Legal Risks that Ecopro Is Facing After Yesterday’s Court Verdict

By Sanghyun Park

The severity of yesterday’s ruling has caught the market’s attention as it may provide insight into an ongoing investigation into insider trading based on undisclosed internal information.
This matter is not limited to the operational risk caused by the imprisonment of Lee Dong-chae. There is a possibility that it could lead to delisting, depending on the circumstances.
The substantial legal risk that could lead to delisting will further amplify price volatility. Adopting a more segmented approach appears crucial, like specific setups in each tighter interval.

Toshiba – Earnings Preview 4QFY23

By Mio Kato

We believe Toshiba guidance could be meaningfully lower than consensus estimates project.
While we expect some conservatism across industrial segments this could easily be offset by prolonged stagnation on the tech side.
Given concerning signs for NAND we believe weak guidance could shake confidence in deal funding.

Timing Stub Trade on Amorepacific Group with a Key Passive Inflow Event Coming Up

By Sanghyun Park

AmoreG has been closely moving relative to Amorepacific Corp (090430 KS) over the past few months, but starting from mid-April, it rapidly entered a downward diversion phase.
It appears to have experienced greater sensitivity towards the recent tensions in Sino-Korean relations, possibly due to its higher price correlation with the Chinese market.
The issue lies in the timing of entry aimed at reversion, and there may be one upcoming passive inflow event that we should pay attention to in this regard.

HUUUGE Ushio (6925) Buyback

Ushio Inc (6925 JP) reported earnings on 11 May, with revenue +17.6% on the year, OP +21.4%, and NP +8.7% on the year. Div was unchanged at ¥50/share.
Forecasts are for revenue +7.4%, OP -21.2%, and NP -27% (¥90.6/EPS). But importantly, the company also announced a HUUUUUGE Buyback.
Buying ≦20mm shares (17.0%) spending ≦¥30bn from 29May2023 to 10May2024. That’s 13.3% at the 12 May close. How this will work is unknown. There’s less detail than one would want.

Horizon Construction Development IPO: Valuation Insights

By Arun George

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), has launched its HKEx listing at HK$4.52-4.80 per share to raise up to US$223 million.
We previously discussed the IPO in Horizon Construction Development IPO: The Bull Case and Horizon Construction Development IPO: The Bear Case.
Our valuation analysis suggests that HCD is fully priced at the IPO price range. Therefore, we are inclined to pass on the IPO.

Silver Lake And Genesis Duke It Out For St Barbara’s Flagship

After abandoning its reverse merger, St Barbara (SBM AU) confirmed it will sell its flagship Leonora gold project to Genesis Minerals (GMD AU) for $600mn (cash and GMD scrip).
That transaction appeared all stitched up, until Silver Lake Resources (SLR AU) gatecrashed the party with a non-binding proposal for the Leonara asset. SBM’s board rejected the competing proposal.
SLR has now tweaked terms to address SBM concerns. Back in SBM’s court. GMD has matching rights if SBM sides with SLR.

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May 13

Daily Brief TMT/Internet: GigaVis, SUMCO Corp, Softbank Group, XL Axiata, Immersion Corporation, Arlo Technologies Inc, Flash Coffee, Paypal Holdings, Servicenow Inc, Alphabet Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Gigavis IPO Bookbuilding Results Analysis
SUMCO Q1’23 Revenues of ¥109.9 Billion, -6.4% QoQ but up 10% YoY. Q2’23 Flat QoQ
Softbank (9984 JP): Private Company Valuations Still in Question
XL Axiata (EXCL IJ) – Convergence Blast-Off
IMMR: Optionality to Cash
ARLO: Recurring Revenue Growth, PT to $11
Flash Coffee Closes $50m Funding, Targets Profitability by 2024
PayPal: Panicking As A Result Of Quarterly Trends And Narratives Is Not A Viable Strategy
ServiceNow Inc.: The Next King of Digital Transformation? – Key Drivers
Alphabet Inc.: A Major Challenge From Bing AI – Key Drivers

Gigavis IPO Bookbuilding Results Analysis

By Douglas Kim

On 12 May, GigaVis announced its IPO price of 43,000 won, which is 8% higher than the high end of the IPO price range of 39,700 won.
Our base case valuation of Gigavis is target price of 61,755 won per share, which is 44% higher than the IPO price of 43,000 won.
Gigavis makes automatic optical inspection equipment (AOI) and automatic optical repair equipment (AOR) for the inspection and repair process of inner layer substrates, which are core components of semiconductor substrates.

