In today’s briefing:
- [Japan Buyback] Sankyo (6417) – Starts Buying Bigly. Again. Re-Levered It Has A Super-High ROE
- Tencent Music (TME): 1Q25, Unnoticed Growth Continued, 80% Upside
- Automotive & Industrial Semiconductors Part 2: Is It the Bottom, Finally? Time to Buy?
- SMBC’s Strategic Entry into Yes Bank: A Look at the Backstory and Future
- A Pair Trade Between LG Electronics and LG Display
- DKSH Malaysia: Excellent 1st Quarter Performance
- China Hongqiao (1378 HK): Leading the Low-Cost, Low-Carbon Aluminium Shift
- Short Tata Motors: Challenges Ahead
- Alfen Beheer BV – What’s News in Amsterdam
- Full-year FY03/25 flash update and upward revision to performance targets in the medium-term business plan
[Japan Buyback] Sankyo (6417) – Starts Buying Bigly. Again. Re-Levered It Has A Super-High ROE
- On 12 May 2025, Sankyo Co Ltd (6417 JP) announced earnings (Revenue -3.7%yoy, OP +1.5%, Net Profit +0.4%) with guidance for March 2026 showing Revs, OP, and NP all falling.
- OP and NP would fall 14.4% and 18.5% respectively. The dividend is expected to fall ¥10 to ¥90/share which would be a 41.6% payout ratio.
- The company also announced a BIG BUYBACK – Up to ¥60bn buying up to 30.0mm shares (13.66%), starting today and going through 31 March 2026.
Tencent Music (TME): 1Q25, Unnoticed Growth Continued, 80% Upside
- The 1Q25 result is quite healthy, but the shrinking minor business, social entertainment, covers the fact.
- The main businesses grew by two digits and the operating margin continued to grow by 28% YoY in 1Q25.
- We believe the stock has an upside of 83% and a price target of US$26 for the yearend 2025.
Automotive & Industrial Semiconductors Part 2: Is It the Bottom, Finally? Time to Buy?
- Revenues are hitting the bottom in 1Q25, most firms mention sequential growth in 2Q, sometimes YoY growth. Trends depend on specific firms, mentions of both Auto and Industrial recovering.
- Gross / operating profit recovery could take a bit longer as inventory and price concessions could negate revenue growth for a couple of quarters.
- 2 categories of stocks: the cheap ones (NXP, Onsemi, Renesas, STMicro) and the expensive stocks (Analog Devices, Infineon, Microchip, Texas Instruments). I’d go with Renesas and Texas Instruments.
SMBC’s Strategic Entry into Yes Bank: A Look at the Backstory and Future
- SMBC, a major Japanese bank, is buying a 20% stake in Yes Bank for INR 13,483 crore, marking a significant move towards strengthening Yes Bank’s recovery and future growth.
- It provides SMBC direct access to India’s growing banking sector and potential for strategic collaboration.
- The partnership enhances Yes Bank’s stability, governance, and access to global markets, positioning it for further growth. SMBC’s involvement could pave the way for future capital support and operational improvements.
A Pair Trade Between LG Electronics and LG Display
- In this insight, we discuss a pair trade between LG Electronics (066570 KS) (long) and LG Display (034220 KS) (short).
- LG Display is likely to face greater margin pressures than LG Electronics this year, which could lead a bigger consensus estimates downward revisions for LG Display than LG Electronics.
- Both LG Electronics and LG Display are trading at 0.6x P/B multiples. Given LG Electronics’ much higher ROE vs LG Display, LG Electronics should be trading at higher valuation multiples.
DKSH Malaysia: Excellent 1st Quarter Performance
- Revenue up 7% Y on Y basis. PBT and PAT up 19%
- Operating profit of both consumer and healthcare business was up 15 & 18% respectively
- Cash flow from operations up by 11% and working capital improved
China Hongqiao (1378 HK): Leading the Low-Cost, Low-Carbon Aluminium Shift
- China Hongqiao has delivered steady ~6 Mt volumes, ~25% EBITDA CAGR, and 15–27% ROCE over the last three years, supported by integration and energy transition gains.
- China Hongqiao is relocating 4 Mt of capacity to Yunnan to tap low-carbon hydropower, advancing its green aluminium transition.
- China Hongqiao offers strong earnings visibility backed by low-cost operations, while trading at attractive valuations relative to peers.
Short Tata Motors: Challenges Ahead
- Tata Motors Ltd (TTMT IN) delivered a decent operational performance in Q4 FY25, with a flat topline and margin recovery, led by robust performance in the Jaguar Land Rover business.
- While the Q4 FY25 performance was steady, we expect near-term results to remain muted.
- Therefore, we present a case for shorting Tata Motors in the near term and outlook on individual segments.
Alfen Beheer BV – What’s News in Amsterdam
- In this edition: • Ahold Delhaize | Delhaize aims for market leadership in online groceries in Belgium • ASM International | looking for bolt-on acquisitions • Heineken | row with Jumbo not only on price gap but also on lower discount • InPost | signs contract with ASOS for D+1 OOH delivery in the UK • TKH Group | slow start of the year as expected, reiterates FY25 guidance • Alfen | revises both FY25 revenue and adjusted EBITDA guidance downward • Kendrion | Mobility continues its strong growth, Industrial mixed performance
Full-year FY03/25 flash update and upward revision to performance targets in the medium-term business plan
- From FY03/22 to FY03/24, Q4 revenue accounted for over 30% of full-year revenue, with Q4 operating profit over 80%.
- In FY03/25, the company reported revenue of JPY57.7bn (+22.2% YoY) and operating profit of JPY4.9bn (+75.4% YoY).
- For FY03/26, the company forecasts revenue of JPY59.6bn (+3.4% YoY) and operating profit of JPY3.9bn (-19.9% YoY).
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