Smartkarma Daily Briefs

Rainbow Children’s Hospital (RCH) raised around US$200m via issuing a mix of primary and secondary shares in its India IPO.
RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
In this note, we will talk about our the trading updates.

Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player

By Janaghan Jeyakumar, CFA

On 6th May 2022, Larsen & Toubro (LT IN)‘s publicly-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN) announced plans to merge.
I discussed this situation previously in Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI when the ratio was 0.66, expecting a scrip ratio north of 0.70.
Below is a closer look at the details of the transaction and the outlook for the combined entity.

Reliance Industries – Energy Business Outlook Sanguine. Maintain ADD.

By HDFC Securities

Standalone oil to chemicals (O2C) segment: 1,370bn, primarily due to improved realisation, led by increase in oil prices Revenue grew 53% YoY to INR and higher volumes
Oil & gas: Revenue grew ~4x YoY to INR 20bn and EBITDA improved ~5x YoY to INR 15bn, driven by sharp improvement in price realisaton and stable production from the KG D6 block.

RJPL: Revenue improved to INR 261bn (+21% YoY, +8% QoQ) due to increase in ARPU to INR 168 (+21% YoY, +11% QoQ).

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1QCY22 Results Update – Castrol (India)

Volume recovery strong, expect margin to rebound- Castrol (CSTRL)’s revenue missed our estimate while its EBITDA and PAT were above estimates

Revenue below estimate, but beat on EBITDA and PAT – Revenue was 10% lower than estimate at INR12.4b (+9% YoY, +13% QoQ).

Strategic developments during the quarter – CSTRL expanded its Castrol Auto Service (CAS) network to 116 multi-brand passenger car workshops in 50+ cities across India.

4QFY22 Results Update – Britannia Industries

Result beats expectations; but near-term outlook challenging
Sales in line; margins ahead of estimates BRIT’s consolidated sales rose 13.4% YoY to INR 35.5b (inline )in 4QFY22.

Highlights from the management commentary -forward commitments had helped protect margins in 4QFY22.

Reliance Industries – Energy Business Outlook Sanguine

By HDFC Securities

Standalone oil to chemicals (O2C) segment: Revenue grew 53% YoY to INR 1,370bn, primarily due to improved realisation, led by increase in oil prices and higher volumes.
Oil & gas: Revenue grew ~4x YoY to INR 20bn and EBITDA improved ~5x
YoY to INR 15bn, driven by sharp improvement in price realisaton and stable production from the KG D6 block.

RJPL: Revenue improved to INR 261bn (+21% YoY, +8% QoQ) due to increase in ARPU to INR 168 (+21% YoY, +11% QoQ).

DCB Bank: Growth Pick-Up and Asset Quality Trends Encouraging

By Axis Direct

DCB Bank’s (DCB)Q4FY22 performance was strong with growth picking-up, NIMs at multiquarter high aided by better recoveries and asset quality improvement.
We believe the stock trades at attractive valuations (0.5x FY24E ABV) and the improving operating performance and asset quality are key triggers for re-rating the stock
We maintain our BUY rating with a target price of Rs 115/share (0.8x FY24E ABV), implying an upside of 47% from CMP.

Cholamandalam Investment – Provision Write-Back Aids Profitability; Asset Quality Improves

By Nirmal Bang

Disbursements strong: Disbursements at Rs127bn were up 58% YoY and 22% QoQ. Vehicle Finance disbursements grew by 43% YoY and 15% QoQ.
Improved collections and higher write-offs lead to lower NPAs: Write-offs for 4QFY22 at Rs5.5bn (calc), 0.7% of gross advances, were higher than normal range of 10-20bps per quarter.
Other key takeaways: (1) Focus is to maintain NIM at ~7.5% levels and RoA at 3-3.5%

Blue Star – Result Above Expectations; Expect Margin Improvement in FY23

By Nirmal Bang

UCP Segment Update: RAC business recorded 47% YoY growth in 4QFY22. BSTAR grew faster than the market and ended FY22 with a market share of 13.25% vs 13% in FY21.

EMPS and Commercial AC segment update: Carry forward order book at the end of FY22 was up 10.2% YoY at Rs32.53bn.

Net debt and capital employed position: Net borrowings at the end of FY22 were Rs671.4mn (vs net cash position of Rs1.51bn at the end of FY21) due to planned advancement in inventory levels related to the procurement of long-lead raw materials and components in order to de-risk supply chain constraints and investments in expansion projects at Wada & Sri City.

