Daily Brief Equity Bottom-Up: TRACKING TRAFFIC / Container Shipping: End of the Rollercoaster Ride and more

• After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123
• We believe core profitability has also declined to pre-Covid levels for some carriers
• Evergreen Marine Corp (2603 TT) no longer looks expensive, trading at 70-75% of replacement  cost.

• JD Health reported 2H2022 results. 2H revenue increased 55.5% YoY to RMB26.5bn (RMB24.2bn) while fall in GPM and an increase in fulfilment costs led to operating losses during the period.
• Product revenues (JD Pharmacy) continues to account for a majority of JD Health’s revenues that generate lower GPM compared to Marketplace and other revenues.
• JD Health’s share price has moved up over the last few months but further decline in GPM  could pull the share price down suggesting it could be a Good Short.

• 2023 will be a transitional year for SD Biosensor (137310 KS), with revenue and earnings taking a massive hit due to the declining revenue contribution of the COVID-19 tests.
• The company is reaping the benefits of its continuous effort in adding new growth engines through M&A and global expansion of its all-in-one molecular diagnostic system called the Standard M10.
• SD Biosensor is set to enter the US market through the acquisition of Meridian. With ~40% share of the global IVD market, the US has big potential.

• Yilli’s aggressive marketing in 2Q raised market concerns over intensifying competition
• An outright price war is unlikely as its closest competitor, Mengniu, is not willing to follow suit
• Margin remains under pressure on rising input cost
• Trimmed fair value to CNY22.5 (from CNY26.1)

• Net profit up 3% on higher toll revenue and operating margin expansion.
• Longer term concerns remain, maintain IDR4,900 TP.
• With 62% of Indonesia’s toll roads by length, JSMR offers exposure to Indonesia’s ongoing urbanisation and infrastructure spending plans. Near term, government intervention in toll tariffs will likely weigh on the stock.

FY22 was the first year since its inception that CVC Income & Growth (CVC IG) saw a negative NAV total return (TR). Its euro and sterling share classes produced NAV total negative returns of c 8.3% and 6.8%, respectively, which compares with 3.3% and 1.9% negative TRs by the Credit Suisse Western European Leveraged Loan Index (CS WELLI) in euro and sterling terms, respectively. This was primarily the result of downward mark-to-market valuation adjustments (resulting in unrealised losses for CVC IG), driven by price declines in the European loan market amid higher risk aversion. Meanwhile, defaults in the European loan market remained low at 0.4% in 2022, based on the Morningstar European Leveraged Loan Index (with no defaults in CVC IG’s portfolio). Subsequently, European loan markets rebounded strongly in January and February 2023, leading to 6.7% and 6.9% returns for CVC IG’s euro and sterling share classes, respectively (therefore allowing CVC IG to almost fully recoup the 2022 loss).

• Qualcomm has appeared on the radar for attractive dividend plays.
• The current yield is among the highest in the sector and also appears safe based on historical data.
• There are a number of important risks that overshadow Qualcomm’s ability to consistently increase its dividend.

• Steelcase reported 4QFY23 on March 22 after the close, with a beat on adjusted EPS and revenues. Guidance for FY24 beat estimates, then in print.
• 4QFY23 adjusted EPS was $0.19, above our estimate of $0.12 and consensus of $0.11. GAAP EPS was $0.13, above our estimate of $0.06. 4QFY23 revenue of $802 million was a ~$50 million positive surprise.
• The positive earnings and revenue surprises were due primarily to core corporate business in the Americas and EMEA segments.

• UI is coming off a strong performance in the December quarter but should continue to show improving margins as the Company maintains products in stock and at higher prices
• The March quarter can be seasonally challenging. For Ubiquiti, it could end up being a period where customers are able to find the products they are looking for in stock 
• In the March quarter Ubiquiti has maintained a higher level of product availability than what we had been observing in the prior year

• 1H18 net profit of MYR3.83bn grew 14% yoy, driven by higher interest income growth and continued cost management. Interim dividend of 25 sen consisting of 15 sen cash portion and 10 sen electable portion.
• Group gross impaired loans ratio picked up in 2Q largely due to deterioration in Singapore corporate book (classified Hyflux group exposure of MYR1.95bn as impaired and provisioned ~RM315.1mn in 2Q).
• Fair value reduced to MYR11 implying 1.6x p/b. FY18 targets were maintained. Focus ahead on continued costs controls and margins after taking cautious approach on liquidity in 1H.