Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Since late-February (2/25/25 Compass and 2/27/25 Int'l Compass) we expected an 8-10% pullback to provide a buying opportunity.</li>
<li>But that all changed last week (4/1/25 Compass and 4/3/25 Int'l Compass), when we downgraded our outlook to bearish/cautious, citing several concerning developments.</li>
<li>Despite the 90-day pause, we remain cautious and we continue to favor defensives as long as the S&amp;P 500 and ACWI-US are below their 200-day MAs.</li>
</ul>


Since late-February (2/25/25 Compass and 2/27/25 Int'l Compass) we expected an 8-10% pullback to provide a buying opportunity.
But that all changed last week (4/1/25 Compass and 4/3/25 Int'l Compass), when we downgraded our outlook to bearish/cautious, citing several concerning developments.
Despite the 90-day pause, we remain cautious and we continue to favor defensives as long as the S&amp;P 500 and ACWI-US are below their 200-day MAs.


Still Favor Defensives Until Market Dynamics Improve; EURO STOXX 50 Testing Crucial 5000 Level

China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> announced its strategic investment on <a href="https://www.smartkarma.com/entities/fujian-sunner-development-a" target="_blank" data-smartkarma-citation="entities:9168:1" rel="noopener">Fujian Sunner Development A (002299 CH)</a> and increase the equity interest to 5%. We estimate transaction price is about RMB 26.51/share for <a href="https://www.smartkarma.com/entities/fujian-sunner-development-a" target="_blank" data-smartkarma-citation="entities:9168:1" rel="noopener">Fujian Sunner Development A (002299 CH)</a> or 17x forward P/E. We believe the transaction valuation is favorable as poultry industry is facing downward pricing pressure due to the prolonged pandemic impact. </li>
<li>Founded in 1983 and headquartered in the Fujian Province, Sunner is China's largest white- feathered chicken producer. We estimate that Sunner is one of Yum China's largest poultry supplier and accounts more than half of its chicken supply. This strategic investment will enhance Yum China's supply chain security and strengthen the collaborations. We have highlighted in the investment theme: Yum China's capability to secure supply chain and distribution system make its wide moat in China restaurant industry.</li>
<li>
<a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> finished 2020 on a high note given its resilient business model. The system sale grew 5% in Q4 2020, and it operating profit grew 78% year-over-year given its consolidation of Huang Ji Huang. We believe Yum China is well positioned to weather the uncertainty post COVID. On the M&amp;A front, Yum China is committed to open 1000 new stores in 2021 and will seek for strategic opportunities to manage cost and drive efficiency improvement. The Fujian Sunner strategic investment bodes well for this principle. We continue to believe <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a>  offers investor better reward/risk potential. </li>
</ul>



Yum China Holdings, Inc (YUMC US) announced its strategic investment on Fujian Sunner Development A (002299 CH) and increase the equity interest to 5%. We estimate transaction price is about RMB 26.51/share for Fujian Sunner Development A (002299 CH) or 17x forward P/E. We believe the transaction valuation is favorable as poultry industry is facing downward pricing pressure due to the prolonged pandemic impact. 
Founded in 1983 and headquartered in the Fujian Province, Sunner is China's largest white- feathered chicken producer. We estimate that Sunner is one of Yum China's largest poultry supplier and accounts more than half of its chicken supply. This strategic investment will enhance Yum China's supply chain security and strengthen the collaborations. We have highlighted in the investment theme: Yum China's capability to secure supply chain and distribution system make its wide moat in China restaurant industry.

Yum China Holdings, Inc (YUMC US) finished 2020 on a high note given its resilient business model. The system sale grew 5% in Q4 2020, and it operating profit grew 78% year-over-year given its consolidation of Huang Ji Huang. We believe Yum China is well positioned to weather the uncertainty post COVID. On the M&amp;A front, Yum China is committed to open 1000 new stores in 2021 and will seek for strategic opportunities to manage cost and drive efficiency improvement. The Fujian Sunner strategic investment bodes well for this principle. We continue to believe Yum China Holdings, Inc (YUMC US)  offers investor better reward/risk potential. 


