Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Alibaba Group, Jinxin Fertility Co Ltd, Capcom Co Ltd, National Beverage, CyberAgent Inc, Spotify Technology SA, M3 Inc, Kpit Technologies, PT Nippon Indosari Corpindo Tbk. (ROTI), Shiseido Company and more

In today’s briefing:

  • Alibaba (BABA): Over Impacted Before Quarter Result
  • Jinxin Fertility: Signs of Policy Tailwind and Valuation Dislocation
  • Capcom – On Track for ¥60bn in OP This Year
  • This Atypically-Cultured Beverage Business Can Be Interesting!
  • CyberAgent 3Q: Recurring Strong Results Ease Concerns over Gaming Revenues; Guidance Revised Upwards
  • Spotify 2Q21: Podcasting Rolling Over?
  • M3: Medlive IPO Helped OP Surge in 1Q; Expect Earnings Weakness to Come Through in 2H
  • KPIT Tech: Hitting All the Right Notes
  • PT Nippon Indosari Corpindo (ROTI IJ) – Oven Ready
  • Japanese Cosmetics Industry: 2Q21 Statistics Update

Alibaba (BABA): Over Impacted Before Quarter Result

By Ming Lu

  • The stock price has plunged since October 2020.
  • Over the past few days, BABA became a casualty of the policy against tutoring companies.
  • However, we believe the China online retail has been recovering.
  • We also believe the stock has an upside of 27% in nine months.

Jinxin Fertility: Signs of Policy Tailwind and Valuation Dislocation

By Ke Yan, CFA, FRM

We have discussed in our previous note that Jinxin Fertility will be a beneficiary for the China’s promotional policy for the third child. With the recent share price weakness and development on the policy front, we provide updates on the company and continue to believe that it is a name to hold for more favorable policy tailwinds to come. 


Capcom – On Track for ¥60bn in OP This Year

By Mio Kato

Capcom handily beat consensus estimates at 1Q with revenue of ¥48.4bn (+27.8%) and OP of ¥23.6bn (+37.4%). Consensus had been as low as ¥13.4bn in early May so the beat is significant. Yet, it failed to meet our ¥25-30bn on account of a write-off of some game assets (“several billion yen”) and deferring revenue for RE8 due to free DLC which we had not expected. Without those factors we believe OP would have come extremely close to ¥30bn. We remain confident that ¥60bn in OP is on the cards for the full year though it is plausible that Capcom could push out sales into next FY and come in slightly below that.


This Atypically-Cultured Beverage Business Can Be Interesting!

By Steven Chen

  • US-based National Beverage has an atypical management culture that emphasizes long-term value creation;
  • The business outperforms its publicly-traded peers across many dimensions;
  • At the current level, the risk-reward ratio looks quite favorable for the company’s long-term shareholders.

CyberAgent 3Q: Recurring Strong Results Ease Concerns over Gaming Revenues; Guidance Revised Upwards

By Shifara Samsudeen, ACMA, CGMA

CyberAgent Inc (4751 JP) reported its 3Q FY09/21 financial results after market on 28th. CyberAgent’s revenue for the quarter increased 70.3% YoY while operating profit grew 23.2% YoY during the period. Revenue beat consensus by 8.9% while OP beat consensus by 53.9%. The company has once again revised its FY2021 forecasts upwards given that it has already reached its OP target for the year which was set in 2Q FY09/2021.


Spotify 2Q21: Podcasting Rolling Over?

By Aaron Gabin

Spotify missed on MAUs again and lowered 2021 guidance. Not great for a subscription business built on a distant 10 year DCF built on subscriber trajectories. We have pushed Spotify as a short for a while and think its still a good short, especially as their spending on podcasting continues, even as usage is rolling over…oh yeah, and they still have no operating leverage. 

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  


M3: Medlive IPO Helped OP Surge in 1Q; Expect Earnings Weakness to Come Through in 2H

By Shifara Samsudeen, ACMA, CGMA

M3 Inc (2413 JP)  reported 1QFY03/2022 results on Wednesday which saw revenues growing 30.8% YoY while reported operating profit grew 38.2%YoY during the quarter (excl. the impact from stake disposal of Medlive Technology (2192 HK)). M3’s operating profits during 1QFY03/2022 benefitted from the IPO of Medlive Technology on Hong Kong Stock Exchange in July 2021 with a profit attribution of JPY9.1bn (19.6% of total revenues in 1Q and 36.9% of operating profits excl. Medlive IPO impact).

Source: Company disclosures

The reported revenue was 3.8% higher than consensus estimates while reported operating profits beat consensus by a huge margin of about 50%.


KPIT Tech: Hitting All the Right Notes

By Ankit Agrawal, CFA

KPIT reported strong Q1FY22 earnings. Overall, the earnings growth was led by margin expansion (EBITDA margin expanded to 17.3% vs 13.4% YoY) and high-teens QoQ revenue growth. The guidance also remains robust. While the stock has more than quadrupled since our initiation note KPIT Technologies: A Pure Play on Automotive Technology in Jun 2020, we believe the upside potential still remains significant.


PT Nippon Indosari Corpindo (ROTI IJ) – Oven Ready

By Angus Mackintosh

Indonesia’s leading bread company PT Nippon Indosari Corpindo (ROTI IJ) announced a strong set of results for 1H2021 with net Income up by +33.2%, despite a -7.0% YoY decline in sales. 

PT Nippon Indosari Corpindo( ROTI IJ)‘s 1H2021 return rate was improved to 10.4% versus 13.1% last year, as the company quickly anticipated changes in consumer shopping behaviour during the pandemic.

2Q2021 modern trade sales started to recover more than general trade, as the economy started to recover. The fact that malls have been shut in the latest emergency PPKM has been a positive for PT Nippon Indosari Corpindo Tbk. (ROTI) (ROTI IJ)

1H2021 gross margin came under some pressure from rising wheat (flour) prices but ROTI was able to reduce overall operating expenses to offset this coupled with the fact that business no longer had the drag from SMFC in the Philippines.

An encouraging July 2021 indicates significantly increased sales per day for general and modern trade with sales per day hitting close to the record set in 4Q2019.

PT Nippon Indosari Corpindo (ROTI IJ) remains a core consumer staples holding in Indonesia. It trades on 24.1x FY21E PER and 20.7x PER, with forecast EPS growth of +29.1% and +21.5% for FY21E and FY22E respectively versus its 5-year average forward PER of 27.7x, which looks relatively attractive.


Japanese Cosmetics Industry: 2Q21 Statistics Update

By Oshadhi Kumarasiri

Cosmetics exports grew 32.8% YoY and 15% QoQ in 2Q21 to more than offset the weaknesses in the domestic cosmetics market which remained 26% and 31% below the pre-COVID level in April and May 2021 respectively.

The earnings season of the Japanese cosmetics commences with quarterly results from Pola Orbis Holdings (4927 JP) and Kose Corp (4922 JP) on 30th July 2021. Kao Corp (4452 JP), Fancl Corp (4921 JP) and Shiseido Company (4911 JP) are scheduled to report their quarterly results early next week.

We analyse the 2Q21 cosmetic industry statistics, using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.


Related tickers: Alibaba Group (BABA.N), Jinxin Fertility Co Ltd (1951.HK), Capcom Co Ltd (9697.T), National Beverage (FIZZ.O), CyberAgent Inc (4751.T), Spotify Technology SA (SPOT.N), M3 Inc (2413.T), Kpit Technologies (KPIT.NS), PT Nippon Indosari Corpindo Tbk. (ROTI) (ROTI.JK), Shiseido Company (4911.T)

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