In today’s briefing:
- Softbank Group – Expiration of SenseTime Lock-Up Has Lopped $1.5bn off the VF Valuation
- Tencent: End of Another Quarter with No New Game Approval and Prosus Selling
- Bukalapak (BUKA IJ) – Track the Execution Not the Headlines
- PT Nippon Indosari Corpindo (ROTI IJ) – Adding Chocolate Spread and UHT Milk to the Mix
- Hyundai Engineering & Construction (000720 KS): Trading Points
- KBANK : Return to Normal Operations
- Itaú Corpbanca – Contrarian Buy Idea in the Andean Banks
- BGC : Packaging Remains a Key Focus
- Pure Storage (PSTG): Market Leader Facing Commoditization of Its Products
- Ryohin Keikaku (7453) | Oops Something Went Wrong
Softbank Group – Expiration of SenseTime Lock-Up Has Lopped $1.5bn off the VF Valuation
- Just as the December quarter was flattered by the last minute IPO of SenseTime Group (20 HK), expiration of the lockup six months later has delivered a corresonding valuation hit
- Vision Fund is still up on that investment but the public portfolio is flirting with a $10bn loss for the quarter depending on how US shares trade later
- The discount has improved modestly to 49% from 51% but remains at the high end of the recent range as worries on tech valuations cast a long shadow
Tencent: End of Another Quarter with No New Game Approval and Prosus Selling
- Tencent’s share price is down 6.5% over the last five days as largest shareholder Prosus sais that it would sell down Tencent shares to fund the buyback of Prosus/Naspers shares.
- Though Chinese regulators removed the ban on new game approval in April this year, none of Tencent’s new game titles received approvals in over the last two months.
- Tencent’s 1Q2022 earnings were weak and we expect 2Q2022E earnings to further decelerate with resurgence of Covid cases in China alongside weak macroeconomy.
Bukalapak (BUKA IJ) – Track the Execution Not the Headlines
- Bukalapak (BUKA IJ) held its AGM this week, which effectively repeated the messages from its 1Q2022 results including guidance for FY2022 but there is more excitement beneath the headline numbers.
- One key metric tracked by management is the contribution margin, which is moving towards positive territory put take rates will improve for both Mitra and through its specialty store strategy.
- AlloFresh has launched and is testing the offline line efficiencies before being applied to Mitra partners and AlloBank has also started its digital journey. Bukalapak looks cheap.
PT Nippon Indosari Corpindo (ROTI IJ) – Adding Chocolate Spread and UHT Milk to the Mix
- PT Nippon Indosari Corpindo (ROTI IJ) recently announced that it will launch two new product lines away from bread including Sari Roti chocolate spread and UHT Milk.
- Investment in these products will be relatively small but it will increase the visibility of Sari Roti brands on the shelves of modern retail adding to its bread and cakes.
- Wheat prices have stabilised recently but ROTI may consider raising prices further after assessing June performance. 2Q2022 performance has been stronger than expected post-Lebaran, as demand improved with greater mobility.
Hyundai Engineering & Construction (000720 KS): Trading Points
- The market seems to be focusing more on the cost risk increase than on Hyundai E&C’s sales growth following the top-line expansion of the urban renewal market.
- Instead, the market is looking forward to the possibility that Hyundai E&C’s leap forward as a nuclear power solution provider will lead to a growth premium for the share price.
- The trading point should be to target this risk when the price is peaking out from the nuclear power theme. Specifically, we need to consider a sector pair long/short setup.
KBANK : Return to Normal Operations
- Maintain BUY for KBANK with a target price of Bt174.00. We are optimistic about the joint venture between KBANK and JMT. Going forward, we expect KBANK’s profitability to increase
- A joint venture between KBANK and JMT: KBANK joined with JMT Network (JMT) in establishing JK Asset Management Co., Ltd. (JK AMC). The establishment of JK AMC will allow KBANK
- KBANK plans to sell NPLs of Bt50bn to JK AMC within 2022, which will alleviate KBANK’s future NPLs, improve net interest margin (NIM), and reduce potential provisions
Itaú Corpbanca – Contrarian Buy Idea in the Andean Banks
- Itaú Corpbanca operates in Chile and Colombia, with the recent win by Colombian presidential candidate Gustavo Petro hitting Colombian share prices, including Itaú Corpbanca
- Nonetheless, we see some evidence of fundamental recovery from a bottom up perspective in the case of Itaú Corpbanca, despite the political headwinds
- We rate Itaú Corpbanca as a contrarian buy; it is an emerging recovery stock, unloved and undervalued by the market but with a firmer balance sheet base and returns recovering
BGC : Packaging Remains a Key Focus
- Yesterday site visit to BVP and BGP plants came out as neutral tone.We do see its underlying growth potential but believe both will not be a growth driver for 2022-23.
- Yesterday’s company visit came in at neutral tone : We visited BVP (Paper packaging manufacturer) at Pathumthani and BGP (PET and Plastic films packaging manufacture) at Ayutthaya.
- A challenging growth roadmap, but only time will tell: The company target to achieve sales to Bt25bn by 2025,representing a 19% 4Y CAGR (2021-25E) by M&A strategy focusing at businesses
Pure Storage (PSTG): Market Leader Facing Commoditization of Its Products
- Enterprise storage hardware market faces numerous headwinds and increasing commoditization
- STaaS is cannibalistic, facing increasing competition, and decelerated in the MRQ
- Each of the last 2 quarters have seen some meaningful, non-recurring revenues lead to PSTG beating estimates
Ryohin Keikaku (7453) | Oops Something Went Wrong
- Ryohin Keikaku (Muji) slashed its earnings guidance for FY8/22 by 32%
- The retailer is facing a number of headwinds, only some of which are industry wide
- We remain bearish as Muji lacks the pricing power to push through higher input costs
Related tickers: Softbank Group (9984.T), Tencent (0700.HK), PT Nippon Indosari Corpindo Tbk. (ROTI) (ROTI.JK), Hyundai Engineering & Construction (000720.KS), Kasikornbank PCL (KBANK.BK), Ryohin Keikaku (7453.T)
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