Before it’s here, it’s on Smartkarma

By Shifara Samsudeen, ACMA, CGMA

May 10

Equity Capital Markets: Delhivery, Rainbow Children’s Hospital, Ngern Tid Lor and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Delhivery IPO: Peer Comparison and Valuation
Rainbow Children’s Hospital IPO Trading – Decent Anchor, Strong Insti Subs but Limited Upside
Ngern Tid Lor IPO Lock-Up – A US$660m Overhang. Selldown Is a Question of When, Not If.

Delhivery IPO: Peer Comparison and Valuation

Delhivery (1058656D IN) IPO will run from 11-13th May. The company plans to raise INR52.35bn (US$680m) through the issuance of a mix of new shares and OFS by existing shareholders.
At the indicative IPO price range of INR462-487 per share, Delhivery will have a market capitalisation of INR334.7-352.8bn and a post-money EV of INR294.8-312.9bn.
Delhivery plans to use the IPO proceeds for funding organic growth initiatives such as building scale and expanding network infrastructure as well as for funding inorganic growth.

Rainbow Children’s Hospital IPO Trading – Decent Anchor, Strong Insti Subs but Limited Upside

Rainbow Children’s Hospital (RCH) raised around US$200m via issuing a mix of primary and secondary shares in its India IPO.
RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
In this note, we will talk about our the trading updates.

Ngern Tid Lor IPO Lock-Up – A US$660m Overhang. Selldown Is a Question of When, Not If.

Ngern Tid Lor (NTL), a financial service provider based in Thailand, raised around US$1bn in its Thailand IPO in May 2021.
NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance.
The lock-up on its two main shareholders will expire today.

Before it’s here, it’s on Smartkarma

May 10

Macro: QT Is Already Here And The 2022-23 Bear Market Is Now Well Underway and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

QT Is Already Here And The 2022-23 Bear Market Is Now Well Underway
Can Asia Ex-China Continue to Be Resilient?
Egyptian Equities Are Approaching a Bottom
The Week That Was in ASEAN@Smartkarma – Indonesia & CPO, ROTI, and Siam Cement

QT Is Already Here And The 2022-23 Bear Market Is Now Well Underway

By Michael J. Howell

Bear market underway in World equities and likely to see one-third peak to trough decline
Trigger is US Fed QT, but US Fed is NOT about to start QT. It has already been underway since Dec 15th 2021
Each $100 billion of QT, costs the SPX index around 60 points. Therefore expect S&P500 to test 3250, or 20% lower

Can Asia Ex-China Continue to Be Resilient?

By Manu Bhaskaran

Asia ex-China has been relatively resilient this year despite the harsher global environment.
We believe that the re-opening of the developing Asian economies ex-China will outweigh the headwinds, allowing this resilience to continue.
China is the single biggest risk: it can succeed in suppressing covid infections but only at a high economic cost. Overall, growth in developing Asia can remain relatively resilient

Egyptian Equities Are Approaching a Bottom

By Dylan Waller

Egyptian equities are beginning to enter a bottoming out phase, although there is likely more economic pain this year and no near-term stock market catalysts are present.
However, with MSCI Egypt trading at circa six times forward earnings, a near 50% discount to MSCI Emerging Markets, Egypt appears to be positioned very well in terms of relative value
Some of the major headwinds approaching include food/energy inflation, declining tourism, and Egypt’s entry into another IMF program this year

The Week That Was in ASEAN@Smartkarma – Indonesia & CPO, ROTI, and Siam Cement

By Angus Mackintosh

The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
The past week saw insights on PT Nippon Indosari Corpindo (ROTI IJ), AEM (AEM SP) in Singapore, as well as Rex International Holding (REXI SP), and Siam Cement (SCC TB).
There was also an interesting macro commentary on Indonesia’s economy as it banned CPO exports but it is seeing a significant pick up in FDI.

