Category

Equity Bottom-Up

Daily Brief Equity Bottom-Up: Tesla Q4 Miss Is Big & Sets the Stage for a Drop in 2023 Profits and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Tesla Q4 Miss Is Big & Sets the Stage for a Drop in 2023 Profits
  • ASML & Lam Results: Key Take-Aways for Semiconductors in 2023
  • Hyundai Motor: Solid Earnings in 4Q 2022 + Shares Cancellation
  • Hindustan Unilever (HUVR IN) | Royalty Rukus
  • S&P (SPGI US) VS S&P (SPX Index): A Leveraged Play on Rate Expectations
  • Technical Analysis On Exxon Mobil
  • Record Sales at JR Tokai Takashimaya
  • HYDB: Optimistically Backing High-Yield Corporate Bonds
  • Itochu Signs L.L.Bean License, Gears up Forever 21 and Eddie Bauer Relaunches
  • UI: Inventory Environment

Tesla Q4 Miss Is Big & Sets the Stage for a Drop in 2023 Profits

By SC Capital

  • Tesla reported a 6% Q4 EPS beat, but stripping out a one-off deferred revenue booking & higher than expected regulatory credits, Q4 results missed by 9%.  
  • Tesla rose +5.5% post market close after Musk said YTD orders are “2x” output. None of the data we have seen implies such demand, especially weekly China sales. 
  • What went unnoticed on the earnings call is that Tesla created a $7bn credit facility this month, which should dash all hopes of them doing a share buyback in 2023. 

ASML & Lam Results: Key Take-Aways for Semiconductors in 2023

By Vincent Fernando, CFA

  • ASML and Lam Research’s latest guidance implies extremely different near-term revenue outlooks but shows an industry pulling back near-term while investing for long-term.
  • Results show the much weaker situation for Memory chips vs. Logic chips, and little discussion of a recovery for Memory from the firms so far.
  • Firms servicing long-term strategic, specialized demand from customers are indeed performing better than those servicing more commoditized demand.

Hyundai Motor: Solid Earnings in 4Q 2022 + Shares Cancellation

By Douglas Kim

  • Hyundai Motor’s EV sales as a percentage of total sales increased from 4.3% in 4Q 2021 to 5.7% in 4Q 2022. 
  • Hyundai Motor announced that it will cancel 2.14 million common shares, representing 1% of its outstanding common shares.
  • The company beat consensus sales and operating profit estimates in 4Q 2022 and the consensus is likely to revise up their earnings estimates. 

Hindustan Unilever (HUVR IN) | Royalty Rukus

By Pranav Bhavsar

  • Hindustan Unilever (HUVR IN)‘s strong quarterly performance was overshadowed by a proposed hike in royalty payments to parent Unilever PLC (ULVR LN) 
  • HUVR’s historical royalty growth has been below revenue and PBT growth and hence does not generate any red flags in terms of minority shareholder protection.  
  • While the impact on EPS is ~3%, we believe much of the reaction around HUVR’s Royalty is Noise. 

S&P (SPGI US) VS S&P (SPX Index): A Leveraged Play on Rate Expectations

By Stanley Tsai, CFA

  • S&P (the company) may be a lot more exposed than S&P (the index) if rates stay higher for longer and bets against the Fed unwind in 2H23.
  • While we like the rating agency and financial data provider’s business portfolio, valuation is looking a bit stretched based on fundamental, relative and technical valuation metrics.
  • We believe it is unlikely that the stock will push through the USD375/share resistance level in the near term, and would look for entry opportunities closer to USD325/share.

Technical Analysis On Exxon Mobil

By VRS (Valuation & Research Specialists)

  • Exxon Mobil Corporation is engaged in energy business. The Company’s principal business involves the exploration for, and production of, crude oil and natural gas, and the manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and a range of specialty products.
  • The Company’s segments include Upstream, Downstream and Chemical.
  • The Upstream segment is organized and operates to explore for and produce crude oil and natural gas.

Record Sales at JR Tokai Takashimaya

By Michael Causton

  • JR Takashimaya is a newbie in the world of department store retailing but has grown to become the fourth highest selling store in the two decades since it opened. 
  • As a result, it is increasingly regarded by brands as the Nagoyan version of Isetan Shinjuku in Tokyo and Hankyu Umeda in Osaka.
  • The store is an example of Takashimaya’s successful strategy to surround its key stores with more shopping facilities to suit all population segments, so driving traffic to the main store.

HYDB: Optimistically Backing High-Yield Corporate Bonds

By Pearl Gray Equity and Research

  • We might get a reasonable amount of flak for this article, as many investors fear a recession, and concurrently are staying away from high-yield bonds.

  • However, credit spreads are narrowing, and the equity market is receiving substantial support.

  • Thus, we believe the


Itochu Signs L.L.Bean License, Gears up Forever 21 and Eddie Bauer Relaunches

By Michael Causton

  • Three years ago, Itochu Corp made it clear it would be investing heavily in its brand business.
  • It has been true to its word, adding the likes of Reebok, Under Armour and Forever 21 to its portfolio in the last year alone.
  • It has now signed a deal with long-term Japan operator, L.L.Bean, while gearing up for a major relaunch of Eddie Bauer.

UI: Inventory Environment

By Hamed Khorsand

  • The enterprise segment has fueled revenue growth at Ubiquiti (UI) and it should remain the same in the fiscal second quarter
  • Ubiquiti has expanded its product offering for enterprise customers where it includes a complete solution down to the EV charging station
  • We have made several adjustments to our earnings model. We continue to assume gross margin rising sequentially due to lower costs

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Daily Brief Equity Bottom-Up: Sea Ltd: Game Over and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Sea Ltd: Game Over
  • Alibaba (BABA US): What Is Next After Strong Rally?
  • CyberAgent (4751) | World Cup Winners
  • Korean Holdcos Vs Opcos Gap Spreads Opportunities in 1Q 2023
  • CyberAgent 1QFY09/2023: Earnings Miss, Struggling Gaming and Huge FIFA Cost Add to the Woes
  • Nidec (6594): A V-Shaped Recovery Cannot Be Taken for Granted
  • Bank Negara Indonesia (BBNI IJ) – Laggard Leader with Appealing Returns Ahead
  • Krishna Institute of Medical Sciences (KIMS IN): Improving Operations; Expansion to Drive Growth
  • 5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT
  • Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

Sea Ltd: Game Over

By Oshadhi Kumarasiri

  • We don’t see a way for Sea Ltd (SE US)’s e-commerce business to turn profitable in the next few years.
  • For the moment, the Digital-Entertainment segment is capable of absorbing most of e-commerce losses, but we are expecting the segment profitability to fall 70% to $135m per-quarter over the-next two-years.
  • Once that happens, we think it will be game over for Sea Ltd.

