Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Alibaba Group, Sea Ltd, HK inno.N, BTS Group Holdings, Index Livingmall PCL, TPC Power Holdings, Global Green Chemicals, PTG Energy PCL, Avaya Holdings Corp and more

In today’s briefing:

  • Alibaba: The Commerce Segment Weakens Amidst Government Scrutiny
  • Sea Ltd (SE US) – The Sails Are Set
  • HK Inno.N (INNO KS): On a Solid Growth Path with Blockbuster New Drug K-CAB
  • BTS: Short & Long Terms Outlook Remain Positive
  • ILM: Positive Earnings Outlook and Attractive Valuation
  • TPCH: Capacity Expansion Will Accelerate 2022 Earnings
  • GGC: Improve Volume to Drive 4Q21 Earnings
  • PTG: Recovering Volume Sales to Drive 4Q21 Profit and Ahead
  • AVYA: Calling It a Preview

Alibaba: The Commerce Segment Weakens Amidst Government Scrutiny

By Oshadhi Kumarasiri

  • Alibaba Group (9988 HK) shares dropped 11.1% yesterday on rather disappointing 2QFY22 earnings which saw the company’s operating profit tumble 32% YoY.
  • Driven by the ongoing regulatory pressure and the Chinese government’s push for common prosperity measures, the Core-Commerce segment’s revenue growth and operating margins have fallen below the pre-COVID trend line.
  • Although the valuation multiples look cheap compared to history, there’s a possibility for multiples to drop another 50%, especially if the regulatory environment remains the same.

Sea Ltd (SE US) – The Sails Are Set

By Angus Mackintosh

  • Sea Ltd (SE US) released yet another knockout set of results in 3Q2021, representing the ninth quarter of triple-digit growth in GAAP sales plus management upgraded FY2021 guidance.
  • Key positives include e-commerce loss per order declining further in 3Q2021, take-rates improving further, marketplace revenues growing +151% YoY in 3Q2021 and good progress made in new markets. 
  • Gaming adjusted EBITDA continues to cover losses from e-commerce despite slower growth from digital entertainment. We see the post-results correction as an opportunity to accumulate Sea Ltd (SE US)

HK Inno.N (INNO KS): On a Solid Growth Path with Blockbuster New Drug K-CAB

By Tina Banerjee

  • HK inno.N (INNO KS)‘s new digestive disease drug K-CAB is the only drug of its class available in Korean market and has superior efficacy than the current standard of care. 
  • K-CAB has already become the no. 1 drug in Korean digestive treatment market. HK inno plans to further strengthen its position by expanding global presence and increasing indication approvals.
  • From this year, HK inno has started distributing Merck’s seven vaccines, including its largest selling HPV vaccine ‘Gardasil’ in Korea. The company also has a rich pipeline of innovative drugs.

BTS: Short & Long Terms Outlook Remain Positive

By Research Group at Country Group Securities

  • We reiterate a BUY rating for BTS while roll over target price to Bt11.0 (Previous TP: Bt10.20), derived from SOTP.
  • BTS report 2QFY22 (July’21-Sep’21) net profit at Bt576m (-24%YoY -58%QoQ), the lowest level in the past five quarter. The result came out slightly below our expectation while 9M21 result accounts 
  • Disappointed earnings reported in 2QFY22 was pressured by 13-quarter low of revenue and increasing share of loss from weak U-city and KEX performance.

ILM: Positive Earnings Outlook and Attractive Valuation

By Research Group at Country Group Securities

  • Yesterday analyst meeting came out with a positive tone. SSSG turned to positive at double digit growth in 4QTD. We upgrade recommendation to BUY from HOLD rating with higher TP:Bt21.0
  • The re-rating PE multiple reflects; 1) strong earnings momentum, 2) growing demand for furniture after The Bank of Thailand eased the loan-to-value (LTV)
  • We expect its 4Q21 earnings to hit the highest record in the past nine quarters supported by 1) an increase in revenue, thanks to stores sales recovery solid online sales

TPCH: Capacity Expansion Will Accelerate 2022 Earnings

By Research Group at Country Group Securities

  • Upgrade to BUY from HOLD with a new target price of Bt13.10 (+26% from previous TP), derived from 16.7xPE’22E, -1 SD of its 3-year trading average. Our rating reflects 
  • Its 3Q21 net profit reached the 4-quarter high at Bt52m (-15% YoY, +7% QoQ), with YoY drop caused by rising administrative expenses (+34%YoY) and finance cost (+48%YoY).
  • We expect continuing growth in 4Q21 earnings onwards backed by improving capacity factor of the power plants, COD during 4Q20 and 1Q21. •The COD of new power plants in 4Q21 

GGC: Improve Volume to Drive 4Q21 Earnings

By Research Group at Country Group Securities

  • Yesterday analyst meeting came out with a positive tone. We expect GGC’s earnings to remain at a high level, backed by rising sales volume and higher product prices, in response
  • Diesel demand in 4Q21 to improve QoQ, backed by lockdown easing to push local transportation, amplify tourism, along with end of rainy season.
  • Methyl Ester to soften QoQ, upon competition, brief change to B6 and tighten price for B7 and B10, will offset volume growth and rising B100 price.

PTG: Recovering Volume Sales to Drive 4Q21 Profit and Ahead

By Research Group at Country Group Securities

  • We maintain the BUY rating with a target price of Bt18.0, derived from 20xPE’22E, which is equal to World Consumer Staple sector. We see the earnings momentum in 4Q21-2022 
  • Having the earnings touched bottom in 3Q21 due to lower domestic oil demand from lockdown measures, we see the resumption of travel in 4Q21 to act as key catalyst 
  • The volume sales in expected to improve 10% QoQ in 4Q21 as majority of PTG’s clients are in logistics sector. However, we see drop in marketing margin to Bt1.7/L (-10%QoQ)

AVYA: Calling It a Preview

By Hamed Khorsand

  • AVYA is scheduled to report fiscal fourth quarter (September) results on November 22, 2021, with all eyes on how much the cloud business has grown.
  • During the calendar year 2021, cloud adoption had accelerated where AVYA pulled forward the timing of reaching $1 billion in ARR. This trend is to continue
  • ARR momentum would harm revenue line and push out free cash flow generation to late fiscal 2022. 

Related tickers: Sea Ltd (SE.N), BTS Group Holdings (BTS.BK), TPC Power Holdings (TPCHM.BK), Global Green Chemicals (GGC.BK), PTG Energy PCL (PTG.BK)

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