Before it’s here, it’s on Smartkarma

May 10

Financials: Jakarta Stock Exchange Composite Index, Industrial Bank of Korea, Ngern Tid Lor, Accenture Plc Cl A, Adobe Systems, Equitas Holdings Ltd/India, Ethereum, Federal Bank, IIFL Wealth Management, Kotak Mahindra Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Indonesia the Latest Safe Haven to Buckle with KLSE in Pursuit
IBK – Loan to Deposit Ratio at 181%
Ngern Tid Lor IPO Lock-Up – A US$660m Overhang. Selldown Is a Question of When, Not If.
Aristotle Capital Management International Equity 1Q 2022 Commentary
Aristotle Capital Management Value Equity 1Q 2022 Commentary
Equitas Holdings – Growth Momentum to Accelerate
Airdrops as the Ultimate Marketing Tool
Federal Bank – Guiding for 15% Credit Growth and ROA Improvement
IIFL Wealth | PAT Grew 8% QoQ and 64% YoY to INR1.7b (24% Beat) In 4QFY22.
Kotak Mahindra Bank – Growth Momentum Steady; High CASA Positions It Well in a Rising Rate Cycle

Indonesia the Latest Safe Haven to Buckle with KLSE in Pursuit

By Thomas Schroeder

Hiding spots that are coming under pressure – Indonesia’s JKSE just cracked key support that makes the USD/IDR one of the last holdouts to see a big USD move.
USD/IDR bull triangle breakout unfolding with risk of a big USD short squeeze.
USD/MYR break above 4.50 would increase odds of devaluation and a more painful USD move in Asian FX. A huge pivot level to watch.

IBK – Loan to Deposit Ratio at 181%

By Daniel Tabbush

A wholesale funded bank with rising rates can see margin compression
In recent months Korea shows a higher delta on funding costs than loan yields
Credit costs already at half normal level, where ramp up was never high in FY20-21

Ngern Tid Lor IPO Lock-Up – A US$660m Overhang. Selldown Is a Question of When, Not If.

Ngern Tid Lor (NTL), a financial service provider based in Thailand, raised around US$1bn in its Thailand IPO in May 2021.
NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance.
The lock-up on its two main shareholders will expire today.

Aristotle Capital Management International Equity 1Q 2022 Commentary

For Q1 2022, Aristotle Capital’s International Equity Composite posted a total USD return of -10.28% gross of fees.Performance for the first few months of 2022 has undoubtedly been disappointing.

Aristotle Capital Management Value Equity 1Q 2022 Commentary

For Q1 2022, Aristotle Capital’s Value Equity Composite posted a total return of -7.19% gross of fees.
The labor market continued to improve and inflation continued to rise, resulting in tighter monetary policy.
The labor markets continued to improving and inflation continues to rise.

Equitas Holdings – Growth Momentum to Accelerate

Improvement in its asset quality outlook; CASA mix improves to 52%

Healthy growth in PPOP led by NII; provisioning remains high
Highlights from the management commentary – With asset quality back in place, a robust growth outlook, a strong management team, and a high CASA ratio positions the bank well for the future.

Airdrops as the Ultimate Marketing Tool

By Carbono Insights

The marketing world is probably one of the earliest adopters of new technological trends, albeit often for the wrong reasons.
But there is a lot in store for those brands that a ready to dig a little deeper. Web 3 is an ultra noisy, ultra-competitive sector, where the marketer’s toolkit has expanded thanks to tokens and their ability to disrupt the companies’ and clients’ roles
When created with honesty and common sense, a project’s token can have a lot of uses: they are fundraising tools, help distribute revenue, and fuel decentralized governance

Federal Bank – Guiding for 15% Credit Growth and ROA Improvement

By Nirmal Bang

Guiding for 15% credit growth: Overall advances growth stood at 9.5% YoY and 2.8% QoQ. Retail loans increased by 10.7% YoY and 4.7% QoQ.

CASA share improves further: Deposits increased by 5.2% YoY and 3.6% QoQ. CASA deposits grew by 14.3% YoY.

Slippages trend down: Overall asset quality improved, with the GNPA ratio declining from 3.06% in 3QFY22 to 2.8% in 4QFY22.

IIFL Wealth | PAT Grew 8% QoQ and 64% YoY to INR1.7b (24% Beat) In 4QFY22.

Revenue beat led by transaction-based income – PAT grew 8% QoQ and 64% YoY to INR1.7b (24% beat) in 4QFY22. The beat on profitability was driven by a 16% beat on net revenue, up 12% QoQ and 59% YoY to INR4.2b, owing to Transaction/Brokerage Revenue (TBR, 39% beat) and Annual Recurring Revenue (ARR, a 4% beat).

Gross AUM flat QoQ at INR2.6t; shift in mix favors ARR assets
Yields jump sequentially with a higher increase in TBR

Kotak Mahindra Bank – Growth Momentum Steady; High CASA Positions It Well in a Rising Rate Cycle

Provisioning reversal drives a strong beat in earnings

Robust loan growth; NIM improves by 16bp QoQ (33bp in 2HFY22)

Subsidiary performance: While PAT for the standalone bank jumped 65% YoY in 4QFY22, profitability of all subsidiaries grew 24%.

