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Smartkarma Daily Briefs

Sep 09
0

Daily Brief Industrials: Dongfang Electric, Model Solution, Cummins Inc and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Dongfang Electric (1072 HK): At Full Throttle
  • Model Solution IPO Valuation Analysis
  • Cummins Inc: The Meritor Acquisition & Other Drivers

Dongfang Electric (1072 HK): At Full Throttle

By Osbert Tang, CFA

  • Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
  • Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
  • We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

Model Solution IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Model Solution is implied market cap of 156 billion won and target price of 24,417 won. 
  • The IPO valuation range is from 24,000 won to 27,000 won and our target price would be close to the low end of the IPO price range.
  • Given the low upside relative to the IPO price range, we have a Negative view of this IPO. 

Cummins Inc: The Meritor Acquisition & Other Drivers

By Baptista Research

  • Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
  • The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
  • It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.

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Sep 09
0

Daily Brief Financials: Onewo Space-Tech, People’s Insurance (PICC), Binjiang Service Group and more

By | Daily Briefs, Financials

In today’s briefing:

  • Onewo Space-Tech Pre-IPO – Thoughts on Valuation
  • People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued
  • Binjiang H1 2022: Management Soundbites
  • Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment

Onewo Space-Tech Pre-IPO – Thoughts on Valuation

By Sumeet Singh

  • Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
  • As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
  • In this note, we provide our earnings estimates and thoughts on valuation.

People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued

By Xinyao (Criss) Wang

  • People’s Insurance (PICC) (1339 HK)’s 2022H1 performance outpaced the industry peers, mainly driven by the improved performance of motor vehicle insurance business and non-vehicle insurance business. 
  • While non-life insurance business is the foundation/main driver of growth,life insurance business is the drag on performance, the successful transformation of which is an important factor to drive up valuation.
  • PICC’s is undervalued. The major catalyst could be the upcoming 20th National Congress, expecting some rally during this period. Due to unfriendly macro, the rally may not last long.

Binjiang H1 2022: Management Soundbites

By Sameer Taneja

  • Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).
  • The company has >35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.
  • If the company is willing to continue paying >60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.

Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment

By Shifara Samsudeen, ACMA, CGMA

  • Onewo Space-Tech (ONEWO HK)  is a leading property management service provider in China focused on offering basic property management services.
  • Backed by China Vanke Co Ltd (H) (2202 HK) , the company has filed for an IPO on the HKEx and plans to raise proceeds of around US$2bn.
  • In this insight, we discuss the company’s business model and deep dive into the largest business segment Community Space Living Consumption Services.

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Sep 09
0

Daily Brief TMT/Internet: Link Administration, Matrimony.com, Tyro Payments, Elan Microelectronics, Circles.Life, WCP, Sea Ltd, Bilibili and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Link Admin (LNK AU): ACCC Approval & Index Changes
  • Link Admin Gets ACCC Nod. Woodford Condition Outstanding
  • Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
  • Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations
  • Tyro in Play as It Rejects Potentia’s A$1.27 Offer
  • Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence
  • Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives
  • WCP: First Day IPO Trading Strategy
  • Reneging on Job Offers Underscores Sea’s Retrenchment
  • Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

Link Admin (LNK AU): ACCC Approval & Index Changes

By Brian Freitas

  • The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
  • If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
  • We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Link Admin Gets ACCC Nod. Woodford Condition Outstanding

By David Blennerhassett

  • Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
  • The next step is the rescheduled second court hearing on the 15 September.
  • The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.  

Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval

By Arun George

  • Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
  • Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
  • The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations

By Pranav Bhavsar

  • Matrimony.com (MATRIM IN) is a leading player with the highest market share in the Indian matchmaking market. 
  • A close examination of the marketing expenses and subscriber additions reveals poor quality growth.
  • Employee remuneration is perplexing and so is the decision that leads to a reduction in PP&E.

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

By Arun George

  • Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
  • Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
  • Potentia’s move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.

Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence

By Vincent Fernando, CFA

  • Elan Microelectronics (2458 TT) will be removed from the FTSE Taiwan Mid Cap 100 Index on September 16th. As a result, it could see 12+ days of volume of selling.
  • We had a call with management. Guidance and product performance implies the company has relative strength vs. its end-market demand weakness.
  • The stock has already underperformed notebook-related peers by a wide margin, hence a further underperformance caused by passive selling could open up a rebound opportunity,

Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives

By Alec Tseung

  • A fully virtual mobile operator which leases its 4G/5G networks to provide digital mobile services targeting mainly young digital natives. 
  • Circles.Life is known for offering very flexible plans with highly competitive pricing; it also offers its proprietary tech platform, Circles Global, as a B2B SaaS product.
  • It was reported to be in early talks with a SPAC for a potential merger in July this year.

WCP: First Day IPO Trading Strategy

By Douglas Kim

  • The IPO book building for WCP starts on 14 September. We have updated our earnings estimates following the company’s 2Q 2022 results.
  • Our base case target price of WCP is 78,317 won per share, which is 2% lower than the low end of the IPO price range of 80,000 won.
  • To derive our target price, we used 22.4x EV/EBITDA in 2023, which is the average multiple of its peers in 2023.

Reneging on Job Offers Underscores Sea’s Retrenchment

By Caixin Global

  • Southeast Asian conglomerate Sea Ltd. has pumped the brakes on its e-commerce unit Shopee’s expansion, resorting to measures such as reneging on jobs offers to Chinese employees at the last minute.
  • The strategy shift came as the Singaporean company backed by Chinese tech giant Tencent Holdings Ltd. tries to slash costs to shore up its bottom line amid widening losses.
  • The red ink has followed several years of aggressive expansion by Shopee, which has piled pressure on its balance sheet this year, just as challenges raising money abroad mounted.

Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

By Ming Lu

  • In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
  • We believe the May layoff will reduce operating expenses in following quarters.
  • We set an upside of 8.3% and a price target of HK$197.

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Sep 09
0

Daily Brief Industrials: Dongfang Electric, Model Solution, Cummins Inc and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Dongfang Electric (1072 HK): At Full Throttle
  • Model Solution IPO Valuation Analysis
  • Cummins Inc: The Meritor Acquisition & Other Drivers

Dongfang Electric (1072 HK): At Full Throttle

By Osbert Tang, CFA

  • Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
  • Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
  • We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

Model Solution IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Model Solution is implied market cap of 156 billion won and target price of 24,417 won. 
  • The IPO valuation range is from 24,000 won to 27,000 won and our target price would be close to the low end of the IPO price range.
  • Given the low upside relative to the IPO price range, we have a Negative view of this IPO. 

Cummins Inc: The Meritor Acquisition & Other Drivers

By Baptista Research

  • Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
  • The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
  • It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.

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Sep 09
0

Daily Brief Consumer: Shidax Corp, TORIDOLL Holdings Corporation, Honda Motor, Gokomodo, Coolmate, Target Corp, Lululemon Athletica, Ross Stores Inc, Gap Inc/The and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
  • Toridoll – Bull Run Can Stretch Much Longer
  • Honda Sets Up New Venture to Procure Batteries From CATL
  • East Ventures Leads $26m Round of Indonesian Agritech Firm
  • Vietnamese D2C Apparel E-Commerce Startup Coolmate Banks US$2.3M, Plans IPO in 2025
  • Tarjay: Legendary Retailer on Markdown
  • LULU: Revisiting Lululemon
  • Lululemon Athletica: Expansion In Spain & Other Drivers
  • Ross Stores: New Store Additions & Other Drivers
  • Gap Inc: New Experience Centre & Other Updates

Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy

By Travis Lundy

  • Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
  • The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
  • But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support. 

Toridoll – Bull Run Can Stretch Much Longer

By Oshadhi Kumarasiri

  • TORIDOLL Holdings Corporation (3397 JP) is trading near the historical peak of ¥3,000 per share which translates to a consensus FY+2 EV/OP of 30.9x.
  • We think the stock has more room to run as its OP margin is expected to reach double digits for the first time since FY13.
  • Meanwhile, there could be an upside to FY23 guidance as it is currently based on an exchange rate of ¥116 per $1.0.

