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

LVMH Moet Hennessy Louis Vuitton SE / Technical Analysis

LVMH Moet Hennessy Louis Vuitton SE (MC FP)

<ul>
<li>Select regions such as the US, Europe, Japan, and India are bullish, while others are not -- namely Hong Kong and China.</li>
<li>Relative strength (RS) for MSCI ACWI Technology is breaking out to new highs while RS on the MSCI ACWI Discretionary Sector is on the cusp of a breakout. </li>
<li>We highlight several buy opportunities within global Technology and Consumer Discretionary.</li>
</ul>


Select regions such as the US, Europe, Japan, and India are bullish, while others are not -- namely Hong Kong and China.
Relative strength (RS) for MSCI ACWI Technology is breaking out to new highs while RS on the MSCI ACWI Discretionary Sector is on the cusp of a breakout. 
We highlight several buy opportunities within global Technology and Consumer Discretionary.


Add To Global Technology and Consumer Discretionary

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 22 April, after the market close, <a href="https://www.smartkarma.com/entities/tod-s-spa" target="_blank" data-smartkarma-citation="entities:21231:1" rel="noopener">Tod's SpA (TOD IM)</a> issued a press release which said that Delphine SAS, a subsidiary of <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>, entered into an agreement to acquire an additional 6.8% stake in <a href="https://www.smartkarma.com/entities/tod-s-spa" target="_blank" data-smartkarma-citation="entities:21231:1" rel="noopener">Tod's SpA (TOD IM)</a> from Diego Della Valle &amp; C. S.A.P.A for a total consideration of €74.5 mn.
The 22 April agreement represented at the time 2.2x EV/Fwd Sales and 14.2x EV/Fwd EBITDA,an implied equity value of €1,095 mn and an implied EV of €1,625 mn, and a 11.2% premium to the 1-month WVAP.
On 19 May, Diego Della Valle said said that if he ever decided to sell his company it would be to LVMH's boss Bernard Arnault but he added that he had no current plans to do so. He added that LVMH's recent decision to raise its stake in Tod's was a message "that we like to stay together". He reiterated that if the right opportunity arose, the two groups might "do something together". The shares increased by 3.6% and closed at €48.56. I do not think the family will sell their company that easily when there is a recovery from the pandemic in sight and a new creative director.
Shares enjoyed good momentum after LVMH increased its shareholding in Tod's from 3.2% to 10%, on expectations of an offer by LVMH, but the market seems to have run ahead of itself and the trend may have reversed in the last trading sessions.
In the insight I present a bull (acquisition by LVMH) and a bear case (on valuation grounds, more realistic in my view) for Tod's.
As a standalone entity, Tod's lacks the economies of scale that LVMH enjoys. Without scale, there is a limit as to how much can Tod's shrink its cost structure (procurement of leather and other inputs, marketing and publicity budgets, training of artisans). A best-case scenario valuation would assume an offer from LVMH at an EV 2.0x pre-Covid sales, not expected until 2023e, at least, plus a 15% control premium and some synergies factored in, say 5%, and the valuation would be around €50/share.
At current market prices, Tod's market cap and revenue are respectively &lt;0.5% and 1.5% those of LVMH, hence I do not think that acquiring Tod's is a strategic priority for LVMH in the same way as Tiffany was, nor is it a game changer, no matter how much a successful turnaround of Tod's could achieve in the mid term.
On valuation grounds, Tod's shares do not seem such good value after the recent bull run. A blended average of DCF, WACC 7.8%, terminal growth 1.5%, and 6.8x terminal EBITDA multiple, FCF and EBITDA from capital IQ consensus) and 2.0x EV/22e Sales gives €35.26/share.
<div>
Bernard Arnault, in contrast to the products offered at his stores, likes to buy cheap. His reputation is at stake and the renegotiation of the price tag for Tiffany is a case in point. Tod's does not seem a bargain right now.
Recommendation is short Tod'sTP 35.26/share, a 24% discount to the closing price on 20 May.
</div>
Read across: <a href="https://www.smartkarma.com/entities/salvatore-ferragamo-spa" target="_blank" data-smartkarma-citation="entities:21220:1" rel="noopener">Salvatore Ferragamo (SFER IM)</a> is a similar situation to that of Tod's.