Before it’s here, it’s on Smartkarma

May 10

Consumer: Match Group Inc, Denso Corp, Kura Sushi Inc, Skylark Co Ltd, Britannia Industries, TVS Motor , Exide Industries, Marico Ltd, MGP Ingredients and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Revisiting Long Ideas: Match Group
Denso – Strong Overshoot Potential And Only Modest Execution Risk
Kura Sushi (2695): Detective Conan in April, Dragon Ball in May
Skylark Holdings (3197): April Sales on an Improving Trend; Over 1,000 Robots in Operation
4QFY22 Results Update – Britannia Industries
TVS Motor Company – Lower RM Cost Drives Beat in Operating Performance
Exide – Mixed Bag; Strong Revenue Growth, but Margin Weak
4QFY22 Results Update – Marico
Weekly Stock Bullfinder- Week of 5/9

Revisiting Long Ideas: Match Group

By Aaron Gabin

Match is down 52% over the past 6 months and at $71, Match trades at a 5% FCF yield, ~17x Fwd EBITDA, for ~20% growth / ~35% EBITDA margin
Covid restrictions lifted in Japan (2nd biggest market) should be tailwind for 2H22
New CEO from Zynga brings unique mobile monetization skillset ideally suited for coming Tinder Coins summer launch.

Denso – Strong Overshoot Potential And Only Modest Execution Risk

Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus).
The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).
We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.

Kura Sushi (2695): Detective Conan in April, Dragon Ball in May

Same-store sales were in line with the pre-pandemic levels, and our impression is neutral.
Same-store sales of other revolving sushi formats in April (compared to April 2021 and April 2019) were 105.3% and 104.2% for Sushiro (Food & Life Companies), 108.4% and 94.5% for Genki Sushi, and 103.7% and 87.1% for Kappa Sushi, respectively.
The number of stores at the end of April was 512 in Japan (+2MoM), 37 in the U.S. (+/-0 MoM), and 45 in Taiwan (+/-0 MoM)

Skylark Holdings (3197): April Sales on an Improving Trend; Over 1,000 Robots in Operation

Skylark Holdings (3197, the company) disclosed monthly data for April (on a preliminary basis). All of its restaurants resumed normal operations on March 22
April same-store sales were significantly higher than in April 2021. Although the sales are still weaker than the pre-pandemic levels, the situation has been improving.
Same-store sales were 110.6% vs. April 2021 (99.0% for March), 182.0% vs. April 2020 (92.8% for March), and 77.4% vs. April 2019 (71.0% for March)

4QFY22 Results Update – Britannia Industries

Result beats expectations; but near-term outlook challenging
Sales in line; margins ahead of estimates BRIT’s consolidated sales rose 13.4% YoY to INR 35.5b (inline )in 4QFY22.

Highlights from the management commentary -forward commitments had helped protect margins in 4QFY22.

TVS Motor Company – Lower RM Cost Drives Beat in Operating Performance

Invests ~INR14.2b in FY22 on acquisitions, subsidiaries, and associates

Strong mix drives realization and margin –Revenue/EBITDA/adjusted PAT grew 4%/4%/-5% YoY to INR55.3b/INR5.6b/ INR2.75b in 4QFY22. The same grew 24%/36%/47% YoY in FY22.

Key takeaways from the management interaction – Its positive FY23 outlook is driven by a normal monsoon and low impact of further COVID waves.

Exide – Mixed Bag; Strong Revenue Growth, but Margin Weak

To invest in Li-ion cell manufacturing without PLI incentive

Operating leverage partially offsets cost inflation – Revenue grew 16% YoY to INR34.1b, while EBITDA/PAT fell 15%/ 8% YoY to INR3.5b/INR2.25b in 4QFY22. The same grew 23%/3%/ 11% YoY in FY22.

Highlights from the management interaction – EXID has set up a wholly-owned subsidiary – Exide Energy Solutions, which will house its greenfield multi-gigawatt hour Li-ion cell manufacturing facility. It is in advanced talks for procuring a land parcel in Karnataka.

4QFY22 Results Update – Marico

Result in line; material cost outlook benign – MRCO’s 4QFY22 result was in line our estimates.

Performance in line with our estimates – Consolidated net sales grew 7.4% YoY to INR 21.6b (inline) in 4QFY22.

Highlights from the management commentary – International business reported double-digit growth in constant currency (CC) for the fifth consecutive quarter.

