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Smartkarma Daily Briefs

Nov 02
0

Daily Brief Thematic (Sector/Industry): Smartkarma Webinar | Short Trade Ideas in US and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Smartkarma Webinar | Short Trade Ideas in US

Smartkarma Webinar | Short Trade Ideas in US

By Smartkarma Research

In the next webinar, we have Smartkarma Insight Provider Eric Fernandez, CFA who will be taking us through his top short trade ideas in the US. Have your burning questions answered in the live Q&A session that will follow after Eric’s presentation. 

The webinar will be hosted on Wednesday, 16 November 2022, 17:00 SGT/HKT.

Eric Fernandez, CFA, has 30+ years of research and investment banking experience in company modeling, equity valuation and credit is the backbone of Two Rivers Analytics analytical approach. He founded Two Rivers to remedy a shortfall of traditional short idea generation which relies primarily on thematic, top-down processes. Instead, Two Rivers combines a methodical framework to sift through the universe looking for markers of various types of short candidates, which are subsequently vetted via traditional fundamental analysis. Our Stocks at Risk (SAR 2.0) models are a comprehensive framework for identifying short sale candidates. Each model is tailored to the various types of short situations. The models generate ideas to match different client preferences in shorting styles, from lower beta, long horizon Declining Businesses, to higher volatility Breaking Growth short types. They help in diversifying short portfolios by type, beta, time horizon, risk/return, and other characteristics. On net, this framework produces more ideas, boosting returns, and saving time for portfolio managers and analysts.

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Nov 02
0

Daily Brief Equity Bottom-Up: Toyota’s Q2 Is a Huge Miss; EV Strategy in Flux and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Toyota’s Q2 Is a Huge Miss; EV Strategy in Flux
  • SONY (6758) | Q2 Earnings Beat, Guidance Raise
  • Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside
  • Close Out the Pair Trade Between LG Chem & LG Energy Solution
  • Hana – Granular Data On China
  • Japan Tobacco: Revised Guidance & Growth in the US With Altria JV Could Get The Shares Moving Again
  • CIMC Enric (3899 HK): Maintaining a Solid Trend
  • KPIT: Strong Execution and Bullish Outlook
  • HDFC Bank: Strong Results – In Line with Expectation
  • WuXi AppTec (603259.CH/2359.HK) 22Q3- It’s Too Early to Think That The Past Rapid Growth Has Resumed

Toyota’s Q2 Is a Huge Miss; EV Strategy in Flux

By SC Capital

  • Toyota’s Q2 EPS undershot estimates by 28%. FY3/23 guidance was kept flat, but given a more favorable assumption for forex tailwinds, Toyota effectively lowered FY3/23 EPS by 7%.  
  • Management partially admitted to parts of recent media reports that Toyota was overhauling its EV strategy.  Targets of 3.5m BEVs by 2030 are unchanged, but the ramp may be slower.
  • Toyota’s 2H FY3/23 hurdles are low and its auto division’s operating profits appear to be bottoming. Stock may still be a laggard, but we’re bullish on a 12-month basis. 

SONY (6758) | Q2 Earnings Beat, Guidance Raise

By Mark Chadwick

  • Q2 OP rises +8% to Y344 billion on strong growth in Music and Image Sensors, despite 49% profit fall in Games segment.
  • SONY sold 3.3 million PS5 units in the quarter, the same figure as a year ago. Managment remains confident of hitting 18m units by the end of the fiscal year
  • Sony’s stock is down -30% YTD. We think the Q2 results/guidance lift should help put a floor under the stock. We would be buyers below 15x earnings

Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside

By Mark Chadwick

  • Komatsu reported above Consensus 2Q OP; lifted OP guidance; and raised dividends.  Outlook for next FY3/24 looks bright
  • Share price is pricing in a severe recession. A PBR of 1.1x is implies a significant OP decline. We see no evidence of an earnings contraction next year
  • We expect the share price to re-rate as the market prices in resilient earnings outlook. Our back test still suggests over 45% upside

Close Out the Pair Trade Between LG Chem & LG Energy Solution

By Douglas Kim

  • On 25 October, we recommended a pair trade between LG Chem (go long) and LGES (go short). Since then, this trade has resulted in a net gain of 15.7%.
  • It is very unusual to get this kind of alpha sized gains on Korean large caps in such a short time period. 
  • Given the sharp net appreciation on this pair trade in the past week, we would close out this trade. 