On 22 April, after the market close, Tod's SpA (TOD IM) issued a press release which said that Delphine SAS, a subsidiary of Lvmh Moet Hennessy Louis Vuitton (MC FP), entered into an agreement to acquire an additional 6.8% stake in Tod's SpA (TOD IM) from Diego Della Valle &amp; C. S.A.P.A for a total consideration of €74.5 mn.
The 22 April agreement represented at the time 2.2x EV/Fwd Sales and 14.2x EV/Fwd EBITDA,an implied equity value of €1,095 mn and an implied EV of €1,625 mn, and a 11.2% premium to the 1-month WVAP.
On 19 May, Diego Della Valle said said that if he ever decided to sell his company it would be to LVMH's boss Bernard Arnault but he added that he had no current plans to do so. He added that LVMH's recent decision to raise its stake in Tod's was a message "that we like to stay together". He reiterated that if the right opportunity arose, the two groups might "do something together". The shares increased by 3.6% and closed at €48.56. I do not think the family will sell their company that easily when there is a recovery from the pandemic in sight and a new creative director.
Shares enjoyed good momentum after LVMH increased its shareholding in Tod's from 3.2% to 10%, on expectations of an offer by LVMH, but the market seems to have run ahead of itself and the trend may have reversed in the last trading sessions.
In the insight I present a bull (acquisition by LVMH) and a bear case (on valuation grounds, more realistic in my view) for Tod's.
As a standalone entity, Tod's lacks the economies of scale that LVMH enjoys. Without scale, there is a limit as to how much can Tod's shrink its cost structure (procurement of leather and other inputs, marketing and publicity budgets, training of artisans). A best-case scenario valuation would assume an offer from LVMH at an EV 2.0x pre-Covid sales, not expected until 2023e, at least, plus a 15% control premium and some synergies factored in, say 5%, and the valuation would be around €50/share.
At current market prices, Tod's market cap and revenue are respectively &lt;0.5% and 1.5% those of LVMH, hence I do not think that acquiring Tod's is a strategic priority for LVMH in the same way as Tiffany was, nor is it a game changer, no matter how much a successful turnaround of Tod's could achieve in the mid term.
On valuation grounds, Tod's shares do not seem such good value after the recent bull run. A blended average of DCF, WACC 7.8%, terminal growth 1.5%, and 6.8x terminal EBITDA multiple, FCF and EBITDA from capital IQ consensus) and 2.0x EV/22e Sales gives €35.26/share.

Bernard Arnault, in contrast to the products offered at his stores, likes to buy cheap. His reputation is at stake and the renegotiation of the price tag for Tiffany is a case in point. Tod's does not seem a bargain right now.
Recommendation is short Tod'sTP 35.26/share, a 24% discount to the closing price on 20 May.

Read across: Salvatore Ferragamo (SFER IM) is a similar situation to that of Tod's.

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

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

Equity Bottom-Up

Italian shoe and handbag maker <a href="https://www.smartkarma.com/entities/tod-s-spa" target="_blank" data-smartkarma-citation="entities:21231:1" rel="noopener">Tod's SpA (TOD IM)</a> has been discussed as a takeover target for LVMH since 2017. See my previous insights in 2017, 2018, and 2019 for background.Yesterday, LVMH made its opening salvo raising its stake to 10% by acquiring 2,250,000 shares at 33.10 EUR per share (total value of 74.5 million EUR) from founder Diego Della Valle who will still control 63.64% after the transaction. Please note that Diego Della Valle is also a board member at <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>.Tod's is in the early innings of potential brand revival having added 33-year old influencer Chiara Ferrangi to its board of directors earlier this month. Chiara has 23 million followers on Instagram alone.This follows news of Tod's appointing 42-year old Walter Chiapponi as its head designer in late 2019. Tod's goal is to try and push Tod's brand into the millenial "cool" bucket and revive sales after years of declines.The long-term age of Della Valle (67) means LVMH will acquire the brand outright in FY22/FY3. Before this happens Della Valle will attempt to maximize value for himself one last time.Tod's market cap has shriveled to 1.2 billion EUR (from 4.8 billion in 2013) which means it trades at just 1.5x P/S, 1.2x P/B, and 11x FY22 EV/EBITDA. P/S and EV/EBITDA are the right metrics here as weak execution and heavy investment in company-operated stores have meant the company was printing red-ink for the last three years. Luxury brands typically get sold between 15-20 EV/EBITDA.For Della Valle to sell his life's work it will require a much larger premium by LVMH to get his remaining shares. As highlighted in my 2019 insight large upside remains for Tod's minority shareholders from today's share price levels.