Alibaba (BABA US): What Is Next After Strong Rally?

By Eric Chen

  • Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
  • Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
  • That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.

CyberAgent (4751) | World Cup Winners

By Mark Chadwick

  • CyberAgent Q1 loss on one-off expenses from World Cup streaming. We see Q1 as a bottom this fiscal year
  • Share price already discounted weak FY9/23 guidance last October and focus is now on recovery 
  • The World Cup was a success for the Japanese National side and for Abema

Korean Holdcos Vs Opcos Gap Spreads Opportunities in 1Q 2023

By Douglas Kim

  • In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 1Q 2023.
  • Of the 33 pair trades, 2/3 of them involved holdcos outperforming opcos in the past year and 1/3 of them involved opcos outperforming holdcos in the same period.
  • We highlight 33 pair trades that involve Korean holdcos and opcos.

CyberAgent 1QFY09/2023: Earnings Miss, Struggling Gaming and Huge FIFA Cost Add to the Woes

By Shifara Samsudeen, ACMA, CGMA

  • CyberAgent Inc (4751 JP) reported 1QFY09/2023 results. Revenue declined 2.1% YoY to JPY167.6bn (vs consensus JPY176.1bn) while OP turned negative JPY1.25bn (vs consensus OP of JPY4.1bn.
  • CA’s largest investment to-date was for FIFA 2022 but top line growth has largely been in line with previous quarter. WAU have dropped to pre-FIFA levels.
  • Though AbemaTV’s monetisation strategy seems to work, the growth prospects for other two segments are concerning and likely to drag down the consolidated performance.

Nidec (6594): A V-Shaped Recovery Cannot Be Taken for Granted

By Scott Foster

  • Nidec is headed into the red due to market disruption in China, restructuring charges and stagflation.
  • The first two of these factors should be temporary, but the third points to longer term pressure on margins. Competition in EV motors is another problem that won’t go away.
  • In a weak economy characterized by stagflation, it is too early to turn bullish.

Bank Negara Indonesia (BBNI IJ) – Laggard Leader with Appealing Returns Ahead

By Angus Mackintosh

  • Bank Negara Indonesia finished 2022 with a strong set of numbers beating guidance and consensus, as it continued to benefit from low cost of funds and strong loan growth. 
  • The bank has increased its exposure to higher-quality corporate customers, and large commercial customers in their supply chain plus growing government-backed KUR loans as well as consumer loans. 
  • BNI’s strategy in digital banking for consumers and business customers is driving loan growth and fee income as well as funding. Valuations are attractive with rising returns increasing the appeal. 

Krishna Institute of Medical Sciences (KIMS IN): Improving Operations; Expansion to Drive Growth

By Tina Banerjee

  • Krishna Institute of Medical Sciences (KIMS IN) is seeing a continued business recovery reflected in improving operating metrics. In Q2FY23, KIMS reported record high quarterly sales, EBITDA, and footfall.
  • KIMS is following a disciplined growth strategy and plans to grow into markets that are adjacent to the current core markets of Andhra Pradesh and Telangana.   
  • KIMS has set foot in a new market of Maharashtra, outside of its core market. With lower margins from acquired assets than matured hospitals, KIMS has scope for margin improvement.

5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT

By Geoff Howie

5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT

Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

By Victor Galliano

  • Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk
  • Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator
  • BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns

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Daily Brief Equity Bottom-Up: Nidec (6594) | Down but Not Out and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Nidec (6594) | Down but Not Out
  • Tencent (700.HK): Valuing Wechat Channels
  • Comfortdelgro (CD): Now or Never
  • Baycurrent Consulting: High Value-Added Projects and New Consulting Areas Drive New Phase of Growth
  • Asian Paints (APNT IN) | Masking Growth Concerns
  • Hutchmed China Ltd (13.HK/HCM.US) – The $1.13B Eye-Catching Deal with Takeda and the New Outlook
  • PolyNovo (PNV AU): 1H23 Result- Growth Trajectory Continues; Fund Raising Strengthens Balance Sheet
  • Bayer: Focusing On Fundamentals – What The Market Isn’t Picking Up!
  • Teladoc Inc: New Integrated Healthcare Experience & Other Developments
  • ON Semiconductor Corp: Major Drivers

Nidec (6594) | Down but Not Out

By Mark Chadwick

  • Nidec slashed its full year operating profit guidance by 48% to 110 billion yen
  • For Q3, Nidec reported an operating profit of 28 billion yen (-37% YoY), significantly below street expectations (51 billion)
  • We remain bullish, expecting cost cutting efforts to ignite a profit recovery next year

Tencent (700.HK): Valuing Wechat Channels

By Eric Chen

  • Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
  • Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
  • Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.

Comfortdelgro (CD): Now or Never

By Henry Soediarko

  • New leadership with expertise in Australia could lead to value unlocking for Australian assets. 
  • Q3 22 ridership has gone up to 85% and 83% of pre-COVID level for NEL and DTL while in Q3 21 was only 49% for NEL and 43% for DTL.
  • The reopening has brought tourists back and increased ridership level while China’s reopening has just started and is not yet priced in. 

Baycurrent Consulting: High Value-Added Projects and New Consulting Areas Drive New Phase of Growth

By Shifara Samsudeen, ACMA, CGMA

  • Baycurrent’s share price has moved up 41.3% YTD with the company reporting strong earnings for 3QFY02/2023 which beat consensus estimates by a huge margin.
  • With pandemic conditions fading off, share price began to fall with top-line growth declining slightly. However, growth rates have bounced back, and margins have seen strong improvement reaching new highs.
  • Though share priced has rallied significantly over the last few months, we think there is further upside driven by value-added projects and expansion into new consulting areas.