Honda Sets Up New Venture to Procure Batteries From CATL

By Caixin Global

  • Honda Motor Co. Ltd.’s Chinese unit will set up a new joint venture with two Chinese partners to procure electric vehicle batteries from battery giant Contemporary Amperex Technology Co. Ltd. (CATL)
  • The joint venture will be 50% owned by Honda Motor (China) Investment Co. Ltd. and 25% each by Dongfeng Motor Corp. Ltd. and Guangzhou Automobile Group Co. Ltd. (GAC)
  • Honda’s joint ventures with Dongfeng and Guangzhou Automobile already use CATL batteries in electric cars made in China

East Ventures Leads $26m Round of Indonesian Agritech Firm

By Tech in Asia

  • Gokomodo, an Indonesia-based agriculture supply chain platform, said it earned US$26 million in a series A round led by East Ventures.
  • Gokomodo is a B2B startup that offers digital procurement, digital commerce, and distribution services.
  • Its clients also have the option of buying competitive products through the company’s ecommerce storefront.

Vietnamese D2C Apparel E-Commerce Startup Coolmate Banks US$2.3M, Plans IPO in 2025

By e27

  • Coolmate says it has tripled its revenue over the past year and is on track to hit the US$19 million revenue milestone in 2022.
  • As Vietnam’s e-commerce is expanding quickly and the country’s robust textile and garment industries are transforming through more consolidated value chains, Coolmate will utilise the new capital to achieve its 2022 sales target and plan for an IPO in 2025.
  • Founded in early 2019, Coolmate employs the D2C e-commerce model (providing products directly through online channels) to cut the distribution costs in traditional retail.

Tarjay: Legendary Retailer on Markdown

By Enlightened Capital

  • Summary: Resilience and Growth Through Turmoil, Asymmetric Opportunity Today
  • Target TGT 4.54%↑ has been a highly controversial retailer for years.
  • Recall that in 2007, Bill Ackman’s Pershing Square invested in the business, ultimately building a 10% stake and launching an activist campaign to get on the board and force a sale-leaseback of Target’s extraordinarily valuable real estate.

LULU: Revisiting Lululemon

By Investment Talk

  • The last time I penned my thoughts about Lululemon was December 2021 during a period when the core business shined and Lulu’s Mirror acquisition began to show the early signs of wilting in the face of declining demand.
  • I was grateful that management’s commentary implied they would avoid throwing everything at an attempt to make Mirror, a business which comprised <3% of Lulu’s revenue at the time, work.
  • They have since repurposed the business into a two-tiered subscription offering, branded under the parent’s more reputable name.

Lululemon Athletica: Expansion In Spain & Other Drivers

By Baptista Research

  • Throughout the second quarter, Lululemon’s momentum remained strong.
  • The company’s total revenue accelerated by 29% compared to last year and 28% on a 3-year CAGR basis, helping the company surpass Wall Street expectations.
  • It has been benefitting heavily from this launch as hiking has become increasingly popular among visitors since the pandemic.

Ross Stores: New Store Additions & Other Drivers

By Baptista Research

  • Ross Stores had quite a disappointing quarter where its revenues were well below Wall Street expectations.
  • Comparable store sales were low in comparison to a strong increase in the second quarter of the last year.
  • We provide the stock of Ross Stores with a ‘Hold’ rating with a revision in the market price.

Gap Inc: New Experience Centre & Other Updates

By Baptista Research

  • Gap saw a decline in its overall revenues in the past quarter but its results were still above analyst expectations.
  • The company’s overall revenues of $3.86 billion were down 8% from the prior year or 7% when measured in constant currency but it did deliver an earnings beat.
  • Further, they anticipate the near-term downturn in demand at Gap outlets, which they attribute to the persistent backlash from lower-income consumers.

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Sep 09
0

Daily Brief Private Markets: Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives and more

By | Daily Briefs, Private Markets

In today’s briefing:

  • Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives
  • East Ventures Leads $26m Round of Indonesian Agritech Firm
  • Japan’s Corporate IT Operations Firm JOSYS Nets US$32M Funding, to Expand to Singapore
  • Vietnamese D2C Apparel E-Commerce Startup Coolmate Banks US$2.3M, Plans IPO in 2025
  • Japanese Virtual Office Platform Raises $32m for Market Expansion

Circles.Life: A Fully Virtual Mobile Operator Targeting APAC’s Digital Natives

By Alec Tseung

  • A fully virtual mobile operator which leases its 4G/5G networks to provide digital mobile services targeting mainly young digital natives. 
  • Circles.Life is known for offering very flexible plans with highly competitive pricing; it also offers its proprietary tech platform, Circles Global, as a B2B SaaS product.
  • It was reported to be in early talks with a SPAC for a potential merger in July this year.