Weekly Stock Bullfinder- Week of 5/9

By Weekly Stock Bull Finder

Lost in all the hoopla of the annual Berkshire Hathaway annual meeting this past year was the significant investments Warren Buffett has made over the past 6 months in the oil and gas energy sector.
MGP Ingredients, Inc., together with its subsidiaries, produces and supplies distilled spirits, branded spirits, and food ingredients.
The Chemours Company provides performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America

Before it’s here, it’s on Smartkarma

May 10

Event-Driven: NTT (Nippon Telegraph & Telephone), SK Telecom Co Ltd (Adr), ioneer Ltd, AGL Energy Ltd, Mindtree Ltd, Canon Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
Trading Opportunity Coming on SK Telecom ADR Premium
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Potential Adds & Capping Flows
AGL Energy’s Demerger Booklet Provides an Underwhelming Justification
Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
Canon (7751) – Buyback Looks Small But Shareholder Structure Matters

NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”

NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) this morning announced a 1pm joint presser. Imaginations ran wild and NTT went up 12+%.
The reality is more subdued (as it should have been for a during-market-hours-presser) and it involves a restructuring of a small NTT subsidiary which happens to own NTT Data shares.
But it is still positive. It is something of a win-win for both parties.

Trading Opportunity Coming on SK Telecom ADR Premium

By Sanghyun Park

ADRs are traded at a significant premium when the foreign room for underlying shares is exhausted. This is the pattern that KT showed in 2018.
SKT’s foreign room is currently 1.85%. That is, the burnout rate is 98.15%. Only about 2M shares need to be burned to hit bottom. This is 0.91% of SO.
The shortage of SKT ADRs is likely to intensify, which in turn suggests that the ADR premium may rise further.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Potential Adds & Capping Flows

By Brian Freitas

Core Lithium Ltd (CXO AU) could be added to the MVIS Global Rare Earth/Strategic Metals Index in June. Lake Resources Nl (LKE AU) is the next highest ranked non-index constituent.
Irrespective of whether there are inclusions, there will be passive selling on ioneer Ltd (INR AU) and Australian Strategic Materials (ASM AU) due to capping changes to the index constituents.
Inclusions to the index jump post announcement. The review cutoff date is 31 May, so weakness in the potential inclusions could be used to pre-position (if they outperform index constituents).

AGL Energy’s Demerger Booklet Provides an Underwhelming Justification

By Arun George

The IFA supported the demerger by stating that “in the absence of a fully priced takeover offer from a third party, the demerger is the most attractive course of action.”
IFA concedes that “it is not possible to form a definitive view” if the demerger will generate higher shareholder returns. The report is light on qualitative analysis.
Mike Cannon-Brookes continues to gain retail support for a NO vote at AGL Energy Ltd (AGL AU)‘s 15 June scheme meeting. Our SoTP points to upside absent a demerger.

Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player

By Janaghan Jeyakumar, CFA

On 6th May 2022, Larsen & Toubro (LT IN)‘s publicly-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN) announced plans to merge.
I discussed this situation previously in Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI when the ratio was 0.66, expecting a scrip ratio north of 0.70.
Below is a closer look at the details of the transaction and the outlook for the combined entity.

Canon (7751) – Buyback Looks Small But Shareholder Structure Matters

Canon Inc (7751 JP) on Monday announced a share buyback programme.
It isn’t very big. But it bears consideration because of other things going on.
Shareholder structure is of much more importance than many investors appreciate. Here even more so.

Before it’s here, it’s on Smartkarma

May 10

China: China Conch Venture Holdings, TK Group (Holdings), Shanghai Microport Endovascular MedTech, Ashtead Group PLC, Road King Infrastructure and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Conch Venture (586 HK): Another Spin-Off in the Pipeline
Investing in HK Stocks
Shanghai Microport Endovascular MedTech (688016.CH) 21/22Q1 – This Is a Company Worth Investing In
Aristotle Capital Management International Equity ADR 1Q 2022 Commentary
Morning Views Asia: Japfa Comfeed Indonesia, Melco Resorts & Entertainment

Conch Venture (586 HK): Another Spin-Off in the Pipeline

By Osbert Tang, CFA

Following listing of China Conch Environment (587 HK), China Conch Venture (586 HK) is seeking a spin-off of CV Green Energy in A-share market and we view this move positively.
Limited details are currently available, but we think CV Green Energy, which operates WTE businesses, will trade at significantly higher multiples than its Hong Kong peers.
Assuming CV Green Energy to hold all Conch Venture’s WTE businesses, we estimate the IPO will boost the latter’s sum-of-the-parts value by 8% or HK$2.14 per share.

