Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Forensic Accounting

Fox Factory Holding / Forensic Accounting

<ul>
<li>This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  </li>
<li>They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.</li>
<li>These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.</li>
</ul>


This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  
They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.
These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.


Earnings Quality Short Candidates: Fox Factory, Beyond Meat, Coupa SW, Beacon Roofing

Equity Bottom-Up

<ul>
<li>Falling analyst estimates can point to good short candidates.  This is especially true given Wall Street perpetual bias towards buy recommendations.   </li>
<li>The key judgement involves whether the negative sales or estimate revision is temporary or if they are indications of continuing weakness in the business. </li>
<li>These shorts can have very disparate characteristics: they can have high or low beta, be expensive or cheap, be favored or shunned.</li>
</ul>


Falling analyst estimates can point to good short candidates.  This is especially true given Wall Street perpetual bias towards buy recommendations.   
The key judgement involves whether the negative sales or estimate revision is temporary or if they are indications of continuing weakness in the business. 
These shorts can have very disparate characteristics: they can have high or low beta, be expensive or cheap, be favored or shunned.


Breaking Estimates Short Model Flags Beyond Meat, Zillow, Purple & Chegg

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/beyond-meat-inc" target="_blank" data-smartkarma-citation="entities:28065:1" rel="noopener">Beyond Meat (BYND US)'s </a>reported weak 3Q2021 results and muted sales guidance could trigger a downward revision in street sales forecasts for FY2022. Downside risk to stock price from sales downgrades and likely lower valuation multiples.</li>
<li>Slow down in sales growth in the US and a rise in competitive pressure has impacted revenue growth and margin outlook adversely. International markets could be key growth driver in the medium term.</li>
<li>IPO prospects of other alternative protein companies could be negatively impacted. Notable players in this space - <a href="https://www.smartkarma.com/entities/impossible-foods-inc" target="_blank" data-smartkarma-citation="entities:28361:1" rel="noopener">Impossible Foods Inc (1249597D US)</a> , Eat Just Inc - that had raised private funds at steep valuations earlier, may delay listing plans.</li>
</ul>



Beyond Meat (BYND US)'s reported weak 3Q2021 results and muted sales guidance could trigger a downward revision in street sales forecasts for FY2022. Downside risk to stock price from sales downgrades and likely lower valuation multiples.
Slow down in sales growth in the US and a rise in competitive pressure has impacted revenue growth and margin outlook adversely. International markets could be key growth driver in the medium term.
IPO prospects of other alternative protein companies could be negatively impacted. Notable players in this space - Impossible Foods Inc (1249597D US) , Eat Just Inc - that had raised private funds at steep valuations earlier, may delay listing plans.


Beyond Meat 3Q21: Weak Sales/Guidance, Weaker Margins. Downside Risk.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Monde Nissin (MNC), a food manufacturer in the Philippines, raised around US$1.1bn (including over-allocation) in its Philippines IPO. It will start trading tomorrow.</p></div><div><p>We have looked at various aspects of the deal in our previous notes, </p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-the-positives-high-market-share" target="_blank" rel="noopener">Monde Nissin Pre-IPO - The Positives - High Market Share</a>, and <a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-the-negatives-high-debt-div-payments-floundering-ma" target="_blank" rel="noopener">Monde Nissin Pre-IPO - The Negatives - High Debt, Div Payments, Floundering MA</a> we spoke about the company background and its past performance.</li>
<li>In <a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-peer-comparison-for-food-business" target="_blank" rel="noopener">Monde Nissin Pre-IPO - Peer Comparison for Food Business</a> and <a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-peer-comparison-for-meat-alternative-business" target="_blank" rel="noopener">Monde Nissin Pre-IPO - Peer Comparison for Meat Alternative Business</a> we compared the two business with their regional and global peers.</li>
<li>In <a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-thoughts-on-valuation" target="_blank" rel="noopener">Monde Nissin Pre-IPO - Thoughts on Valuation</a> and <a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-not-cheap-but-sensible" target="_blank" rel="noopener">Monde Nissin Pre-IPO - Not Cheap but Sensible</a> we discussed our thoughts on valuation. </li>
<li>In <a href="https://www.smartkarma.com/insights/monde-nissin-ipo-might-not-be-a-high-flyer-but-worth-the-ride-quorn-tastes-good" target="_blank" rel="noopener">Monde Nissin IPO - Might Not Be a High Flyer but Worth the Ride, Quorn Tastes Good</a> we spoke about the deal pricing and dynamics.</li>
</ul></div><div><p>In this note, we’ll talk about trading updates.</p></div>

Monde Nissin (MNC), a food manufacturer in the Philippines, raised around US$1.1bn (including over-allocation) in its Philippines IPO. It will start trading tomorrow.We have looked at various aspects of the deal in our previous notes, 

Monde Nissin Pre-IPO - The Positives - High Market Share, and Monde Nissin Pre-IPO - The Negatives - High Debt, Div Payments, Floundering MA we spoke about the company background and its past performance.
In Monde Nissin Pre-IPO - Peer Comparison for Food Business and Monde Nissin Pre-IPO - Peer Comparison for Meat Alternative Business we compared the two business with their regional and global peers.
In Monde Nissin Pre-IPO - Thoughts on Valuation and Monde Nissin Pre-IPO - Not Cheap but Sensible we discussed our thoughts on valuation. 
In Monde Nissin IPO - Might Not Be a High Flyer but Worth the Ride, Quorn Tastes Good we spoke about the deal pricing and dynamics.
In this note, we’ll talk about trading updates.

