Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Meituan, Nintendo Co Ltd, Thai Beverage, Stove Kraft, Remegen Co Ltd, Howard Hughes Corp, Netgear Inc, TTW Pcl and more

In today’s briefing:

  • Meituan (3690): Positive Signal from Tax Bureau After Negative News from Market Bureau
  • Nintendo – Can Metroid Dread Hit the 10m Unit Mark
  • Thai Bev (THBEV SP): Neither Recovery nor BeerCo IPO Is Priced In. SOTP Suggests Upside.
  • India Channel Insight | Stovekraft, Bajaj Electricals, Crompton Consumer, Havells
  • Remegen Co Ltd (9995.HK) – Insights About the First Round Enquiry by Shanghai Stock Exchange
  • HHC: Build and Deliver
  • NTGR: Routing to Operating Margin
  • TTW: Expect 3Q21 Earnings to Be the Peak Quarter

Meituan (3690): Positive Signal from Tax Bureau After Negative News from Market Bureau

By Ming Lu

  • The fine of RMB3.4 billion was based on an investigation long before.
  • Value Added Tax data shows that Meituan recovered strongly in the holiday of the National Day.
  • We are confident in Meituan’s main business lines.
  • However, we believe the company should shut its community group purchase.

Nintendo – Can Metroid Dread Hit the 10m Unit Mark

By Mio Kato

We previously noted that the Metroid series has not been a big seller, at least compared to most of Nintendo’s heavyweight titles, and it hasn’t been as it has yet to break the 3m unit mark for a single title. As such we did not play especially close attention to the latest release but maybe we should have.


Thai Bev (THBEV SP): Neither Recovery nor BeerCo IPO Is Priced In. SOTP Suggests Upside.

By Devi Subhakesan

Thai Beverage (THBEV SP) had reported a strong improvement in its Thailand operations for 9MFY2021 suggesting that a recovery is underway and we expect this could look up further as the country opens to tourists from November 1st (ending quarantine for visitors to tourist destinations). The stock, at current levels, does not seem to factor in an earnings recovery given it is trading at conservative valuations even on current earnings.  In the insight below, we share SOTP based valuation to assess the stock’s upside potential and discuss possible catalysts and timelines.


India Channel Insight | Stovekraft, Bajaj Electricals, Crompton Consumer, Havells

By Pranav Bhavsar

About India Channel Insight

Our objective with India Channel Insight is to share snippets from our channel interactions that are part of our research process. These snippets can potentially be signals for larger themes/ideas emerging out of these interactions.  


Remegen Co Ltd (9995.HK) – Insights About the First Round Enquiry by Shanghai Stock Exchange

By Xinyao (Criss) Wang

In August, 2021, after Remegen Co Ltd (9995 HK) announced that the Company and Seagen Inc. had entered into an exclusive worldwide licensing agreement to develop and commercialize disitamab vedotin (RC48), the share price of RemeGen rose to HK$145.50/share, its second-highest ever. Meanwhile, in June, RemeGen submitted a prospectus to the SSE STAR Market, which was its second IPO application after its listing on the HKEX in November 2020. In September, RemeGen completed its reply to the first round enquiry by Shanghai Stock Exchange. Although RemeGen always seems to inadvertently bring “stimulation” to the market, from this enquiry and the business analysis, we could still find some concerns that worth investors’ attention. 


HHC: Build and Deliver

By Hamed Khorsand

  • Howard Hughes Corp. (HHC) has started deliveries of apartments of its ‘A’ali’i tower in master planned community (“MPC”), Ward Village, setting up for a large revenue and profit fourth quarter. The third quarter is expected to show revivals in the economy helping lift hospitality and retailer revenue.

 

  • Investors might be overly worried on slivers of the business than the entire pie. Over the course of the next few quarters, HHC’s businesses returning to pre-COVID-19 levels should result in higher funds from operation.

 

  • On October 6, 2021, HHC announced the opening of the ‘A’ali’I, the fifth tower in Honolulu’s Ward Village. The 750-unit building was 87.1 percent sold at the end of the second quarter. HHC recognizes the full sale of each unit upon delivery. Accordingly, HHC has the potential recognize approximately $450 million in revenue, at midpoint, for the square footage already sold.

NTGR: Routing to Operating Margin

By Hamed Khorsand

  • NETGEAR (NTGR) used the third quarter to push through some of its excess channel inventory through several promotions. The Company should report third quarter results at the end of October. NTGR is anticipated to report softer sales than the usual third quarter sequential increase the firm experiences, but it’s inventory level that would matter.

 

  • When NTGR reported second quarter results the Company had asserted the consumer was more interested in traveling and being outside than in purchasing a wireless router. NTGR had oversupplied the channel with wireless routers. The strategy was to run promotions during the third quarter to prompt consumers to buy routers for back to school.

 

  • Continued government mandated closures related to new outbreaks in Southeast Asia could have resulted in lower production and shipments of wireless routers to end markets. We believe this delay could help NTGR in the overall need to run promotions.

 

Focus has turned to operating margin as units sold per quarter normalizes.


TTW: Expect 3Q21 Earnings to Be the Peak Quarter

By Research Group at Country Group Securities

We expect TTW to report 3Q21 net profit of Bt874m (-6%YoY, +2%QoQ) then should drop in 4Q21 due to lower contribution from CKP.

• We expect equity income from CKP to reach the peak quarter at Bt237m due to high seasonality of hydropower plant (XPCL) and contribute to QoQ growth.
• Meanwhile, profit from core operations will continue to drop to Bt641m (-12%YoY, -6%QoQ) due to weak sales from tap water in both industrial and household customers.
• We expect 4Q21 earnings to drop both YoY and QoQ due low seasonality of the hydropower plant and weak performance from its core business.

We maintain our BUY rating with TP of Bt15.3 based on  SOTP, implying 17.4xPE’22E which is 17% discount from Thailand utilities sector. Our rating reflects our positive outlook toward its 2022 performance onwards supported by growth in tap water business after the COVID-19 epidemic gradually improved.


Related tickers: Meituan (3690.HK), Nintendo Co Ltd (7974.T), Thai Beverage (TBEV.SI), Howard Hughes Corp (HHC.N), Netgear Inc (NTGR.O), TTW Pcl (TTW.BK)

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