Asian Paints (APNT IN) | Masking Growth Concerns

By Pranav Bhavsar

  • Asian Paints (APNT IN) reported flat year-over-year volumes and flat sales in domestic decorative paints in 3Q FY23. The company’s gross margin recovery is aligned with easing raw material prices.  
  • The company attributed the rough quarter to a heavy base from last year’s price increases and a prolonged monsoon, which impacted October volumes.
  • We believe that the volumes are lower than what has been reported.  Increasing competition could challenge APNT’s premium valuation.

Hutchmed China Ltd (13.HK/HCM.US) – The $1.13B Eye-Catching Deal with Takeda and the New Outlook

By Xinyao (Criss) Wang

  • HUTCHMED entered into an exclusive license agreement with Takeda- HUTCHMED will receive up to US$1.13 billion including US$400 million upfront, the third highest upfront among China’s TOP 10 license-out deals.
  • Even if fruquintinib may probably not become a blockbuster product in the future, HUTCHMED still gets a decent upfront to relieve its cash flow pressure and an internationalization admission ticket.
  • Hutchmed China Ltd (13 HK) is undervalued based on our sales forecast. After savolitinib has been included in the updated NRDL, this year’s performance growth is worth looking forward to.

PolyNovo (PNV AU): 1H23 Result- Growth Trajectory Continues; Fund Raising Strengthens Balance Sheet

By Tina Banerjee

  • PolyNovo Ltd (PNV AU) reported record high sales of A$27.3 million, up 67.5% YoY during H1FY23, mainly driven by the strong momentum in the U.S.
  • The company has continued to increase the sales team, particularly in the U.S. which has driven sales growth and customer account acquisition, entailing long-term visibility.
  • Recently, PolyNovo has raised A$53 million to fund its global growth aspirations. The company is entering new markets, enhancing portfolio, and expanding manufacturing facility to support 5x sales.

Bayer: Focusing On Fundamentals – What The Market Isn’t Picking Up!

By Alexis Dwek

  • The equity story expands across all of Bayer’s three segments. Positive signs in Pharma, Crops Sciences, and Consumer Health are showing, which we believe are misunderstood by the investment community
  • Bayer has seen a material share price decline driven by litigation issues, while earnings showed solid progress.
  • Positive news from the Pharma pipeline and progress in the high value seed business as well as the litigation cases removed from the spotlight should help the stock rerate.

Teladoc Inc: New Integrated Healthcare Experience & Other Developments

By Baptista Research

  • Teladoc Health delivered a decent result for the last quarter and managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
  • Teladoc concluded the quarter with a total US paid membership of 57.8 million members, an increase of 1.2 million members over the second quarter, driven by a combination of new virtual care client onboardings and population expansions within current clients.
  • The management conducted their client advisory panel with representatives from 30 health plans, sizable employers, and health systems in attendance.

ON Semiconductor Corp: Major Drivers

By Baptista Research

  • ON Semiconductor Corporation delivered another all-around beat in its last result.
  • The company is a well-known provider of intelligent sensing and power solutions and has established a good market position within its niche in the semiconductor market.
  • More and more companies are considering ON Semiconductors as their long-term strategic partners as the company walks according to an amazing foresight.

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Daily Brief Equity Bottom-Up: China Internet Weekly (23Jan2023): Tencent and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • China Internet Weekly (23Jan2023): Tencent, Meituan, NetEase, Activision Blizzard
  • Universal Entertainment of Japan: IPO for Its Manila Casino Draws Closer
  • Takeda Strengthens Oncology Portfolio with HUTCHMED’s Fruquintinib Acquisition
  • Sciclone Pharmaceuticals (6600.HK) – The Business, the Outlook and the Challenges
  • Taiwan Tech Weekly: Dutch & Japan China Restrictions End-January, Realtek Results Show Pain in PCs
  • Medlab Clinical – NanaBis development centre stage in 2023
  • Naspers: Looming Concerns

China Internet Weekly (23Jan2023): Tencent, Meituan, NetEase, Activision Blizzard

By Ming Lu

  • The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
  • Tencent closed its XR business and terminated a property rental contract.
  • NetEase refused to extend service for Activision Blizzard for additional six months.

Universal Entertainment of Japan: IPO for Its Manila Casino Draws Closer

By Howard J Klein

  • The long, tortured legal mess between Universal and its ousted founder over control of its lucrative Manila integrated casino resort now has a clear path to its spin off IPO.
  • The Okada Manila resort is among the sector leaders in the burgeoning Philippines gaming market now ramping rapidly toward full GGR recovery.
  • At UE’s current price of 2,347jpy, the stock bears a built in premium of a Spac IPO now appearing to be pointed to debut this year.

Takeda Strengthens Oncology Portfolio with HUTCHMED’s Fruquintinib Acquisition

By Shifara Samsudeen, ACMA, CGMA

  • Takeda announced Monday that it has entered into an exclusive licensing agreement with HUTCHMED (China) for further development and commercialisation of Fruquintinib outside of Mainland China, Macau and Hong Kong.
  • Takeda will pay HUTCHMED $400m upfront and up to $730m in additional potential payments relating to regulatory, development and commercial sales milestones, as well as royalties on net sales.
  • Fruquintinib was approved in China in 2018, is a highly selective, oral VEGFR1/2/3 Tyrosine Kinase Inhibitor and offers potential new treatment option for patients with refractory metastatic colorectal cancer (CRC).

Sciclone Pharmaceuticals (6600.HK) – The Business, the Outlook and the Challenges

By Xinyao (Criss) Wang

  • Zadaxin has been the biggest performance driver of SciClone, but it would face the risk of losing market share and increased pricing pressures after generic drugs were included in VBP.
  • SciClone is primarily a pharmaceutical development/sales company, rather than a research-based innovative drug company.The increasingly low cost performance of in-licensed products has made the capital “reconsider” and be more rational.
  • SciClone is a good stock for short-term trade, especially by taking advantage of the positive momentum after it reaches licensing deals/launches new products, but we’re concerned about its long-term prospects.

Taiwan Tech Weekly: Dutch & Japan China Restrictions End-January, Realtek Results Show Pain in PCs

By Vincent Fernando, CFA

  • New China semiconductor restrictions could be announced by the Netherlands and Japan by end-January.
  • Realtek 4Q22 results — Signals weakness for companies serving the PC market, and could get worse in 1Q23E.
  • Western Digital & Kioxia could merge NAND flash units to create a rival to Samsung.

