Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Astra International, Keyence Corp, Mediatek Inc, Xiaomi Corp, MP Materials Corp, KDDI Corp, Siloam International Hospital, Bangkok Bank Public, Orion Corp, Hawkins Inc and more

In today’s briefing:

  • Astra International (ASII IJ) – Leaning into the Recovery
  • Keyence – Showing Its Quality
  • MediaTek: Results Beat, Increased Guidance, Earnings Upgrades… and a Lower Share Price
  • Hong Kong Buybacks: HK$200m Buyback by Xiaomi
  • MP Material (MP): Is This Time Different?
  • KDDI (Buy): Q1 21 Results – Weak Consumer Offset by Solid Corporate Sales
  • Siloam International Hospital (SILO IJ) – Base Cases Improvement
  • BBL: Cheap Valuation with Secured Portfolio Will Limit Downside
  • Pair Trade Setups of Korean Holdcos & Opcos
  • HWKN: The Right Ingredients

Astra International (ASII IJ) – Leaning into the Recovery

By Angus Mackintosh

Astra International (ASII IJ) announced its 1H2021 results with sales increasing by +20% YoY and headline net profit decreasing by -22% YoY but removing the impact of the Bank Permata (BNLI IJ) sale last year, net profit increased by an impressive +61% YoY.

The better numbers were driven by a strong improvement in the auto business, with car sales up +50% YoY and motorcycle sales +29% YoY.

The group was also a beneficiary of higher commodity prices in 1H2021, which boosted the performance of its heavy equipment and mining business under United Tractors (UNTR IJ) and its agribusiness under Astra Agro Lestari (AALI IJ), which saw net profit +14% YoY and +66% YoY respectively.  

The group consumer finance business saw a +13% increase in the amounts financed with an increase of +2% in net profit growth. Car finance saw a +2% increase and motorcycle finance a +3% YoY increase in net profit, while heavy equipment finance saw a +46% increase in the amounts financed by a -20% decrease in contribution due to a reduced loan portfolio. 

United Tractors (UNTR IJ) saw a +13% increase in net income with a +60% increase in Komatsu heavy equipment sales and helped by higher coal prices. Astra Agro Lestari (AALI IJ)saw a boost from higher crude palm oil prices, which rose +29% in 1H2021.

Astra International (ASII IJ) remains relatively cautious on the outlook given the current wave of COVID-19 cases but the company is well-positioned to weather any delay in an economic recovery but also to take advantage of any potential opportunities, given its rock-solid balance sheet. Astra International (ASII IJ) is trading on 10.6x FY2021E PER and 9.1x FY2022E PER versus its 5-year average forward PER of 14.2x, making it attractive from a valuation perspective. It remains one of our top recovery picks for Indonesia, given its exposure to autos, motorcycles, consumer finance, heavy equipment, and commodities.

Keyence – Showing Its Quality

By Mio Kato

Keyence revenue growth surprised to the upside like peers with a 10.7% positive surprise vs. consensus. Just as importantly, OPM was also strong as the unusually high SG&A burden the company has been experiencing over the last two years continues to ease.

MediaTek: Results Beat, Increased Guidance, Earnings Upgrades… and a Lower Share Price

By Wium Malan, CFA

Mediatek Inc (2454 TT) delivered a strong set of 2Q21 results, beating sell-side consensus estimates on both the top and bottom-line and delivering numbers at the top-end of management’s guided ranges, which, in conjunction with a continued strong demand environment, has led to an increase in growth and profitability guidance for the remainder of FY2021.

Further short-term share price weakness, based on supply constraint concerns, along with a continuation of the earnings upgrade cycle, has resulted in MediaTek trading on a 13.8x NTM PE ratio, which is more than one standard deviation below its historical average trading range. MediaTek also currently trades on an extremely attractive 6.3% NTM dividend yield with little risk of a negative surprise to dividend payments given the ongoing earnings upgrades, and MediaTek having generated NT$28bn in Operating Cash Flow, during 2Q21, which helped its Net Cash balance increase further to NT$191bn, now 13% of its Market Cap. 

In this insight, we look at MediaTek’s 2Q21 results, its medium- and longer-term growth outlook and current valuation levels. This insight is also a follow-up from our more-detailed analysis of MediaTek (MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield) last month.

Hong Kong Buybacks: HK$200m Buyback by Xiaomi

By Ke Yan, CFA, FRM

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Jul 30.

In the past 7 days, the top 3 companies that repurchased the most shares from the market were  Xiaomi Corp (1810 HK) (HKD 196.9 million worth of buybacks), New World Development (17 HK) (HKD 170.2 million worth of buybacks), China Gas Holdings (384 HK) (HKD 86.6 million worth of buybacks).

MP Material (MP): Is This Time Different?

By Robert C Prather Jr

Is MP Materials Corp (MP US) a way for investors to play the increasing demand for rare earth materials or will this play out similarly for the mine that has experienced its fair share of problems over the past few decades?

