Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Keyence Corp, S Hotels & Resorts PCL and more

By September 12, 2020 No Comments

In today’s briefing:

  • Keyence (6861 JP): Back to the Future?
  • Small Cap Diary: Singha Hotels, PTG Energy

Keyence (6861 JP): Back to the Future?

By Scott Foster

We asked Keyence about the impact of COVID-19 on their business. They were not terribly helpful.

  • Management expects market conditions to revert to pre-COVID normal as the economy recovers. They see no material change in their business mix, growth drivers or competition. 
  • Their business in China began to recover in the three months to June. Sales in all other regions were down, although activity has picked up recently with the easing of travel restrictions.
  • As usual, they provided no guidance. 

The share price is sticking near the all-time high reached a month ago. Valuations suggest profit taking is in order. So do economic factors. It took three years for operating profit to recover from the Lehman Shock.


Small Cap Diary: Singha Hotels, PTG Energy

By Athaporn Arayasantiparb, CFA

We have visited many of two interesting companies recently, namely Singha Hotels (SHR) and PTG Energy, the country’s second largest gas station operator.

  • Singha Hotels‘ losses in H1’20 widened over six-fold YoY to Bt946m as revenues dropped 34% to just Bt1.5bn, and the company expects earnings to be flat in H2’20. The company could not cut costs as aggressively as Minor did, bleeding Bt120/month on fixed cash costs alone.
  • Management clarified that most of their investments would be organic (refurbishment and improvements) rather than M&A due to the tougher operating conditions. In the long-run, UK based hotels would fall from 74% to 21% of portfolio, and homegrown, own-managed hotels would rise to 48% of the portfolio.
  • PTG Energy reported H1’20 earnings of Bt717m, down 24% YoY, on the back of a 15% revenue decline to Bt51.4bn during the same period. The company put up a brave face talking about its strong MKM (marketing margin) even as volumes plunged more than 30% for key categories.
  • We are rather bearish on the company, which appears to focus more on market share than profitability during this precarious period. They are investing some Bt3.5bn in capex and hoping to move up the rankings against key rivals.

Before it’s here, it’s on Smartkarma