Medlab Clinical – NanaBis development centre stage in 2023

By Edison Investment Research

As Medlab Clinical moves into 2023, the expected commencement of a Phase III trial for NanaBis (the company’s cannabinoid based analgesic therapy) in cancer-induced bone pain will be the focus for investors. Management made considerable progress towards Phase III in 2022, by switching to a purely synthetic cannabinoid formulation and gathering encouraging real-world data on NanaBis use. We believe these actions should maximise the potential for NanaBis in both a regulatory and a commercial setting. We note that successful progression of the company’s programmes will be contingent on Medlab’s ability to raise capital, given the short cash runway (funded into March 2023) and recent setback with the Nasdaq listing plans. We update our estimates to reflect the financing risk and macro uncertainty, resulting in our valuation decreasing to A$183.5m or A$80.4/share, from A$236.1m or A$103.5/share.


Naspers: Looming Concerns

By Pearl Gray Equity and Research

  • Naspers’ South African ventures exhibit solid growth, but an inflection point awaits, according to the company.
  • The company’s exposure to China’s reopening is a roll of the dice, says Naspers.
  • Naspers’ (OTCPK:NPSNY) stock has climbed by more than 20% in the past month, subsequently luring investors’ attention.

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Daily Brief Equity Bottom-Up: Chugai Pharmaceutical (4519 JP): Hemlibra Is the Only Saviour; Competition Bites Mainstay Drugs and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Chugai Pharmaceutical (4519 JP): Hemlibra Is the Only Saviour; Competition Bites Mainstay Drugs
  • China Healthcare Weekly (Jan.20) – NRDL Negotiation Results, JW Therapeutics, Sirnaomics, Antengene
  • Alibaba Group Holdings: Staying the Course
  • Tencent Music Entertainment(TME.US) 4Q22 Preview: Raise TP for Gradual but Slow Recovery
  • ZTO Express(ZTO.US) 4Q22 Preview: Maintain Leadership and Benefit from Industry Rebound
  • Bilibili(Bili.US) 4Q22 Preview: Raise TP for More Optimistic Outlook in 2023
  • JD Logistics(2618.HK) 4Q22 Preview: Topline Reacceleration Supported by Retail Recovery
  • KE Holdings(BEKE.US) Preview:C4Q22 Marked the Beginning of 2023 Recovery

Chugai Pharmaceutical (4519 JP): Hemlibra Is the Only Saviour; Competition Bites Mainstay Drugs

By Tina Banerjee

  • Chugai Pharmaceutical (4519 JP) recorded double and triple-digit revenue growth from Hemlibra in domestic and export markets, respectively during 9M2022. Growth momentum is expected to continue.
  • Both Actembra and Ronapreve have limited revenue potential from COVID-related indications. Ronapreve reported revenue of ¥60.8 billion in 1Q22 in domestic market, with no reported revenue in two subsequent quarters.
  • Actemra will face biosimilar competition. This month China has approved first Actembra biosimilar, while a couple of others are under review of the FDA.  

China Healthcare Weekly (Jan.20) – NRDL Negotiation Results, JW Therapeutics, Sirnaomics, Antengene

By Xinyao (Criss) Wang

  • The 2022 NRDL negotiation results were released. We analyzed some points worth investor’s attention.
  • The “safety pad” brought by medical insurance is difficult to ensure products future sales.Even after entering NRDL, how to improve patient/doctor coverage is an important problem for enterprises to consider.
  • Here are some companies that investors are interested in. We mainly analyzed some key points of them, including Sirnaomics (2257 HK), JW Therapeutics (2126 HK), Antengene (6996 HK)

Alibaba Group Holdings: Staying the Course

By Steven Holden

  • Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months. 
  • Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
  • Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.  

Tencent Music Entertainment(TME.US) 4Q22 Preview: Raise TP for Gradual but Slow Recovery

By Shawn Yang

  • We estimate that TME’s 4Q22 topline/bottom line would be (2.5%)/3.8% vs cons., because of disturbance in its social entertainment and ads business.
  • We forecast net income would only slightly beat cons by 6.1%, due to likely expense rebound and no major improvement on main businesses.
  • Reiterate SELL rating but raise TP to US$ 6.7 to reflect margin beat and improvement of macro environment. Our TP implies 12.3X PE in 2023.

ZTO Express(ZTO.US) 4Q22 Preview: Maintain Leadership and Benefit from Industry Rebound

By Shawn Yang

  • Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
  • ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
  • Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

Bilibili(Bili.US) 4Q22 Preview: Raise TP for More Optimistic Outlook in 2023

By Shawn Yang

  • While BILI’s top line in 4Q22/2023 would be in line, we suggest that its bottom line in 4Q22/2023 would beat cons. by 6%/18% due to cost-savings and optimized monetization efficiency. 
  • BILI’s adjusted net loss would be significantly narrowed to (3.2)bn RMB in 2023, per our estimation. However, we still have concerns about some of BILI’s fundamentals.
  • Maintain SELL but raise TP to US$ 16.4, implying 1.8X PS in 2023.

JD Logistics(2618.HK) 4Q22 Preview: Topline Reacceleration Supported by Retail Recovery

By Shawn Yang

  • We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
  • We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
  • Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

KE Holdings(BEKE.US) Preview:C4Q22 Marked the Beginning of 2023 Recovery

By Shawn Yang

  • We expect BEKE C4Q22 revenue and non-GAAP NI to be 9% and 64% above consensus. The bottom line beat is a result of earning leverage;
  • We expect the market monthly EH/NH transaction volume to turn positive growth in C1H23, with resumed offline activities and continuing policy support as main drivers
  • We raise TP by US$1 to US$20: 1) dialling up GTV in 4Q22, 2) faster pace transaction recovery in 2023, and 3) rebase FX from 7.05 to 6.77 in valuation.