SUMCO Q1’23 Revenues of ¥109.9 Billion, -6.4% QoQ but up 10% YoY. Q2’23 Flat QoQ

By William Keating

Q1’23 revenues of ¥109.9 billion, better than forecasted, down 6.4% QoQ but up 10% YoY.
Q2’23 forecasted flat sequentially, no full year 2023 forecast provided
There’s a major headwind looming on the horizon for the broader silicon wafer segment…

Softbank (9984 JP): Private Company Valuations Still in Question

By Victor Galliano

4QFY22 saw the best result for the Vision Funds since 3QFY21; SVF private companies saw minimal valuation write-downs last quarter, and we suspect valuations may still be too optimistically marked
Masa’s debts to SoftBank stand at USD5.2bn in 4QFY22; in addition, the group’s credit risk exposure to troubled company WeWork was over USD1.1bn at fiscal year end and going higher
Softbank shares trade at a 46% discount to the stated NAV; with the Alibaba valuation “cushion” largely consumed, the potential Arm IPO is critical but private company valuations remain questionable

XL Axiata (EXCL IJ) – Convergence Blast-Off

By Angus Mackintosh

XL Axiata reported a robust set of 1Q2023 results as the competitive environment remains rational allowing it to raise prices, whilst its convergence strategy is starting to gain traction.
XL’s convergence penetration grew in 1Q2023 but the key announcement was that Link Net will become a pure fibre player whilst the retail element of fixed broadband will fall under XL.
XL Axiata (EXCL IJ) has seen the MAUs for its digital platform reach 26m with increased user transactions and higher spending. Valuations remain attractive on 4.1x FY2023E EV/EBITDA.

IMMR: Optionality to Cash

By Hamed Khorsand

IMMR reported first quarter results reflecting the slowdown in smartphone shipments and the benefits of the Company’s investing activity
Of the $150.3 million invested, at the end of March 2023, equity securities were $56.5 million of the portfolio compared to $53.3 million in December 2022
IMMR’s legal pursuit of patent infringing parties could become an option on the current valuation of the stock

ARLO: Recurring Revenue Growth, PT to $11

By Hamed Khorsand

ARLO reported a non-GAAP profit in the first quarter of 2023 after the Company implemented a price increase on its subscription plan
ARLO added 182 thousand paid subscribers in the quarter and ended the first quarter with more than 2 million paying subscribers
Service revenue has allowed for greater operating leverage with gross margin expected to rise further in future quarter with the growth in service revenue

Flash Coffee Closes $50m Funding, Targets Profitability by 2024

By Tech in Asia

Rocket Internet-backed Flash Coffee has officially closed its series B round totaling US$50 million.
In a statement, the company said it would expand deeper into Indonesia, with plans to open a branch in Surabaya in July. It already has a presence in Jakarta and Bandung.
Besides Indonesia, Flash Coffee also operates in Singapore, Hong Kong, South Korea, Thailand, and Taiwan.

PayPal: Panicking As A Result Of Quarterly Trends And Narratives Is Not A Viable Strategy

By Vladimir Dimitrov, CFA

PayPal has significant competitive advantages, and the management is making the right moves to improve them.
PayPal continues to slide to multi-year lows, with a mixed quarter that was perceived as a very negative one.
PayPal has been in a strong position in the market for the past three years.

ServiceNow Inc.: The Next King of Digital Transformation? – Key Drivers

ServiceNow delivered an outstanding first quarter for 2023 which was an all-around beat.
The subscription revenue showed a 27% growth in constant currency, surpassing the high end of guidance by 150 basis points.
The latest release of ServiceNow, Utah, offers a range of new features and capabilities to increase automation, simplify user experiences, and provide greater organizational flexibility.

Alphabet Inc.: A Major Challenge From Bing AI – Key Drivers

Alphabet reported an all-around beat in Q1 2023, with a steady increase in Google Services and Other revenues.
There were indications of stabilization and performance in YouTube Ads, while advertiser spending pulled back slightly in the network.
Alphabet identified Google AI, retail, and YouTube as the three critical areas for long-term growth in advertising.

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May 13

Daily Brief Industrials: Horizon Construction Development, Ushio Inc, C.H. Robinson Worldwide, AEye, Old Dominion Freight Line, Otis Worldwide Corp, Paccar Inc, NOW Inc, Fortive Corp, Norfolk Southern and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Horizon Construction Development IPO: Valuation Insights
HUUUGE Ushio (6925) Buyback
C.H. Robinson Worldwide: Can Automation & Digitization Save The Day? – Major Drivers
AEYE, INC – Automotive-First, Capital-Light, and Partnership with Continental Position AEye Well
Old Dominion Freight Line Inc.: Is The Bad Result A Sign Of Trouble Or A Bargain? – Major Drivers
Otis Worldwide Corporation: The Moat Source That Helps It Thrive In An Oligopolistic Market – Major Drivers
PACCAR Inc.: Renewed Growth
NOW, INC. – 1Q23 Solid Start to the Year
Fortive Corporation: What You Need To Know About The Q1 Success & Why It Matters – Key Drivers
Norfolk Southern Corporation: Improved Network Reliability and Productivity Saving The Day? – Major Drivers

Horizon Construction Development IPO: Valuation Insights

By Arun George

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), has launched its HKEx listing at HK$4.52-4.80 per share to raise up to US$223 million.
We previously discussed the IPO in Horizon Construction Development IPO: The Bull Case and Horizon Construction Development IPO: The Bear Case.
Our valuation analysis suggests that HCD is fully priced at the IPO price range. Therefore, we are inclined to pass on the IPO.

