Smartkarma Daily Briefs

• Short video companies are taking users’ time from other kinds of apps.
• Kuaishou has a lot of promising data, such as active users, paying users, and time spent.
• The operating losses significantly shrank in the past four quarters.

• Across the major economies in East Asia (China, Japan, Korea), Korea is the only country that follows the global trend of rising interest rates and yields.
• Investing in the country’s life insurers could be a good way to play out the thesis of rising yield environment in 2023.
• Samsung Life is a better bet for this among the country’s two largest public life insurance companies.

• Jinxin Fertility is a leading IVF service provider in China. It has done a series of M&A in the past two years.
• We examine the thesis of the company for a trade into 2023.
• We believe the company has big potential to realize its synergy post acquisition and ramp up post expansion. More favorable policy to come.

In this webinar, we will be hosting Mr Lee Sanghyun, the CEO of Flashlight Capital Partners (FCP), who will discuss their case for Corporate Activism at KT&G Corporation (033780 KS). Interviewing Mr Lee, will be Smartkarma’s Co-Head of Research, Pranav Rao. The focus of the interview would be FCP’s shareholder return plan which aims to drive significantly higher returns (3x) versus the plan currently proposed by the company.

For further detail, please refer to prior insights by Smartkarma Insight Provider Douglas Kim, as well as relevant sections of FCP’s website.

The webinar will be hosted on Wednesday, 14 December 2022, 17:00 SGT/HKT.

Lee Sanghyun is the CEO of Flashlight Capital Partners. Previously, he was the head of The Carlyle Group Korea, and has spent time at Affinity Capital Partners in Hong Kong, as well as McKinsey & Co. in Seoul. Mr Lee Sanghyun is also a graduate of Seoul National University and Harvard Business School.

Pranav Rao is the Co-Head of Research at Smartkarma. 

• With three food deliveries a day, convenience stores need to optimise stocks to sell unsold items, most of which have only been on shelves for a few hours.
• Most chains deal with this problem manually by offloading the burden of optimal ordering and the cost of unsold stock onto franchisees,
• Lawson has a new AI system that can automatically apply markdowns on any item without the need for skilled labour in the store. Gross margins rose 1% in test stores.

• Integra Indocabinet recently reported 9M2022 results, which painted a less rosy picture than at the mid-year stage, with sales growth of +10.6% versus +46% YoY for 1H2022.
• A key change has been the drop off in demand for components for US housing given inflationary pressure and rising rates, which led to higher inventories with distributors. 
• Integra recently downgraded guidance for FY2022 to reflect the less optimistic outlook though remains upbeat on a recovery in 2023, as inventories clear and it goes direct to retailers.

• 3Q22E earnings came in mostly ahead of expectations, however, if one looks at margin and inventory performance, the latest earnings season doesn’t look so good.
• Semiconductor margins fell and inventory days rose multi-year highs, Hardware margins fell further and inventory days look worse than ever.
• Conclusion: 4Q22E end-demand could disappoint significantly and then companies will be slashing prices/writing off inventory into 1Q23E.

• PT Surya Citra Media Tbk (SCMA IJ) released solid 9M2022 results with revenues rising 12.8% YoY but profits were impacted but higher programming costs and switch to FTA digital.
• SCMA continues to gain audience share in FTA, especially through Indosiar as new drama series and sports attract eyeballs, with Vidio taking the lead on digital with 4m paying subs.
• The company looks attractive at these levels trading below its 5-year average forward PER plus its stake in Vidio alone is worth US$756m versus a Market Cap of US$1bn. 

• An unprecedented pace of expansion is underway at Trent Ltd (a TATA group company) with the rapid roll-out of Zudio, a youth-fashion retail store chain across India, beyond big cities.
• STAR Bazaar, its 50:50 JV with Tesco PLC (TSCO LN), in grocery retail, has the potential to drive long term growth given the segment’s immense size and scope. 
• Trent could emerge as one of the leading players in India’s fast-growing organized retail sector as it rapidly expands its pan-India network in apparel and plans to grow in grocery. 

• Shift offers outsourced software testing services and is the market leader in Japan. Software testing market is estimated at JPY5.5trn in Japan but only 1% of the market is outsourced.
• The company has been rebranding itself from software testing provider to digital transformation (DX) and business services provider and this expansion has further potential to drive growth in the long-term.
• Though Shift’s valuation multiples look expensive, we think there is further upside given the strong growth in top line alongside further improvement in margins.