FMEX.DE – Page 2 – WILLIAM O'NEIL+CO

Global Laggards

Posted on November 29, 2018February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Lyondellbasell Ind A Nv ( LYB ), Barnes Group ( B ), Criteo SA ( CRTO ), Colgate Palmolive Co ( CL ), Plains GP Hldgs Cl A ( PAGP ), Corporate Office Pptys ( OFC ), Bio Rad Labs Inc. ( BIO ), Autonation ( AN ), Shutterstock Inc. ( SSTK ), Kulicke and Soffa Ind ( KLIC ), Manhattan Associates ( MANH ), Saia Inc ( SAIA ).

Developed: Rio Tinto ( RIO.GB; RIO LN ), Singapore Telecom ( TELC.SG; ST SP ), Nissin Foods Holdings ( NIFP.JP; 2897 JP ), Subsea 7 ( SUBC.NO; SUBC NO ), Partners Group Holdings ( PGHB.CH; PGHN SW ), Recordati Industria Chimica ( REC.IT; REC IM ), Izumi ( IZUM.JP; 8273 JP ), Hitachi Metals ( HM@N.JP; 5486 JP ), Fujitsu ( FT@N.JP; 6702 JP ).

Emerging: Klabin Units ( KLU.BR; KLBN11 BZ ), Mondi ( MNDJ.ZA; MND SJ ), Minor International ( RGRT.TH; MINT TB ), Pegatron ( PEG.TW; 4938 TT ).

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Shutterstock ( SSTK ) – Retail Internet, $1.36B Market Cap – operates an online marketplace for licensed commercial digital imagery for sale to media and marketing agencies. The company serves more than 1.8 million active paying users in 150 countries.

The company’s Enterprise business (40% of revenues) faces an increasingly competitive environment, with y/y sales growth for this segment decelerating from 35% in Q2 to 14% in Q3. This trend is particularly concerning as Enterprise has been the key growth driver for SSTK, while the company’s e-commerce business has only been growing in the single digits.

The stock breached its 200-DMA, previous a level of support, in mid-October before gapping down substantially on October 30 after reporting below-consensus Q3 results and reducing the high end of its guidance range for FY 2018 sales and EPS.

SSTK has missed consensus EBITDA estimates in 7 of the past 8 quarters.

The stock’s RS rating has dropped from 88 to 21 over the past month, while its weak A/D Rating (D+) indicates ongoing distribution.

SSTK trades at 25x next year’s earnings, while estimated 2019 EPS only represents 5% y/y growth.

Global Laggards

Posted on November 15, 2018February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Royal Gold ( RGLD ), Jefferies Financial ( JEF ), Honda Motor ( HMC ), MGP Ingredients ( MGPI ), Enbridge Energy Partners ( EEP ), Cyrusone ( CONE ), Bio Rad Labs ( BIO ), Sothebys ( BID ), Power Integrations ( POWI ), Q2 ( QTWO ), Allegiant Travel Company ( ALGT )

Developed: EMS-Chemie ( EMS.CH; EMSN TQ ), Legrand ( LRRS.FR; LR FP ), Umicore ( UMI.SE; UMI BB ), Modern Times ( MOTB.SE; MTGB: SS ), Asics ( FD@N.JP; 7936 JP ), Subsea 7 ( SUBC.NO; SUBC NO ), CK Asset ( CKPH.HK; 1113 HK ), Recordati ( REC.IT; REC IM ), Shimamura ( SHIM.JP; 8227 JP ), Canon ( CN@N.JP ; 7751 JP ), Capcom ( CAPO.JP ; 9697 JP ), Ryanair ( RY4C.IE; RYA ID )

Emerging: Klabin Units ( KLU.BR; KLBN11 BZ ), Hero MotoCorp ( HER.IN; HMCL IN ), Samsung Electromechanics ( SEM.KR; 009150 KS ),

Stocks worth focusing on in this week’s Global Laggards:

Developed

Capcom Limited ( CAPO.JP ) – Technology Software ( $2.64B Market Cap ) – develops and publishes video games ( console, online, mobile, and arcade ) and manages amusement arcades.

The stock is currently rolling over after a strong uptrend from late 2017 through September 2018 and facing upside resistance at the 200-DMA. The next level of support is at ¥2,000. RS line is at 52-week lows, RS and A/D Ratings are deteriorating.

