Vipshop Holdings Limited

VIPS Details

Vipshop Holdings Limited (NYSE: VIPS) operates as an online discount retailer for brands in China. Its operating segments are 1) Vip.com, which offers high-value and trendy branded products to customers through flash sales via vipshop.com and vip.com online platforms, 2) Shan Shan Outlets, which operates offline retail locations in China and 3) Others, includes VIPS’ other two divisions, i.e., internet finance and offline shop. Vip.com segment accounts for most of its revenue.  As of August 23, 2021, the company’s market capitalization stood at USD 8.94 billion, with 676.21 million American Depositary Shares (ADS) listed and outstanding (each ADS representing 0.2 Class A ordinary shares).

Share Repurchase Program: Effective March 30, 2021, VIPS’ board approved a 24-month program to repurchase up to USD 500 million of its Class A ordinary shares, ending on March 29, 2023. The company had repurchased ~USD 301 million worth of ADS as of June 30, 2021.  

Q2FY21 Results: The company reported a growth of 22.80% YoY in total net revenues to RMB 29.61 billion in Q2FY21 (ended June 30, 2021) compared to RMB 24.11 billion in Q2FY20, attributable to a 32% YoY increase in the total number of active customers during the quarter. In Q2FY21, VIPS’ Gross Merchandise Value (GMV) improved by 25% YoY to RMB 48.1 billion, primarily due to 30% YoY growth in total orders to 221.5 million. Net income for the company reduced to RMB 1.09 billion in Q2FY21 vs. RMB 1.54 billion in Q2FY20. As of June 30, 2021, the company stood with cash and cash equivalents (including short-term investments) of RMB 19.31 billion, and total debt of RMB 1.96 billion.

Strong Total Orders & Net Revenue Growth (Source: Investor Presentation, August 2021)

Risks: VIPS operates in the online discount retail industry and faces direct competition from more prominent domestic players with higher financial and operational resources at their disposal, which could undermine its prospects.

Moreover, the Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. After the passage of a bill in the US, this 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.

Outlook: In Q3FY21, VIPS expects to generate total revenue in the range of RMB 24.3 – 25.5 billion, thus realizing YoY growth of approximately 5% – 10%.

Valuation Methodology: EV/EBITDA 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.

VIPS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VIPS’ share price has decreased 40.20% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 13.02 to USD 46.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 31.67. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 17.97. Considering the correction in the stock price in the past three months, decent financials, and associated risks, we recommend a "Speculative Buy” rating on the stock at the closing price of USD 14.01, up 5.98% as of August 23, 2021.

* 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. 

International General Insurance Holdings Ltd.

IGIC Details

International General Insurance Holdings Ltd. (NASDAQ: IGIC) is primarily engaged in the business of insurance and reinsurance. It underwrites a portfolio of specialty risks, including energy, property, construction and engineering, ports and terminals, general aviation, political violence, casualty, financial institutions, marine liability, and treaty reinsurance in more than 200 countries and territories. IGIC's shares were listed on NASDAQ on March 18, 2020. As of August 23, 2021, the company's market capitalization stood at USD 444.85 million.

Augmenting European Operations & Affirmation of Strong Credit Rating: On July 13, 2021, IGIC announced the incorporation of International General Insurance Company (Europe) SE (IGI Europe), a Malta-based European subsidiary of the company. IGI Europe was granted a license by the Malta Financial Services Authority (MFSA) to commence an insurance writing business. This new subsidiary aims to tap business growth opportunities in Europe and enable it to service its European clients better.

Subsequently, on August 13, 2021, S&P Global Ratings, an American credit rating agency and a division of S&P Global, conferred a Financial Strength Rating of A (Excellent) to IGI Europe. The rating given by S&P Global Ratings is based on consistent operating results and a strong balance sheet.

Q2FY21 Results: The company reported YoY growth of 20.98% in gross written premiums (GWP) to USD 166.1 million in Q2FY21 (ended June 30, 2021) compared to USD 137.3 million in Q2FY20. Net income for the company reduced to USD 5.6 million in Q2FY21 vs. USD 12.0 million in Q2FY20. The combined ratio (i.e., the sum of net claims and claim expense ratio and the expense ratio) for Q2FY21 was 92.3%, compared to 84.0% for Q2FY20.

Key Risks: IGIC operates in the insurance and reinsurance industry and faces direct competition from more significant players, resulting in fewer policies underwritten, lower premium rates, increased expense for customer acquisition and retention, and less favorable policy terms and conditions. In addition, the insurance and reinsurance sector has witnessed a lot of merger and acquisition activity. Should this industry consolidate further, it could impair the financial and operational performance of the company.

Valuation Methodology: Price/Book Value 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.

IGIC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IGIC's stock price increased 13.90% in the past six months and is currently close to the higher-band of the 52-week range of USD 6.40 to USD 11.05. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 49.61. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 10.14. Considering the uptick in the stock price, improvement in the top-line, entry into the European market, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 9.26, up 1.76% as of August 23, 2021.

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

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

Immersion Corporation

IMMR Details

Immersion Corporation (NASDAQ: IMMR) is engaged in the design, development and licensing of haptic technologies that allow people to use their sense of touch when operating digital devices such as mobile devices, consumer electronics, gaming consoles and automotive interfaces. IMMR has over 1,700 granted or pending patents globally as of June 30, 2021. It derives its revenue from royalty and licensing payments, development contracts and service fee and operates in Asia, North America, and Europe.

Geographical Expansion: On August 12, 2021, IMMR signed a license agreement with TITAN Haptics, a Canada-based developer of haptic motors for smartphones, consoles, and touchscreen devices that have developed new actuator technology called Linear Magnetic Ram (LMR). Under the agreement, IMMR's haptic patent licences would be made available to mobile phone and wearable Original Equipment Manufacturers (OEMs) who use TITAN's actuators. In addition, this collaboration augments IMMR's component partner offering by providing a channel licence for China and other global markets.

Expanding its Automotive Portfolio: On August 11, 2021, IMMR announced the expansion of its licence with Stanley Electric Co., Ltd., a supplier of lighting products and electronic components, to use haptics in the automotive market. IMMR's touch feedback technology is incorporated into an increasing number of vehicles nowadays as they enhance the in-vehicle interfaces and applications such as entertainment, navigation, and climate control.

Q2FY21 Results: The company reported YoY growth of 94.25% in the total revenue to USD 11.01 million in Q2FY21 (ended June 30, 2021) compared to USD 5.67 million in Q2FY20. Royalty and license segment, which accounted for 98.83% of the total revenue in Q2FY21, expanded 94.55% YoY. IMMR reported a net income of USD 5.34 million in Q2FY21 vs. a net loss of USD 0.71 million in Q2FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 107.27 million and no outstanding debt.

Key Risks: IMMR generates most of its revenue from a limited number of customers, with Samsung alone accounting for significant net revenues in Q2FY21. As a result, the loss of any of its key customers could hurt its financials.

Valuation Methodology: EV/Sales 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.

IMMR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IMMR's stock price decreased 37.10% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 6.10 to USD 16.64. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 47.12. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.49. Considering the significant correction in the stock price, balance sheet strength, strong financial performance, recent collaborations, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.27, up 3.49% as of August 23, 2021, 11:46 AM 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.