In today’s briefing:
- Add Meituan on Rumors of Social Benefit Payments
- Alibaba (BABA US): Fighting Back
- Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent
- 2023 High Conviction: Workman’s Cost Performance Will Beat the Competition
- Kuaishou: Domestic Business Turns Profitable for the First Time
- Geely – ’22 Target Miss Already in Expectations, Catalysts for ’23
- China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign
- PHC Holdings (6523 JP): Strong H1 Result; FY23 Revenue Guidance Raised; Mid-Term Plans Revised
- JB Financial Group: Four Key Investment Merits
- International Flavors & Fragrances Inc.: Initiation of Coverage – Business Strategy & Other Drivers
Add Meituan on Rumors of Social Benefit Payments
- Meituan’s recent price decline was partly due to the rumors about the social benefit payments.
- First, rumors are unverified statements. There was no such meeting at all.
- Second, the social benefit payment impact is probably controllable. I think the recent price decline provides a chance of adding on the stock.
Alibaba (BABA US): Fighting Back
- Ownership in Alibaba Group Holdings is on the rise among active Greater China managers.
- Stock price below $100 a catalyst for active Greater China managers to buy back in, with Invesco, JP Morgan and E Fund among those opening positions
- Alibaba remains well behind both TSMC and Tencent on an average weight basis and is the 2nd largest underweight in the Greater China region.
Grab (GRAB US) – Shifting Down a Gear for A Steep Ascent
- Grab‘s recent results reflect a change of pace in terms of moving along the path to profitability with a more disciplined approach to incentives and a focus on cost controls.
- Deliveries segment adjusted EBITDA turned positive for the first time, 3Qs ahead of previous guidance, and food 2Qs ahead of guidance both of which are positives.
- A continuing drag will likely continue to come from expenses related to the buildout of its three digibanks. Grab‘s headline EBITDA is not forecast to be positive until 2025.
2023 High Conviction: Workman’s Cost Performance Will Beat the Competition
- Although spending on non-necessities withered from March 2020 onwards, some low-cost retailers of discretionary items continued to grow.
- Workman’s mix of high cost performance and engagement with the ever more active outdoor market has, and will, support expansion, even if same-store sales growth has slowed.
- Future category expansion will deliver higher same-store sales as well as top line growth. 1,500 stores (from 1,000) is certain but 2,000 is possible thanks to new categories like footwear.
Kuaishou: Domestic Business Turns Profitable for the First Time
- Kuaishou Technology (1024 HK) reported 3Q2022 results. Revenue grew 12.9% YoY to RMB23.1bn (vs consensus RMB22.6bn) while reported operating losses declined to RMB2.6bn (vs consensus RMB3.1bn) from RMB3.1bn in 3Q2021.
- The company’s domestic business made an operating profit for the first time while there has been significant reduction in operating losses from the overseas business
- Kuaishou’s share price moved up 7% during today’s trade following its earnings announcement and we think there is further upside to the company’s current share price.
Geely – ’22 Target Miss Already in Expectations, Catalysts for ’23
- Sector headwinds including supply chain shortage and business interruptions from Covid lockdown is easing.
- More new models in pipeline to drive sales volumes and earnings in 2023E
- Valuation re-rating would be triggered with earning recovery, consensus estimate upgrades, Zeekr ramping up and potentially Zeekr spin off.
China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign
- Lower losses for investment business and sportswear retailing have contributed to a 48.4% reduction in losses for 1H FY23 at China Dongxiang Group Co (3818 HK).
- The resumption of interim special dividend is a welcoming sign. Inventory clearance, store optimisation, cost reduction and growth at the PHENIX ski wear brands are positive drivers.
- Its market capitalisation of HK$1.88bn represents a steep discount of 79% to its cash and investment portfolio of Rmb8.46bn, and this also means sportswear business is free.
PHC Holdings (6523 JP): Strong H1 Result; FY23 Revenue Guidance Raised; Mid-Term Plans Revised
- PHC Holdings (6523 JP) has revised mid-term plan for FY23–26, targeting revenue of ¥420 billion in FY26, representing 5.4% CAGR. CGM will be one of the key growth engines.
- During H1FY23, total revenue increased 3% y/y to ¥171 billion, mainly driven by a 3% growth in diabetes management business, which contributed 32% of total revenue.
- In response to the recent depreciation of the Japanese yen, PHC has raised FY23 revenue guidance to ¥358 billion (+5% y/y) from ¥350 billion earlier.
JB Financial Group: Four Key Investment Merits
- There are four major reasons why we like JB Financial Group.
- They include highest ROE among peers, highest dividend yield among peers, potential inclusion in KOSPI200 in 2023, and continued pressure by Align Partners to improve corporate governance.
- One of the key risk factors of the company is that it is not a nationwide banking group but most of its operations are in the southwestern portion of Korea.
International Flavors & Fragrances Inc.: Initiation of Coverage – Business Strategy & Other Drivers
- This is our first report on International Flavors and Fragrances (IFF), one of the global market leaders in the production of cosmetic active and natural health ingredients for use in consumer products.
- The increase in sales in the quarter was driven primarily by double-digit growth in its pharma and nourish solutions divisions.
- In spite of its volatile market environment, IFF continues to execute its operational priorities for achieving strong bottom and top-line results.
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