Hana – Granular Data On China

By Daniel Tabbush

  • Hana Financial Group reported a loss in its China banking business in 9MQ22
  • Hana Bank (China) recorded credit costs at KRW119bn or 20% of group total
  • Off balance sheet commitments in China appear to be moving on balance sheet 

Japan Tobacco: Revised Guidance & Growth in the US With Altria JV Could Get The Shares Moving Again

By Oshadhi Kumarasiri

  • Japan Tobacco (2914 JP)’s 3Q22 was stronger than expected with revenue and OP surpassing consensus by 9.2% and 8.8% respectively through better than expected performance in almost all the markets.
  • Just as we predicted in our previous insights, JT upgraded its revenue, OP, FCF and DPS guidance by ¥182bn, ¥100bn, ¥77bn and ¥38 respectively sighting stronger volumes and favorable pricing.
  • We believe this earnings upgrade and a JV with Altria to expand Ploom in the US should get the share price going again after being held back by Russia fears.

CIMC Enric (3899 HK): Maintaining a Solid Trend

By Osbert Tang, CFA

  • CIMC Enric Holdings (3899 HK) has a steady 3Q22 with good revenue growth for the chemical & environmental and liquid food segments. Management also said margin has expanded YoY.
  • Overall order backlog of Rmb13.7bn is generally sufficient to cover individual segment’s revenue over the next 6-15 months, comfortably securing the growth prospects. 
  • With significant overseas revenue, it is benefiting from depreciation of Rmb against the USD. It also anticipates a pick-up in domestic clean energy segment growth in FY23.

KPIT: Strong Execution and Bullish Outlook

By Ankit Agrawal, CFA

  • KPIT Technologies (KPIT) reported decent Q2FY23 earnings. Sales grew 8.3% QoQ and 27% YoY in Constant Currency (CC) terms. EBITDA and Net Profit grew 33% and 28% YoY, respectively. 
  • Led by an all-time high order pipeline, KPIT Technologies (KPITTECH IN) gave a bullish outlook and upgraded its FY23 growth guidance. KPIT’s Technica acquisition also looks very promising.
  • In terms of order pipeline, KPIT has a couple of mega deals ($100mm+) in the offing, which if realized, would be the first-ever in its history.

HDFC Bank: Strong Results – In Line with Expectation

By Ankit Agrawal, CFA

  • Annualized credit cost at 87bp was at the lowest in many quarters. This provides further room to the bank to invest for future growth.
  • HDFCB continues to focus on enhancing its distribution presence, both physical and digital. It is continuing to add new branches. Its digital efforts are also paying off well.
  • At a valuation of 20x P/E, HDFC Bank (HDFCB IN) is attractively priced and offers potential for 23%+ IRR over the next 3Y.

WuXi AppTec (603259.CH/2359.HK) 22Q3- It’s Too Early to Think That The Past Rapid Growth Has Resumed

By Xinyao (Criss) Wang

  • WuXi AppTec’s 2022Q3 results beat the market expectations. The Company’s performance showed good recovery from the prior pandemic/lockdown, but it has not yet entirely reversed the trend of slowing growth.
  • Wuxi AppTec has a problem of decreasing future gross margins. Although the Q3 results could bring short-term catalyst for WuXi AppTec’s share price, such rebound may not last long.
  • We further analyzed WuXi AppTec’s business, and we remain to be conservative on the Company, because the whole outlook and investment logic of CXO have changed. 

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Nov 02
0

Daily Brief Crypto: DeFi Options Protocols Series (#3): Where Can the Next Phase of Growth Come From? and more

By | Crypto, Daily Briefs

In today’s briefing:

  • DeFi Options Protocols Series (#3): Where Can the Next Phase of Growth Come From?

DeFi Options Protocols Series (#3): Where Can the Next Phase of Growth Come From?

By Alec Tseung

  • DeFi options protocols’ TVL did not change much in the past three months despite the bear market we are now in.
  • Many (TradFi) institutions and institutional investors we spoke to believed the next bull market/major innovations in DeFi might be coming from protocols that offer yields from real-world assets. 
  • To drive the next phase of growth, options protocols should leverage their composability to tap into it by offering those protocols additional use cases related to options. 