Monde Nissin IPO Trading - Most Get off to a Slow Start, Peers Trading up Should Help

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<div>
<p><a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" data-smartkarma-citation="entities:32188:1" rel="noopener">Monde Nissin Corp (0191881D PM)</a> is a leading food manufacturer in the Philippines with flagship brands such as <em>Lucky Me!</em> for instant noodles and <em>Quorn</em> for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen.</p>
<p>Monde Nissin shares will begin trading on the PSE on 1 June and will be the largest listing on the PSE. The IPO received strong investor demand which included a high profile line-up of cornerstone investors. The cornerstone shares represent 67.1% of the offer shares. The eleven cornerstone investors are <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>, Stichting Depositary APG Emerging Markets Equity Pool (Dutch pension funds), Avanda Investment Management, Capital Group, Eastspring Investments, FIL Investment, GIC, <a href="https://www.smartkarma.com/entities/goldman-sachs-group-inc" target="_blank" data-smartkarma-citation="entities:785:1" rel="noopener">Goldman Sachs Group (GS US)</a>, M&amp;G Investment Management, NS Partners and RWC Asset Management.</p>
</div><div><p>In <a href="https://www.smartkarma.com/insights/monde-nissin-ipo-initiation-instant-karma" target="_blank" data-smartkarma-citation="insights:49745" rel="noopener">Monde Nissin IPO Initiation: Instant Karma</a>, we opined that Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. We concluded that Monde Nissin’s fundamentals are attractive. In <a href="https://www.smartkarma.com/insights/monde-nissin-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:51224" rel="noopener">Monde Nissin IPO: Valuation Insights</a>, we noted that the IPO price range is fair.</p></div><div>
<div class="content-highlight"><p>Our base-case DCF derived price target is PHP13.72 per share and our DCF sensitivity shows potential upside to the IPO price. Notably, our SoTP valuation of PHP15.90 is 13% above our previous SoTP valuation largely due to the significant re-rating of <a href="https://www.smartkarma.com/entities/beyond-meat-inc" target="_blank" data-smartkarma-citation="entities:28065:1" rel="noopener">Beyond Meat (BYND US)</a>. Since the announcement of the final IPO price on 5 May, Beyond Meat's shares have re-rated +22%.</p></div>
<p></p>
</div>


Monde Nissin Corp (0191881D PM) is a leading food manufacturer in the Philippines with flagship brands such as Lucky Me! for instant noodles and Quorn for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen.
Monde Nissin shares will begin trading on the PSE on 1 June and will be the largest listing on the PSE. The IPO received strong investor demand which included a high profile line-up of cornerstone investors. The cornerstone shares represent 67.1% of the offer shares. The eleven cornerstone investors are AIA Group Ltd (1299 HK), Stichting Depositary APG Emerging Markets Equity Pool (Dutch pension funds), Avanda Investment Management, Capital Group, Eastspring Investments, FIL Investment, GIC, Goldman Sachs Group (GS US), M&amp;G Investment Management, NS Partners and RWC Asset Management.
In Monde Nissin IPO Initiation: Instant Karma, we opined that Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. We concluded that Monde Nissin’s fundamentals are attractive. In Monde Nissin IPO: Valuation Insights, we noted that the IPO price range is fair.
Our base-case DCF derived price target is PHP13.72 per share and our DCF sensitivity shows potential upside to the IPO price. Notably, our SoTP valuation of PHP15.90 is 13% above our previous SoTP valuation largely due to the significant re-rating of Beyond Meat (BYND US). Since the announcement of the final IPO price on 5 May, Beyond Meat's shares have re-rated +22%.



United States

Beyond Meat Inc. develops plant based protein food products. The Company offers burgers, sausage, crumbles, strips, and other related products. Beyond Meat serves customers in the United States.

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Beyond Meat (BYND US)

Earnings Quality Short Candidates: Fox Factory, Beyond Meat, Coupa SW, Beacon Roofing

Earnings Quality shorts lead to idiosyncratic alpha. Today, we show our model rankings and highlight Fox Factory, Beyond Meat, Coupa SW, Beacon...

Eric Fernandez, CFA

Breaking Estimates Short Model Flags Beyond Meat, Zillow, Purple & Chegg

Our Breaking Estimates Short Model Calls out Beyond Meat, Zillow, Purple & Chegg as short candidate. Presented here with commentary and the...

Eric Fernandez, CFA

Beyond Meat 3Q21: Weak Sales/Guidance, Weaker Margins. Downside Risk.

Downside risk to stock from downward revisions to FY2022 sales estimates and likely lower valuation multiples in the near-to-medium term given...

Devi Subhakesan

Monde Nissin IPO Trading - Most Get off to a Slow Start, Peers Trading up Should Help

Monde Nissin (MNC), a food manufacturer in the Philippines, raised around US$1.1bn in its Philippines IPO. It will start trading tomorrow.

Sumeet Singh

Monde Nissin IPO: Trading Debut

Monde Nissin shares will begin trading on the PSE on 1 June. Our SoTP valuation of PHP15.90 is 13% higher than our previous valuation due to Beyond...

Arun George

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