In this briefing:
- New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2
- IndusInd Bank – NPL Formation Doubling
- RHB Bank – Quiet Transformation
- TSMC. Setting The Stage For Record Growth In 2020 And Beyond
- EDU’s stock price had risen more than 120% in 2019.
- The growth rate of both students and revenues accelerated in 2Q2020 (ended November 2019).
- The operating margin turned to 3% in 2Q2020 versus -5% in 2Q2019.
- The classroom-based business grew more rapidly than the online business and EDU has been utilizing learning centers more efficiently.
- We believe, in fiscal 2020 (ended May 2020), total revenues will grow 29% and the operating margin will improve to 14% versus 10% in F2019.
- The P/E band suggests an upside of 23%.
Our previous coverage on New Oriental:
- New Oriental (EDU): Operating Profits Up 54%, as a Main Competitor Goes Bankrupt
- New Oriental (EDU): Growth and Margin Recovered
- New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside
- New Oriental (EDU): Educator License Not A Concern
- New Oriental (EDU): Laws Harm Private Schools? Not This One
Indusind Bank (IIB IN) is one of India’s fastest growing financials. This means that it has higher unseasoned loans than many. Where this occurs alongside weak or deteriorating economic conditions, it can see higher NPL formation. The numbers just out, are illustrative of how this can look. Our emphasis herein is on Pillar 3 detail of NPLs and also credit costs, but for an intriguing read of questionable accounting and disclosure, we refer to Hemindra Hazari‘s report IndusInd Bank’s Charge on Shareholder Funds: Obscurity Is the Best Policy?.
RHB Bank Bhd (RHBBANK MK) used to be far more focused on corporate loans and this has changed dramatically over the years, in favor of consumer loans and SME loans. The bank’s transformation is also evident in its digitalization program, which may be easier for a medium-sized, well-managed bank to affect, than for large banks or less able small banks. The result of the bank’s strategic shift is evident in many facets, including ROA and ROE. But we believe there is more to come. Better credit metrics than most is also a stand out feature, as is the RHB’s relatively low market capitalization level compared with assets.
TSMC kicked off earnings season with a bang, racking up their highest ever quarterly revenues and closing out 2019 with the company’s highest ever annual CapEx spending. Expecting semi sales, excluding memory, to grow by 8% in 2020, they forecasted that foundry will grow by 17% and that TSMC will grow even more than that
During what was a strongly upbeat earnings call, they shrugged off concerns about geopolitics, lingering trade wars and even the threat of further changes to the US Export Administration Regulations (EAR) de minimis rules. Here’s a look in detail at what TSMC had to say.
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