HUUUGE Ushio (6925) Buyback

Ushio Inc (6925 JP) reported earnings on 11 May, with revenue +17.6% on the year, OP +21.4%, and NP +8.7% on the year. Div was unchanged at ¥50/share.
Forecasts are for revenue +7.4%, OP -21.2%, and NP -27% (¥90.6/EPS). But importantly, the company also announced a HUUUUUGE Buyback.
Buying ≦20mm shares (17.0%) spending ≦¥30bn from 29May2023 to 10May2024. That’s 13.3% at the 12 May close. How this will work is unknown. There’s less detail than one would want.

C.H. Robinson Worldwide: Can Automation & Digitization Save The Day? – Major Drivers

C.H.
Robinson had a disappointing result in Q1 and it failed to meet the revenue expectations and earnings expectations of analysts.
They believe that an increased digitization and automation are critical components of providing an improved client experience and operating leverage.

AEYE, INC – Automotive-First, Capital-Light, and Partnership with Continental Position AEye Well

By Water Tower Research

1Q23 revenue came in at the midpoint of guidance at $0.6 million.
CEO Matt Fisch has been making changes and said that after “a comprehensive review of AEye’s business, it was clear that we needed to intensify our focus on automotive and our path to commercialization with Continental, while aligning our resources with this streamlined business model.”
The company’s automotive-first strategy, capital-light model, and strategic partnership with Continental should position it well in the upcoming LiDAR market.

Old Dominion Freight Line Inc.: Is The Bad Result A Sign Of Trouble Or A Bargain? – Major Drivers

Old Dominion Freight Line produced a highly disappointing set of results as a result of the persistent downturn in the local economy and the volume decline.
The revenue decline and slight deterioration in Old Dominion’s operating ratio caused the earnings per diluted share for the quarter to decline by 0.8% to $2.58.
We give Old Dominion Freight Line an ‘Underperform’ rating with a revised target price.

Otis Worldwide Corporation: The Moat Source That Helps It Thrive In An Oligopolistic Market – Major Drivers

Despite ongoing market volatility, Otis Worldwide Corporation produced a good first quarter to begin 2023, delivering an all-around beat.
Otis’s service division’s contribution to organic sales growth allowed it to increase adjusted service operating profit margins by 40 basis points, which resulted in mid-single-digit adjusted EPS growth.
We give Otis Worldwide Corporation a ‘Hold’ rating with a revised target price.

PACCAR Inc.: Renewed Growth

PACCAR had a strong first quarter and the company achieved revenues and net income that were well above market expectations, driven by strong demand for trucks, parts, and financial services.
PACCAR’s management attributes this growth to its investments in new truck models, global expansion, and the strong performance of PACCAR Parts.
PACCAR Financial, the company’s financial services arm, also had an excellent quarter, achieving a pretax income of $149 million, similar to the same quarter of last year.

NOW, INC. – 1Q23 Solid Start to the Year

By Water Tower Research

DistributionNOW’s 1Q23 revenue totaled $584 million, a 23% Y/Y increase and a 7% increase from 4Q22.
US revenue climbed 28% Y/Y, while International revenue climbed by 30%.
Canadian revenue was 1% higher. The US contributed 73% of total revenue in the quarter.

Fortive Corporation: What You Need To Know About The Q1 Success & Why It Matters – Key Drivers

Fortive Corporation made a solid start to the year, achieving sales, margins, and higher profitability than Wall Street expectations in the first quarter.
Each of their key regions experienced another quarter of rapid sales growth.
Precision Technologies also reported another quarter of double-digit core revenue growth or a 14% revenue increase.

Norfolk Southern Corporation: Improved Network Reliability and Productivity Saving The Day? – Major Drivers

Norfolk Southern Corporation delivered strong results in the quarter with revenues in accordance with analyst expectations and managed an earnings beat.
However, these improvements boosted the company’s network’s reliability and made it even more productive.
We give Norfolk Southern Corporation a ‘Hold’ rating with a revised target price.

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May 13

Daily Brief Energy/Materials: St Barbara Ltd, Copper and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Silver Lake And Genesis Duke It Out For St Barbara’s Flagship
Commodity and FX Impulse Moves

Silver Lake And Genesis Duke It Out For St Barbara’s Flagship