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Nov 02
0

Daily Brief Macro: China: Imbalances In The Economy Rise To The Fore As Growth Slows and more

By | Daily Briefs, Macro

In today’s briefing:

  • China: Imbalances In The Economy Rise To The Fore As Growth Slows
  • CX Daily: The Evolution Of Crime In China
  • Brent Prices: Direction Of Travel Is Down In The Absence Of Additional Catalysts
  • Indonesia: Bright Portents From Influx Of FDI

China: Imbalances In The Economy Rise To The Fore As Growth Slows

By Nigel Chiang

  • The latest PMI surveys show that stimulus measures are taking effect but are unable to offset the drags from renewed lockdowns, weaker external demand and the deflating real estate sector.
  • The slowdown has now reached a point where the imbalances in the economy could be crystallised and so precipitate broader challenges to stability.
  • Financial imbalances are a key source of risk. Much focus has been on default risks in the over-leveraged property sector, but we highlight growing default risks at LGFVs as well.

CX Daily: The Evolution Of Crime In China

By Caixin Global

  • Crimes / Cover Story: The evolution of crime in China. 

  • Seoul / Chinese nationals among scores dead in Seoul crush. 

  • Personnel / Rising Communist Party star Yin Yong named acting mayor of Beijing. .

Brent Prices: Direction Of Travel Is Down In The Absence Of Additional Catalysts

By Manu Bhaskaran

  • Brent crude prices have traded sideways in recent weeks, despite OPEC’s decision to double down on the output cuts. 
  • While global supply remains tight, our view is that oil prices will still trend down moving forward toward the USD80-USD100 range.
  • For the region, lower oil prices will lessen the squeeze on real incomes, and dampen price pressures. Lower import costs will also narrow trade imbalances.

Indonesia: Bright Portents From Influx Of FDI

By Nicholas Chia

  • Inflows of FDI into Indonesia jumped sharply in 3Q22 (+66.4%), by attracting significant investments in the nickel downstream refining sector. 
  • There may also be green shoots of a manufacturing renaissance, given the growing share of FDI into Central and East Java.
  • The influx of FDI portends well for productivity growth via greater investments and foreign involvement, and stability through a positive basic balance (CA + FDI).

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Nov 02
0

Most Read: Toshiba Corp, Highwealth Construction, HPSP, Hubei Feilihua Quartz Glas-A, Yashili International Holdings, ReadyTech Holdings Ltd, Betagro, TVS Motor , SK Innovation, Tata Elxsi Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Toshiba – How Much Risk Is There On A Deal Break?
  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift
  • KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
  • ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
  • Yashili’s Widening Spread Is an Opportunity
  • Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer
  • Betagro IPO Trading – Seems Fairly Valued
  • AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out
  • SK On Valuation at 22 Trillion Won – Impact on SK Innovation
  • S&P BSE/​Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index

Toshiba – How Much Risk Is There On A Deal Break?

By Mio Kato

  • With Toshiba giving up its deal premium on news that the JIP consortium was struggling to secure financing it is worth assessing how much downside risk there is. 
  • Prospects are deteriorating rapidly and we believe valuations for Kioxia and the HDD business are likely to lead the way down. 
  • We estimate that there is still a premium of about 20-25% being assessed for the possibility of a deal but that there is fundamental risk beyond this.

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift

By Brian Freitas

  • Updated forward dividend estimates and price moves lead to changes in adds/deletes and to estimated flows at the December rebalance. We now see 26 adds and 5 deletes in December.
  • The estimated one-way turnover due to adds, deletes, funding and capping is 46.6% and will result in a one-way trade of TWD 72.7bn (US$2.26bn).
  • Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 14 stocks. There will be trading opportunities galore.

KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

By Brian Freitas

  • With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
  • Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
  • The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

By Brian Freitas

  • At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
  • Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
  • The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.

Yashili’s Widening Spread Is an Opportunity

By Arun George

  • Yashili International Holdings (1230 HK)‘s spread to China Mengniu Dairy Co (2319 HK)’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.
  • We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.
  • Both Danone SA (BN FP) and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.

Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer

By David Blennerhassett

  • Software outfit ReadyTech (RDY AU) has announced an indicative proposal from Pacific Equity Partners and affiliates, to acquire ReadyTech by way of a Scheme of Arrangement at $4.50/share.
  • Pemba Capital, with 32.01% of shares out, are in discussion with PEP as to what appears to be the PE firm rolling over shares. 
  • ReadyTech’s independent board has granted PEP non-exclusive due diligence to flesh out a firm Offer. According to media reports, Microequities, with ~13%, is not on board whatsoever.

