Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Oriental Watch, Bandhan Bank Ltd, Recruit Holdings, Samsung C&T, Pola Orbis Holdings, Banco Do Brasil Sa, Kiatnakin Bank, Las Vegas Sands, Beijing Capital International Airport (BCIA) and more

In today’s briefing:

  • Oriental Watch: Good Results in the Bag, Cautious H1 2023
  • India Channel Insight #40 | Assam Floods and Impact on Financials
  • 2022 High Conviction – Recruit: More Downside Ahead with Normalisation of Recruitment Markets
  • Samsung C&T and Hyundai E&C: Two Main Beneficiaries of Neom (World’s Biggest Construction Project)
  • Pola Orbis: Pola Moves to Capture Travel Retail Demand as Air Travel Recovers
  • Brazil Banks – Returns Tug of War Between Spreads and Credit Costs, Stick with Banco Do Brasil
  • KKP : A Growth and Dividend Play
  • Las Vegas Sands:  Totally Asia Facing, It Is Valued on Financial Strength Amid Covid Challenges
  • Beijing Capital Intl Airport (694 HK): Preparing to Take Off

Oriental Watch: Good Results in the Bag, Cautious H1 2023

By Sameer Taneja

  • Oriental Watch (398 HK) profit alert for >350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). 
  • Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. 
  • With cash > 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. 

India Channel Insight #40 | Assam Floods and Impact on Financials

By Pranav Bhavsar

  • Our channels in Assam indicate a high impact of floods this year on the overall state economy. Normalcy is expected to take 4-5 months in order to be restored. 
  • Despite the high impact, Bandhan Bank Ltd (BANDHAN IN) may not see an increase in NPAs.
  • New recovery tools, changing regulations and customer mindsets are aiding faster than anticipated recovery even for older loans. 

2022 High Conviction – Recruit: More Downside Ahead with Normalisation of Recruitment Markets

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) shares have declined 44.35% YTD as the company’s earnings have started normalising following easing off of Covid-19 conditions.
  • 4QFY03/2022 results showed that the strong growth in earnings that the company experienced in FY03/2022 has started to weaken with normalisation of recruitment and staffing markets.
  • With weakening earnings, we think there is further downside and Recruit will be a good short over the next few weeks.

Samsung C&T and Hyundai E&C: Two Main Beneficiaries of Neom (World’s Biggest Construction Project)

By Douglas Kim

  • Neom is the largest construction project in the world with total project size of nearly $500 billion. 
  • Neom has started to provide construction project awards for key projects in 1H 2022. Hyundai E&C and Samsung C&T consortium recently won a project estimated at $1 billion for Neom. 
  • Samsung C&T and Hyundai E&C are two key companies in Korea that will be long-term beneficiaries of the Neom futuristic city construction in Saudi Arabia. 

Pola Orbis: Pola Moves to Capture Travel Retail Demand as Air Travel Recovers

By Oshadhi Kumarasiri

  • Pola Orbis Holdings (4927 JP) is expanding its Travel Retail presence in the region to capitalise on the surge in demand from the recovery of air travel.
  • Inbound demand could also return to Japanese cosmetics through the reopening of Japan’s borders to tourists.
  • The sector is yet to break out from the downtrend. Investors willing to get in early could do that with Pola Orbis with limited downside risk.

Brazil Banks – Returns Tug of War Between Spreads and Credit Costs, Stick with Banco Do Brasil

By Victor Galliano

  • Banco Central do Brasil has been raising benchmark interest rates aggressively since 1H2021 and we believe it is approaching the peak of its tightening cycle; this feeds into loan spreads
  • 1Q22 Brazil bank results showed limited evidence of widening spreads, due to a time lag, but loan quality is worsening due to the hiking interest rates amid the soft economy
  • Disciplined loan origination should support bank returns, especially in the consumer and SME segments, containing credit cost charges growth as spreads expand; deep-value Banco do Brasil remains our top pick

KKP : A Growth and Dividend Play

By Pi Research

  • Maintain BUY for KKP with a target price of Bt82.00. We like its steady net profit growth, resilient fundamentals, and high dividend yield, expected at 5.3-6.6% for 2022-24.
  • Strong 2Q22 net profit to rise YoY : We expect Kiatnakin Phatra (KKP) to post a net profit of Bt1.9b in 2Q22, up 39% YoY (-9% QoQ). 
  • Lending growth in 2Q22 will likely continue to be strong at 4.2% QoQ (1Q22: +6.5% QoQ), largely due to higher demand from vehicle hire purchase and mortgage lending. 

Las Vegas Sands:  Totally Asia Facing, It Is Valued on Financial Strength Amid Covid Challenges

By Howard J Klein

  • LVS is now entirely a balance sheet play in that its cash position vs. run rate assures good liquidity through the lingering covid crisis.
  • Maturities of its debt pose no problems for refis until ’24,’25–and even minimal then.
  • Recurring sporadic covid outbreaks and Beijing policies impede GGR recovery. We are moving LVS from BUY to HOLD to reflect the value of its sustainability rather than growth.

Beijing Capital Intl Airport (694 HK): Preparing to Take Off

By Osbert Tang, CFA

  • Share price of Beijing Capital International Airport (BCIA) (694 HK) underperformed that for Air China Ltd (753 HK) by wide margin in this year, which we believe is not justified.
  • Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.
  • The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA’s performance.

Related tickers: Oriental Watch (0398.HK), Bandhan Bank Ltd (BANDHAN.NS), Recruit Holdings (6098.T), Samsung C&T (028260.KS), Pola Orbis Holdings (4927.T), Banco Do Brasil Sa (BBAS3.SA), Kiatnakin Bank (KKP.BK), Las Vegas Sands (LVS.N), Beijing Capital International Airport (BCIA) (0694.HK)

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