In today’s briefing:
- Sumco (3436) | Bargain Basement
- China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics
- Mandarin Oriental (MAND SP): Life Is Suite
- Japan Post Bank – Unrealized Gains Down 95%
- JD.com (9618 HK): 3Q22, Growth Recovered, Margin Reached Historical High
- Disney: Could Iger Sell to Apple?
- Honda Motor ADR: Initiation of Coverage – Recent JVs & Key Drivers
- Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact
- Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications
- Ascentage Pharma (6855.HK) – May Not Survive “This Winter”
Sumco (3436) | Bargain Basement
- Sumco is a pure play wafer maker that is geared into demand for cutting edge 300mm wafers
- Sumco is attractive given weak sentiment towards tech, attractive valuation, strong profitability and long-term earnings drivers
- With the stock down 12% YTD, we believe the stocks is undervalued and see at least 20% upside from here
China Internet Weekly (21Nov2022): NetEase, Blizzard, Tencent, Meituan, Tencent Music, JD Logistics
- The authorization contracts between Activision Blizzard and NetEase will terminate in January 2023.
- Tencent plans to distribute 91% of its Meituan share as dividend.
- JD Logistics revenue increased by 39% YoY and Net loss decreased to one tenth.
Mandarin Oriental (MAND SP): Life Is Suite
- Hong Kong is – very gradually – rolling back Covid restrictions
- That’s a welcome relief for tourists, and for hospitality companies dependent on tourism.
- Mandarin Oriental International (MAND SP) is trading cheap at 0.7x P/B against 1.8x on average (five years) pre-Covid.
Japan Post Bank – Unrealized Gains Down 95%
- Japan Post Bank continues to see cratering net interest income
- The company’s significant US CLO exposure is not supporting profit
- Total unrealized gains on securities are down 95% in the past six months
JD.com (9618 HK): 3Q22, Growth Recovered, Margin Reached Historical High
- The revenue growth rate bounced back to 11% YoY in 3Q22.
- The operating margin improved to a historical high at 3.1%.
- We believe the stock price has an upside of 27% for year end 2023.
Disney: Could Iger Sell to Apple?
- The suprise return of Bob Iger as Disney CEO can fix certain Bob Chapek specific issues: relationships with investors, politicians, and creative types.
- But Iger faces similar intractable issues: accelerating cord cutting, a transition to a less profitable form of media distribution, and a potential recession.
- We think Iger will refocus investors on revenues/profits at Disney+ rather than subscribers, will more efficiently spend on content through decentralizing decision making… and potentially sell Disney to Apple.
Honda Motor ADR: Initiation of Coverage – Recent JVs & Key Drivers
- This is our first report on global automobile behemoth, Honda Motors.
- The Shanghai lockdown and semiconductor supply shortage resulted in a drop in unit sales and automobile production of Honda in the quarter, mainly in North America and China.
- However, despite soaring raw material costs and a drop in automobile unit sales, the sales of motorcycle units were up which led to the revenue beat.
Arteria Networks (Buy) – Q2 22 Results Reaction: Core Business Growth Intact
- Favorable industry trends like work from home and expanding mobile data usage are helping drive Arteria revenue growth
- Headline profits are down but core OP is up when one-time gains last year are stripped out and quarterly results will start to look better in H2 when fully lapped
- Management says macro concerns such as inflation and power costs are manageable and FY targets remain unchanged
Hon Hai & Yulon IPO: Media Reports of Electric Vehicle JV 1Q23 Listing, Stock Implications
- Hon Hai Precision Industry (2317 TT) and Yulon Motor Company (2201 TT) plan to IPO their electric vehicles JV Foxtron Vehicle Technologies in 1Q23E, seeking NT$10bn.
- The IPO’s valuation could be a major uplift for Yulon Motor Company (2201 TT)‘s valuation.
- Hon Hai Precision Industry (2317 TT): Successful IPO would provide markets proof that its EV platform can create value uplifts again and again in the future. Accumulate.
Ascentage Pharma (6855.HK) – May Not Survive “This Winter”
- The R&D direction and field of Ascentage Pharma Group Corp (6855 HK) distinguish it from other domestic biotech companies. The Company has proved its R&D capability after the successful launch of olverembatinib.
- The uncertainties of commercialization performance and R&D risks would make it difficult for Ascentage to achieve break-even. Due to increasing cash flow pressure, Ascentage must first solve the survival problem.
- Considering the Risk return trade-off, we think Ascentage has short-term investment value only when it’s “extremely undervalued”.We suggest that it could be sold in a timely manner to secure gains.
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