East Ventures Leads $26m Round of Indonesian Agritech Firm

By Tech in Asia

  • Gokomodo, an Indonesia-based agriculture supply chain platform, said it earned US$26 million in a series A round led by East Ventures.
  • Gokomodo is a B2B startup that offers digital procurement, digital commerce, and distribution services.
  • Its clients also have the option of buying competitive products through the company’s ecommerce storefront.

Japan’s Corporate IT Operations Firm JOSYS Nets US$32M Funding, to Expand to Singapore

By e27

  • JOSYS is a B2B platform that streamlines corporate IT operations through automated management of IT devices and SaaS applications
  • JOSYS, a Japanese company offering a B2B SaaS platform for corporate IT operations, has raised US$32 million in a funding round led by Global Brain Corporation
  • With this money, JOSYS — a spin-off of the Tokyo Stock Exchange-listed RAKSUL — plans to strengthen its development wing in India and sales structure in Japan

Vietnamese D2C Apparel E-Commerce Startup Coolmate Banks US$2.3M, Plans IPO in 2025

By e27

  • Coolmate says it has tripled its revenue over the past year and is on track to hit the US$19 million revenue milestone in 2022.
  • As Vietnam’s e-commerce is expanding quickly and the country’s robust textile and garment industries are transforming through more consolidated value chains, Coolmate will utilise the new capital to achieve its 2022 sales target and plan for an IPO in 2025.
  • Founded in early 2019, Coolmate employs the D2C e-commerce model (providing products directly through online channels) to cut the distribution costs in traditional retail.

Japanese Virtual Office Platform Raises $32m for Market Expansion

By Tech in Asia

  • Japan-based virtual office platform oVice has secured US$32 million in series B funding from an unspecified group of local and overseas investors.
  • Launched in 2020, oVice’s software provides customizable virtual offices, classrooms, and event venues for companies disrupted by the pandemic.
  • Currently, the firm has reported over US$6 million in annual recurring revenue and said it has long-term contracts with over 2,200 organizations.

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Sep 09
0

Daily Brief ECM: Onewo Space-Tech Pre-IPO – Thoughts on Valuation and more

By | Daily Briefs, ECM

In today’s briefing:

  • Onewo Space-Tech Pre-IPO – Thoughts on Valuation
  • WCP: First Day IPO Trading Strategy
  • Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment
  • YSB Inc Pre-IPO – The Negatives – However, It Comes at a Cost to Profitability
  • NVIDIA Corporation: Supporting The Metaverse
  • Model Solution IPO Valuation Analysis
  • Lululemon Athletica: Expansion In Spain & Other Drivers
  • Cummins Inc: The Meritor Acquisition & Other Drivers
  • Marathon Oil: Enhancement of Retail Operations & Other Drivers
  • Ross Stores: New Store Additions & Other Drivers

Onewo Space-Tech Pre-IPO – Thoughts on Valuation

By Sumeet Singh

  • Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
  • As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
  • In this note, we provide our earnings estimates and thoughts on valuation.

WCP: First Day IPO Trading Strategy

By Douglas Kim

  • The IPO book building for WCP starts on 14 September. We have updated our earnings estimates following the company’s 2Q 2022 results.
  • Our base case target price of WCP is 78,317 won per share, which is 2% lower than the low end of the IPO price range of 80,000 won.
  • To derive our target price, we used 22.4x EV/EBITDA in 2023, which is the average multiple of its peers in 2023.

Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment

By Shifara Samsudeen, ACMA, CGMA

  • Onewo Space-Tech (ONEWO HK)  is a leading property management service provider in China focused on offering basic property management services.
  • Backed by China Vanke Co Ltd (H) (2202 HK) , the company has filed for an IPO on the HKEx and plans to raise proceeds of around US$2bn.
  • In this insight, we discuss the company’s business model and deep dive into the largest business segment Community Space Living Consumption Services.

YSB Inc Pre-IPO – The Negatives – However, It Comes at a Cost to Profitability

By Clarence Chu

  • YSB Inc (YSB HK) is looking to raise about US$500m in its upcoming Hong Kong IPO.  
  • YSB Inc. (YSB) operates a pharmaceutical platform, digitizing the pharmaceutical transaction and service segment.
  • However, gross margins have fluctuated owing to a changing sales mix. Growth has also come at the cost of profitability and YSB has consistently burned cash over its track period.

