Daily Brief Equity Bottom-Up: Delta Taiwan Vs. Thailand Monitor: Valuation Divergence Hits a New Extreme and more

• The valuation divergence between Delta Electronics Thai (DELTA TB) and its parent Delta Electronics (2308 TT) has hit a new extreme.
• Delta Thailand surged 9.3% Thursday on no news, even prompting the Thailand Stock Exchange to query the company.
• Delta Taiwan’s stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when things revert is uncertain.

• While all eyes are on Alibaba splitting its business into six mini-Babas, some were quick to conclude that Tencent could be the next candidate for a similar split.
• Unlike Alibaba (ADR) (BABA US) whose business units have clear divisions and stand on its own, Tencent (700 HK) ’s businesses are interconnected making a similar split very difficult.
• Having looked at Tencent’s business units and past regulatory probe on the company, it seems unlikely for the company to be the next candidate for an Alibaba style separation.

• RH is the only luxury lifestyle brand at scale on this planet;
• Both qualitative and quantitative evidence point to the emerging and probably widening economic moat around the business;
• We see rich optionality regarding RH’s growth trajectory moving forward;

• Synergy Green Industries (SYGIL IN)  is engaged in the business of foundry i.e., manufacturing of wind turbine casting and other large precision castings.
• The company has been quite aggressive regarding its capex in the last few years especially, but the value add of these projects remains to be seen.
• Levered balance sheet, volatile business operations coupled with high related party transactions are some of the discomforts on the forensic front.

• Siloam International Hospitals (SILO IJ) is coming out of the COVID period with guns blazing as base case revenues continue to grow, surpassing pre-pandemic levels and with margins improving. 
• 2022 was a year of two halves and 2H2022 saw a clear resumption of base case patient activity, Siloam also saw the benefits of unified pricing and improved efficiencies.
• Siloam looks well-positioned to grow its base case revenues further in the coming year, with a healthy cost base and more beneficial pricing. Valuations are attractive on 9.4x FY2023E EV/EBITDA.

• Another smallish one, but EV of ~$500m (bigger than PRST but still illiquid b.c. low free-float).
• Equity is probably not worth much more than $0. I’m not short this yet, because I fear that management still has some fight left in it to ride the AI-hype.
• I want to get my timing right. It is a heavily shorted stock which has been the victim of squeezes multiple times in the past. And I don’t much fancy getting my head ripped off.

• The company’s financial statements reveal a few critical concerns relating to a receivables build-up, increasing credit allowances, and high short-term borrowing.
• The firm’s misfortunes were due to non-core events such as impairments, marketable security losses, and abnormal inflation.
• The economy is on a knife’s edge, and cyclical stocks such as Ford Motor Company (NYSE:F) look like 50:50 bets.

During H123 Quadrise made further progress on the three projects that provide the company with the fastest and most material paths to commercialisation. Assuming that the ongoing discussions regarding a licence agreement with Valkor in Utah complete soon, management expects Quadrise to generate its first commercial revenues, which would be from IP licencing, during Q423 (Q2 CY23).

As a specialist lender, S&U is sensitive to the economic background, but in its main motor finance business it has a strong track record of managing and growing through bumpy conditions. The newer property bridging business is maturing and shares a focus on customer service and a conservative underwriting approach. This provides the group with a sound basis for sustainable long-term growth.

The US Food and Drug Administration (FDA) has granted Breakthrough Device designation (BDD) to Pixium’s wireless Prima bionic vision system (BVS), which is currently being assessed in the European PRIMAvera pivotal study in patients with geographic atrophy due to age-related macular degeneration (GA-AMD). This achievement suggests that the FDA recognises GA-AMD is an irreversibly debilitating human disease and that Prima BVS has the potential to provide an effective treatment in this area of unmet need. Pixium remains on track to report top-line data from PRIMAvera in or around year-end 2023. If positive, a CE Mark regulatory marketing submission can be filed in 2024, which we estimate could lead to commercialisation of the Prima system in H125.