Five interesting news flow/development during this period:
New regulations proposals. The BOT recently discussed measures to rein in overly favorable leasing promotions, while the NBTC backs down from plans to impose surcharge on Facebook and LINE.
Biggest deal in advertising. Though only a minority stake, VGI’s investment in Plan B is arguably the largest one done in the media sector in years. The web of media enmeshed is arguably one of the largest outside broadcast media now.
Breadtalk agrees to buy 15% of Thai-listed NPPG, a holding company for packaging and restaurant chains. A relatively small deal, but one that ties NPPG indirectly to the much bigger Thai giant Minor.
Makro expands with an impressive Bt8.5bn. The budget includes potentially 10 new stores with two outside Thailand. An interesting spin for the CP All subsidiary essentially written off as ‘ex-growth’ by most of the Street.
The new Duty Free wars. Four groups, namely incumbent King Power, Central, Minor, and The Mall, join the fray to dominate Thailand’s Duty Free business for the next decade. We hope Minor wins, but most likely, it’s going to be Central.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Five interesting news flow/development during this period:
New regulations proposals. The BOT recently discussed measures to rein in overly favorable leasing promotions, while the NBTC backs down from plans to impose surcharge on Facebook and LINE.
Biggest deal in advertising. Though only a minority stake, VGI’s investment in Plan B is arguably the largest one done in the media sector in years. The web of media enmeshed is arguably one of the largest outside broadcast media now.
Breadtalk agrees to buy 15% of Thai-listed NPPG, a holding company for packaging and restaurant chains. A relatively small deal, but one that ties NPPG indirectly to the much bigger Thai giant Minor.
Makro expands with an impressive Bt8.5bn. The budget includes potentially 10 new stores with two outside Thailand. An interesting spin for the CP All subsidiary essentially written off as ‘ex-growth’ by most of the Street.
The new Duty Free wars. Four groups, namely incumbent King Power, Central, Minor, and The Mall, join the fray to dominate Thailand’s Duty Free business for the next decade. We hope Minor wins, but most likely, it’s going to be Central.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
The 50th JCNC AGM was all about cars, cows and cement. Investors questioned the board on various topics.
Jardine Cycle & Carriage Ltd (JCNC SP) is an interesting play on Astra (at a discount), and now offers you exposure to some other large companies in Vietnam and Thailand. The increased investments have impacted the balance sheet which now carries $1.3 billion in holding debt. This is high by historical Jardine standards, another rights issue is therefore increasingly likely and is probably only a matter of time.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Five interesting news flow/development during this period:
New regulations proposals. The BOT recently discussed measures to rein in overly favorable leasing promotions, while the NBTC backs down from plans to impose surcharge on Facebook and LINE.
Biggest deal in advertising. Though only a minority stake, VGI’s investment in Plan B is arguably the largest one done in the media sector in years. The web of media enmeshed is arguably one of the largest outside broadcast media now.
Breadtalk agrees to buy 15% of Thai-listed NPPG, a holding company for packaging and restaurant chains. A relatively small deal, but one that ties NPPG indirectly to the much bigger Thai giant Minor.
Makro expands with an impressive Bt8.5bn. The budget includes potentially 10 new stores with two outside Thailand. An interesting spin for the CP All subsidiary essentially written off as ‘ex-growth’ by most of the Street.
The new Duty Free wars. Four groups, namely incumbent King Power, Central, Minor, and The Mall, join the fray to dominate Thailand’s Duty Free business for the next decade. We hope Minor wins, but most likely, it’s going to be Central.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
The 50th JCNC AGM was all about cars, cows and cement. Investors questioned the board on various topics.
Jardine Cycle & Carriage Ltd (JCNC SP) is an interesting play on Astra (at a discount), and now offers you exposure to some other large companies in Vietnam and Thailand. The increased investments have impacted the balance sheet which now carries $1.3 billion in holding debt. This is high by historical Jardine standards, another rights issue is therefore increasingly likely and is probably only a matter of time.