Yum China (YUMC and 9987.HK): Strategic Investment in Sunner to Strengthen Supply Chain Management

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<div>
<a href="https://www.smartkarma.com/profiles/devi-subhakesan" target="_blank" data-smartkarma-citation="accounts:1913" rel="noopener">Devi Subhakesan</a> mentioned in her report in <a href="https://www.smartkarma.com/insights/indofood-cbp-icbp-ij-us-3bn-acqsn-of-affiliate-dizzy-valuation-earnings-dilution" target="_blank" data-smartkarma-citation="insights:39793" rel="noopener">Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution</a> that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> mentioned in <a href="https://www.smartkarma.com/insights/indofood-cbp-sukses-icbp-ij-going-global-with-instant-noodles" target="_blank" data-smartkarma-citation="insights:41873" rel="noopener">Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles</a> is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. </div>
<div></div>
<div>Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While</div>
<div>
<p>compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. </p>
<p>The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. </p>
<p>Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. </p>
</div>


Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as Angus Mackintosh mentioned in Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. 

Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While

compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. 
The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. 
Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. 


Indofood (ICBP): Undervalued and Will Attract New Types of Investors

<p><strong>The Asian Swine Flu</strong> has caused pork prices to increase and shift of protein consumption from pork to others such as chicken. The company does not have big exposure in pork however the demand shift has caused poultry price to increase. </p><div>Many of the poultry farming companies in China experienced an increase in gross margin from an increase in selling price rather than a lower poultry feed thus names such as <a href="https://www.smartkarma.com/entities/fujian-sunner-development-a" target="_blank" data-smartkarma-citation="entities:9168:1" rel="noopener">Fujian Sunner Development A (002299 CH)</a> , <a href="https://www.smartkarma.com/entities/guangdong-wens-foodstuffs-group-co-ltd" target="_blank" data-smartkarma-citation="entities:22859:1" rel="noopener">Guangdong Wens Foodstuffs Group Co. (300498 CH)</a> , and <a href="https://www.smartkarma.com/entities/guangdong-haid-group-co-a" target="_blank" data-smartkarma-citation="entities:16410:1" rel="noopener">Guangdong Haid Group Co A (002311 CH) </a>are the main beneficiary. <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a><a href="https://www.smartkarma.com/entities/yum-brands-inc" target="_blank" data-smartkarma-citation="entities:984:1" rel="noopener"> , </a> unfortunately, is at the losing end of the deal.</div><div></div><div>Due to the increase in chicken price alongside pork price in China, <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> 's earnings could be 17-66% lower if they don't hedge their input cost. As a result, <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US) </a>should trade between 28-69x PER. There is a potential downside of <strong>20-50%</strong> should the increase in raw material cannot be passed on to the customers and investors presumably are not willing to pay more than 23x PER for exposure in Yum China. </div>

The Asian Swine Flu has caused pork prices to increase and shift of protein consumption from pork to others such as chicken. The company does not have big exposure in pork however the demand shift has caused poultry price to increase. Many of the poultry farming companies in China experienced an increase in gross margin from an increase in selling price rather than a lower poultry feed thus names such as Fujian Sunner Development A (002299 CH) , Guangdong Wens Foodstuffs Group Co. (300498 CH) , and Guangdong Haid Group Co A (002311 CH) are the main beneficiary. Yum China Holdings, Inc (YUMC US) ,  unfortunately, is at the losing end of the deal.Due to the increase in chicken price alongside pork price in China, Yum China Holdings, Inc (YUMC US) 's earnings could be 17-66% lower if they don't hedge their input cost. As a result, Yum China Holdings, Inc (YUMC US) should trade between 28-69x PER. There is a potential downside of 20-50% should the increase in raw material cannot be passed on to the customers and investors presumably are not willing to pay more than 23x PER for exposure in Yum China. 