Italian shoe and handbag maker Tod's SpA (TOD IM) has been discussed as a takeover target for LVMH since 2017. See my previous insights in 2017, 2018, and 2019 for background.Yesterday, LVMH made its opening salvo raising its stake to 10% by acquiring 2,250,000 shares at 33.10 EUR per share (total value of 74.5 million EUR) from founder Diego Della Valle who will still control 63.64% after the transaction. Please note that Diego Della Valle is also a board member at Lvmh Moet Hennessy Louis Vuitton (MC FP).Tod's is in the early innings of potential brand revival having added 33-year old influencer Chiara Ferrangi to its board of directors earlier this month. Chiara has 23 million followers on Instagram alone.This follows news of Tod's appointing 42-year old Walter Chiapponi as its head designer in late 2019. Tod's goal is to try and push Tod's brand into the millenial "cool" bucket and revive sales after years of declines.The long-term age of Della Valle (67) means LVMH will acquire the brand outright in FY22/FY3. Before this happens Della Valle will attempt to maximize value for himself one last time.Tod's market cap has shriveled to 1.2 billion EUR (from 4.8 billion in 2013) which means it trades at just 1.5x P/S, 1.2x P/B, and 11x FY22 EV/EBITDA. P/S and EV/EBITDA are the right metrics here as weak execution and heavy investment in company-operated stores have meant the company was printing red-ink for the last three years. Luxury brands typically get sold between 15-20 EV/EBITDA.For Della Valle to sell his life's work it will require a much larger premium by LVMH to get his remaining shares. As highlighted in my 2019 insight large upside remains for Tod's minority shareholders from today's share price levels.

Tod's: LVMH Goes from 3.3%-> to 10%; 100% Next Year?

Julie Lee

Luxury brand companies raised price by 2~4% again in January again after raising price by 10~15% in 2020.  Luxury fashion industry is one of a few industries which has shown strong pricing power even during the pandemic.  The core personal luxury goods market is expected to be contracted for the first time since 2009, falling by 23 percent to hit EUR217 billion, according to Bain&amp;Company.  But it has been showing strong recovery since 2H20. Even though the prolonged pandemic and lock-down can still weigh on the luxury industry, it will continue to show resilience given increasing disposable incomes of high-end consumers thanks to wealth effect and lack of spending on travels.  <a href="https://www.smartkarma.com/entities/prada-s-p-a" target="_blank" data-smartkarma-citation="entities:889:1" rel="noopener">Prada S.P.A. (1913 HK)</a>  is one of a few luxury brands which has been improving its brand equity by appointing the new co-creative director, Raf Simons, enhancing its online marketing and changing its distribution model.We will review details of Prada's strategies and its long term growth potentials in the below section.

Luxury brand companies raised price by 2~4% again in January again after raising price by 10~15% in 2020.  Luxury fashion industry is one of a few industries which has shown strong pricing power even during the pandemic.  The core personal luxury goods market is expected to be contracted for the first time since 2009, falling by 23 percent to hit EUR217 billion, according to Bain&amp;Company.  But it has been showing strong recovery since 2H20. Even though the prolonged pandemic and lock-down can still weigh on the luxury industry, it will continue to show resilience given increasing disposable incomes of high-end consumers thanks to wealth effect and lack of spending on travels.  Prada S.P.A. (1913 HK)  is one of a few luxury brands which has been improving its brand equity by appointing the new co-creative director, Raf Simons, enhancing its online marketing and changing its distribution model.We will review details of Prada's strategies and its long term growth potentials in the below section.  

PRADA (1913. HK): Improving Brand Equity to Fuel Its Long Term Growth

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.

<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

France

LVMH Moet Hennessy Louis Vuitton SE is a diversified luxury goods group. The Company produces and sells wine, cognac, perfumes, cosmetics, luggage, and watches and jewelry.

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LVMH Moet Hennessy Louis Vuitton SE (MC FP)

Add To Global Technology and Consumer Discretionary

Relative strength (RS) for MSCI ACWI Technology is breaking out to new highs while RS on the ACWI Discretionary Sector is on the cusp of a...

Vermilion Research

LVMH/Tod's: Unlikely Deal for Now

Bernard Arnault, in contrast to the products offered at his stores, likes to buy cheap.Tod's does not seem a bargain right now. SHORT Tod's TP...

Jesus Rodriguez Aguilar

Tod's: LVMH Goes from 3.3%-> to 10%; 100% Next Year?

Tod's as a standalone company is on its last legs. Della Valle will attempt his final push to revive the brand with influences Chiara Ferragni on...

Nicolas Van Broekhoven

PRADA (1913. HK): Improving Brand Equity to Fuel Its Long Term Growth

Luxury industry stays resilient given increasing disposable incomes of high-end consumers. We review Prada's strategies and its long term growth...

Julie Lee

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

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