The Company reported Q2 FY2019 results on 10/29/18, showing EPS of ¥26.91 ( 0% y/y ), operating profit of ¥5.4B ( +28%y/y ), and revenue of ¥26.1B ( 19% y/y ), all slightly below consensus expectations. Despite strength from Monster Hunter: World ( MHW ), FY2019 guidance remains unchanged and below consensus. The Company sees FY2019 EPS of ¥109.60 ( +10% y/y ), operating profit of ¥17B ( +6% y/y ), and revenue of ¥96B ( +2% y/y ), below expectations of ¥124, ¥20B, and ¥98B, respectively.

Although demand has been strong for MHW across multiple platforms (console, mobile), sales of the game have been halted in China since August. Tencent was informed by Chinese regulators to remove MHW from its PC download service (WeGame) just days after MHW’s debut. The removal was due to numerous complaints regarding MHW’s adult and violent content and how it did not fit into China’s strict gaming regulations.

Since March 2018, China’s regulators have frozen the approval of game licenses amid a government shake-up and concerns over censorship and children’s health. This has impacted multiple video game developers including Capcom.

Despite Capcom already achieving ¥10.5B or 62% of its operating profit through the first half of 2019 and ahead of the seasonally strong holiday season, the Company remained conservative and left its FY2019 operating guidance unchanged at ¥17B.

Global Laggards

Posted on November 9, 2018February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Lyondellbasell Ind ( LYB ), Berry Global Group ( BERY ), Aptiv Plc ( APTV ), Edgewell Personal Care ( EPC ), Enbridge Energy Partners ( EEP ), Bank of Nova Scotia ( BNS ), United Therapeutics ( UTHR ), AutoNation ( AN ), Penske Automotive Group ( PAG ), PTC ( PTC ), Allegiant Travel Company ( ALGT )

Developed: Nine Dragons Paper ( NDRA.HK; 2689 HK ), Cyberagent ( CYBA.JP; 4751 JP ), Just Eat ( JE.GB; JE/LN ), Ezaki Glico ( BQ@N.JP; 2206 JP ), Subsea 7 ( SUBC.NO; SUBC NO ), RSA Insurance Group,( RSA.GB; RSA LN ), William Demant Holding ( WDH.DK; WDH DC ), K’s Holdings ( GIKS.JP; 8282:JP ), SAP ( SAPX.DE; SAP GR ), Deutsche Post ( DPWX.DE; DPW GR )

Emerging: Mondi ( MNDJ.ZA; MND SJ ), Godrej Consumer Products ( GCD.IN; GCPL IN ), Zhen Ding Technology ( ZHE.TW; 4958 TT )

Stocks worth focusing on in this week’s Global Laggards:

Penske Automotive Group ( PAG ) – Retail ( $4B market cap ) – operates automotive and commercial truck dealerships principally in the U.S., Canada, and Western Europe.

Shares of PAG are 20% off 52-week highs and facing resistance at their downward sloping 10- and 40-WMA. The stock has poor RS and A/D Ratings of 35 and D, respectively. We see support for the stock at ~$42, followed by ~$38.

For Q3 2018, total revenue was $5.7B, increasing 2.4% y/y and missing consensus of 5.5% y/y. The miss was due to lower-than-expected sales growth of 1.2% in its Retail Automotive segment.

Same-store sales of new cars declined 4.2% y/y compared with consensus of 6% y/y growth, as revenue from new car sales in the U.K. decreased 10.5% y/y in Q3 and 20.5% y/y in September. The implementation of the new U.K. emission standard “Worldwide Harmonised Light Vehicle Testing Procedure” delayed the delivery of new cars to dealerships.

PAG expects the availability of new cars from OEM to normalize by the end of Q1 2019.

In 2019, revenue and EPS growth are expected to decelerate to 2%, as the Company is expected to be impacted by FX headwinds because of Brexit. The U.K. market accounted for 36% of the Company’s revenue in 9M 2018.

Further, commercial truck sales growth in the U.S. is expected to slow in 2019. In its trucks segment, which contributed to 5.9% of sales in 9M 2018, the Company expects volume growth to moderate from 28% in 2018 to 1.6-4.8% in 2019.