KDDI (Buy): Q1 21 Results – Weak Consumer Offset by Solid Corporate Sales

By Kirk Boodry

KDDI posted mixed Q1 results with revenue modestly below expectations but profitability higher. Recent operational trends remain unchanged as demonstrated by 18% growth in new DX business sales but a 3% decline in core mobile communication sales.  Profitability growth stands out especially as KDDI did that whilst lapping the toughest comps for FY20 when emergency coronavirus measures kept marketing spend down. With financial results on track to meet FY21 expectations, we remain at Buy.

Siloam International Hospital (SILO IJ) – Base Cases Improvement

By Angus Mackintosh

Siloam International Hospital (SILO IJ) released its 1H2021 results and was able to sustain its positive momentum for revenue, EBITDA and net profit performance from 1Q2021 to 2Q2021.

The numbers have been driven both by testing and treatment for COVID but also a recovery in case bases as the fear of visiting hospitals subsided during the quarter.

Siloam International Hospital (SILO IJ) achieved a net profit margin of 8.0% in 2Q2021 compared with a negative 13.9% in 2Q2020. The company saw YoY EBITDA growth of +487%, booking IDR478bn in 2Q2021 compared with IDR82bn in 2Q2020.

The company conducted a total of 32,000  surgeries in 1H2021, only -10.2% lower than the number of surgeries conducted in pre-COVID 1H2019. Inpatient and outpatient numbers also saw significant improvements in 1H2021

 Of the 18 ramping up hospitals which were unprofitable in 2019, nine of these are now profitable, with a total positive EBITDA contribution of IDR150bn in 1H2021. 

Siloam International Hospital (SILO IJ) continues to strengthen its relationships with corporate and insurance clients, with a corporate loyalty program, as well as consulting services on health issues.

The company continues to invest in new technology and has seen very strong growth in bookings through its My Siloam app, which saw +321% QoQ growth in 2Q2021 versus 1Q2021.

Siloam International Hospital (SILO IJ) is the cheapest of Indonesian hospital stocks trading on 8.7x FY21 EV/EBITDA and it has seen a dramatic turnaround in profitability partly due to COVID-19 related but also the pandemic spurred the company to focus on its loss-making hospitals, which have seen significant improvements. We continue to take a positive view of Siloam International Hospital (SILO IJ), given its ongoing progress on improving profitability and attractive valuation versus its peers. 

BBL: Cheap Valuation with Secured Portfolio Will Limit Downside

By Research Group at Country Group Securities

Neutral tone from yesterday analysts’ meeting. We reiterate our BUY rating with a target price at Bt155, derived from 0.65x PBV’21E,which is close to its 3-year average.

• Management maintain financial targets as previous quarter and in line with our expectation. In essence to our believe, the bank has sufficient loan loss reserve with 190% of coverage ratio in 2Q21  and could decrease its expected credit loss  in 2H21 to meet the target 22,000 million baht in 2021.
• The bank will also benefit from expanding export sector and could reach its target loan growth at 3-4% among covid-19 pandemic. Meanwhile, fund management business and brokerage fee would be the key driver for enhancing net fee income of BBL in this years.
• We expect earnings momentum to remain weak in 2H21 given prolong pandemic which could depress loan growth and NIM. However, current share price which is trading at 0.4xPBV’21E is quite cheap. Together with its secured loan portfolio, any downside should be limited relative to peers.

Pair Trade Setups of Korean Holdcos & Opcos

By Douglas Kim

In this insight, we provide visual set-ups of the Korean stubs related pair-trades. We have included 40 pair trade set-ups of all the major Korean stubs related pairs (including regular and quasi holdcos and their respective opcos). We have provided YTD price chart comparisons of all the 40 pair trade set-ups below. 

The top six best performing holdcos (among the companies listed below) YTD are as follows:

The top six best performing opcos (among the companies listed below) YTD are as follows:

HWKN: The Right Ingredients

By Hamed Khorsand

  • Hawkins (HWKN) has leveraged its storage capabilities to meet increased demand for specialty chemicals at a time when demand has increased. HWKN reported fiscal first quarter (June) results surpassing our expectations on the heels of higher pricing and volumes for multiple products.


  • Ahead of the results we had been expecting some normalization in HWKN’s business due to loosened COVID-19 restrictions. Even though there was evidence of lower bleach demand, there was an increase across a multitude of the products HWKN sells, including those where there has been material increase in selling prices.


  • HWKN reported revenue of $181.2 million compared to our estimate of $178.8 million. The increase in revenue was the result of higher industrial and water treatment revenue while health & nutrition revenue declined sequentially faster than we had expected.


  • We are making changes to our earnings model to reflect the improvement in the underlying demand in HWKN’s businesses. This includes using a higher gross margin than we had originally modeled at the start of the fiscal year.

Related tickers: Astra International (ASII.JK), Keyence Corp (6861.T), Mediatek Inc (2454.TW), Xiaomi Corp (1810.HK), KDDI Corp (9433.T), Siloam International Hospital (SILO.JK), Bangkok Bank Public (BBL.BK), Orion Corp (271560.KS), Hawkins Inc (HWKN.O)

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