NVIDIA Corporation: Supporting The Metaverse

By Baptista Research

  • Nvidia has been among the priciest semiconductor stocks for a while now.
  • The company matched market expectations and delivered an earnings beat though the stock is still very expensive.
  • We provide the stock of Nvidia with a ‘Hold’ rating with a revision in the target price.

Model Solution IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Model Solution is implied market cap of 156 billion won and target price of 24,417 won. 
  • The IPO valuation range is from 24,000 won to 27,000 won and our target price would be close to the low end of the IPO price range.
  • Given the low upside relative to the IPO price range, we have a Negative view of this IPO. 

Lululemon Athletica: Expansion In Spain & Other Drivers

By Baptista Research

  • Throughout the second quarter, Lululemon’s momentum remained strong.
  • The company’s total revenue accelerated by 29% compared to last year and 28% on a 3-year CAGR basis, helping the company surpass Wall Street expectations.
  • It has been benefitting heavily from this launch as hiking has become increasingly popular among visitors since the pandemic.

Cummins Inc: The Meritor Acquisition & Other Drivers

By Baptista Research

  • Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
  • The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
  • It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.

Marathon Oil: Enhancement of Retail Operations & Other Drivers

By Baptista Research

  • Marathon’s previous quarter was one of its best financial performances since transitioning to an independent E&P company.
  • Despite these factors, the company delivered an all-around beat and continues to reward its shareholders with capital returns.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Ross Stores: New Store Additions & Other Drivers

By Baptista Research

  • Ross Stores had quite a disappointing quarter where its revenues were well below Wall Street expectations.
  • Comparable store sales were low in comparison to a strong increase in the second quarter of the last year.
  • We provide the stock of Ross Stores with a ‘Hold’ rating with a revision in the market price.

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Sep 09
0

Daily Brief Thematic (Sector/Industry): Global Emerging Markets: Reporting Season Summary and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Global Emerging Markets: Reporting Season Summary, 2Q2022
  • How New U.S. Chip Restrictions Could Hit China’s Smart Car and Cloud Firms

Global Emerging Markets: Reporting Season Summary, 2Q2022

By Wium Malan, CFA

  • The 200 largest weighted companies in the GEM index reported average EPS growth of +32.6%y/y for 2Q22, an acceleration from what was reported for 1Q22.
  • 61% of companies delivered positive sales surprise, up from 58% in 1Q22, whilst 56% delivered positive EPS surprise, down from 64% in 1Q22.
  • Historically, there has been a massive difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.

How New U.S. Chip Restrictions Could Hit China’s Smart Car and Cloud Firms

By Caixin Global

  • New U.S. export restrictions on certain microchips used for machine learning could distrupt China’s development of autonomous driving technology and data centers, market insiders fear
  • The export restrictions on Nvidia’s A100 and forthcoming H100 graphics processing units (GPU) will affect Chinese carmakers’ research into autonomous driving
  • The Nvidia A100 is a GPU chip with 7-nanometer nodes while the H100 is a model with 4-nanometer nodes that is expected to hit the market this quarter

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Sep 09
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Daily Brief Equity Bottom-Up: Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations
  • People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued
  • Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence
  • Binjiang H1 2022: Management Soundbites
  • Reneging on Job Offers Underscores Sea’s Retrenchment
  • Toridoll – Bull Run Can Stretch Much Longer
  • Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense
  • Honda Sets Up New Venture to Procure Batteries From CATL
  • Dongfang Electric (1072 HK): At Full Throttle
  • Dr. Reddy’s Laboratories (DRRD IN): India Business Still the Brightest Spot; Slow Recovery in the US

Matrimony.com (MATRIM IN) | Poor Quality Growth & Perplexing Operations

By Pranav Bhavsar

  • Matrimony.com (MATRIM IN) is a leading player with the highest market share in the Indian matchmaking market. 
  • A close examination of the marketing expenses and subscriber additions reveals poor quality growth.
  • Employee remuneration is perplexing and so is the decision that leads to a reduction in PP&E.

People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued

By Xinyao (Criss) Wang

  • People’s Insurance (PICC) (1339 HK)’s 2022H1 performance outpaced the industry peers, mainly driven by the improved performance of motor vehicle insurance business and non-vehicle insurance business. 
  • While non-life insurance business is the foundation/main driver of growth,life insurance business is the drag on performance, the successful transformation of which is an important factor to drive up valuation.
  • PICC’s is undervalued. The major catalyst could be the upcoming 20th National Congress, expecting some rally during this period. Due to unfriendly macro, the rally may not last long.

