Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: DBS, Fast Retailing, Selamat Sempurna, Paramount Bed Holdings Co Lt, Air China Ltd (H), Meritz Financial Group, Elastic NV, Shenzhen Chipscreen Biosciences-A and more

In today’s briefing:

  • DBS Group Holdings – And Baby Makes Three
  • Fast Retailing: Q1 Beat Seems Temporary but Concerns About China Could Last Long
  • Selamat Sempurna (SMSM): Less Filters
  • Paramount Bed (7817 JP): Poised to Grow on the Back of Recovery from the COVID-19
  • Air China (753 HK): Down but Not Out
  • Long-Short Trade of Korea Investment Holdings & Meritz Financial Group Inc
  • Elastic: High-Profile Search Company With Attractive Fundamentals
  • Shenzhen Chipscreen Biosciences (688321.CH) – Risks Outweigh Opportunities

DBS Group Holdings – And Baby Makes Three

By Thomas J. Monaco

  • Another Troubled Bank Deal In Asia Adds Another Managerial Distraction;  
  • DBS Agreed to Acquire Citigroup’s Taiwan Consumer Franchise for SGD 2.9 bn After Three Taiwan Banks Couldn’t Make This Deal Work; and
  • In Addition, DBS’ Fundamentals Continue to Weaken, With Lower Fees, Compressed Margins, and Modestly Weaker Credit.

Fast Retailing: Q1 Beat Seems Temporary but Concerns About China Could Last Long

By Oshadhi Kumarasiri

  • Fast Retailing (9983 JP)’s share price is up 10% after beating 1QFY22 consensus revenue and OP by 1.4% and 20.6% respectively.
  • However, the share price move feels unwarranted given that the beat was driven by mostly one-off/temporary factors in the company’s less significant segments
  • We think this is an opportunity to short Fast Retailing as Uniqlo seems to be slowing rapidly in the Chinese market.

Selamat Sempurna (SMSM): Less Filters

By Henry Soediarko

  • The company’s main product, filers, are no longer key features in Electric Vehicles thus earnings will be pressured. 
  • Venture into air-purifying business is commendable yet it may not plug the hole immediately.
  • Foreign investors in the company are mainly looking for exposure in the auto-related business, so the change into air purifier may cause them to sell. 

Paramount Bed (7817 JP): Poised to Grow on the Back of Recovery from the COVID-19

By Tina Banerjee

  • Paramount Bed Holdings Co Lt (7817 JP) reported record-high sales and profit during six-month ended on September 30, 2021, driven by strong domestic demand due to recovery from the pandemic.
  • Each of businesses are receiving steady inquiries from market and is expected to perform strongly. Management raised full-year guidance after a strong Q1 results.
  • New products are driving margin for the company. Nemuri SCAN continues to perform well as remote monitoring using sensor technology is receiving more attention amid the COVID-19 pandemic.

Air China (753 HK): Down but Not Out

By Osbert Tang, CFA

  • Passenger traffic momentum of Air China Ltd (H) (753 HK) has picked up in Dec and it also narrowed down it gap against China Southern Airlines (1055 HK)
  • The resurgence of international traffic over the next two years with more border openings will provide significant benefits to Air China, helping it to recover its depressed load factors.
  • Air China outperformed HSCEI by 3.6pp YTD, but we still consider its P/B of 1.0x, or around historical average, not stretched. Strength of Rmb is also a potential positive factor.

Long-Short Trade of Korea Investment Holdings & Meritz Financial Group Inc

By Douglas Kim

  • In this insight, we discuss the long-short trade idea of going long Korea Investment Holdings Co, Ltd. (071050 KS) and going short Meritz Financial Group (138040 KS). 
  • There has been a massive divergence in share prices of Korea Investment Holdings and Meritz Financial Group in the past year and we believe this divergence has been too excessive. 
  • There is a very high likelihood that on 9 February, MSCI will announce an inclusion of Meritz Financial Group in the MSCI Korea index. 

Elastic: High-Profile Search Company With Attractive Fundamentals

By Andrei Zakharov

  • Elastic NV (ESTC US)  has grown its ARR from ~$207 million as of Jul-18 to ~$760 million today and may become a multi-billion dollar unicorn in the future.  
  • We like the subscription-based freemium business model, strong net expansion rate, and acceleration in revenue growth of Elastic Cloud business, which currently represents ~33% of total revenue. 
  • Elastic Search is one of the most popular search engines globally, and the company’s products have been downloaded more than 350 million times since 2013. 

Shenzhen Chipscreen Biosciences (688321.CH) – Risks Outweigh Opportunities

By Xinyao (Criss) Wang

  • The small market space of peripheral T-cell lymphoma indication and the fierce market competition of other indications, products and candidates make the Company’s future commercialization performance uncertain. 
  • The continuous large investment in R&D, high selling expenses, and declining R&D expending capitalization would further drag down profitability.
  • So, our view is that we are conservative about Chipscreen Biosciences’s outlook at the current stage.

Related tickers: DBS (DBSM.SI), Fast Retailing (9983.T), Selamat Sempurna (SMSM.JK), Paramount Bed Holdings Co Lt (7817.T), Air China Ltd (H) (0753.HK), Meritz Financial Group (138040.KS)

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