SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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 <div class='content-caption'>Sasseur REIT - CEO</div>
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Through his diverse career spanning more than three decades, engineer by training Anthony Ang has always tried to define success on his own terms. 
One dictum that resonates with him is the warning inherent in American Catholic monk and author Thomas Merton’s observation: “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.” 
“I wouldn’t want to try and prescribe the best definition of success, but many who have gone before have suggested that success and happiness do not generally consist of only having material wealth and status, but also of possessing the right values and goals in life,” said the CEO of the manager of SGX-listed Sasseur REIT. 
One of Ang’s role models is Austrian neurologist and psychiatrist Viktor Frankl – a Holocaust survivor and author of “Man’s Search for Meaning”, a bestseller that chronicles his experiences as a prisoner in Nazi concentration camps during World War II. 
“Frankl, one of my favourite authors, focused on the need for meaning and purpose in life – something that transcends our existence and taps the best energies within us,” he added. 
Although Ang graduated with a Bachelor of Science degree in Mechanical Engineering with First Class Honours from London’s Imperial College, he found that his interests lay elsewhere. 
“For my generation, studying engineering as a discipline was seen as the best way to unlock a great career and future, but I couldn’t envisage myself sitting at a drafting table for hours every day – I preferred a more frontline job,” he recalled. 
So in 1979, Ang began his career with Singapore’s Economic Development Board, rising up the ranks to become the Regional Director of EDB’s North America operations, during which he picked up effective policy-making and investment skills for a range of industries. 
That became a springboard for his subsequent career moves spanning a plethora of sectors: from Executive Director and Group General Manager of Armstrong Industrial Corporation running its manufacturing operations, to Senior Vice President of Vertex Management overseeing venture capital investments, and Executive Vice President of GIC Real Estate – which marked his first foray into the property sector. 
Ang, who also holds a Master of Business Administration degree from INSEAD, later went on to take up various CEO appointments within the ARA Group, including its flagship US$1.13 billion ARA Asia Dragon Fund, and Hong Kong-listed Fortune REIT. Buoyant Prospects 
Ang – currently Singapore’s Non-Resident Ambassador to the Republic of Tunisia – was appointed to helm the manager of Sasseur REIT in 2017. 
“Looking back, you realise that life can change very quickly, but there’s no point worrying about what is to come,” he pointed out. 
“Instead, just do your best, be resilient – find ways around problems – and most importantly, stay positive and enjoy the journey. A belief in God can also be a positive anchor.” 
Making its trading debut on SGX Mainboard in March 2018, Sasseur REIT is the first listed retail outlet mall REIT in Asia. With an initial portfolio of four retail outlet malls located in the cities of Chongqing, Kunming and Hefei, the REIT offers investors the opportunity to invest in China’s fast-growing retail outlet mall sector. 
Some of the most popular brands in its portfolio include Coach, +39 Space (with Prada, Dior, Gucci and other Italian luxury brands), FILA, Adidas and Nike. 
Sasseur REIT is managed by Sasseur Asset Management Pte Ltd. Its Sponsor – Sasseur Cayman Holding Ltd – was founded in 1989 by Vito Xu, Chairman of both the Sponsor and the REIT manager. The Sponsor is one of the leading premium outlet mall groups in China, focused on the development and operation of retail outlet malls in the country. 
The Sponsor’s strategic shareholders are L Catterton Asia – a private equity fund partnership between L Capital of the LVMH Group and Catterton of the US – and Ping An Real Estate Co Ltd, a subsidiary of Ping An Insurance (Group) Co of China Ltd, a Fortune Global 500 enterprise. 
Through these parties, the REIT can forge strategic partnerships, as well as leverage an extensive real estate network to grow its portfolio of brands and assets. 
Last September, Sasseur REIT won Best Retail REIT (Platinum), Best CEO (Platinum) and Best Investor Relations (Gold) at the Asia Pacific Best of the Breeds REITs Awards™ 2019. Three months later, the REIT was included in FTSE EPRA NAREIT Global Emerging Index. 
Sasseur REIT has outperformed many of its Singapore REIT peers, ranking amongst the top five performers with a total return of 52% in 2019. It also emerged as the top-performing China S-REIT for the financial year ended 31 December 2019. 
One of the REIT’s key value propositions is its unique Entrusted Management Agreement (EMA) model, Ang noted. Under this lease arrangement, rental income paid to the REIT comprises a fixed component rent as well as a variable rent that is tied to the performance of underlying tenant sales. 
“This model provides a stable fixed income that grows at 3% annually, offering downside protection in unexpected situations and disruptions, such as COVID-19, which resulted in temporary closure of our outlet malls,” he said. “There is also the variable component that is pegged to sales in our outlets, offering potential income upside.” 
And Sasseur REIT has a radically different business model, Ang added. “We have a hybrid lease structure, comprising 100% sales-based leases with no fixed rental – where rental income for the outlet is collected as a percentage of sales of the branded goods tenants – as well as a combination of both sales-based and fixed rentals for some special tenants in lifestyle activities or F&amp;B.” 
“We believe that this, together with the EMA income model, sets Sasseur apart from other REITs, as they align the interests of the manager with that of our tenants and the REIT, or our unitholders.” Conspicuous Consumption 
Medium to longer term growth drivers for the REIT include burgeoning demand for luxury brands from China’s mushrooming middle class, and potential acquisitions in the form of mall assets owned by the Sponsor. 
“The outlet mall business is one of the country’s fastest growing retail segments, supported by increased spending power and aspirations of middle-class Chinese consumers,” Ang said. 
China’s outlet malls are forecast to become the largest globally, exceeding that of the US by 2030, according to independent research data. 
Outlet malls also function as counter-cyclical elements in the economy, benefiting from downturns when budgets shrink and consumers seek better value-for-money bargains, he added. 
As for the potential assets that can be injected into Sasseur REIT, the Sponsor has two right-of-first-refusal (ROFR) and nine pipeline properties. These include four new mall assets located along the more affluent coastal cities of Shenzhen, Xiamen, Yangzhou and Shanghai – scheduled to open later this year and over the next few years, operated by the Sponsor. 
ROFR assets are those where the REIT has priority of choice when the Sponsor decides to sell, while pipeline assets are third-party owned but operated by the Sponsor, and become ROFR assets for the REIT if acquired by the Sponsor. 
“When you look at the REIT industry, size matters. Currently, we have S$1.6 billion worth of assets under management, and if you do not have at least S$3 billion in AUM, you’re not considered significant, so acquisitions are key to our growth,” Ang pointed out. 
“We want to make an acquisition every two to three years – this is the kind of consistency that investors look for. And it’s not a problem to acquire every other year in the future, due to the number of ROFR and pipeline assets available, and also because our Sponsor is a leader in this industry.” Lifestyle Destinations 
In terms of the challenges presented by the rise of e-commerce on the outlet mall industry, Ang sees mitigated impact. “We believe our outlets have competitive advantages over e-commerce, such as non-overlapping product segments, and lower sales commissions for merchants – they pay average sales commissions of approximately 20% on e-commerce platforms, versus 10%-16% on sales as rental at our outlet malls.” 
Sasseur’s outlet malls are also designed as lifestyle destinations, enhancing the shopping activity by offering multi-faceted experiences that include playgrounds, an indoor zoo and sports concepts. “That’s how we pull in our shoppers,” he added. 
Heightened marketing, robust safety measures at the outlets, as well as enhanced customer engagement efforts by the REIT, particularly during COVID-19 closures between January and March this year, have helped its outlet malls to reopen successfully and perform strongly. 
Its four outlet malls generated combined sales of 835.7 million yuan for the second quarter ended 30 June 2020, 18.6% lower year-on-year and comparing favourably with other retail businesses hit by the pandemic. 
This figure is also 56% higher than the combined sales of 534.5 million yuan in the first quarter, underscoring the fact that business recovery is well underway across its portfolio. 
“We believe the hit from COVID-19 on our outlet business will be short-lived,” Ang said. “As the situation in China continues to improve, we expect the remaining quarters of this year to deliver stronger performances, and sales to return to pre-pandemic levels.” 
China’s retail sales rose for the first time in August since the coronavirus pandemic began, gaining 0.5% year-on-year, reversing a drop of 1.1% in July and a plunge of 20.5% in the January to February period. 
Meanwhile, what keeps the genial 65-year-old going is the satisfaction he derives from playing the role of a rainmaker – effecting real and positive change, whether at work, at play, or just interacting with those who cross his path. 
“I enjoy solving a problem, figuring something out, or doing something completely new,” he said. “Of course, this involves human relationships – people must enjoy working with you, and be able to trust you, because that’s when things happen.” 
Key principles that he has passed on to his son, 28, and daughter 29, include a strong moral code, and the capacity to learn and adapt continually. “I always tell them, don’t worry about the future and stop comparing yourself with others,” he said with a chuckle. 
“In my mind, the key to success is very simple – have a goal but do not limit yourself; have the best possible education, gather as much life experience as you can, and always look for meaning in all you do.”