Global Laggards

Posted on October 18, 2018February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Arcelor Mittal Cl ( MT ), News Corporation ( NWS ), Hyatt Hotels ( H ), Schlumberger Ltd ( SLB ), Packwest Bancorp ( PACW ), Varian Medical Systems ( VAR ), Cheesecake Factory ( CAKE ), HD Supply Holdings ( HDS ), Finisar Corporation ( FNSR ), Pegasystems ( PEGA )

Developed: Orica Limited ( ORI.AU; ORI AU ), Nidec ( NDEN.JP; 6594 JP ), Telefonica ( TEF.ES; TEF SM ), Salvatore Ferragamo ( SFER.IT; SFER IM ), Kose ( OSEC.JP; 4922 JP ), Inter Pipeline Fund ( IPL.CA; IPL CN ), ASX ( ASX.AU; ASX AU ), Sonova ( SOON.CH; SOON SW ), Compass Group ( CPG.GB; CPG LN ), Rocket Internet ( RKETX.DE; RKET GR ), Brother Industries ( BI@N.JP; 6448 JP ), Square Enix Holdings ( ENIX.JP; 9684 JP ), Ana Holdings ( ANAW.JP; 9202 JP )

Emerging: Larsen & Toubro ( LST.IN; LT IN ), Sun TV Network ( NSV.IN; SUNTV IN ), Lg Electronics ( JHD.KR; 066570 KS ), Shin Kong Financiual Holding ( SHK.TW; 2888 TT ), Quanta Computer ( QUM.TW; 2382 TT ), SK Holdings ( C&C.KR; 034730 KS )

Stocks worth focusing on in this week’s Global Laggards:

U.S.

HD Supply Holdings ( HDS ) – Retail ( $7B market cap ) – Industrial distributor in North America

HDS shares have come under pressure since the Company reported Q2 FY 2019 results on September 5 and are now 16% off highs. The next level of support is at ~$35 (-10%).

For the quarter, HDS delivered revenue and adjusted EPS growth of 18% and 90%, y/y, respectively, to $1.6B and $0.74. For the full year, it raised its guidance and now expects sales to reach $5.95B-6.00B, compared with $5.12B in FY 2018.

Despite the beat-and-raise quarter, we believe the market is concerned about margin compression, which is expected to continue in the near term.

For Q2, gross margin was down 100bps y/y to 38.9%, out of which 40bps was attributed to the product mix following the acquisition of A.H. Harris by the Company’s Construction and Industrial business ( 49% of Q2 FY 2019 revenue ). In the Facilities Maintenance segment ( 51% of Q2 FY 2019 revenue ), gross margin declined 50bps from a high base due to higher growth of lower-margin HVAC sales and installation and the property improvement business.

HDS is expected to meet its target of revenue growth of more than 300bps above that of the market. For FY 2019, the Company sees its end markets growing ~3%, a key assumption of which is mid-single digit growth in the residential construction market. In our view, residential construction market growth will slow going forward on account of the rising interest rates in the U.S., which will impact the Company’s prospects.

If the Trump administration’s proposed tariff hike to 25% on $200B of Chinese imports goes into effect, it will put further pressure on the Company’s gross margin.

Developed

Kose ( OSEC.JP; 4922:JP; $9.3B market cap ) – Personal care company whose products include cosmetics, skin care, and hair care

Expected Slowdown in Earnings Growth — Japanese Tourism Badly Affected

Kose relies on its international presence for its sales. As of Q1 FY 2019, about 26% of revenues were international. Including sales made to consumers touring in Japan, international customers represented 35% of total sales.

Per data from Japan’s National Tourism Organization, the number of visitors to Japan fell 5.3% y/y in September, the slowest growth since January 2013. Tourists from China fell 3.8%, while visitors from South Korea plunged 14%. The primary reasons for the decline include natural disasters such as earth quakes and typhoons.

This impacted Japanese companies that have revenue exposure to market inbound sales ( foreign visitors to Japan ). With about 10% of Q1 FY 2019 revenues from sales to foreign tourists in Japan, the Company’s Q2 revenues will be affected.

Media reports quoted a customs official announcing that Chinese visitors returning from foreign trips should declare goods if they surpass the tax-exempt amounts for travelers. This is expected to negatively impact the Company’s top-line, as it derives about 76.7% of its revenues from the cosmetics segment (high prestige), which has the highest margins. The increased scrutiny will deter tourists from purchasing high-end cosmetics, which will also impact margins.

Decaying Technical Factors

With Japanese tourism badly affected, the Company’s EPS growth has been revised down to 18% and 8%, y/y, respectively, for FY 2019 and FY 2020.

A/D Rating has declined to E due to above average selling for the past three weeks.

Sharp deterioration in RS Rating to 39 currently ( versus 75 on August 24 ), reflecting the poor stock performance compared with the markets.