Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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.

Event-Driven

<ul><li>
<a href="https://www.smartkarma.com/entities/christian-dior-se" target="_blank" data-smartkarma-citation="entities:21415:1" rel="noopener">Christian Dior SE (CDI FP)</a>’s 41.2% owned listed subsidiary, <a href="https://www.smartkarma.com/entities/lvmh-moet-hennessy-louis-vui" target="_blank" data-smartkarma-citation="entities:21072:1" rel="noopener">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a>, has outperformed Christian Dior shares by over 31% since LVMH made a non-binding proposal to acquire the US luxury jewellery and speciality retailer <a href="https://www.smartkarma.com/entities/tiffany-co" target="_blank" data-smartkarma-citation="entities:14729:1" rel="noopener">Tiffany &amp; Co (TIF US)</a>.</li></ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/744/original/image_9822495321611673131890.png?1611673132" class="editor-image img-responsive" data-smartkarma-image-id="184744"></figure><ul>
<li>After a lawsuit and a counter lawsuit by Tiffany and LVMH respectively, (LVMH requested an amended deal due to COVID-19 led disruptions) LVMH finally managed to complete the acquisition on 7th January for $15.8bn, a 3% discount to LVMH’s original offer.</li>
<li>Dior is 97.4% owned by the Arnault Family and therefore has a very low free float compared to LVMH’s 50% free float. The lack of liquidity meant that Dior failed to keep up with LVMH’s share price movement, even though Dior’s only source of revenue/income is LVMH.</li>
<li>Dior’s current NAV discount is 23.9%, compared to an average of 4.0% during 2018-3Q2019. As the trading volume of LVMH normalises following the Tiffany transaction, we expect Dior’s NAV discount to return to the undisturbed long-term average discount range of 10-18%.</li>
</ul>


Christian Dior SE (CDI FP)’s 41.2% owned listed subsidiary, Lvmh Moet Hennessy Louis Vuitton (MC FP), has outperformed Christian Dior shares by over 31% since LVMH made a non-binding proposal to acquire the US luxury jewellery and speciality retailer Tiffany &amp; Co (TIF US).
After a lawsuit and a counter lawsuit by Tiffany and LVMH respectively, (LVMH requested an amended deal due to COVID-19 led disruptions) LVMH finally managed to complete the acquisition on 7th January for $15.8bn, a 3% discount to LVMH’s original offer.
Dior is 97.4% owned by the Arnault Family and therefore has a very low free float compared to LVMH’s 50% free float. The lack of liquidity meant that Dior failed to keep up with LVMH’s share price movement, even though Dior’s only source of revenue/income is LVMH.
Dior’s current NAV discount is 23.9%, compared to an average of 4.0% during 2018-3Q2019. As the trading volume of LVMH normalises following the Tiffany transaction, we expect Dior’s NAV discount to return to the undisturbed long-term average discount range of 10-18%.


Christian Dior: Holdco Discount Could Normalise Following the Completion of Tiffany Acquisition

Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

Equity Bottom-Up

<ul>
<li>Despite the elevated valuation, family-controlled Hermes demonstrates its superior quality from a business-owner perspective, and hence, is worth following among patient investors;</li>
<li>At the same time, we find that the French heritage name has been increasingly APAC-driven in recent years and can very likely continue to benefit from rising emerging Asia in the foreseeable future.</li>
</ul>


Despite the elevated valuation, family-controlled Hermes demonstrates its superior quality from a business-owner perspective, and hence, is worth following among patient investors;
At the same time, we find that the French heritage name has been increasingly APAC-driven in recent years and can very likely continue to benefit from rising emerging Asia in the foreseeable future.


Hermes: An Increasingly APAC-Driven Story

LVMH Moet Hennessy Louis Vuitton SE / Event-Driven

LVMH Moet Hennessy Louis Vuitton SE (MC FP)

<ul>
<li>Smartkarma recently added a new company/holdco to its list of holdcos under the incredibly useful Holdco Monitor tool.</li>
<li>The latest addition to the tool is <a href="https://www.smartkarma.com/entities/christian-dior-se" target="_blank" data-smartkarma-citation="entities:21415:1" rel="noopener">Christian Dior Se (CDI FP)</a> and its listed subsidiary <a href="https://www.smartkarma.com/entities/lvmh-moet-hennessy-louis-vui" target="_blank" data-smartkarma-citation="entities:21072:1" rel="noopener">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a>, the world leader in luxury goods. Both these companies are controlled by the French billionaire Bernard Arnault.</li>
<li>Below, we analyse the current holdco discount/premium to assess if there’s an opportunity for a market-neutral pair trade once the current ban on short selling is lifted.</li>
</ul>


Smartkarma recently added a new company/holdco to its list of holdcos under the incredibly useful Holdco Monitor tool.
The latest addition to the tool is Christian Dior Se (CDI FP) and its listed subsidiary Lvmh Moet Hennessy Louis Vuitton (MC FP), the world leader in luxury goods. Both these companies are controlled by the French billionaire Bernard Arnault.
Below, we analyse the current holdco discount/premium to assess if there’s an opportunity for a market-neutral pair trade once the current ban on short selling is lifted.


Christian Dior/LVMH: Discount Is Attractive but Liquidity & Pre 2017 Discount Make It a Risky Trade

Director | Exposing Creative Accounting, Bucephalus Research Partnership

Robert Medd

Director | Exposing Creative Accounting

Exposing Creative Accounting

Bucephalus Research Partnership

Bucephalus Research Partnership Limited. Exposing Creative Accounting.

