In today’s briefing:
- Hitachi Ltd. (6501 JP): Short and Long Term Benefit from New U.S. Investments
- Taiwan Dual-Listings Monitor: TSMC Extreme Level; ASE Spread Hits Parity; ChipMOS Near Long Level
- Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (15 Sep)
- ENEOS Holdings (TSE: 5020): Cash Returns Support, Valuation Capped
- Intel (INTC.US): Who Will Adopt Intel’s 14A Technology?
- Laopu Gold (6181.HK) – Gold Stocks Are Different from Gold Commodities
- TSMC’s COUPE Signals Silicon Photonics Go-Time — Early Winners in Taiwan’s Listed Supply Chain
- Eleven Indian Stocks with Strong Earnings Delivery, Healthy Balance Sheet and Reasonable Valuations
- Lonking (3339 HK): Still Well Placed
- What the Heck Is Going on with Oracle?
Hitachi Ltd. (6501 JP): Short and Long Term Benefit from New U.S. Investments
- More than $1 billion to be invested in electric power equipment and railway car production, plus a new automation center, to counter tariffs and support long-term expansion in the U.S.
- The rising share of sales accounted for by smart factory and other digital technologies should lead to higher profit margins and ROIC over the next several years.
- The share price has dropped 13% from its recent high to 26x EPS guidance for FY Mar-26. Buy on weakness for long-term growth. The main risk is a slowing economy.
Taiwan Dual-Listings Monitor: TSMC Extreme Level; ASE Spread Hits Parity; ChipMOS Near Long Level
- TSMC: +24.4% Premium: Remains at Level to Short the ADR Spread
- ASE: 0.0% (Parity); Open Fresh Longs Here or at a Discount
- ChipMOS: -1.9% Discount; Near Level to Go Long the Spread
Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (15 Sep)
- Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
- Highlights: Currently nine pair trade opportunities across four markets and four sectors persist.
- Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.
ENEOS Holdings (TSE: 5020): Cash Returns Support, Valuation Capped
- Business: Japan’s largest integrated energy group, ENEOS runs ~45% of national refining capacity, upstream assets, power generation, and holds 42% of JX Advanced Metals.
- Earnings (3Y): OP peaked at ¥504 bn in FY2023 on high oil prices, fell to ¥107 bn in FY2024 on inventory losses, and is guided to ¥300 bn in FY2025.
- Valuation & Risks: Trades at ~8× EV/EBITDA (~¥900/share), above our SOTP fair value (~¥690); key risks include crude volatility, shrinking domestic fuel demand, high leverage, and transition execution.
Intel (INTC.US): Who Will Adopt Intel’s 14A Technology?
- Why does Intel Corp (INTC US)’s current CFO state “Intel will use TSMC basically forever”?
- From Taiwan Semiconductor (TSMC) – ADR (TSM US)’s perspective, they have always maintained a “no competition with customers” principle.
- Another question remains: who will adopt Intel’s 14A technology in 2027-28?
Laopu Gold (6181.HK) – Gold Stocks Are Different from Gold Commodities
- The strong bullish sentiment towards gold has boosted Laopu’s share price, but we still have doubts about whether Laopu can truly benefit from the gold price rally in the future.
- In a crisis, gold stocks will face sell-off. We may see an “interesting phenomenon”- The price of gold commodities is soaring, while gold stocks are performing unsatisfactory or even plummeting.
- In fact, we already witnessed the inconsistency between the gold commodities prices and Laopu’s share price. This is the core logic we recommend investors take profits on Laopu in time.
TSMC’s COUPE Signals Silicon Photonics Go-Time — Early Winners in Taiwan’s Listed Supply Chain
- Last week at SEMICON, TSMC unveiled COUPE, moving silicon photonics from lab demos into industrial-scale advanced packaging.
- Himax, ASE, Zhen Ding, GlobalWafers, ACON, and Accton form Taiwan’s listed ecosystem for silicon photonics adoption.
- As NVIDIA Corp (NVDA US)-driven AI clusters proliferate, the power and cost of moving data between chips have become as constraining as compute itself.
Eleven Indian Stocks with Strong Earnings Delivery, Healthy Balance Sheet and Reasonable Valuations
- India’s spectacular underperformance over the past 12 months relative to Asia has been driven primarily by dismal earnings delivery by corporates, leading to persistent EPS estimate downgrades.
- We identify stocks with strong earnings delivery, i.e. EPS estimate upgrades over past 1, 3 and 6 months, forecast EPS growth >10%, net D/E < 1 and PEG < 1.4x.
- We screen 11 stocks from industrials, healthcare, materials and property. Most have appreciated significantly over 6- and 12-month timeframes, establishing that the market tends to reward superior earnings delivery.
Lonking (3339 HK): Still Well Placed
- Strong industry sales of wheel loaders (+10.4% YoY) and excavators (+18.8%) in Jul-Aug suggested that the current consensus earnings forecasts are too conservative.
- Lonking Holdings (3339 HK) will also benefit from the strength of the equities market, given it has an investment portfolio of Rmb2.4bn, or 18.6% of its market capitalisation.
- Given net cash equalling HK$2.02/share, or 66.1% of its share price, its 10.3x PER and 4.5% dividend yield for FY25F still appear undemanding.
What the Heck Is Going on with Oracle?
- Oracle is on a mission to rival the Big Three cloud providers and its cloud ambitions are part of a theme that will determine GDP growth in the US and globally as a whole.
- They are guiding for a 10x revenue increase in cloud computing in just four years which would transform Oracle Cloud from a nobody with 3% market share to a leading player with a business larger than AWS is today.
- Most importantly, this guidance is based on contracted revenue, i.e. revenue that their customers (most importantly OpenAI) basically only can get out by declaring bankruptcy.
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