In today’s briefing:
- Sea Ltd: Game Over
- Alibaba (BABA US): What Is Next After Strong Rally?
- CyberAgent (4751) | World Cup Winners
- Korean Holdcos Vs Opcos Gap Spreads Opportunities in 1Q 2023
- CyberAgent 1QFY09/2023: Earnings Miss, Struggling Gaming and Huge FIFA Cost Add to the Woes
- Nidec (6594): A V-Shaped Recovery Cannot Be Taken for Granted
- Bank Negara Indonesia (BBNI IJ) – Laggard Leader with Appealing Returns Ahead
- Krishna Institute of Medical Sciences (KIMS IN): Improving Operations; Expansion to Drive Growth
- 5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT
- Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening
Sea Ltd: Game Over
- We don’t see a way for Sea Ltd (SE US)’s e-commerce business to turn profitable in the next few years.
- For the moment, the Digital-Entertainment segment is capable of absorbing most of e-commerce losses, but we are expecting the segment profitability to fall 70% to $135m per-quarter over the-next two-years.
- Once that happens, we think it will be game over for Sea Ltd.
Alibaba (BABA US): What Is Next After Strong Rally?
- Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
- Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
- That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.
CyberAgent (4751) | World Cup Winners
- CyberAgent Q1 loss on one-off expenses from World Cup streaming. We see Q1 as a bottom this fiscal year
- Share price already discounted weak FY9/23 guidance last October and focus is now on recovery
- The World Cup was a success for the Japanese National side and for Abema
Korean Holdcos Vs Opcos Gap Spreads Opportunities in 1Q 2023
- In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 1Q 2023.
- Of the 33 pair trades, 2/3 of them involved holdcos outperforming opcos in the past year and 1/3 of them involved opcos outperforming holdcos in the same period.
- We highlight 33 pair trades that involve Korean holdcos and opcos.
CyberAgent 1QFY09/2023: Earnings Miss, Struggling Gaming and Huge FIFA Cost Add to the Woes
- CyberAgent Inc (4751 JP) reported 1QFY09/2023 results. Revenue declined 2.1% YoY to JPY167.6bn (vs consensus JPY176.1bn) while OP turned negative JPY1.25bn (vs consensus OP of JPY4.1bn.
- CA’s largest investment to-date was for FIFA 2022 but top line growth has largely been in line with previous quarter. WAU have dropped to pre-FIFA levels.
- Though AbemaTV’s monetisation strategy seems to work, the growth prospects for other two segments are concerning and likely to drag down the consolidated performance.
Nidec (6594): A V-Shaped Recovery Cannot Be Taken for Granted
- Nidec is headed into the red due to market disruption in China, restructuring charges and stagflation.
- The first two of these factors should be temporary, but the third points to longer term pressure on margins. Competition in EV motors is another problem that won’t go away.
- In a weak economy characterized by stagflation, it is too early to turn bullish.
Bank Negara Indonesia (BBNI IJ) – Laggard Leader with Appealing Returns Ahead
- Bank Negara Indonesia finished 2022 with a strong set of numbers beating guidance and consensus, as it continued to benefit from low cost of funds and strong loan growth.
- The bank has increased its exposure to higher-quality corporate customers, and large commercial customers in their supply chain plus growing government-backed KUR loans as well as consumer loans.
- BNI’s strategy in digital banking for consumers and business customers is driving loan growth and fee income as well as funding. Valuations are attractive with rising returns increasing the appeal.
Krishna Institute of Medical Sciences (KIMS IN): Improving Operations; Expansion to Drive Growth
- Krishna Institute of Medical Sciences (KIMS IN) is seeing a continued business recovery reflected in improving operating metrics. In Q2FY23, KIMS reported record high quarterly sales, EBITDA, and footfall.
- KIMS is following a disciplined growth strategy and plans to grow into markets that are adjacent to the current core markets of Andhra Pradesh and Telangana.
- KIMS has set foot in a new market of Maharashtra, outside of its core market. With lower margins from acquired assets than matured hospitals, KIMS has scope for margin improvement.
5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT
5 in 5 with Lendlease Global Commercial REIT – The First Net Zero S-REIT
Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening
- Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk
- Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator
- BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns
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