Betagro IPO Trading – Seems Fairly Valued

By Clarence Chu

  • Betagro (BTG TB) raised about US$460m in its Thailand IPO. 
  • Betagro is an integrated agro-industrial and food business in Thailand.
  • In this note we will talk about the trading dynamics.

AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out

By Brian Freitas

  • Two-Thirds through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, 7 stocks moving from SmallCap to MidCap, 8 moving from MidCap to SmallCap.
  • There have been changes to the list of stocks over the last couple of months and there could be more, especially on stocks that are close to the cutoff ranks.
  • There is a big gap in the performance of the stocks moving upward versus migrating downward and there could be some mean reversion over the next couple of months.

SK On Valuation at 22 Trillion Won – Impact on SK Innovation

By Douglas Kim

  • SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation’s market cap of 17 trillion won. 
  • The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
  • Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.

S&P BSE/​Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
  • The reference period for the trading data used for the index selection ended on 31st October 2022.
  • There have been a couple of key revisions to the index selection methodologies for SENSEX and SENSEX Next 50 which could have important consequences.

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Nov 01
0

Daily Brief Australia: Nitro Software Ltd and more

By | Australia, Daily Briefs

In today’s briefing:

  • Nitro Attracts a Competing Offer from KKR’s Alludo

Nitro Attracts a Competing Offer from KKR’s Alludo

By Arun George

  • Nitro Software Ltd (NTO AU) has received a competing proposal from Alludo. The offer is A$2.00 via a scheme or an off-market takeover at A$2.00, with a 50.1% minimum acceptance condition.
  • Unsurprisingly, the Board rejected Potentia’s A$1.80 per share off-market takeover offer. Potentia has three options – lift its offer, do nothing or sell into Alludo’s offer. 
  • While Alludo’s offer is 11.1% above Potentia’s offer, it is far from a knockout bid. Therefore, there is a good chance that Potentia returns with improved terms.

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Nov 01
0

Daily Brief India: Global Health (Medanta), Wpil Ltd, Trent Ltd, Go Digit General Insurance, AMI Organics Ltd and more

By | Daily Briefs, India

In today’s briefing:

  • Global Health IPO – Small Player but Attractive
  • WPIL Ltd- Forensic Analysis
  • Trent Ltd: Trending Multi-Brand, Multi-Format Retailer. Value Fashion to Home Grocery
  • Go Digit General Insurance Pre-IPO – The Positives – Has Been Growing a Lot Faster than the Industry
  • Ami Organics Ltd: Forensic Analysis

Global Health IPO – Small Player but Attractive

By Ethan Aw

  • Global Health (Medanta) (GH IN) is looking to raise approximately US$268m in its upcoming India IPO.  
  • Global Health (GH) is a hospital network that operates under the Medanta brand. The firm currently has five hospitals in operation and one more planned for development.
  • We have looked at the background of the deal in our earlier notes. In this note, we will talk about the peer comparison and valuations.

WPIL Ltd- Forensic Analysis

By Nitin Mangal

  • Wpil Ltd (WPI IN) is principally engaged the business of pumps & pumping systems. The company recently has also started construction contracts related to water supply and irrigation.
  • Key forensic takeaways include transactions with related parties and promoters, receivables related concerns, auditor woes, etc.
  • Additionally, it is also noticed that WPIL does not exhibit strong disclosure norms in its annual report. Key disclosures regarding receivables, fixed assets, goodwill remain translucent.

Trent Ltd: Trending Multi-Brand, Multi-Format Retailer. Value Fashion to Home Grocery

By Devi Subhakesan

  • Trent Ltd (TRENT IN), one of India’s leading apparel retailers led by the Tatas, is on an accelerated growth path helped by its recently expanded apparel retail chain, Zudio.
  • Zudio sells value fashion through its own stores targeted at India’s burgeoning youth that is high on aspiration while low on budget, a hitherto severely underserved category.
  • Star Bazaar, Trent’s grocery retail JV with Tesco PLC (TSCO LN), is also beginning to gain traction and has the potential to expand and grow its presence across the country.

Go Digit General Insurance Pre-IPO – The Positives – Has Been Growing a Lot Faster than the Industry

By Sumeet Singh

  • Go Digit General Insurance is looking to raise about US$503m in its upcoming India IPO. The deal will be run by ICICISec, MS, Axis, Edelweiss, HDFC Bank and IIFL.
  • Go Digit General Insurance is a digital full stack insurance company, offering motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products.
  • In this note, we talk about the positive aspects of the deal.