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

Thematic (Sector/Industry)

<h2>Headlines­</h2><ul>
<li>In 2016, off-trade sales of bottled water increase by 8% in volume terms and 11% in current value terms, to reach 42.1 billion litres and CNY137.9 billion, respectively</li>
<li>Retail channel development drives volume and value sales growth</li>
<li>Current value sales of bottled water increase by 6% on-trade in 2016 compared with 11% off-trade</li>
<li>Shenzhen C’est Bon Food &amp; Beverage Co Ltd replaces Nongfu Spring Co Ltd and ranks as number one player in bottled water in 2016 with an off-trade value share of 9%</li>
<li>…</li>
</ul>

Headlines­
In 2016, off-trade sales of bottled water increase by 8% in volume terms and 11% in current value terms, to reach 42.1 billion litres and CNY137.9 billion, respectively
Retail channel development drives volume and value sales growth
Current value sales of bottled water increase by 6% on-trade in 2016 compared with 11% off-trade
Shenzhen C’est Bon Food &amp; Beverage Co Ltd replaces Nongfu Spring Co Ltd and ranks as number one player in bottled water in 2016 with an off-trade value share of 9%
…


China

Fujian Sunner Development Company Ltd. processes and markets poultry.  The Company's products include frozen chicken meat and other chicken parts.

Price Gauge
52-week Range	0.00 - 0.00
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Fujian Sunner Development A (002299 CH)

Still Favor Defensives Until Market Dynamics Improve; EURO STOXX 50 Testing Crucial 5000 Level

Still Favor Defensives Until Market Dynamics Improve; EURO $STOXX 50 Testing Crucial 5000 Level; Watch for Resistance at $105-$117.69 on $ACWI. Buy...

Vermilion Research

Yum China (YUMC and 9987.HK): Strategic Investment in Sunner to Strengthen Supply Chain Management

Yum China announced its strategic investment on Fujian Sunner. This transaction will enhance Yum China's supply chain security and strengthen the...

Roger Xie

Indofood (ICBP): Undervalued and Will Attract New Types of Investors

Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal...

Henry Soediarko

YUM China (YUMC): Growling Chicken

The Asian Swine Flu has caused pork prices to increase and shift of protein consumption from pork to others such as chicken. The company does not...

Henry Soediarko

Sector Capsule: Bottled Water in China

Headlines In 2016, off-trade sales of bottled water increase by 8% in volume terms and 11% in current value terms, to reach 42.1 billion litres...

Euromonitor International Ltd.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Still Favor Defensives Until Market Dynamics Improve; EURO STOXX 50 Testing Crucial 5000 Level

Still Favor Defensives Until Market Dynamics Improve; EURO $STOXX 50 Testing Crucial 5000 Level; Watch for Resistance at $105-$117.69 on $ACWI. Buy...

Vermilion Research

Yum China (YUMC and 9987.HK): Strategic Investment in Sunner to Strengthen Supply Chain Management

Yum China announced its strategic investment on Fujian Sunner. This transaction will enhance Yum China's supply chain security and strengthen the...

Roger Xie

Indofood (ICBP): Undervalued and Will Attract New Types of Investors

Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal...

Henry Soediarko

YUM China (YUMC): Growling Chicken

The Asian Swine Flu has caused pork prices to increase and shift of protein consumption from pork to others such as chicken. The company does not...

Henry Soediarko

Sector Capsule: Bottled Water in China

Headlines­ In 2016, off-trade sales of bottled water increase by 8% in volume terms and 11% in current value terms, to reach 42.1 billion litres...

Euromonitor International Ltd.

Headlines In 2016, off-trade sales of bottled water increase by 8% in volume terms and 11% in current value terms, to reach 42.1 billion litres...