At the Bucephalus Research Partnership (BRP) we analyse financial statements using our accountant's practical experience and our own quantitative algorithms for corporate governance, accounting risk and peer performance.

Our thematic research refines our unique algorithms while our single stock research focuses on examples where we discover a significant gap between published accounts and business reality.

​Bucephalus Research Partnership:
- Is an independent fee-based research service
- Does not take proprietary positions, long or short
- Does not solicit business or fees from the corporates we review

Forensic Accounting

Prada is talking about re-building the brand. They have stopped discounting and they are re-organising. However, it appears to us that management may have a different agenda and minorities could be in for a rough ride. We believe that profits are suffering due to a lack of productivity, not discounting and the balance sheet has been hollowed out by excessive dividends, related party deals and vanity projects. Don’t be fooled by the creative accounting, this brand is expensive and offers little value.

Prada is talking about re-building the brand. They have stopped discounting and they are re-organising. However, it appears to us that management may have a different agenda and minorities could be in for a rough ride. We believe that profits are suffering due to a lack of productivity, not discounting and the balance sheet has been hollowed out by excessive dividends, related party deals and vanity projects. Don’t be fooled by the creative accounting, this brand is expensive and offers little value.

SELL Prada: There Is Little Value in This Brand. Fair Value HK$7.90

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Estee Lauder Companies Cl A / Equity Bottom-Up

FQ1 2020 Estimates:Based on our offline store checks in mainland China, we see continued sales growth momentum for  <a href="https://www.smartkarma.com/entities/estee-lauder-companies-cl-a" target="_blank" data-smartkarma-citation="entities:8713:1" rel="noopener">Estee Lauder Companies Cl A (EL US)</a>'s La Mer, Lauder, Tom Ford and MAC, driven by same store sales growth as well as new store expansion, in FQ1 2020.  La Mer and Tom Ford added ~8 new store locations, increasing from 74 to 82 and 14 to 22 offline store locations over past 12 months respectively.  Mac added 12 stores and now has 97 stores in mainland China.Excluding ecommerce, we estimate that the key brands with EL, namely Lauder (~48% group sales in mainland China), La Mer (~20%),  and MAC (~13%) grew 55%, 30%+, and 35% in FQ1 2020 (July-September) year-over-year, driving ~33.5% YoY growth for the group’s offline sales growth in China.  Combining ecommerce (primarily Tmall), EL China growth is likely to reach ~35%-40% YoY in FQ1 2020.  Due to the low retail location penetration for the trending brands such as La Mer, Tom Ford, and MAC, many cities don’t have retail stores conveniently located, ecommerce represents the primary sales channel.  We estimate that La Mer sold ~65% total GMV in mainland online, only ~35% in off-line brick and mortar stores.

FQ1 2020 Estimates:Based on our offline store checks in mainland China, we see continued sales growth momentum for  Estee Lauder Companies Cl A (EL US)'s La Mer, Lauder, Tom Ford and MAC, driven by same store sales growth as well as new store expansion, in FQ1 2020.  La Mer and Tom Ford added ~8 new store locations, increasing from 74 to 82 and 14 to 22 offline store locations over past 12 months respectively.  Mac added 12 stores and now has 97 stores in mainland China.Excluding ecommerce, we estimate that the key brands with EL, namely Lauder (~48% group sales in mainland China), La Mer (~20%),  and MAC (~13%) grew 55%, 30%+, and 35% in FQ1 2020 (July-September) year-over-year, driving ~33.5% YoY growth for the group’s offline sales growth in China.  Combining ecommerce (primarily Tmall), EL China growth is likely to reach ~35%-40% YoY in FQ1 2020.  Due to the low retail location penetration for the trending brands such as La Mer, Tom Ford, and MAC, many cities don’t have retail stores conveniently located, ecommerce represents the primary sales channel.  We estimate that La Mer sold ~65% total GMV in mainland online, only ~35% in off-line brick and mortar stores.

Estee Lauder China Q3 2019 Survey: Accelerating Momentum Aided by Unauthorized ReSeller Transactions

France

Christian Dior SE manufactures luxury products such as upscale clothing, champagne and wines, cognac and spirits, luggage and leather goods, perfumes and cosmetics, and jewelry and watches.  The Company markets its products internationally.

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Christian Dior SE (CDI FP)

Christian Dior: Holdco Discount Could Normalise Following the Completion of Tiffany Acquisition

Dior’s current NAV discount is 23.9%, compared to an undisturbed long-term average discount range of 10-18%. As trading volumes of LVMH normalises...

Oshadhi Kumarasiri

Hermes: An Increasingly APAC-Driven Story

The French heritage story has been increasingly APAC-driven in recent years and can very likely continue to benefit from rising emerging Asia in...

Urbem Capital

Christian Dior/LVMH: Discount Is Attractive but Liquidity & Pre 2017 Discount Make It a Risky Trade

Smartkarma recently added a new company/holdco to its list of holdcos under the incredibly useful Holdco Monitor tool. The latest addition to the...

Oshadhi Kumarasiri

SELL Prada: There Is Little Value in This Brand. Fair Value HK$7.90

Prada is talking about re-building the brand. They have stopped discounting and they are re-organising. However, it appears to us that management...

Bucephalus Research Partnership

Estee Lauder China Q3 2019 Survey: Accelerating Momentum Aided by Unauthorized ReSeller Transactions

FQ1 2020 Estimates:Based on our offline store checks in mainland China, we see continued sales growth momentum for Estee Lauder Companies Cl A (EL...

JL Warren Capital

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