Investing in HK Stocks

By Turtles all the way down

I think most (value) investors go through four stages: Stage 0: Buy stuff that goes up. Especially when a lot of people around you get rich from doing it.
Stage 1: Invest in the future! Buy into some fancy exciting new technology that will become big some day! The Cathie Wood stage. Usually stage 1 and stage 0 go hand in hand.
Stage 2: Buy at low PE multiples. Some are smart and skip the first two. This stage is not bad, it should lead to slight outperformance. Can be dangerous without wide diversification as a lot of them are value traps.

Shanghai Microport Endovascular MedTech (688016.CH) 21/22Q1 – This Is a Company Worth Investing In

By Xinyao (Criss) Wang

The aortic product line would bring strong growth in 1-2 years. From 3 years or longer term, Endovascular’s peripheral vascular interventional devices would be the main driver for high growth.
We don’t think the centralized procurement would be a concern for the time being. As many products are or will apply for CE Mark, the progress of internationalization is promising.
The current valuation is very attractive. Due to the pandemic/lockdown in China and many external uncertainties, share price could go lower, but it’s still a good company to invest in.

Aristotle Capital Management International Equity ADR 1Q 2022 Commentary

For Q1 2022, Aristotle Capital’s International Equity ADR Composite posted a total USD return of -9.75% gross of fees.
The company is an independent/employee-owned investment management organization that specializes in equity and fixed income portfolio management for institutional and advisory clients worldwide.

Morning Views Asia: Japfa Comfeed Indonesia, Melco Resorts & Entertainment

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Japfa Comfeed Indonesia
Melco Resorts & Entertainment
Powerlong Commercial Management Holdings
Road King Infrastructure

Before it’s here, it’s on Smartkarma

May 10

TMT: Apple Inc, Appier Group Inc, Meta Platforms (Facebook), Delhivery, Coupang, Mindtree Ltd, Palantir Technologies Inc, Canon Inc, Hon Hai Precision Industry and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

AAPL and MSFT Support Breaks that Would Implode the US Cycle
Appier – Explosive US Growth
FB: “Planning to Slow the Pace of Our Investments” In the Metaverse.
Delhivery IPO: Peer Comparison and Valuation
Coupang: Four Major Factors to Drive Higher Profit Margins in 2022
Aristotle Capital Management Global Equity 1Q 2022 Commentary
Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
Palantir 1Q22 Earnings: War Supposedly Good for Business?
Canon (7751) – Buyback Looks Small But Shareholder Structure Matters
Hon Hai (2317.TT): 1Q22 Preview/2Q22 Outlook- For 2022, It Could Be the Lowest Revenue in 2Q22.

AAPL and MSFT Support Breaks that Would Implode the US Cycle

By Thomas Schroeder

Apple and Microsoft are pressing on pivotal supports that would weigh on the US equity cycle after the April 26 red flag for defensives and resource stocks to sell off.
Mounting to break AAPL and MSFT key supports at 150 and 270 that would inflection the SPX cycle further given the SPX is flirting with a key break below 4,100/4,030.
AAPL and MSFT support breaks target AAPL 120 and MSFT 220.

Appier – Explosive US Growth

By Shifara Samsudeen, ACMA, CGMA

When we reviewed Appier’s 2021 results we rambled on about the US for about half of our note discussing explosive growth potential.
We said that while Appier touted a >50% QoQ growth rate in the US we suspected it was actually closer to 100%.
In 1Q it accelerated to >180% QoQ growth prompting the sell side to go all surprised Pikachu.

FB: “Planning to Slow the Pace of Our Investments” In the Metaverse.

By Investment Talk

Meta Platforms surprised investors in Q1 but not because the quarter was outstanding. Rather, it wasn’t as bad as some had assumed.
In an unusual turn of events, Zuckerberg’s earnings call appearance resulted in whispering sweet nothings into investors’ ears
However great that might be, the quarter provided no conclusive update on the loss of signal from Apple’s iOS updates, with management offering on-platform messaging/commerce as a potential sidestep

Delhivery IPO: Peer Comparison and Valuation

Delhivery (1058656D IN) IPO will run from 11-13th May. The company plans to raise INR52.35bn (US$680m) through the issuance of a mix of new shares and OFS by existing shareholders.
At the indicative IPO price range of INR462-487 per share, Delhivery will have a market capitalisation of INR334.7-352.8bn and a post-money EV of INR294.8-312.9bn.
Delhivery plans to use the IPO proceeds for funding organic growth initiatives such as building scale and expanding network infrastructure as well as for funding inorganic growth.