ADVANTEST (6857 JP) reported FY2019 on 25th April and released initial forecasts for the current year which suggest that Operating Income will decline by 54% on a 19% decline in sales and a 23% decline in new orders. For details, please see LightStream Research‘s Insight here. This Insight will review the company’s forecasting track record, update our Scoring Charts and, based on our valuation methodology, suggest the current downside risk or short ‘potential’ after today’s near 9% decline. We also highlight the 11% increase in net shares outstanding in the last five quarters.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
A conversation with Bank Central Asia (BBCA IJ) management revealed a relatively positive outlook after a strong start to the year, with politics and security being its red flag to this view.
The bank achieved +13% YoY loan growth in 1Q19 mainly driven by corporate lending, which grew by 15.8% and out of this investment-driven loans grew more quickly.
Consumer lending was altogether more sluggish with +7.9% over the quarter, with mortgage loans outperforming with +11% growth, with some very attractive promotional rates beings offered, and motorcycle loans seeing a notable slowdown.
Funding wise, the bank continues to shine with a CASA ratio of 76.8% and continues to grow in its CASA of over +7% in 1Q19, despite an overall tighter liquidity environment. This was reflected in an improvement in the banks NIM, which increased to 6.19% in 1Q18.
Bank Central Asia (BBCA IJ) continues to innovate on its online offering, with a number of new initiatives. This helps the bank maintain its dominance in transactional banking in Indonesia.
BCA remains the best quality bank in Indonesia, in terms of service and management, which is conservative yet dynamic, with a keen focus on returns but always with the appropriate level of risk exposure in mind. It has the lowest cost of funds amongst the major banks, given its dominance in transactional banking, which means it has a high CASA ratio. The bank has one of the lowest NPL ratios in the sector at 1.5% and with a provision/NPL coverage of 171%. According to Capital IQ Consensus, it trades on 21.0x FY20E PER and 18.5x FY21E PER, with forecast EPS growth of +12.4% and +13.4% for FY20E and FY21E respectively. It trades on a PBV of 3.5x FY20E with forecast ROE of 18% and ROA of 3.4%. Bank Central Asia (BBCA IJ) is a core holding in Indonesia and should be bought on any major correction in the overall market.
InfinitySub, a subsidiary of ESR Cayman, is raising its stake in the SPV which owns the manager of Sabana Shari’Ah Compliant Reit (SSREIT SP) (Sabana REIT) and buying units in the REIT in a S$62.2mn deal through a set of transactions. This ESR’s second attempt to acquire Sabana REIT after talks of unit/asset sales to ESR REIT was aborted in 2017.
Based on current year DPU of 3.0 cents (annualized based on 1Q19 DPU), the yield of 7.1% is unimpressive and the REIT continues to face challenging market conditions and the likelihood of negative rental reversions. The entry of ESR Cayman as the controlling shareholder is definitely welcome as it may bring about a swifter reconstitution of Sabana REIT’s existing portfolio and a brighter prospect of acquisitions.
Sabana REIT’s estimated debt headroom of about S$190mn before hitting the regulatory gearing limit is by no means considered high. However, having a new sponsor such as ESR Cayman may give Sabana REIT more options for manoeuvre.
The vendor, Vibrant (VIBG SP) has obtained a waiver from the SGX for holding an extraordinary general meeting (EGM) for shareholders to approve the deal as the transactions are price- and time-sensitive.
Luxurious auto car distribution in China sounds like a great business to have, supported by the rising number of wealthy individuals springing up in various parts of the Middle Kingdom. However, the sector seems to be very fragmented where no single companies is able to have significant market share as none of them has exclusive distribution rights over a particular foreign brand including China Meidong Auto (1268 HK) .
The recent share price surge powered by growth expansion from the single city single store initiative (in third and fourth tier cities) may not last long as there is nothing stopping any competitor to expand to these markets when demand still outstrip supply therefore margin is better compared to the first tier cities. However, it also brings the question whether the fresh demand from the new wealth in the third and fourth tier cities have enough depth to sustain China Meidong Auto’s sales growth.