Elan Microelectronics Event: Index Removal Selling Could Exacerbate Price Divergence

By Vincent Fernando, CFA

  • Elan Microelectronics (2458 TT) will be removed from the FTSE Taiwan Mid Cap 100 Index on September 16th. As a result, it could see 12+ days of volume of selling.
  • We had a call with management. Guidance and product performance implies the company has relative strength vs. its end-market demand weakness.
  • The stock has already underperformed notebook-related peers by a wide margin, hence a further underperformance caused by passive selling could open up a rebound opportunity,

Binjiang H1 2022: Management Soundbites

By Sameer Taneja

  • Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).
  • The company has >35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.
  • If the company is willing to continue paying >60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.

Reneging on Job Offers Underscores Sea’s Retrenchment

By Caixin Global

  • Southeast Asian conglomerate Sea Ltd. has pumped the brakes on its e-commerce unit Shopee’s expansion, resorting to measures such as reneging on jobs offers to Chinese employees at the last minute.
  • The strategy shift came as the Singaporean company backed by Chinese tech giant Tencent Holdings Ltd. tries to slash costs to shore up its bottom line amid widening losses.
  • The red ink has followed several years of aggressive expansion by Shopee, which has piled pressure on its balance sheet this year, just as challenges raising money abroad mounted.

Toridoll – Bull Run Can Stretch Much Longer

By Oshadhi Kumarasiri

  • TORIDOLL Holdings Corporation (3397 JP) is trading near the historical peak of ¥3,000 per share which translates to a consensus FY+2 EV/OP of 30.9x.
  • We think the stock has more room to run as its OP margin is expected to reach double digits for the first time since FY13.
  • Meanwhile, there could be an upside to FY23 guidance as it is currently based on an exchange rate of ¥116 per $1.0.

Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense

By Ming Lu

  • In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
  • We believe the May layoff will reduce operating expenses in following quarters.
  • We set an upside of 8.3% and a price target of HK$197.

Honda Sets Up New Venture to Procure Batteries From CATL

By Caixin Global

  • Honda Motor Co. Ltd.’s Chinese unit will set up a new joint venture with two Chinese partners to procure electric vehicle batteries from battery giant Contemporary Amperex Technology Co. Ltd. (CATL)
  • The joint venture will be 50% owned by Honda Motor (China) Investment Co. Ltd. and 25% each by Dongfeng Motor Corp. Ltd. and Guangzhou Automobile Group Co. Ltd. (GAC)
  • Honda’s joint ventures with Dongfeng and Guangzhou Automobile already use CATL batteries in electric cars made in China

Dongfang Electric (1072 HK): At Full Throttle

By Osbert Tang, CFA

  • Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
  • Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
  • We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

Dr. Reddy’s Laboratories (DRRD IN): India Business Still the Brightest Spot; Slow Recovery in the US

By Tina Banerjee

  • Dr. Reddy’s Laboratories (DRRD IN) reported Q1FY23 results, with revenue growing 6% and 108% y/y, mainly driven by a 26% y/y growth in India business.
  • Despite price erosion and increasing competition in some of the key products, North America revenue grew 2% y/y, driven by launch of new products and favorable forex rates.
  • Bottom line got benefitted from one-off items including settlement income and non-core brand divestment proceeds. Net profit surged 108% y/y.

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Sep 09
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Daily Brief Event-Driven: Link Admin (LNK AU): ACCC Approval & Index Changes and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Link Admin (LNK AU): ACCC Approval & Index Changes
  • Link Admin Gets ACCC Nod. Woodford Condition Outstanding
  • Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
  • Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
  • Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Link Admin (LNK AU): ACCC Approval & Index Changes

By Brian Freitas

  • The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
  • If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
  • We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Link Admin Gets ACCC Nod. Woodford Condition Outstanding

By David Blennerhassett

  • Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
  • The next step is the rescheduled second court hearing on the 15 September.
  • The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.  

Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval

By Arun George

  • Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
  • Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
  • The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy

By Travis Lundy

  • Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
  • The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
  • But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support. 

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

By Arun George

  • Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
  • Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
  • Potentia’s move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.

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