In today’s briefing:
- Grab 1Q2022: On a Path to Recovery but Still Has a Long Way To Go
- Xiaomi (1810 HK): 1Q22, Revenue Down Due to Weak Smartphone Market, 26% Downside
- Screen Holdings (7735 JP): Good Results, Optimistic Guidance, Great Uncertainty
- Safie – Cost Overshoot Could Drive This Lower But…
- Revisiting Long Ideas: Square (Block)
- GULF: Continued Growth Supported by New Power Plant COD
- Sumitomo Dainippon Pharma Co (4506 JP): New Launches Ensure Post-Latuda Growth Trajectory
- CENTEL: Hotel Business Recovery Drives 1Q22 EBITDA Growth
- BJC: Gaining Market Share on Modern Retail Business
- Overearning Short Candidates, CF Industries, Photronics, LSB Industries, Builders FirstSource
Grab 1Q2022: On a Path to Recovery but Still Has a Long Way To Go
- Grab (GRAB US) reported 1Q2022 results. IFRS revenue increased 6% YoY to $228m (vs consensus $142m) and negative adjusted EBITDA of $287m ( consensus $291m) compared to $111m in 1Q2021.
- The company’s deliveries biz saw a strong recovery in revenues post disappointing performance in 4Q2021 and the acquisition of Jaya Grocers partially contributed to this growth.
- Grab’s Mobilities biz has not yet recovered to pre-pandemic levels due to Omicron-related restrictions in the first two months of the quarter, but set to benefit from recovery in travel.
Xiaomi (1810 HK): 1Q22, Revenue Down Due to Weak Smartphone Market, 26% Downside
- In 1Q22, Xiaomi’s revenue decreased by 5% YoY in 1Q22 and the main business, smartphone, decreased by 11% YoY.
- Both global and domestic markets shrank and the competitor “Honor” came back.
- We conclude a downside of 26% and price target of HK$8.10.
Screen Holdings (7735 JP): Good Results, Optimistic Guidance, Great Uncertainty
- Screen Holdings beat FY Mar-22 profit guidance by a wide margin. This year, management is aiming for 12% sales growth and a 22% increase in operating profit.
- New SPE orders have exceeded sales for seven straight quarters and the backlog is at a record high. But 1H of FY Mar-23 is expected to be weak.
- A new factory is scheduled to come on line in 4Q, raising total SPE capacity by 20%. The risk is that this will coincide with a downturn in demand.
Safie – Cost Overshoot Could Drive This Lower But…
- Safie’s 1Q results disappointed the market as revenue came in 5% lower than the average of two consensus estimates and R&D expense surged.
- Nevertheless, 1Q should be the worst quarter of the year as downside from the specific distributor issue is now quantifiable and the stock is now on 2.5x 2022 EV/Sales.
- Valuations are already highly compelling and if the sentiment driven sell off continues we would be looking for 5-10x returns over a 3-4 year timeframe.
Revisiting Long Ideas: Square (Block)
- Impressive Analyst Day Presentation got us bulled up on the potential for Afterpay to juice growth on both Square and the Cash App
- Cash App getting a design overhaul to create a super app that spans commerce, investing, payments, personal finance, loans, etc.
- Unit economics outlined today lead us to a ~40% potential EBITDA margin in 3-5 years…well higher than is currently considered by consensus today.
GULF: Continued Growth Supported by New Power Plant COD
- We maintain our BUY call with a target price of Bt58.0, derived using SOTP methodology, implying 51x PE’22E. The rising gas price has relatively lower impact on GULF’s earnings performance
- Positive 2Q22 and 2022 outlook,The revenue recognition from GSRC unit 1,2(COD in 2021), unit 3 commencing operation in 2Q22,along with equity income from INTUCH, should drive 2Q22 profit both YoY&QoQ.
- 27% power generation capacity expansion in 2022, including 1.3GW IPP gas power plant (TH), 100MW solar roof top (TH) and 128 MW offshore wind (Vietnam).
Sumitomo Dainippon Pharma Co (4506 JP): New Launches Ensure Post-Latuda Growth Trajectory
- Sumitomo Dainippon Pharma Co (4506 JP)‘s flagship drug Latuda will loss patent protection in the U.S. in 2023. Latuda is already seeing revenue erosion.
- Sumitomo is expected to reap the benefit of new products launched in the U.S. market in 2020 and 2021. These are expected to gradually become next growth drivers.
- The company has a rich pipeline and targets to launch at least two new drugs in the U.S. in next two years.
CENTEL: Hotel Business Recovery Drives 1Q22 EBITDA Growth
- We downgrade to HOLD rating from BUY rating with TP unchanged at Bt43, derived from DCF (WACC of 10% and TG of 2%), implying 28.6xPE’23.
- The company reported a net loss of Bt44m in 1Q22 compared to net loss of Bt476m in 1Q21 and net profit of Bt152m in 4Q21 in line with our expectation.
- 1Q22 EBITDA doubled YoY but remained flat QoQ at Bt951m supported by strong YoY recovery of hotel performance benefitting from 1) Rebound of Thailand tourism 2) Continued strong operations.
BJC: Gaining Market Share on Modern Retail Business
- Yesterday analyst meeting came out with slightly positive tone. However, weak short-term performance from rising energy cost and lower consumer purchasing power and limited upside to our target price
- From management guidance, gross profit margin will be decline 50bps YoY in 2022 due to a rising energy cost and raw material in packaging business and consumer supply business. Meanwhile
- We have positive view on medium to long-term performance supported by better modern retail performance (BigC). Currently,BigC market share was at 21% (+1% to 2% YoY) and we expect BigC
Overearning Short Candidates, CF Industries, Photronics, LSB Industries, Builders FirstSource
- This model seeks companies that are potentially “overearning”, defined as companies with unusually high margins relative to their own history or relative to the industry.
- The reasons for the margin increases are sometimes unsustainable or fraudulent. The critical judgement involves to what extent unsustainable margins are embedded in a company’s forecasts and/or the stock’s valuation.
- These shorts tend to have moderate to higher betas, higher valuations due to recent strong results and good short responses to subsequently disappointing earnings.
Related tickers: Xiaomi Corp (1810.HK), SCREEN Holdings (7735.T), Square Inc (SQ.N), Gulf Energy Development Public Company (GULF.BK), Sumitomo Dainippon Pharma Co (4506.T), Central Plaza Hotel (CENTEL.BK), Berli Jucker (BJC.BK), Cf Industries Holdings (CF.N)
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