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Daily Brief Equity Bottom-Up: Adobe Inc: Major Drivers and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Adobe Inc: Major Drivers
  • Campbell Soup: Key Drivers
  • Cirrus Logic Inc: Major Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (01/23)
  • Columbia Sportswear: Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Risks (01/23)
  • Oracle Corporation: New Cloud Zone & Other Developments
  • Plug Power Inc: Partnership With Nikola Corporation & Other Drivers

Adobe Inc: Major Drivers

By Baptista Research

  • Adobe managed a decent result in the last quarter meeting the revenue expectations of Wall Street and managing an earnings beat.
  • The company delivered 15% growth in the top-line for the 2022 fiscal with $17.61 billion in revenue.
  • We remain confident in their long-term strategies and give Adobe a ‘Hold’ rating with a revised target price.

Campbell Soup: Key Drivers

By Baptista Research

  • Campbell Soup is off to a good start to the fiscal year and delivered an all-around beat.
  • Meals & beverages delivered a strong performance, and there is growth in key brands, particularly RTS (Ready-To-Serve) soups, Mexican sauces, and Italian soup, well-outpaced the growth.
  • We provide the stock of Campbell Soup with a ‘Hold’ rating and a revision in the target price.

Cirrus Logic Inc: Major Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (01/23)

By Baptista Research

  • Cirrus delivered a decent quarterly result with an all-around beat, driven by greater smartphone unit volumes linked to its customers’ new product launches, resulting in revenue over the high end of its target range.
  • Furthermore, with the development of Cirrus’ 22-nm codec, audio sensing and other signal processing use cases will benefit from increased performance and power efficiency.
  • The management has been working with several customers to design their first amplifier created especially for this market.

Columbia Sportswear: Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Risks (01/23)

By Baptista Research

  • Columbia Sportswear delivered a mixed set of third-quarter results as it failed to meet the revenue expectations of Wall Street given the economic, geopolitical, and supply chain challenges.
  • Consumer challenges are being solved by innovations like Omni-Heat Infinity and the recently unveiled Omni-Heat Helix.
  • The patent-pending Omni-Heat Helix from Columbia uses highly effective insulation cells to optimize warmth while ensuring breathability.

Oracle Corporation: New Cloud Zone & Other Developments

By Baptista Research

  • Oracle had a strong quarter and saw its revenue increase by 25%.
  • Even with Cerner excluded, total revenue increased by 9% in constant currency, exceeding Q1 and surpassing revenue from the same period last year.
  • Oracle’s liquidity is also solid as it held over $7.4 billion in cash and marketable securities at the end of the quarter.

Plug Power Inc: Partnership With Nikola Corporation & Other Drivers

By Baptista Research

  • Plug Power delivered another below par result in the quarter, failing to meet Wall Street expectations in terms of revenues as well as earnings.
  • The management claims that its fully developed green hydrogen platform has the potential to make it profitable.
  • In the hydrogen and fuel cell industries, Plug Power has a first-mover advantage which drives investor optimism.

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Daily Brief Equity Bottom-Up: CP ALL PCL (CPALL TB) – A King for All Seasons and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • CP ALL PCL (CPALL TB) – A King for All Seasons
  • EM and DM Neobanks in 2023; Selective Opportunity Driven by Bottom-Up Execution
  • Carly Holdings Limited – Q2 Shows Vehicle Finance = Growth
  • Xpeng: Surprise Price Cut Weighs on Sentiment, but Share Price Likely Bottomed
  • Goldman Sachs’ Stock Isn’t As Lucrative As You Might Think
  • Obi Pharma Inc (4174 TT): Inherent Pipeline Risk Has Clouded Near-Term Outlook
  • Ford: Why We’re Bullish For A Change (Rating Upgrade)
  • Netflix 4Q22: Priced for Perfection
  • Intercontinental Exchange (ICE): Initiation of Coverage – APAC Expansion & Other Drivers
  • IPG Photonics: Major Drivers

CP ALL PCL (CPALL TB) – A King for All Seasons

By Angus Mackintosh

  • CP ALL is a unique and high-quality proxy for the recovery in domestic consumer demand plus increasing tourist arrivals, which should soon see a further boost from China.
  • We would expect a strong finish to the year with an even stronger pickup in 2023 across convenience stores, Lotus supermarkets and hypermarkets, as well as Siam Makro cash-and-carry. 
  • CP ALL is a top growth pick in Thailand, with EPS expected to grow by +35% and 25% for FY2023E and FY2024E, with ongoing expansion and economic recovery.

EM and DM Neobanks in 2023; Selective Opportunity Driven by Bottom-Up Execution

By Victor Galliano

  • Fintechs and neobanks suffered a valuations reality check in 2022, due to rising interest (and discount) rates, poor fundamental results coupled with – in certain cases – high cash burn
  • Most neobanks need to improve customer activity rates as well as product and revenue penetration; legacy banks are responding to disruptors and in developed markets megafintechs are encroaching on neobanks
  • We see 2023 neobank picks driven by bottom-up calls on focused execution; we turn constructive on Nubank, stay negative on Inter and Jago and neutral on Kakaobank and Banco PAN

Carly Holdings Limited – Q2 Shows Vehicle Finance = Growth

By Research as a Service (RaaS)

  • Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging the existing DriveMyCar operations and technology.
  • Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
  • Carly has attracted larger automotive industry businesses as shareholders, with a model that facilitates sales volumes of new vehicles and delivers a new recurring revenue stream for automotive manufacturers and dealers. 

Xpeng: Surprise Price Cut Weighs on Sentiment, but Share Price Likely Bottomed

By Victoria Li

  • Xpeng announced price cuts on existing G3i, P5 and P7, which surprised the market on negative side, potentially indicating weaker demand and profitability
  • Recent management changes has also hurt sentiment with the new CEO from a ‘traditional’ car background
  • Xpeng’s share price has bottomed in our view and we expect a 2H’23 recovery with improving fundamentals

Goldman Sachs’ Stock Isn’t As Lucrative As You Might Think

By Pearl Gray Equity and Research

  • Goldman Sachs’ business model is not aligned to benefit from an elevated interest rate environment.
  • The bank’s trading segment could pivot, but Goldman’s investment banking prospects remain gloomy.
  • The firm’s stock presents reasonable valuation and dividend metrics, but they might not be enough to convince investors, analysts say.

