Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Meituan operates as a web based shopping platform for locally found consumer products and retail services. The Company offers deals of the day by selling vouchers on local services and entertainment, dining, delivery, and other services. Meituan provides its services throughout China.

<ul>
<li>Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.</li>
<li>As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.</li>
<li>Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel &amp; Travel which seems strange, suggesting 2Q numbers could be worse.</li>
</ul>


Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel &amp; Travel which seems strange, suggesting 2Q numbers could be worse.


Meituan – Omicron Impact Was Not as Big in 1Q but 2Q Will Have the Full Impact

New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Freightways Limited provides express package services throughout New Zealand along with providing information management and business mail services.  The Company's courier services includes same day and overnight national and international deliveries, freight forwarding services, computer media transport and payroll data deliveries.

<h2>Freightways<br>Earnings Delta Symptomatic of Omicron&nbsp;</h2>
<div></div>
<p><strong>NEUTRAL</strong></p>
<p>We downgrade Freightways (FRE) to NEUTRAL from OUTPERFORM following strong relative performance and as growing earnings headwinds (more challenging macro and the reversal of some COVID-19 gains) dampen the near term outlook. We still expect above average earnings growth over the medium term as FRE's operational and strategic (including scope for accretive M&amp;A) levers leave it well positioned. Trading in-line with the market median at ~19x one year forward PE, FRE offers reasonable value for above average quality and growth. However, sentiment is no longer supportive.&nbsp;</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/272/972/original/image_37218797421652143703281.png?1652143705" class="editor-image img-responsive" data-smartkarma-image-id="272972"></figure>
<div>
<h3>What's changed?&nbsp;</h3>
</div>
<div id="m_6283692730658309859iwrmo3">
<ul>
<li><strong>EBITA</strong>:&nbsp;FY22 falls -4% from&nbsp;full Omicron hit and higher cost inflation; similar hits in FY23/FY24 as macro headwinds strengthen&nbsp;</li>
<li><strong>Target price</strong>:&nbsp;&nbsp;Lowered to NZ$12.75 from NZ$13.30&nbsp;</li>
<li><strong>Rating</strong>:&nbsp;Downgraded to NEUTRAL from OUTPERFORM</li>
</ul>
</div>
<div>
<h3>Omicron impact outlined</h3>
</div>
<div id="m_6283692730658309859in52k">
<p>The Omicron outbreak through March/April resulted in a NZ$5–7m profit hit from higher operating costs and lower volumes. ~1,000 FRE team members had to isolate for at least seven days, adding significant cost from the increased temporary labour. Absenteeism has now largely abated. The company's update provides the isolated profit impact of Omicron on its operations with no reference to current market earnings expectations. In light of FRE's resilient performance through COVID-19 to-date, we assume that FY22 consensus earnings incorporates very little of the financial cost to FRE. Consequently, we expect consensus downgrades.&nbsp;</p>
</div>
<div>
<h3>Express Package volume declines; B2C market likely to give back some of its COVID-19 gains</h3>
</div>
<div id="m_6283692730658309859iew2l">
<p>FRE's network parcel volumes declined -2% through March and April reflecting (1) lower customer demand due to their absenteeism,&nbsp; (2) a two week period where NZ Couriers limited pick-up volumes in Auckland, and (3) a slower underlying growth environment as ecommerce growth slows against strong prior year comparatives. Lower ecommerce demand has been illustrated in other markets internationally once COVID-19 restrictions ease. While B2C (business-to-consumer) represents a key growth driver for FRE, it represents ~24% of network volumes, so any decline will likely remove growth rather than materially dent overall network volumes.&nbsp;</p>
</div>
<div>
<h3>Cost pain through 4Q22; pricing offset to come&nbsp;</h3>
</div>
<div id="m_6283692730658309859i6arf">
<p>Industry cost growth has accelerated materially. A&nbsp;tight labour market and minimum wage increases are lifting average pay rates for lower skilled roles.&nbsp;FRE will likely absorb some of these increases through 4Q22, but plans to action a material price increase on 1 July 2022, which should offset margin pressure through FY23. Previously management has suggested that it would levy a price increase of &gt;+6%. We expect a gross increase of ~+8%.&nbsp;</p>
</div>

Freightways Earnings Delta Symptomatic of Omicron&nbsp;

NEUTRAL
We downgrade Freightways (FRE) to NEUTRAL from OUTPERFORM following strong relative performance and as growing earnings headwinds (more challenging macro and the reversal of some COVID-19 gains) dampen the near term outlook. We still expect above average earnings growth over the medium term as FRE's operational and strategic (including scope for accretive M&amp;A) levers leave it well positioned. Trading in-line with the market median at ~19x one year forward PE, FRE offers reasonable value for above average quality and growth. However, sentiment is no longer supportive.&nbsp;


What's changed?&nbsp;



EBITA:&nbsp;FY22 falls -4% from&nbsp;full Omicron hit and higher cost inflation; similar hits in FY23/FY24 as macro headwinds strengthen&nbsp;
Target price:&nbsp;&nbsp;Lowered to NZ$12.75 from NZ$13.30&nbsp;
Rating:&nbsp;Downgraded to NEUTRAL from OUTPERFORM



Omicron impact outlined


The Omicron outbreak through March/April resulted in a NZ$5–7m profit hit from higher operating costs and lower volumes. ~1,000 FRE team members had to isolate for at least seven days, adding significant cost from the increased temporary labour. Absenteeism has now largely abated. The company's update provides the isolated profit impact of Omicron on its operations with no reference to current market earnings expectations. In light of FRE's resilient performance through COVID-19 to-date, we assume that FY22 consensus earnings incorporates very little of the financial cost to FRE. Consequently, we expect consensus downgrades.&nbsp;