Ami Organics Ltd: Forensic Analysis

By Nitin Mangal

  • AMI Organics Ltd (AMIORG IN)  is engaged in business of drugs intermediate chemicals and related activities.
  • Key forensic takeaways include bizarre accounting especially pertaining to JV, no provisioning on debtors and working capital woes, and mystery towards transfer from CWIP.
  • There are governance related concerns surrounding related parties, churn in top management, etc that should also not be overlooked.

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Nov 01
0

Daily Brief South Korea: HPSP, SillaJen Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
  • End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022

KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

By Brian Freitas

  • With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
  • Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
  • The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.

End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022

By Douglas Kim

  • We discuss end of the mandatory lock-up periods for 54 stocks in Korea in November 2022, among which 2 are in KOSPI and 52 are in KOSDAQ.
  • These 54 stocks on average could be subject to further selling pressures in November and could underperform relative to the market. 
  • Among these 54 stocks, the top 5 market cap stocks include Enchem, Sebit Chem, DearU, Sillajen, and Sampyo Cement. They could be exposed to greater selling pressures in November. 

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Nov 01
0

Daily Brief Indonesia: Kino Indonesia, Mitra Keluarga Karyasehat Tbk, Bank Central Asia and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Kino Indonesia (KINO IJ) – Staples with a Discretionary Edge
  • Mitra Keluarga Karyasehat Tbk (MIKA IJ) – Higher Volumes Lower Intensity
  • Bank Central Asia (BBCA IJ) – Demonstrating Digital Prowess

Kino Indonesia (KINO IJ) – Staples with a Discretionary Edge

By Angus Mackintosh

  • Kino Indonesia (KINO IJ) is one of Indonesia’s most interesting staples players with a strong share in a number of segments within beverages and personal care which dominate its sales.
  • The company has seen a decent rebound in its beverages business as mobility has improved but continues to face some headwinds from higher input costs and packaging for personal care. 
  • Kino Indonesia (KINO IJ) has been selectively increasing prices to offset higher costs and is seeing an improvement in sales of some of its more discretionary products. 

Mitra Keluarga Karyasehat Tbk (MIKA IJ) – Higher Volumes Lower Intensity

By Angus Mackintosh

  • Mitra Keluarga‘s 3Q2022 results reflected the changing environment with patient volumes higher and back above COVID levels but treatment intensity came down YoY in 3Q2022 given last year’s Delta base.
  • MIKA continues to expand its hospital numbers through greenfield and brownfield expansions with three new hospitals due to open in the next 12 months plus it is open to M&A.
  • Mitra Keluarga’s treatment intensity should start to improve over the next few quarters given management’s focus on this plus easier YoY comparisons. Valuations remain attractive versus historical levels. 

Bank Central Asia (BBCA IJ) – Demonstrating Digital Prowess

By Angus Mackintosh

  • Bank Central Asia (BBCA IJ) released a robust set of 9M2022 results driven by loan growth across all segments together with low-cost CASA funding and falling provisioning.
  • The bank demonstrated its leadership in transactional banking with total transactions growing +48% YoY, with 89% in volume terms and 59% in value terms through mobile and internet banking. 
  • Bank Central Asia (BBCA IJ) continues to be a core holding and trades at a premium to its peers for good reason and it has already demonstrated its digital prowess.

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Nov 01
0

Daily Brief United States: PNM Resources, Coca Cola Co, Crude Oil, Netgear Inc, AXT Inc, Visa, 3 M Co, Kraft Heinz Co, MSCI Inc, Otis Worldwide Corp and more

By | Daily Briefs, United States

In today’s briefing:

  • Iberdrola/PNM Resources: One to Watch
  • The Coca-Cola Co: Major Drivers
  • The Commodity Report #75
  • NTGR: Retail Headwinds Is Not the Story
  • AXTI: Inventory Balloon Pop
  • Visa Inc: Collaboration With FTX & Other Drivers
  • 3M Co: Acquisition of Treo Solutions & Other Drivers
  • Kraft Heinz Inc: New Plant-Based Offerings & Other Drivers
  • ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus
  • Otis Worldwide Corp: New Contracts For Gen 2 & Other Drivers

Iberdrola/PNM Resources: One to Watch

By Jesus Rodriguez Aguilar

  • Iberdrola SA has not abandoned its strategic plan in the United States, which includes the acquisition of PNM Resources through its American subsidiary Avangrid Inc.
  • Iberdrola is convinced that the transaction will be unblocked in the coming weeks, either because the appeal prospers or because of changes in the regulator.
  • I retain my TP of $50.3 cash takeout price (consideration offered by Avangrid/Iberdrola) vs. my $49.8/share median implied valuation. My TP represents 8.5% upside plus a 2.9% dividend yield.

