Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Water Oasis, Taiwan Semiconductor Sp Adr, Capcom Co Ltd, Bilibili Inc, Sinopharm Group Co Ltd H, Infosys Ltd, SCG Packaging Public Company Limited, Eastern Polymer Group, Samsara, Calix Inc and more

In today’s briefing:

  • Water Oasis, Execution Makes It More Compelling
  • TSMC (TSM.US, 2330.TT): Bright Outlook in 2022
  • Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low
  • Bilibili Makes a Late Entry into Livestreaming E-Commerce; Timing Is Not Just Right
  • Sinopharm Group (1099 HK): Stable Pharma Distribution Business Despite Weak Demand for Vaccine
  • Earnings Update | Infosys: Raises Revenue Growth Guidance
  • SCGP: Expect 4Q21 Earnings to Grow QoQ
  • EPG: Expect 3QFY22 Core Earnings to Grow QoQ but Contract YoY
  • Recent IPO Insights: Samsara
  • CALX: Designed for Decline

Water Oasis, Execution Makes It More Compelling

By Sameer Taneja

  • Water Oasis (1161 HK) trades at a 6x FY22 ( Sept end ) PE with 31% of its market capitalization in cash ( implying ex-cash 4x PE ). 
  • For FY21, Water Oasis (1161 HK) paid a 22 cent dividend implying a 12.43% dividend yield. We forecast a forward yield of 14%.
  • The company will continue to execute as it opens newer stores and beds down its M&A for a 15% CAGR revenue growth.

TSMC (TSM.US, 2330.TT): Bright Outlook in 2022

By Patrick Liao

  • TSMC’s 2022 outlook is bright, but new drama around Intel’s possible orders could define the foundry in 2023
  • IPhone’s 2022 modem is currently equipped with Qualcomm’s design but 2023’s will be designed by Apple
  • TSMC’s continuously updated technology roadmap shows it as a tech-leader in the foundry space

Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low

By Mio Kato

  • Early last year we very wrongly called Capcom as our top short-term pick as we expected an earnings blowout in 1QFY22. 
  • The blowout duly came with OP 37% above clueless sell side expectations and… the stock tanked. 
  • Almost a year later the stock languishes 28% lower just as the PC version of Monster Hunter Rise launches.

Bilibili Makes a Late Entry into Livestreaming E-Commerce; Timing Is Not Just Right

By Shifara Samsudeen, ACMA, CGMA

  • Bilibili launched a shopping cart feature (Xiaohuangche) recently on its livestreaming platform which enables users to purchase goods while watching a live-stream.
  • This comes at a time; China’s common prosperity crackdown has set its eyes on livestreaming e-commerce.
  • Bilibili has been looking at ways to improve its monetisation to reduce losses, but we think the new initiative will likely add further pressure on deteriorating margins.

Sinopharm Group (1099 HK): Stable Pharma Distribution Business Despite Weak Demand for Vaccine

By Tina Banerjee

  • With its nationwide distribution and delivery network, Sinopharm Group Co Ltd H (1099 HK) remains a beneficiary of increasing adoption of China’s VBP scheme for drug procurement.
  • Despite decreasing demand for Sinopharm’s COVID-19 vaccine, its pharmaceutical distribution business is expected to remain stable, driven by the steady recovery in China’s healthcare industry.
  • The company is successfully promoting fast-growing oncology products. Its strategic partnership with I-Mab (IMAB US) further strengthens competitive edge, as I-Mab has a robust pipeline for China market.

Earnings Update | Infosys: Raises Revenue Growth Guidance

By Ankit Agrawal, CFA

  • Infosys reported strong Q3FY22 earnings with constant currency (CC) sequential growth of 7%, despite weak seasonality.  YoY CC growth at 21.5% is the highest ever over the past 11 years.
  • Large deal wins and continued momentum in digital revenue growth helped Infosys Ltd (INFO IN) to post a strong Q3. Share of digital revenues grew to 58.5% vs 50.1% YoY.
  • On the back of strong Q3FY22 earnings, Infosys raised its FY22 revenue growth guidance to 19.5-20% vs 16.5%-17.5% earlier.

SCGP: Expect 4Q21 Earnings to Grow QoQ

By Research Group at Country Group Securities

  • Downgrade to HOLD rating due to limited upside, with a TP of Bt72, based on 30xPE’22E, derived from 2-years trailing average.Share price which is trading at premium to Asia ex-Japan
  • We expect solid 4Q21 earnings at Bt1.9bn (+9%QoQ, +31%YoY),backed by both sales growth and  margin expansion, given the demand recovery after the easing of ASEAN lockdown and multiple M&As consolidation
  • We expect 2022 earnings to grow strongly by 30%YoY, on the back of organic and inorganic growth; coupled with global demand recovery, that we anticipate in 4Q21 onwards

EPG: Expect 3QFY22 Core Earnings to Grow QoQ but Contract YoY

By Research Group at Country Group Securities

  • We expect the company to report 3QFY22 (Oct-Dec) core profit at Bt400m (+9%QoQ -12%YoY). QoQ expansion will be due to recovery for thermal insulator sales after selling price adjustment 
  • We maintain positive outlook for earnings growth in FY2023 (+14%YoY) backed by; 1.) an increase in revenue for thermal insulator and consumer packaging segments, 2.) improving operating margin
  • We assume profit margin to remain at high level at above 31% in the remaining quarters of FY22 as demand for most of the products remain strong while

Recent IPO Insights: Samsara

By Aaron Gabin

  • IOT data platform meant to digitize physical operations for manufacturing, transportation, construction, utilities, healthcare, and education. 
  • Excellent management team, previously co-founded Meraki, which was sold to Cisco.
  • Hypergrowth software business on par with ServiceNow and Workday at this stage in growth, but much less profitable (so far) due to hardware and bandwidth costs.

CALX: Designed for Decline

By Hamed Khorsand

  • CALX has yet to experience the full extent of our original sell thesis even though there are growing signs of an impending impact
  • Component issues could have become a headwind in the fourth quarter and remain a challenge in 2022.
  • With Huawei equipment replacement predominately complete, small service providers could reduce their spending

Related tickers: Water Oasis (1161.HK), Taiwan Semiconductor Sp Adr (TSM.N), Capcom Co Ltd (9697.T), Bilibili Inc (BILI.O), Sinopharm Group Co Ltd H (1099.HK), Infosys Ltd (INFY.NS), Eastern Polymer Group (EPG.BK), Calix Inc (CALX.N)

Before it’s here, it’s on Smartkarma