In today’s briefing:
- Del Monte Pacific: Interest Costs Weigh On Financials
- SHK 86_HK: Dividend Yield 8%, P/E 2.0x, P/B 0.27x
- Meituan (3690 HK) Earnings Preview: Less Loss in 4Q22 and to See Profit in 2023
- China Internet Weekly (20Mar2023): Baidu, Tencent, KE
- Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call
- Pinduoduo (PDD): 4Q22, Lower Than Consensus, But Higher Than Competitors
- Screen Holdings (7735 JP): Positive Impression from Hikone Factory Tour
- Takeda: Nimbus Acquired Psoriasis Drug Showing Positive Results in Key Trial
- PC Industry Monitor: Signs of Inventory Improvement at PC Industry’s Leading Edge; Shares Diverged
- Fast Retailing: Japan Demand Not Enough to Warrant an Upside, Downside Risks Looming on The Horizon
Del Monte Pacific: Interest Costs Weigh On Financials
- Global branded food and beverage outfit Del Monte Pacific (DELM SP) recently announced group sales grew by 3% to US$68mn in the 3Q23 (April Y/E).
- However net profit declined by 62% to US$9.8mn due to lower operating results and increased interest expense from higher cost bank loans.
- Del Monte’s net debt, net gearing, and net debt/EBITDA were S$2.2bn, 582.5%, and 6.1x, compared to S$1.45bn, 211%, and 4.2x a year ago.
SHK 86_HK: Dividend Yield 8%, P/E 2.0x, P/B 0.27x
- For FY2022–Total Buyback of 5.9 million shares (HK$18.3 million) at average price of $3.10
- Funds Management Business – Extended Platform to provide Family Office Solutions
- Funds Management Unit – Total AUM increased 21% to US$975 million in 2022 with external capital accounting for 46.5%
Meituan (3690 HK) Earnings Preview: Less Loss in 4Q22 and to See Profit in 2023
- We believe total revenue grew 18% in 4Q22 and 22% in 2023.
- We believe operating losses decreased YoY in 4Q22 and the company will report an operating profit in 2023.
- We expect the stock has an upside of 47% for year end 2023.
China Internet Weekly (20Mar2023): Baidu, Tencent, KE
- Baidu launched a beta test of a ChatGTP-like function, WXYY.
- Tencent announced it will close its digital collection platform, Huanhe, in June.
- KE’s revenue decreased by 25% and new losses were RMB1.4 billion.
Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call
- After a dip in earnings in FY22, Fu Shou Yuan (1448 HK) guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.
- We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population.
- Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%.
Pinduoduo (PDD): 4Q22, Lower Than Consensus, But Higher Than Competitors
- In 4Q22, revenue grew by 46% YoY, lower than consensus, but higher than competitors.
- The operating margin improved significantly from 7% in 2021 to 23% in 2022.
- We believe the stock has an upside of 31% and a price target of US$120.
Screen Holdings (7735 JP): Positive Impression from Hikone Factory Tour
- A tour of the Hikone factory last week left us impressed with Screen’s efficiency and the timing of its capacity expansion.
- The company’s semiconductor production equipment sales are likely to decline this year, but outperform the industry as a whole due to low exposure to memory.
- Buy for longer-term recovery after the recent advance has been digested.
Takeda: Nimbus Acquired Psoriasis Drug Showing Positive Results in Key Trial
- Takeda Pharmaceutical (4502 JP) revealed over the weekend that experimental drug TAK-279 (acquired from Nimbus) for psoriasis is showing positive results suggesting it could become the best of its type.
- On the other hand, Takeda’s dengue vaccine Qdenga has been granted approval in Brazil, a country with high prevalence of dengue.
- Takeda’s top selling drug Entyvio’s exclusivity in the US will end in 2026 and the company continues to see strong progress with its development pipeline and M&A deals.
PC Industry Monitor: Signs of Inventory Improvement at PC Industry’s Leading Edge; Shares Diverged
- Asustek, Acer, and HP’s recent quarterly results indicate decreases in inventory days, highlighting potential improvement happening at the leading edge of the PC industry chain.
- Asustek (Asus) has substantially underperformed Acer YTD with one factor likely being Asus reporting worse margin performance. Asus is flat YTD after its post-results drop vs. +15% YTD for Acer.
- Long/Short: One can explore Long Asustek vs. Short Acer based on expectations of normalization of relative operational performance.
Fast Retailing: Japan Demand Not Enough to Warrant an Upside, Downside Risks Looming on The Horizon
- We don’t think that a strong-looking demand in the domestic market is sufficient to warrant an upside to Fast Retailing (9983 JP)’s current consensus FY+2 EV/OP of 19.9x.
- Although on the downside we see significant risks with China’s rebound, decelerating revenue growth in high growth markets and margin pressure from wage hikes and inventory growth.
- Therefore, we think the company’s FY+2 EV/OP could potentially go down to around 15.0x, which is towards the bottom end of Fast Retailing’s pre-COVID FY+2 EV/OP range.
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