Express Package volume declines; B2C market likely to give back some of its COVID-19 gains


FRE's network parcel volumes declined -2% through March and April reflecting (1) lower customer demand due to their absenteeism,&nbsp; (2) a two week period where NZ Couriers limited pick-up volumes in Auckland, and (3) a slower underlying growth environment as ecommerce growth slows against strong prior year comparatives. Lower ecommerce demand has been illustrated in other markets internationally once COVID-19 restrictions ease. While B2C (business-to-consumer) represents a key growth driver for FRE, it represents ~24% of network volumes, so any decline will likely remove growth rather than materially dent overall network volumes.&nbsp;


Cost pain through 4Q22; pricing offset to come&nbsp;


Industry cost growth has accelerated materially. A&nbsp;tight labour market and minimum wage increases are lifting average pay rates for lower skilled roles.&nbsp;FRE will likely absorb some of these increases through 4Q22, but plans to action a material price increase on 1 July 2022, which should offset margin pressure through FY23. Previously management has suggested that it would levy a price increase of &gt;+6%. We expect a gross increase of ~+8%.&nbsp;


Freightways: Earnings Delta Symptomatic of Omicron

External broker reports(aggregated public sources), Nirmal Bang

Nirmal Bang

External broker reports(aggregated public sources)

A Relationship Beyond Broking

Nirmal Bang, one of the leading stock broking companies in India, caters to retail and institutional clients by offering them a range of financial products and services, including equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS.

Nirmal Bang is drawn from a diversity of professional backgrounds, and blend of experience, skill and dedication is shared with its clients. Nirmal Bang emphasizes adequate, thorough research local and world-wide developments, balancing these with the astute discovery of intrinsic values, synergies and growth. The aim is simply to help the investors to maximize their returns.

Indian Hotels Company Limited operates The Taj Group of hotels.  The Company owns or maintains long term leases/licenses for hotels in India, in addition to International hotels.  The Group's hotels are divided into three groups: Luxury, Business, and, Leisure.

<div><div><div><div><ul><li>We were surprised by the weak 4QFY22 results of Indian Hotels Company Ltd (IHCL) as it implied that the impact of Omicron was higher than what we had expected.</li></ul><div><div><div><ul><li>However, as indicated by the management on the conference call and in our own interactions with experts, there has been a strong demand revival from Corporates and MICE segments since April’22.</li></ul><div><div><div><div><ul><li>IHCL’s 4QFY22 revenue declined by 21.5% QoQ but increased by 41.8% YoY to Rs8,721mn.</li></ul></div></div></div></div></div></div></div></div></div></div></div><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

We were surprised by the weak 4QFY22 results of Indian Hotels Company Ltd (IHCL) as it implied that the impact of Omicron was higher than what we had expected.However, as indicated by the management on the conference call and in our own interactions with experts, there has been a strong demand revival from Corporates and MICE segments since April’22.IHCL’s 4QFY22 revenue declined by 21.5% QoQ but increased by 41.8% YoY to Rs8,721mn.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Indian Hotels Company - RevPar Impacted Amid Omicron Wave

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Casino Business Review LLC

Extensive experience in marketing and development in the Asian gaming market

Global Gaming and Casinos Industry

Delta Corp Limited a diversified business group having a presence in the entertainment and gaming, real estate business in India and Kenya. The Company's business includes offshore casinos, and real estate consulting & development.

<ul>
<li>Legal casino gaming is limited to only three of India's states, including Goa, Sikkim and Daman. But nationally US$60b is wagered legally and in grey area sites.</li>
<li>Delta's gambling ships and casinos lie within a roughly 2.5 hour flight from population centers like Mumbai and Delhi.</li>
<li>Latest operating results indicate strong gains despite lingering Omicron spurts positioning the stock for a strong upside ahead.</li>
</ul>


Legal casino gaming is limited to only three of India's states, including Goa, Sikkim and Daman. But nationally US$60b is wagered legally and in grey area sites.
Delta's gambling ships and casinos lie within a roughly 2.5 hour flight from population centers like Mumbai and Delhi.
Latest operating results indicate strong gains despite lingering Omicron spurts positioning the stock for a strong upside ahead.


India's Delta Corporation Endures Omicron with Strong Fiscal 2021-2022 in Vastly Underserved Market

Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Thematic (Sector/Industry)

<ul>
<li>The sector will benefit from the economic recovery as shown by Consumer Confidence Index that recovered to 44.6% in February 2022 from the bottom at 36.7% in July 2021, </li>
<li>All retailers (BJC, CPALL, CRC, HMPRO, GLOBAL, DOHOME, and ILM) are reported with positive SSSG at a range of 4% to 26% amid Omicron outbreaks in 1Q22. We expect SSSG</li>
<li>Top home improvement players (CRC, HMPRO, GLOBAL, and DOHOME) plan to expand its stores by 10% in 2022 up from 5%CAGR(2019-21) as it impacted from COVID-19 outbreaks.</li>
</ul>


The sector will benefit from the economic recovery as shown by Consumer Confidence Index that recovered to 44.6% in February 2022 from the bottom at 36.7% in July 2021, 
All retailers (BJC, CPALL, CRC, HMPRO, GLOBAL, DOHOME, and ILM) are reported with positive SSSG at a range of 4% to 26% amid Omicron outbreaks in 1Q22. We expect SSSG
Top home improvement players (CRC, HMPRO, GLOBAL, and DOHOME) plan to expand its stores by 10% in 2022 up from 5%CAGR(2019-21) as it impacted from COVID-19 outbreaks.


Commerce Sector: SSSG Remain Strong Amid Omicron Outbreaks