Nomura Holdings Inc.

NMR Details

Nomura Holdings Inc. (NYSE: NMR) is a Japanese international financial services company that operates globally, including Japan, the US, UK, Singapore, and Hong Kong, through its subsidiaries. Individuals, companies, financial institutions, governments, and governmental agencies are served by the company's three business segments, Retail, Wholesale (Global Markets and Investment Banking), and Investment Management. As of August 30, 2021, the company has 3.23 billion American Depository Shares (ADS) listed and outstanding (each ADS representing one ordinary share).

Research on SDG Bonds: With the help of Sony Computer Science Laboratories, Inc. (Sony CSL), Nomura Securities Co., Ltd. (NSC), a subsidiary of NMR, stated, on August 11, 2021, that it had begun research on identifying sustainable development goals (SDG) bonds using natural language processing (NLP) technology.

Launch of Fourth Equity UCITS: On August 10, 2021, American Century Investments, a leading global manager, announced its fourth Undertakings for Collective Investment in Transferable Securities (UCITS), a sub-fund of Nomura Funds Ireland Plc, in collaboration with NMR's affiliate Nomura Asset Management. The new sub-fund aims to deliver returns through an investing strategy that selects firms with solid long-term potential, primarily in their early and rapid development stages.

Senior Notes Offering: NMR announced an offering of USD 3.25 billion of senior notes offering on July 06, 2021, comprised of USD 1.25 billion aggregate principal amount of 1.653% senior unsecured fixed rate notes due 2026, USD 1.0 billion aggregate principal amount of 2.172% senior notes due 2028, and USD 1.0 billion aggregate principal amount of 2.608% senior notes due 2031. Notes were all issued at par and received a credit rating of Baa1 and BBB+ from Moody's and S&P Global, respectively.

Q1FY22 Results: The company reported a 23.3% decline in net revenues to JPY 353.28 billion in Q1FY22 (ended June 30, 2021) compared to JPY 460.75 billion in Q1FY21, primarily due to a decline in trading activities and interest and dividends. In addition, net income reduced to JPY 49.99 billion in Q1FY22 vs. JPY 144.30 billion in Q1FY21. As of June 30, 2021, NMR witnessed a decline in its total trading assets, private equity and debt investments to JPY 15.35 trillion.

Key Risks: The corporation works in a highly competitive market with fierce pricing competition, especially in brokerage, investment banking, and other areas. As a result, its brand identity, financial performance, and economic position may be harmed if it fails to compete successfully.

Valuation Methodology: Price/Earnings Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NMR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: NMR's stock price has declined by 19.57% in the past six months and is currently trading at the lower-band of the 52-week range of USD 4.43 to USD 6.72. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 43.10. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 5.86. Considering the company's market dominance, growth initiatives, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 4.81, down 0.41% as of August 30, 2021, at 3:08 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

China Yuchai International Limited

CYD Details

China Yuchai International Limited (NYSE: CYD) is engaged in the manufacture, assembly, and sale of a wide variety of engines for trucks, buses, passenger vehicles, construction equipment, marine and agriculture applications in China.  It also produces diesel power generators and offers maintenance and retrofitting services. CYS distributes its engines directly to auto Original Equipment Manufacturers (OEMs) and retailers. The company operates via its subsidiary, Guangxi Yuchai Machinery Company Limited (GYMCL).

Appointment of CFO: On June 03, 2021, the company announced the resignation of its previous Chief Financial Officer (CFO), Dr Thomas Phung Khong Fock, effective June 01, 2021. In his place, Mr Loo Choon Sen was appointed as CFO effective June 03, 2021.

Strategic Partnership with Sunlong: On June 02, 2021, CYD formed a strategic partnership with Guangxi Shenlong Automobile Manufacturing (Sunlong), under which the companies plan to develop new electric vehicles based on CYD's four new energy powertrain systems. The partnership also plans to leverage its supply chains and distribution networks to capture the Southeast Asian markets.

H1FY20 Results: The company reported an uptick of 26.81% in total revenue to RMB 12.63 billion in H1FY21 (ending June 30, 2021) compared to RMB 9.96 billion in H1FY20. CYD sold in 285,342 engines in H1FY21, 33.85% higher than 213,182 units sold in H1FY20, primarily due to higher engine sales in the heavy-duty truck and off-road segments. Net income (attributable to equity holders) for H1FY21 was RMB 253.707 million, compared to RMB 305.730 million reported in H1FY20, owing to higher operating expenses during the current period. The company exited the quarter with a cash balance of RMB 5.66 billion and total debt of RMB 2.37 billion.

Key Risks: In FY20, the company generated 46.6% of its total revenue from its top 5 customers and 29.2% from the Dongfeng Group. Hence, the loss of even one of these customers could adversely affect its financial condition. Further, the Chinese authorities' recent crackdown on its US-listed businesses and the consequential possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CYD Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CYD's stock price fell 16.51% in the past nine months and is currently close to the lower end of the 52-week range of USD 13.91 to USD 20.49. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.49. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 16.83. Considering the correction in the stock price in the past nine months, decent financials, significant growth potential, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 14.06, down 1.95% as of August 30, 2021, 2:34 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.