Coupang: Four Major Factors to Drive Higher Profit Margins in 2022

By Douglas Kim

We have been Bearish on Coupang since 12 May 2021. Now we are turning Positive since we believe the valuations have become a lot more attractive.
We highlight four major factors that could result in higher profit margins for Coupang in 2022 including competitors exiting early dawn service, lower COVID and EATS related costs.
Our base case valuation of Coupang is implied market cap of $24.9 billion and target price of $14.1 per share, representing 32% upside from current levels.

Aristotle Capital Management Global Equity 1Q 2022 Commentary

For the first quarter of 2022, Aristotle Capital’s Global Equity Composite posted a total U.S.
dollar return of -9.19% gross of fees (-9.28% net of fees) The company is an independent/employee-owned investment management organization that specializes in equity and fixed income portfolio management.

Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player

By Janaghan Jeyakumar, CFA

On 6th May 2022, Larsen & Toubro (LT IN)‘s publicly-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN) announced plans to merge.
I discussed this situation previously in Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI when the ratio was 0.66, expecting a scrip ratio north of 0.70.
Below is a closer look at the details of the transaction and the outlook for the combined entity.

Palantir 1Q22 Earnings: War Supposedly Good for Business?

By Aaron Gabin

Revenue growth ex-SPAC decelerated to 19% this quarter, 11% below consensus.
1Q22 20% operating margins vs. consensus 27% margins as the company invests to reaccelerate growth in 2H from rising government contracts due to war.
Alex Karp warns that nuclear war in Ukraine is being dramatically underestimated.

Canon (7751) – Buyback Looks Small But Shareholder Structure Matters

Canon Inc (7751 JP) on Monday announced a share buyback programme.
It isn’t very big. But it bears consideration because of other things going on.
Shareholder structure is of much more importance than many investors appreciate. Here even more so.

Hon Hai (2317.TT): 1Q22 Preview/2Q22 Outlook- For 2022, It Could Be the Lowest Revenue in 2Q22.

By Patrick Liao

Hon Hai’s revenue was NT$1,408bn in 1Q22. We expect the OPM and EPS would be ~2.2% and ~NT$2.18 in 1Q22.
It’s a gradually increase for end-product shipment in 2021, but we think it might be followed by a slower season in 2Q22.
Hon Hai’s target is to address the profit in 2022. For 2022, we believe it could be the lowest revenue in 2Q22.

Before it’s here, it’s on Smartkarma

May 10

Indonesia: Jakarta Stock Exchange Composite Index, Kawasan Industri Jababeka, Solusi Sinergi Digital Tbk PT and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Indonesia the Latest Safe Haven to Buckle with KLSE in Pursuit
Jababeka – Earnings Flash – FY 2021 Results – Lucror Analytics
PT Solusi Sinergi Digital Tbk – FO Delayed but Sales Traction Growing; Exciting FY22E

Indonesia the Latest Safe Haven to Buckle with KLSE in Pursuit

By Thomas Schroeder

Hiding spots that are coming under pressure – Indonesia’s JKSE just cracked key support that makes the USD/IDR one of the last holdouts to see a big USD move.
USD/IDR bull triangle breakout unfolding with risk of a big USD short squeeze.
USD/MYR break above 4.50 would increase odds of devaluation and a more painful USD move in Asian FX. A huge pivot level to watch.

Jababeka – Earnings Flash – FY 2021 Results – Lucror Analytics

By Trung Nguyen

Jababeka has delivered acceptable FY 2021 results, with slight revenue and earnings increases. The financial risk profile improved slightly, but remained weak with elevated leverage and thin coverage ratios. Liquidity is adequate for the next 12 months. The strong FY 2021 and Q1/22 marketing sales will likely support decent growth in revenue and earnings from the Real Estate pillar.

However, the key concern remains refinancing risk for the USD 300 mn 6.5 2023 notes that will mature in October. The company announced in late July 2021 that it plans to buy back the 2023 notes, with the intention of issuing USD 350 mn in new notes to fund this transaction. No further details were provided, and Jababeka has not released an update in this regard.

PT Solusi Sinergi Digital Tbk – FO Delayed but Sales Traction Growing; Exciting FY22E

By SCCM Asia Research

4Q21 performance lifted by year-end sales festivities: 4Q21 revenue grew 5.9% QoQ to IDR98.1bn, primarily due to a 7.2x QoQ surge in advertising revenue as eCommerce platforms spent big on OOH media during year-end sales promotions.