Rakuten Inc (4755 JP) hosted a call with CTO Tareq Amin to update analysts and investors on recent progress. The company says cell site acquisition is moving ahead quickly and it an end-October mobile launch remains the target. As discussed previously, the next major milestone is the start of 1 July beta-testing so there was little that could be added this week although management did again run through key success factors like cost and operational efficiency from its cloud-based integrated network architecture. Mr. Amin teased a possible game-changing announcement next week, which is likely to come from the vendor side and we suspect has to do with 5G turnkey solutions. Coming out of quarterly results for all companies, the outlook has not meaningfully changed with incumbents confident that pricing changes are sufficient even with Rakuten promising disruption from a unique network and installed base of eCommerce/fintech users.
We maintain our BUY rating for JKN with a target price of Bt8.80 based on 14.8xPE’19E, average of Asia ex-Japan Consumer Discretionary sector. We foresee insignificant impact from seven of digital TV channel operators (out of 22) who intend to return broadcasting licenses to the NBTC. We expect new clients to cover such a loss from one key account (Bright TV no.20) within 3Q19.
The story:
New potential clients could buffer loss from one key client
Continuing recovery for domestic digital TV industry
Expect 24% CAGR of EPS growth in 2019-21E
Risks: Heavy reliance on a few major customers, probability it will have to set provisions for doubtful debts and potential inability to renew contracts with customers.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
The 50th JCNC AGM was all about cars, cows and cement. Investors questioned the board on various topics.
Jardine Cycle & Carriage Ltd (JCNC SP) is an interesting play on Astra (at a discount), and now offers you exposure to some other large companies in Vietnam and Thailand. The increased investments have impacted the balance sheet which now carries $1.3 billion in holding debt. This is high by historical Jardine standards, another rights issue is therefore increasingly likely and is probably only a matter of time.
ADVANTEST (6857 JP) reported FY2019 on 25th April and released initial forecasts for the current year which suggest that Operating Income will decline by 54% on a 19% decline in sales and a 23% decline in new orders. For details, please see LightStream Research‘s Insight here. This Insight will review the company’s forecasting track record, update our Scoring Charts and, based on our valuation methodology, suggest the current downside risk or short ‘potential’ after today’s near 9% decline. We also highlight the 11% increase in net shares outstanding in the last five quarters.
Early this morning the Yomiuri Shimbun reported that Renault SA (RNO FP) had decided to block Nissan CEO Saikawa’s reappointment at the company’s Annual Shareholders’ Meeting set to be held in late Jun, if he did not agree to a merger.
This move by Renault, or rather Paris, is to put it bluntly, absurdly clumsy and in our opinion goes a long way towards ensuring the death of the alliance. It also, together with Nissan Motor (7201 JP)‘s recent downward revision make the probability of a dividend cut more likely if things turn outright hostile.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
ZOZO Inc (3092 JP) released weak results (-14% vs. consensus) and guidance (-10.2% vs. consensus) at the OP level. The company did announce the stoppage of the unpopular Zozoarigatou service which caused so much friction with merchants and it is likely that the market was far below consensus, so the stock initially reacted positively. As the reality of the failure of various attempts to generate a new growth driver sets in though, the stock is now down almost 10%.
After a small improvement in operating trends in 4Q18, China Mobile (941 HK) failed to consolidate those gains and recently reported poor 1Q results. We downgraded China Mobile some time ago given its potential exposure to aggressive 5G capex (as part of national service). While China Telecom Corp Ltd (H) (728 HK) and China Unicom Hong Kong (762 HK) have laid out modest 5G capex plans for 2019, China Mobile has yet to do so. We continue to see risk that 5G capex is ahead of expectations, esp from 2020, and with poor current fundamentals retain our Reduce recommendation and target price of HK$75.
Chairmain Koo wants to make some big changes to improve profitability of LG Electronics – The company’s decision to stop production of smartphones in Pyeongtaek, Korea by end of this year and move this operation to Hai Phong, Vietnam has been received with mixed reactions by the shareholders so far and its share price is up 2% after this announcement.
Workers’ pay in Vietnam is nearly 1/8 of the levels in Korea.
LG is now likely to focus on the low-to-mid end of the global smartphone segment.
Moon Jae-In administration’s socialist policies are not business friendly.
We think that the annual potential savings of shifting the manufacturing to Vietnam could be about 50 billion won or 2% of the company’s annual operating profit.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
ZOZO’s (3092 JP) announced its FY18 results today, with operating profit down 21% despite sales increasing by 20.3%.
