In today’s briefing:
- SK Square: Higher NAV Driven by Its Holding in SK Hynix
- Aster DM Healthcare Ltd (ASTERDM IN): Recent Correction Can Be a Good Entry Point
- China Comm Const (1800 HK): A Nice Surprise
- Midea Group (000333 CH): Strong 4Q23 Result As Expected
- [#20] Namaste India 🙏 | Bajaj Finance’s Catch Up
- TSMC (2330.TT; TSM.US): 2Q24F Preview; TSMC Is Anticipated to Receive ~US$5Bn from the US Chip Act.
- CBA – Sharply Higher Past Due Loans, but Not Impaired, Alongside Surge of Australia Insolvencies
- Legend Biotech Corp (LEGN.US) – FDA’s Upcoming Decision on Carvykti Will Change the Whole Landscape
- As Predicted, TCL Electronics (1070.HK) Wows with 2023 Results
- Dream International (1126 HK): Dream Valuation of 3.7x PE and 12% Div Yield, >40% of Mkt Cap In Cash
SK Square: Higher NAV Driven by Its Holding in SK Hynix
- SK Square owns a 20.07% stake in SK Hynix which is now worth 27.2 trillion won. SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix.
- SK Square has benefited from increased capital allocation to low P/B stocks in Korea due to the Corporate Value Up program. SK Square is trading at P/B of 0.7x.
- Amid the tremendous demand for Nvidia’s AI related chips, this has also benefited several Korean companies including SK Hynix and SK Square.
Aster DM Healthcare Ltd (ASTERDM IN): Recent Correction Can Be a Good Entry Point
- Aster DM Healthcare Ltd (ASTERDM IN) shares took a beating as Olympus Capital offloaded ~49M shares at a price range of INR405.00–406.72 (~7% discount to the last close price).
- GCC business separation is expected to complete in Q4FY24. Aster DM plans to consider distributing 70–80% of the upfront consideration of $903M as dividend to its shareholders.
- Stake sale by Olympus Capital is not a warning sign for the company. Despite CGHS rate overhang, we think recent pullback in Aster DM share provides an attractive entry point.
China Comm Const (1800 HK): A Nice Surprise
- China Communications Construction (1800 HK) believes its FY24 new contracts and revenue growth can be faster than FY23, particularly fuelled by strategic new industries and overseas.
- Its end-FY23 contract backlog of Rmb3.45trn (+1.8% YoY) translates into coverage of 4.1x of FY24F revenue, providing a secured stream of revenue over the next few years.
- Its improving cash flow allows for a 1pp increase in the payout ratio. Efforts in realising underlying asset value should narrow its 82% discount to book value.
Midea Group (000333 CH): Strong 4Q23 Result As Expected
- Midea Group Co Ltd A (000333 CH) posted strong 4Q23 results, with net profit up 18% yoy and sales up 10% yoy.
- In terms of 2024 outlook, management targets a 5-10% yoy growth in both the top and bottom line.
- The stock is has rerated up to 12x 2024E earnings, compared to an average of 13x over the last 10 years.
[#20] Namaste India 🙏 | Bajaj Finance’s Catch Up
- Our popular, text-only weekly is back, hopefully in an improved version, and aims to be more consistent throughout this financial year.
- The market structure and momentum seem to be positive. Upcoming earnings season and elections are likely to be key drivers going forward.
- Stocks discussed include Bajaj Finance Ltd (BAF IN), SBI Cards & Payment Services (SBICARD IN), Honasa Consumer (HONASA IN) and Delta Corp Ltd (DELTA IN)
TSMC (2330.TT; TSM.US): 2Q24F Preview; TSMC Is Anticipated to Receive ~US$5Bn from the US Chip Act.
- TSMC Q2 2024 outlook is expected to increase by approximately 5% QoQ, with 2024 projected Capex to see a slight uptick.
- Intel is expected to adopt TSMC N3B technology in 2Q24F, while we anticipate that MediaTek will transition to N3E by the end of 3Q24F.
- Intel has received financial assistance of US$8 billion through the US Chips and Science Act, and TSMC is also projected to receive around US$5 billion.
CBA – Sharply Higher Past Due Loans, but Not Impaired, Alongside Surge of Australia Insolvencies
- It is not only NPLs that we must worry about for banks, but also loans that can turn NPL amidst a worsening economic backdrop
- CBA’s past due loans but not impaired are up 43% in past two years and this bucket of loans is now 2.6x NPLs compared with 1.9x NPLs recently
- Australia shows surging insolvencies across many sectors through 17 March 2024 and this can mean past due loans are more prone to migrating to turn NPL
Legend Biotech Corp (LEGN.US) – FDA’s Upcoming Decision on Carvykti Will Change the Whole Landscape
- The sBLA of Carvykti is under review by FDA with a target PDUFA date of April 5. If approved for 2L therapy, Carvykti would become “a game changer” in MM treatment.
- The peak sales of US$5 billion is becoming possible. From this perspective, as Carvykti advances towards earlier line treatment, the subsequent valuation leap of legend Bio is becoming more certain.
- However, considering lower gross margin and Legend Bio/J&J’s 50/50 split ratio, Legend Bio’s market value performance could be inferior to BeiGene. Investors should also closely monitor the changes in macro.
As Predicted, TCL Electronics (1070.HK) Wows with 2023 Results
- Spirits were high as we attended the TCL Electronics (1070.HK ) (“TCL”) investor conference last Thursday (28 March) at the Shangri-La in Hong Kong, following its after-market earnings release.
- The results topped our own expectations in some areas, which we outlined in our recent write-up on the Company .
- We decided to summarize the results, as well as management insights shared at the conference for added context.
Dream International (1126 HK): Dream Valuation of 3.7x PE and 12% Div Yield, >40% of Mkt Cap In Cash
- We like Dream International (1126 HK), the plush toy maker listed in HK for its long-term association with Disney and revenue growth profile (12% CAGR over 15 years).
- The 15-year ROE has averaged 18%, and the company currently has 40% of the market capitalization (1.3 bn HKD) in net cash on the balance sheet.
- Trading at 3.7x FY23 PE, with a 12% dividend yield (and the company’s high likelihood of maintaining a payout ratio), this is an idea worth exploring.
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