Obi Pharma Inc (4174 TT): Inherent Pipeline Risk Has Clouded Near-Term Outlook

By Tina Banerjee

  • Obi Pharma Inc (4174 TT) is developing novel therapeutic agents for unmet medical needs against cancers. The company’s lead pipeline candidate, adagloxad simolenin is a first-in-class cancer vaccine candidate.
  • Currently, adagloxad simolenin is in phase 3 study as an adjuvant treatment of high-risk, early-stage, Globo H-positive triple negative breast cancer, which represents 15–20% of breast cancer cases.
  • The company has a cash runway through 2024, while phase 3 trial is expected to be completed in 2025. With the pipeline progress, operating expenses are expected to increase.

Ford: Why We’re Bullish For A Change (Rating Upgrade)

By Pearl Gray Equity and Research

  • Softening macroeconomic circumstances in the Eurozone and cooling inflation in the U.S. could reignite demand.
  • China’s reopening might smooth supply chains.
  • Ford Motor Company’s EU market share is expanding, and its product-driven approach has sustained customer loyalty in North America.

Netflix 4Q22: Priced for Perfection

By Aaron Gabin

  • Netflix is now up 50% from its lows on hope that advertising and paid sharing drive a revenue reacceleration and multiple rerating. Part B has happened.
  • Advertising uptake will be slow. But consensus has 55M incremental ad-subs (20% of the total) and $8B in revenue assumed in 2025! 
  • Netflix intends on keeping content spending flat for the next few years, raising the importance of its hit rate – which has not been Netflix’s forte.

Intercontinental Exchange (ICE): Initiation of Coverage – APAC Expansion & Other Drivers

By Baptista Research

  • This is our first report on the Intercontinental Exchange (ICE), one of the largest providers of provider of market infrastructure, data services and technology solutions in the world.
  • In ICE’s equity derivatives complex, the ADV in its MSCI complex was up as the volatility levels continued rising.
  • Recurring revenues increased, driven by robust demand for the company’s energy exchange data as well as the continued benefit from its record 2021 listings performance.

IPG Photonics: Major Drivers

By Baptista Research

  • IPG Photonics delivered a mixed result in the last quarter, as it failed to meet Wall Street expectations in terms of revenues but managed an earnings beat.
  • Sales in high-power cutting applications suffered from a decline in general industrial demand in China and Europe.
  • As this business required extra investment and was noncore to IPG, the management announced they would sell it to Lumentum.

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Daily Brief Equity Bottom-Up: Fanuc (6954) | Bullish on Robots and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Fanuc (6954) | Bullish on Robots
  • Tencent: Gaming on the Road to Recovery
  • Fewer but Better Suits from Aoyama and Its Competitors
  • Kalbe Farma (KLBF IJ) – Stronger for Longer
  • Health & Happiness (1112 HK): Up 100% Since Nov. 2022. Still Awaiting a Re-Rating Upside
  • Shenzhen Intl (152 HK): Numerous Drivers in Place to Boost FY23
  • Perpetua Resources Corp (PPTA) Flash Note Essential US Defense Project ACF Equity Research 19012023
  • Secure Trust Bank – In line, with good momentum
  • Supermarket Income REIT – SUPR takes majority interest in indirect portfolio
  • Esker – Order momentum maintained in Q422

Fanuc (6954) | Bullish on Robots

By Mark Chadwick

  • Fanuc is a core structural growth stock that has fallen by -4% over the past year. We turn bullish with 8 days to earnings
  • We believe that Fanuc is a key beneficiary of continued investment in automation and realignment of supply chains globally
  • We focus on Fanuc’s core value drivers – revenue, margins, risk and investment – and see 25% upside for long term investors

Tencent: Gaming on the Road to Recovery

By Shifara Samsudeen, ACMA, CGMA

  • China’s gaming regulator granted publishing licenses to 88 video games including three licenses to Tencent (for Undawn, Alchemy Stars and Yuan Meng Zhi Xing) and one for NetEase (for Badlanders).
  • In December, NPPA gave approvals to 84 new domestic games and 44 imported games suggesting the 18-month long crackdown on the sector is nearing an end.
  • Tencent’s online games revenue declined YoY for three consecutive quarters with regulatory hurdles and drop in ranking of key titles but we expect an improvement going into 2023.

Fewer but Better Suits from Aoyama and Its Competitors

By Michael Causton

  • Fewer people wear suits as a regular office uniform and there are also fewer working age Japanese.
  • Combined with the fact that more people work from home some days a week, this has meant a drastic decline in suit sales
  • In response, the big retailers are exploiting the growing popularity of custom and premium suits but the shift won’t offset the decline.

Kalbe Farma (KLBF IJ) – Stronger for Longer

By Angus Mackintosh

  • Kalbe Farma (KLBF IJ) remains an interesting proxy for the deepening penetration of healthcare and greater health consciousness in Indonesia through its prescription drugs, consumer health and nutritional products.
  • The company continues to expand its scope if pharmaceutical products into areas such as oncology and biosimilar drugs, as well as growing its exposure BPJS with carefully selected unbranded generics. 
  • Its distribution and logistics business continues to be a growth driver, it onboards new third-party principals. Valuations below 5-year historical average on a PER basis despite higher projected growth ahead. 

Health & Happiness (1112 HK): Up 100% Since Nov. 2022. Still Awaiting a Re-Rating Upside

By Devi Subhakesan

  • Despite the steep stock rebound following a strong recovery in sales, stock attracts modest valuations in line with Infant milk players. Re-rating potential exists from valuing high-growth segments differently.
  • Strong growth in Adult Nutrition and Pet products fueled overall sales. Baby Nutrition sales growth is muted and accounts for less than half of total sales (vs 2/3rd in 2020).
  • Stock rebound triggered by a recovery in Sep. quarter sales thanks to its diverse product portfolio, and prospects of a revival in cross-border trade following China opening its borders.

Shenzhen Intl (152 HK): Numerous Drivers in Place to Boost FY23

By Osbert Tang, CFA

  • Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
  • Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines’ drag are drivers. 
  • ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. 

Perpetua Resources Corp (PPTA) Flash Note Essential US Defense Project ACF Equity Research 19012023

By ACF Equity Research

  • ACF identifies PPTA as a US national strategic asset (Sb)and best-in-class gold asset.
  • Sb: Proven & Probable Reserves 148 Mlbs at 0.06% in 104 Mt.
  • Au: Proven & Probable Reserves at 4.8 Moz gold (Au) @ 1.43 g/t.

