Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Sony Corp, Nintendo Co Ltd, Raffles Medical, CJ Cheiljedang, Chiyoda Corp, Sumitomo Metal Mining, SK Telecom, Zydus Lifesciences Ltd, Tisco Financial Group and more

In today’s briefing:

  • Sony – That Revenue Guidance Tho
  • Nintendo – A Stock Split And Not Much Else
  • Raffles Medical (RFMD SP): Resilient Business Model; Border Reopening to Further Boost Growth
  • A Pair Trade Between CJ Cheiljedang and CJ Logistics
  • Raffles Medical: Earnings to Remain Under Pressure in 2022 but Long-Term Prospects Remain Attractive
  • Chiyoda – Just Getting Started
  • SMM – Guidance Makes Little Sense
  • SK Telecom: Better Control of Marketing Expenses & Improving Economies of Scale for 5G in 1Q 2022
  • Zydus Lifesciences (ZYDUSLIF IN): U.S. Business Is Cloudy; Innovative Portfolio Has A Long Way To Go
  • TISCO: Quality Growth with a High Dividend Payment

Sony – That Revenue Guidance Tho

By Mio Kato

  • Sony results were in-line with revenue of ¥9.92trn barely below ¥10trn consensus and OP of ¥1.20trn also just below consensus at ¥1.21trn. 
  • Guidance was interesting however as Sony guided for revenue of ¥11.4trn and a slight decline in OP. 
  • We believe that is either extreme conservatism or potentially a sign of very aggressive and interesting investment plans.

Nintendo – A Stock Split And Not Much Else

By Mio Kato

  • Nintendo results were in-line with both revenue and OP within 1% of consensus. 
  • Guidance was extremely weak missing consensus by 5.5% at the revenue line and 20.5% at the OP line. 
  • Nintendo gonna Nintendo so this is nothing to panic about but it isn’t positive either… though the stock split is.

Raffles Medical (RFMD SP): Resilient Business Model; Border Reopening to Further Boost Growth

By Tina Banerjee

  • Raffles Medical (RFMD SP) reported 27% y/y revenue growth to S$723.8 million and net profit increase of 30% y/y to S$83.7 million in 2021.
  • Following full border reopening by Singapore beginning April, medical tourism is set to revive. As a leading hospital operator in Singapore, Raffles is well-positioned to grab the opportunity. 
  • Regular share buyback and recent stake increase by a major investor further enhance conviction on the company’s growth potential.

A Pair Trade Between CJ Cheiljedang and CJ Logistics

By Douglas Kim

  • CJ Cheiljedang (097950 KS) reported better than expected earnings in 1Q 2022 and we continue to have a POSITIVE view of this stock.
  • Bio business sales increased by 39.3% YoY to 1.08 trillion won and operating profit jumped by 128% YoY 175.8 billion won in 1Q 2022, driven by strong demand for lysine. 
  • We also like a pair trade between CJ Cheiljedang and CJ Logistics at current prices. We recommend on going long on CJ Cheiljedang and going short on CJ Logistics.

Raffles Medical: Earnings to Remain Under Pressure in 2022 but Long-Term Prospects Remain Attractive

By Shifara Samsudeen, ACMA, CGMA

  • Raffles Medical (RFMD SP) is a private medical provider in Singapore. The company owns and operates a network of medical clinics and hospitals.
  • The company’s earnings saw a boost in 2021 driven by demand for Covid-19 related services such as PCR tests, vaccine administration and operation of Cov-19 treatment facilities.
  • With Singapore reopening borders post Covid, we expect foreign patient volume to see a recovery, however, lower revenue from Covid related services would negatively impact earnings in 2022.

Chiyoda – Just Getting Started

By Mio Kato

  • Chiyoda results were slightly weak driven by a poor gross margin in the fourth quarter but revenue guidance was punchy at ¥500bn vs. consensus at ¥354bn. 
  • We had flagged previously that Chiyoda would be moving to the favourable portion of the construction s-curve shortly and that appears to be coming through. 
  • That drove OP guidance of ¥20bn which is far above consensus at ¥14bn and could eventually help Chiyoda reduce potential dilution.

SMM – Guidance Makes Little Sense

By Mio Kato

  • SMM beat at the PTP level by 10% driven by the surge in nickel prices but guided for just ¥194bn undershooting consensus by 9.3%. 
  • We do not find guidance credible at all as it would defy historical trends to a very large degree. 
  • In fact we believe that excluding one-off gains from the sale of Sierra Gorda, PTP could actually be up YoY.

SK Telecom: Better Control of Marketing Expenses & Improving Economies of Scale for 5G in 1Q 2022

By Douglas Kim

  • We continue to have a POSITIVE view on SK Telecom following its excellent 1Q 2022 earnings results which displayed solid sales growth and improved control of its marketing expenses.
  • The company’s sales of 4.3 trillion won was in line with the consensus estimate and its operating profit of 432 billion won was 8.5% higher than the consensus estimate.
  • Despite concerns about SK Telecom getting deleted from MSCI Korea Index, foreigners have been increasing their stake in the company due to its attractive fundamentals amid macro uncertainties. 

Zydus Lifesciences (ZYDUSLIF IN): U.S. Business Is Cloudy; Innovative Portfolio Has A Long Way To Go

By Tina Banerjee

  • Zydus Lifesciences Ltd (ZYDUSLIF IN) earns more than 40% revenue from the U.S. This business is under continued pricing pressure, which is squeezing the gross profit margin of the company.
  • The company has received approval for COVID-19 vaccine in India, which seems to have limited visibility and revenue potential, amid competition and uncertain COVID-19 outlook.  
  • Zydus has launched one new drug and received approval for another in India. However, its innovation portfolio has to go a long way to become a significant growth contributor.

TISCO: Quality Growth with a High Dividend Payment

By Pi Research

  • We initiate coverage of TISCO with a BUY rating and a target price of Bt106. Our valuation is derived from a Gordon growth model (ROE 17.5%, growth 2%),implying 2.0x PBV’22E
  • Moderate net profit growth at 6% CAGR in 2022-24 on a potential reduction in credit cost and higher NIM
  • Loans will likely pick up in 2022 with a focus on high-yield loans.  Resilient asset quality and high loan loss reserves against uncertainties

Related tickers: Sony Corp (6758.T), Nintendo Co Ltd (7974.T), Raffles Medical (RAFG.SI), CJ Cheiljedang (097950.KS), Raffles Medical (RAFG.SI), Chiyoda Corp (6366.T), Sumitomo Metal Mining (5713.T), SK Telecom (017670.KS), Zydus Lifesciences Ltd (CADI.NS), Tisco Financial Group (TISCO.BK)

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