In today’s briefing:
- Interglobe Aviation (Indigo) Placement – Selldowns Are Becoming Increasingly Regular
- Tokyo Electron (8035 JP): Saved from Disaster by China
- StubWorld: AviChina Is Coming Up “Cheap”
- Nidec (6594 JP): Favorable Margin Trends
- Sanyo Trading (3176) – Well-Positioned for Sustainable Growth
- WILLs (4482) – Highest Quarterly Customer Acquisition in Two Years
Interglobe Aviation (Indigo) Placement – Selldowns Are Becoming Increasingly Regular
- InterGlobe Aviation Ltd (INDIGO IN)’s co-founder, Rakesh Gangwal and his wife, aim to raise up to US$450m through the bulk sale of 15.6m shares (4% of TSO).
- He had earlier stated his intention to pare down his stake after a long drawn battle with his co-founder Rahul Bhatia. He last sold in Sep 2022 and Feb 2023.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Tokyo Electron (8035 JP): Saved from Disaster by China
- Thanks to strong demand from China, 1Q results at Tokyo Electron (TEL) were just bad, not horrible. Operating profit was down 30% YoY on a 17% decline in sales.
- 1H guidance implies that 2Q will also be weak. Full-year FY Mar-24 guidance implies an unlikely 50% sequential increase in net profit, putting the shares on 32x projected EPS.
- A return to peak EPS next fiscal year would drop the P/E ratio to 21x, which used to be the top of TEL’s P/E range. Sell.
StubWorld: AviChina Is Coming Up “Cheap”
- As a PRC aviation/defense play, AviChina Industry & Technology H (2357 HK)‘s fundamentals are undemanding.
- Preceding my comments on AviChina are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Nidec (6594 JP): Favorable Margin Trends
- EV motors are out of the red, profits on appliance, commercial and industrial products are up, and the yen is much weaker than management’s forecast assumes.
- Despite economic uncertainty, achieving FY Mar-24 profit guidance should not be difficult.
- Operating margin trends are generally positive and valuations not too high for longer-term investors. Buy into current pull-back.
Sanyo Trading (3176) – Well-Positioned for Sustainable Growth
- Businessdiversificationpayingoff–Q1-3FY9/2023resultsshowed double-digit growth for sales at 15.3% YoY and OP at 26.8% YoY, despite high hurdles YoY.
- The Machinery & Industrial Products segment continues to be the core earnings driver, contributing approximately 60% of total operating profit, and growing segmental profits by 71.4% YoY.
- A rebound in industrial material-related products due to Japanese auto production recovery and the contribution of Scrum Inc., consolidated in February 2022 boosted profits.
WILLs (4482) – Highest Quarterly Customer Acquisition in Two Years
- Positive development over new customer acquisition – WILLs’ positive execution resulted in the net acquisition of five new customers for its Premium Benefits Service during Q2 FY12/2023, the highest level for two years.
- Positive thematic tailwinds are a combination of digital transformation needs as well as improving share trading liquidity for listed entities, and the company remains well positioned to cater to this in our view.
- WILLs also made significant progress in growing its Advertising business, generating positive segmental profits from losses in the previous year.
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