FO deployment delayed but sales traction grows: As at Dec’21, WIFI’s balance sheet indicates that FO completion is currently at 51% (Sep’21: 30%).

Adjusting projections lower for FY22E with stronger numbers further afield: With stronger-than-expected sales traction, we believe that management could hike ASPs for its managed capacity segment in Jun’22 after the current auction is completed.

Before it’s here, it’s on Smartkarma

May 10

Japan: NTT (Nippon Telegraph & Telephone), Appier Group Inc, Denso Corp, Canon Inc, Kura Sushi Inc, Skylark Co Ltd, Zenkoku Hosho and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
Appier – Explosive US Growth
NTT (Buy) – An Exciting Day for Data but Not Much Has Changed
Denso – Strong Overshoot Potential And Only Modest Execution Risk
Canon (7751) – Buyback Looks Small But Shareholder Structure Matters
Kura Sushi (2695): Detective Conan in April, Dragon Ball in May
Skylark Holdings (3197): April Sales on an Improving Trend; Over 1,000 Robots in Operation
Zenkoku Hosho (7164): FY3/22 OP Achieved Guidance, but Not Strong Enough; Credit Costs Remain Low

NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”

NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) this morning announced a 1pm joint presser. Imaginations ran wild and NTT went up 12+%.
The reality is more subdued (as it should have been for a during-market-hours-presser) and it involves a restructuring of a small NTT subsidiary which happens to own NTT Data shares.
But it is still positive. It is something of a win-win for both parties.

Appier – Explosive US Growth

When we reviewed Appier’s 2021 results we rambled on about the US for about half of our note discussing explosive growth potential.
We said that while Appier touted a >50% QoQ growth rate in the US we suspected it was actually closer to 100%.
In 1Q it accelerated to >180% QoQ growth prompting the sell side to go all surprised Pikachu.

NTT (Buy) – An Exciting Day for Data but Not Much Has Changed

By Kirk Boodry

NTT and NTT Data will reorganize overseas assets into a new operating company run through NTT Data
The transaction results in little change for consolidated results at NTT Group although segment reporting may change and it will buy up to ¥100bn more of NTT Data
Restructuring could help unlock the potential of Dimension Data which has been a consistent laggard since NTT acquired it in FY11

Denso – Strong Overshoot Potential And Only Modest Execution Risk

Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus).
The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).
We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.

Canon (7751) – Buyback Looks Small But Shareholder Structure Matters

Canon Inc (7751 JP) on Monday announced a share buyback programme.
It isn’t very big. But it bears consideration because of other things going on.
Shareholder structure is of much more importance than many investors appreciate. Here even more so.

Kura Sushi (2695): Detective Conan in April, Dragon Ball in May

Same-store sales were in line with the pre-pandemic levels, and our impression is neutral.
Same-store sales of other revolving sushi formats in April (compared to April 2021 and April 2019) were 105.3% and 104.2% for Sushiro (Food & Life Companies), 108.4% and 94.5% for Genki Sushi, and 103.7% and 87.1% for Kappa Sushi, respectively.
The number of stores at the end of April was 512 in Japan (+2MoM), 37 in the U.S. (+/-0 MoM), and 45 in Taiwan (+/-0 MoM)

Skylark Holdings (3197): April Sales on an Improving Trend; Over 1,000 Robots in Operation

Skylark Holdings (3197, the company) disclosed monthly data for April (on a preliminary basis). All of its restaurants resumed normal operations on March 22
April same-store sales were significantly higher than in April 2021. Although the sales are still weaker than the pre-pandemic levels, the situation has been improving.
Same-store sales were 110.6% vs. April 2021 (99.0% for March), 182.0% vs. April 2020 (92.8% for March), and 77.4% vs. April 2019 (71.0% for March)

Zenkoku Hosho (7164): FY3/22 OP Achieved Guidance, but Not Strong Enough; Credit Costs Remain Low

Compared to our forecast, operating revenue and the number of new guarantees executed were lower. On the other hand, credit-related expenses were lower than our assumption
The company’s OP guidance for FY3/23 is 40.970bn yen (+3.8% YoY), more conservative than our forecast of 43.137bn yen and the QUICK consensus forecast of 43.653bn yen
The company disclosed that it purchased two RMBS, etc. in FY3/22. The total amount of the underlying assets was 60bn yen.

Before it’s here, it’s on Smartkarma