Secure Trust Bank – In line, with good momentum

By Edison Investment Research

In its FY22 post-close trading update, Secure Trust Bank (STB) announced that business has been trading in line with management expectations and with good momentum. Continuing profit before taxes and impairments was ‘significantly’ up, while its cost to income ratio ‘improved markedly’. Core loans rose by 19.1% y-o-y (we forecast 13%), with strongest growth in consumer finance as expected. New business lending did drop 11% y-o-y for Q422 as the bank tightened its lending criteria (as previously flagged by management) due to macroeconomic concerns. Loan arrears are back to pre-pandemic levels in vehicle finance and at record low levels in retail finance. This reflects STB’s repositioning to more prime segments and the de-risking of its loan book over the last few years. STB stated that its FY22 net interest margin percentage remained stable versus H122 despite rising funding costs (this matches our expectation).


Supermarket Income REIT – SUPR takes majority interest in indirect portfolio

By Edison Investment Research

Supermarket Income REIT (SUPR) has acquired an additional 25.5% beneficial interest in the Sainsbury’s Reversion Portfolio (SRP) from its joint venture (JV) partner. It now has a 51% interest with 49% held by Sainsbury’s. SUPR’s positioning in the winding up of the SRP structure is strengthened, its relationship with Sainsbury’s, operator of the stores, is deepened, and it expects to further enhance the return on its SRP investment. Separately, reflecting widespread expectations that yields will continue to widen across real estate sectors, our forecast net tangible assets (NTA) per share is reduced by c 10%.


Esker – Order momentum maintained in Q422

By Edison Investment Research

Esker’s Q422 revenue update confirmed that the company hit the mid-point of its revenue guidance for FY22, despite the already flagged slowdown in volumes processed. The company continued to see strong bookings intake, with the annual recurring value (ARR) of contracts for Q422 up 21% y-o-y in constant currency (cc) and up 19% cc for FY22. This provides support for management’s FY23 guidance; our FY23 estimates are within the guidance range and we maintain our forecasts pending FY22 results on 23 March.


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Daily Brief Equity Bottom-Up: Kyocera (6971 JP): Another Leg Down and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Kyocera (6971 JP): Another Leg Down
  • Tencent/Netease: January Game Approval Shows Tencent Playing Catching Up
  • Brilliance China: Special Dividend Amount Disappoints, but More Could Be on the Way
  • Sosei Group (4565 JP): Partners’ Pipeline Progress Reflects Power of Drug Discovery Platform
  • Adani Enterprises Offering – A Discount and a Put Option But Liquidity Is a Bug Not A Feature
  • Keepers: Thoughts on the Move Up, More to Come Easy Double from Here
  • Visa: Looking For Quality As Recession Looms On The Horizon
  • Seiyu Plans ¥100 Billion Investment
  • Leonardo: European Value Defense Play
  • Calbee’s FY24 OP Is Bound to Exceed ¥30.0bn

Kyocera (6971 JP): Another Leg Down

By Scott Foster

  • Kyocera’s aggressive long-term investment plan makes sense: abandon an unnecessary zero-debt policy and borrow while interest rates are still low. The resulting debt/equity ratio should be manageable.
  • But the near- to medium-term outlook is not encouraging. Semiconductor inventories are still too high and demand is down. Recovery is likely to be slow.
  • The shares have dropped 21% since mid-September, but FY Mar-23 guidance looks too high and both consumer and corporate spending are weak. Wait for capitulation.

Tencent/Netease: January Game Approval Shows Tencent Playing Catching Up

By Ke Yan, CFA, FRM

  • China just announced game approval for January batch. The number of games approved is slightly higher than the previous three months.
  • Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
  • Both Tencent and Netease received approval for one game each. Overall Tencent is still behind its peers since the approval resumed.

Brilliance China: Special Dividend Amount Disappoints, but More Could Be on the Way

By Victoria Li

  • HK$0.96 per share special dividend announced last Friday disappointed the market. 
  • The dividend implies only 20% of the cash on the balance sheet paid out in dividends
  • We think there could be 1-2 more special dividends in 2023E given lack of obvious uses for the cash balance

Sosei Group (4565 JP): Partners’ Pipeline Progress Reflects Power of Drug Discovery Platform

By Tina Banerjee

  • Sosei Group (4565 JP) is currently eligible for total milestone payment of more than $9.5B for its existing collaborations. During 9MFY23, Sosei reported revenue growth of 141% YoY to ¥8.6B.
  • Pfizer Inc (PFE US) has dosed first subject in phase 2 clinical trial of type 2 diabetes drug candidate PF-07081532. Achievement of this milestone triggers a $10M payment to Sosei.
  • Sosei has four programs in preclinical studies and 10+ in discovery phase, which are still unpartnered. The company has a cash runway into 2025 to fund its drug discovery activities.

Adani Enterprises Offering – A Discount and a Put Option But Liquidity Is a Bug Not A Feature

By Travis Lundy

  • After the postal ballot approved the offering in December 2022, Adani Enterprises (ADE IN) is on track to conduct a Rs 200bn or US$2.4bn+ Equity Offering.
  • One exchange release today gave the timing, and following  few articles in recent days suggesting it, another release said the offering would be partly paid shares.  
  • The structure of the Offer and risks are detailed below but investors should remember, it was illiquidity which got the price here. Liquidity is a Bug not a Feature.

Keepers: Thoughts on the Move Up, More to Come Easy Double from Here

By Sameer Taneja

  • The Keepers Holdings (KEEPR PM) recent move of +24% (3 months) was catalyzed by the dividend payout ratio (to 50%) increase and a solid Q4 2022 on the cards. 
  • Post the move, the stock trades at 8.4x/6.6x FY22/23e. The dividend yield for FY23e/FY24e is 6.0%/7.6% ( based on a 50% payout). 8% of the market cap is net cash.
  • We expect the next catalyst to be when the company reports its earnings ( probably the second week of April 2023). 

Visa: Looking For Quality As Recession Looms On The Horizon

By Vladimir Dimitrov, CFA

  • Visa continues to outperform the market and fully capitalize on the prolonged business cycle.
  • The company’s share price appears fairly valued both relative to peers and to its historical business fundamentals, according to the company’s stock price.
  • The share price seems fairly valued and to the historical business fundamental, says the company.

