In today’s briefing:
- Softbank Group (9984 JP) –The Masa Hurdles
- FY3Q23: If It’s All Macro, Do You Buy the Dip?
- A Blessing in Disguise
- Nippon Shinyaku (4516 JP): Viltepso Has Strong Muscle Power; New Seizure Drug Launch in Japan
- Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over
- Balrampur Chini Mills Ltd- Forensic Analysis
- BLS International Services Ltd: Forensic Analysis
- Mahindra & Mahindra (MM IN) | Wake up and Smell the Coffee
- Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen
- Saratoga Investama Sedaya (SRTG IJ) – A World of Indonesian Themes
Softbank Group (9984 JP) –The Masa Hurdles
- Masayoshi’s debt with Softbank group is big, and due to the poor performance of SoftBank Vision Fund 2, Masa’s equity interest as a co-investor is now zero
- Internal hedge fund Northstar, in which Masa has a 33.3% stake, is in liquidation leaving Masa’s share of his Northstar debt to SoftBank at USD1.2bn
- SoftBank’s collateral on Masa debt includes the Vision Fund 2 equity, as well as SoftBank shares and other personal assets; we expect SoftBank’s NAV discount of c 25% to widen
FY3Q23: If It’s All Macro, Do You Buy the Dip?
- First ever ARR miss, and big initial guide down on FY2024 ARR growth: low 30s vs. 37% into the Q. Pretty shocking given Crowdstrike’s track record.
- Macro Macro Macro – deal close times pushed out for SMBs and Enterprise customers reworking timing of deal starts to match opex budgets.
- Stock is overly punished down 20% and trading at 9x forward sales for a platform consolidator with 30% FCF margins.
A Blessing in Disguise
- We try to stay away from the fool’s errand of forecasting the economy;
- But often, we notice that high-quality businesses actually benefit from harsh economic conditions in terms of (long-term) shareholder value;
- We provided an example of a company that we own to illustrate how.
Nippon Shinyaku (4516 JP): Viltepso Has Strong Muscle Power; New Seizure Drug Launch in Japan
- Driven by continued strong performance of Viltepso and other partnered drugs, Nippon Shinyaku (4516 JP) is expected to report accelerated revenue growth momentum.
- Viltepso is expected to be the top selling drug of Nippon Shinyaku in FY23. For FY23, the drug is expected to report revenue of ¥14.7 billion (+90% y/y).
- In November, Nippon Shinyaku launched Fintepla (fenfluramine) for the treatment of seizures in patients with Dravet syndrome (DS) as an add-on therapy to other anti-epileptic medicines in Japan.
Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over
- Rakuten’s successful junk bond sale means the Rakuten Bank IPO will happen next year and not in December as some had feared
- More detail on mobile shows that network costs including D&A are 4x that of service revenue and slightly higher QoQ. Roaming alone is higher than service revenue
- And that means Rakuten can’t aggressively go after new subscribers unless it wants operating losses to accelerate. Bad for Rakuten but good news for incumbents KDDI, NTT and Softbank.
Balrampur Chini Mills Ltd- Forensic Analysis
- Balrampur Chini Mills (BRCM IN) is one of the major integrated sugar manufacturing companies in India. Besides sugar, the company also engages in the business of ethanol and power generation.
- Balrampur has managed to turnaround its free cash flows and earnings quality. Additionally, it has also stabilized working capital on the back of declining debt.
- While there are not many red flags, care must be given to inventory reconciliation with bank statement.
BLS International Services Ltd: Forensic Analysis
- BLS International Services (BLSIN IN) is engaged in business of providing outsourcing and administrative task of Visa, Passport and Consular services to various Diplomatic Missions across the world.
- BLS is troubled with several forensic discomforts. One should take into account the discomforts on the subsidiaries end and other linked entities like DSS Gulf Realtors.
- Other forensic setbacks include alarming bad debts, misstatement of operating cash flows and several grey areas pertaining to disclosure norms followed by the company.
Mahindra & Mahindra (MM IN) | Wake up and Smell the Coffee
- Mahindra & Mahindra (MM IN) ‘s production data provides more questions than answers.
- The drop in production for Thar and XUV 700 in October in spite of the high order backlog is surprising.
- Considering the industry outlook and the existing sales and production for these two models, we believe this demand forecast may not materialise
Alibaba Health 1H: Cost Enhancements Support Margins but Sustainabaility Remains to Be Seen
- Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
- Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
- Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.
Saratoga Investama Sedaya (SRTG IJ) – A World of Indonesian Themes
- Saratoga Investama Sedaya (SRTG IJ) is the leading listed investment company with stakes in a number of leading companies across sectors in Indonesia with some of the highest growth potential.
- Investments include stakes in Adaro Energy, Merdeka Copper Gold, Tower Bersama Infrastructure, Mitra Pinasthika Mustika, and Aneka Gas (AGII IJ), and a number of tech companies providing unique thematic exposure.
- Saratoga Investama Sedaya (SRTG IJ) provides a one-stop shop to get well-rounded exposure to high-growth areas of the Indonesian economy and to early-stage growth companies in the digital space.
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