What was more surprising was a clear sign of retreat and even some humility as the online fashion mall announced it would end its disastrous Zozoarigato campaign.
Merchants are delighted but the damage has already been done and it will take time to repair merchant trust at a time when headwinds are building for Zozotown and the private brand is no longer expected to deliver growth as forecast.
The company is much less optimistic about growth for the current year; it forecasts a 24.7% increase in OP to ¥32 billion but much slower GMV growth of just 13.6% to ¥367 billion. The private brand will shrink by 38.5% to just ¥1.7 billion.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
ZOZO’s (3092 JP) announced its FY18 results today, with operating profit down 21% despite sales increasing by 20.3%.
What was more surprising was a clear sign of retreat and even some humility as the online fashion mall announced it would end its disastrous Zozoarigato campaign.
Merchants are delighted but the damage has already been done and it will take time to repair merchant trust at a time when headwinds are building for Zozotown and the private brand is no longer expected to deliver growth as forecast.
The company is much less optimistic about growth for the current year; it forecasts a 24.7% increase in OP to ¥32 billion but much slower GMV growth of just 13.6% to ¥367 billion. The private brand will shrink by 38.5% to just ¥1.7 billion.
Lawson is opening up its store and logistics network to provide a customer returns service to third-party vendors, affirming its role as a hub for e-commerce transactions. The move follows the expansion of Lawson’s online food service, Loppick.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
ZOZO’s (3092 JP) announced its FY18 results today, with operating profit down 21% despite sales increasing by 20.3%.
What was more surprising was a clear sign of retreat and even some humility as the online fashion mall announced it would end its disastrous Zozoarigato campaign.
Merchants are delighted but the damage has already been done and it will take time to repair merchant trust at a time when headwinds are building for Zozotown and the private brand is no longer expected to deliver growth as forecast.
The company is much less optimistic about growth for the current year; it forecasts a 24.7% increase in OP to ¥32 billion but much slower GMV growth of just 13.6% to ¥367 billion. The private brand will shrink by 38.5% to just ¥1.7 billion.
Lawson is opening up its store and logistics network to provide a customer returns service to third-party vendors, affirming its role as a hub for e-commerce transactions. The move follows the expansion of Lawson’s online food service, Loppick.
In 2017, Aeon (8267 JP) said it would spend ¥500 billion on logistics and digital infrastructure to grow online sales to ¥1 trillion by 2020.
Two years on and the only public developments are a series of investments in tech companies and reassurances that it has teams working on new systems.
The ¥1 trillion goal looks increasingly out of reach without a major new initiative very soon.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
ZOZO’s (3092 JP) announced its FY18 results today, with operating profit down 21% despite sales increasing by 20.3%.
What was more surprising was a clear sign of retreat and even some humility as the online fashion mall announced it would end its disastrous Zozoarigato campaign.
Merchants are delighted but the damage has already been done and it will take time to repair merchant trust at a time when headwinds are building for Zozotown and the private brand is no longer expected to deliver growth as forecast.
The company is much less optimistic about growth for the current year; it forecasts a 24.7% increase in OP to ¥32 billion but much slower GMV growth of just 13.6% to ¥367 billion. The private brand will shrink by 38.5% to just ¥1.7 billion.
Lawson is opening up its store and logistics network to provide a customer returns service to third-party vendors, affirming its role as a hub for e-commerce transactions. The move follows the expansion of Lawson’s online food service, Loppick.
FANUC (6954 JP)‘s FY2019 results were released on 25th April, and the detail and the downside risk has been well-covered by Lightstream’s Mio Kato in Fanuc: Profitability Deterioration and Share Price Rebound Open Up Significant Downside. This Insight will look instead at the company’s earnings cycle and its relationship with Fanuc’s Relative Price Score. In the DETAIL section below, we shall also look at the company’s forecast history, Comprehensive Income, cash flows, shareholder returns and historical valuation trends. Although we share some of Mio’s concerns, we do not share his view that “the stock can trade down towards 1.0-1.5x PB – it does not strike us as impossible for the stock to halve”. Although the upside may be constrained, we believe the 25th December 2018 low of ¥15,760 will be the current cycle low point.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
