Daily BriefsEquity Bottom-Up

Equity Bottom-Up: Indo Tambangraya Megah, Taste Gourmet Group, Microport Scientific, Inpex Corp, Mani Inc and more

In today’s briefing:

  • A Layman’s Thesis for ITMG
  • Taste Gourmet: Terrible Q4 2022, Q1 2023 off to a Good Start
  • Microport Scientific (853.HK)-The “unique” Development Mode Leads to Lower-Than-Expected Performance
  • INPEX (1605) | The Cheapest Oil Stock in the World
  • Mani Inc (7730 JP): Q2 Result Exceeds Expectation Aided by Demand Recovery; FY22 Guidance Reiterated

A Layman’s Thesis for ITMG

By Sameer Taneja

  • Indo Tambangraya Megah (ITMG IJ) is a 2.3 bn USD company with ~880 mn USD net cash adding >100 mn USD of free cash flow a month.
  • At a 103 USD/ton ASP the company made a 475 mn USD profit for 2021. We estimate prices are easily around 200 USD/ton for the company in the current environment.
  • Indo Tambangraya Megah (ITMG IJ) has a track record of paying >70% of its profits as dividends since 2009 ( implying a yield of 37% for FY22 ). 

Taste Gourmet: Terrible Q4 2022, Q1 2023 off to a Good Start

By Sameer Taneja

  • Taste Gourmet Group (8371 HK) reported worse numbers than we expected for Q4 2022 during the restrictions; Checks indicate recovery in Q1 2023 is far better than our expectations. 
  • Cash declining from 96 to 65 mn HKD QoQ resulted in the company having to declare a smaller final dividend of 1.6 HKD cents ( interim: 4 HKD cents ) 
  • Trading at 5.4x FY23 and 11.1% dividend yield (assuming a 60% payout ratio), the company represents an excellent investment opportunity with >100% upside at the very least.

Microport Scientific (853.HK)-The “unique” Development Mode Leads to Lower-Than-Expected Performance

By Xinyao (Criss) Wang

  • Due to the centralized procurement in PRC market and decreasing volume of operations in overseas markets during pandemic, Microport Scientific (853 HK)’s 2021 performance missed expectations. 
  • Even if Microport could finally digest the negative impact of centralized procurement, its “unique” development mode would still put pressure and uncertainties on future performance/outlook, leading to lower-than-expected results.
  • Our earnings estimate of Microport in 2022 could be about HK$-1.7, and revenue estimate could be about HK$7.3 billion. It’s quite possible that the Company will not end up profitable.

INPEX (1605) | The Cheapest Oil Stock in the World

By Mark Chadwick

  • Oil prices have had a good run, and so have oil stocks, but INPEX can still double from here
  • High oil prices and rising production will generate strong operating cash flow growth
  • Total shareholder returns will be close to 10% this year, meanwhile the valuation languishes at 0.6x P/B, way below global peers

Mani Inc (7730 JP): Q2 Result Exceeds Expectation Aided by Demand Recovery; FY22 Guidance Reiterated

By Tina Banerjee

  • Mani Inc (7730 JP) reported Q2FY22 revenue ahead of guidance, mainly driven by demand recovery in the surgical segment and positive effect of foreign exchange. However, profitability declined year-over-year.
  • Despite revenue beat in H1FY22, management reiterated FY22 guidance due to geographical risk. Outlook seems to be uncertain for China and India, which together contribute 33% of total revenue.
  • Mani shares plunged 20% since I published bearish note on the company in January 2022. Investors should avoid Mani due to its uncertain revenue outlook and deteriorating profitability in short-term.

Related tickers: Indo Tambangraya Megah (ITMG.JK), Microport Scientific (0853.HK), Inpex Corp (1605.T), Mani Inc (7730.T)

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