The Coca-Cola Co: Major Drivers

By Baptista Research

  • Despite a macroeconomic environment that remained difficult in the third quarter, Coca-Cola managed to deliver yet another all-around beat.
  • Utilizing their customer-centric marketing strategy, they are rapidly connecting consumption occasions with passion points through digital engagement.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

The Commodity Report #75

By The Commodity Report

  • With the beginning of this week’s newsletter, I probably won’t make any new friends in my home country.
  • What makes me sad is that literally nobody is speaking about the untapped natural gas reserves we have underground in Germany that are indeed accessible.
  • A short calculation: In 2021 Russia delivered 55 billion cubic meters to Germany or 55% of the total German gas consumption.

NTGR: Retail Headwinds Is Not the Story

By Hamed Khorsand

  • NTGR reported third quarter results showcasing continued growth in its SMB and service provider product lines while the retail channel remained challenged. 
  • NTGR has been transitioning away from the lower end of the Wi-Fi router market, but a contracting market has extended out the timeframe of depleting channel inventory
  • NTGR’s growth driver are primarily its Pro AV switches and 5G hotspots, which continue to outperform our expectations

AXTI: Inventory Balloon Pop

By Hamed Khorsand

  • AXTI slightly beat its downward adjusted third quarter guidance but issued fourth quarter forecast showing further deterioration in the business
  • During the third quarter AXTI experienced a significant delay in orders from customers causing revenue to decline by approximately 11 percent sequentially
  • The spill over of weakness into the fourth quarter should not be a surprise given the pace of decline in revenue in the third quarter

Visa Inc: Collaboration With FTX & Other Drivers

By Baptista Research

  • Despite the uncertainty brought on by the pandemic, the timing of the cross-border travel rebound, inflation, the Ukraine crisis, and potential recession, Visa’s performance in 2022 has been quite solid.
  • The company delivered yet another all-around beat as it established over 400 business collaborations with fintechs worldwide this year, ranging from start-ups to established businesses.
  • Cross-border volumes in Q4 increased by 7 points from Q3 and were up 49% year over year and 130% compared to three years earlier, excluding intra-Europe.

3M Co: Acquisition of Treo Solutions & Other Drivers

By Baptista Research

  • 3M delivered a mixed set of results for the last quarter as it failed to meet revenue expectations of Wall Street but managed an earnings beat.
  • Every business segment produced margins higher than 21%, with noteworthy margin growth in the safety, industrial, transportation, and electronics sectors.
  • This is what helped them deliver an earnings beat.

Kraft Heinz Inc: New Plant-Based Offerings & Other Drivers

By Baptista Research

  • Kraft Heinz has had another strong quarter and the company delivered yet another all-around beat.
  • Despite the challenges of the supply chain, the company managed to have a strong customer demand that resulted in a greater-than-expected profitability and cash flow in this quarter.
  • Kraft Heinz has not only succeeded in meeting the market demand but also gained market share in many key categories during the third quarter.

ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus

By Kyle Rudden

  • The International Sustainability Standards Board (ISSB) recently confirmed important aspects of its proposed sustainability reporting standards. One step closer to a unified standard.
  • Particularly noteworthy is confirmation that disclosures of Scope 3 emissions will be required. Scope 3 emissions are largely unreported, but account for the majority of total emissions.
  • Scope 3 disclosure could have repercussions for ESG ratings, ESG indices based on ESG ratings, and potentially (though too soon to tell) reconstutions of exchange-traded funds.

Otis Worldwide Corp: New Contracts For Gen 2 & Other Drivers

By Baptista Research

  • Otis delivered a mixed set of results for the last quarter.
  • The company saw a good growth in organic sales but failed to meet the revenue expectations of Wall Street.
  • Its expansion in margins did result in the company delivering an earnings beat.

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