Seiyu Plans ¥100 Billion Investment

By Michael Causton

  • Rakuten only has a 15% stake in Seiyu, alongside majority shareholder, KKR, but the pivot by Seiyu post-acquisition shows the potential for Rakuten in this sector.
  • Building on the 5 year plan that it set out in 2021, Seiyu last month announced a ¥100 billion in investment over the next 5 years.
  • Funds will be used to increase integration with Rakuten’s online supermarket, with the aim to become the biggest GMS retailer.

Leonardo: European Value Defense Play

By Alexis Dwek

  • Leonardo’s revenues should benefit from several program ramp-ups driven by strong book-to-bill in prior years, and an impressive backlog that now stands at €37.4bn
  • The underlying market for defense spending remains strong and is set to grow further
  • The stock screens very cheap, trading on low multiples vs the sector, and our model shows a fair value well above the current share price.

Calbee’s FY24 OP Is Bound to Exceed ¥30.0bn

By Oshadhi Kumarasiri

  • Japan’s largest snacks maker, Calbee Inc (2229 JP) has raised prices by 10-20% for almost 75% of its product range.
  • Meanwhile, main inputs such as potatoes and palm oil have seen extensive price drops in the past few months.
  • With margin pressures alleviating from both angles (revenue & cost), we think Calbee’s FY24 OP is bound to exceed ¥30.0bn.

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Daily Brief Equity Bottom-Up: TSI Holdings (3608) – New Year and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap
  • Semen Indonesia (SMGR IJ) –  A Set Up with New Capacity and Lower Costs
  • Fu Shou Yuan (1448 HK): Latest Mortality Rate Supports Long-Term Outlook
  • Fast Retailing: Growth Markets Look Weak & Uniqlo Japan Profitability Affected By Rising Wages
  • Money Forward: Top Line Expands, Yet to See Meaningful Turnaround in Profitability
  • Amvis Holdings Inc (7071 JP): Scale Expansion to Drive Revenue Growth; Formulated New 3-Year Plan
  • Cameco: A Turnaround Is En Route

TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap

By Travis Lundy

  • Last April I wrote about Tsi Holdings (3608 JP) which was trading at 0.5x EV/EBITDA and where I suggested it could double in 2-3yrs. 
  • The day after I wrote, the stock closed at ¥312/share, briefly touched ¥480 before ending the year at ¥444. On Friday they announced Q3 earnings, now TTM EV/EBITDA is 2.5x.
  • They also announced a buyback, and the stock is up further. It is worth looking into the details both near-term and what they mean longer-term.

Semen Indonesia (SMGR IJ) –  A Set Up with New Capacity and Lower Costs

By Angus Mackintosh

  • Semen Indonesia came through the worst of 2022 with flat sales, despite lower volumes, with profits rising by +18.9%, driven by cost savings, reduced debt, and use of DMO coal.
  • 4Q2022 may see a slowdown given. the onset of the rainy season but the company is well-positioned to ride a recovery in 2023 with additional capacity from Semen Baturaja.
  • Semen Indonesia (SMGR IJ) is well set up for a recovery in earnings for the next two years, with great synergies to come from Semen Baturaja. Valuations are well-below historic.

Fu Shou Yuan (1448 HK): Latest Mortality Rate Supports Long-Term Outlook

By Osbert Tang, CFA

  • China recorded 270,000 increases in deaths in 2022 to 10.41m (+2.7% YoY, vs. flat in 2020). This is a sad demographic trend but favourable to Fu Shou Yuan (1448 HK).  
  • Death rate of 0.74% has returned to the 1974 level. With termination of “zero COVID” policy, this is poised to increase. This will also stimulate demand for its pre-need services.
  • Despite a 73% rebound in share price from trough, valuation is still undemanding at 14.4x FY23F PER. This implies a 35% discount to the average of 22x since 2013. 

Fast Retailing: Growth Markets Look Weak & Uniqlo Japan Profitability Affected By Rising Wages

By Oshadhi Kumarasiri

  • Fast Retailing (9983 JP)’s 1QFY23 results were below consensus estimates with OP missing consensus by 13.2%.
  • The outlook for the rest of the year doesn’t seem too well either with Domestic profitability held back by rising wages and growth markets affected by slowing demand for apparel.
  • Even though China could emerge from COVID to boost Uniqlo’s profits, we see significant downside risk to Fast Retailing’s FY23 guidance.

Money Forward: Top Line Expands, Yet to See Meaningful Turnaround in Profitability

By Shifara Samsudeen, ACMA, CGMA

  • Money Forward (3994 JP) reported 4QFY11/2022 results yesterday. Revenue increased 42.5% YoY to JPY6.2bn (vs consensus JPY6.0bn) driven by growth in both MF Business and MF Home.
  • Operating losses for the quarter widened to JPY2.2bn (34.8% of revenue) from JPY661m (15.2% of revenue) in the same quarter last year (vs consensus JPY2.0bn).
  • Though MF’s top line continues to grow, we have not yet seen a meaningful improvement in its profitability, and we think, MF’s shares are overvalued compared to its counterpart freee.

Amvis Holdings Inc (7071 JP): Scale Expansion to Drive Revenue Growth; Formulated New 3-Year Plan

By Tina Banerjee

  • Amvis Holdings Inc (7071 JP) recorded 51% YoY revenue growth to ¥22B in FY22, 3% ahead of guidance. The company has added 16 facilities (825 beds), exceeding its initial plan.
  • Buoyed by strong FY22 results, business expansion, and favorable demand scenario, Amvis has raised FY23 guidance. In FY23, the company aims to open 19 new facilities.   
  • Amvis has formulated the new three-year plan, “Amvis 2025”. The company is accelerating the pace of opening Ishinkan to bring up the number to 127 by September 30, 2025.  

Cameco: A Turnaround Is En Route

By Pearl Gray Equity and Research

  • Plans are being made to reroute Inkai’s production to avoid Russian infrastructure and port reliance.
  • The firm’s joint acquisition of equipment supplier, Westinghouse, might add valuable cost synergies and improve Cameco’s economies of scope.
  • Uranium prices remain supportive, and an operational pivot could realign Cameco stock’s valuation.

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