 

Sasseur REIT 
Sasseur REIT is the first retail outlet mall REIT listed in Asia. Sasseur REIT offers investors the unique opportunity to invest in the fast-growing retail outlet mall sector in the People’s Republic of China through its initial portfolio of four quality retail outlet mall assets strategically located in fast-growing cities in China, such as Chongqing, Kunming and Hefei, with a net lettable area of 312,844 square metres. The REIT is established to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate, as well as real estate-related assets, which are used primarily for retail outlet mall purposes, with an initial focus on Asia.

Sasseur REIT is managed by the Manager, an indirect wholly owned subsidiary of the Sponsor, Sasseur Cayman Holding Ltd. The Sponsor Group is one of the leading premium outlet groups in China, and ranked within the top 500 service companies in the country. With about 30 years of experience in art-commerce, the Sponsor Group has attained recognition in Asia as a leading outlet operator that adopts the strategic approach of integrating emotion, aesthetics, scenario planning and prudent capital management. 
The company website is: <a href="http://www.sasseurreit.com">www.sasseurreit.com</a>. 
Click <a href="https://www.sgx.com/securities/equities/CRPU">here </a>for the company's StockFacts page. 
For the three months ended 30 June 2020 financial results, click <a href="http://ir.listedcompany.com/tracker.pl?type=6&amp;id=793096&amp;">here</a>.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="///C:/Users/tanje/Desktop/Working%20Files/kopi-C/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    Sasseur REIT - CEO


Through his diverse career spanning more than three decades, engineer by training Anthony Ang has always tried to define success on his own terms.  
One dictum that resonates with him is the warning inherent in American Catholic monk and author Thomas Merton’s observation: “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.”  
“I wouldn’t want to try and prescribe the best definition of success, but many who have gone before have suggested that success and happiness do not generally consist of only having material wealth and status, but also of possessing the right values and goals in life,” said the CEO of the manager of SGX-listed Sasseur REIT.  
One of Ang’s role models is Austrian neurologist and psychiatrist Viktor Frankl – a Holocaust survivor and author of “Man’s Search for Meaning”, a bestseller that chronicles his experiences as a prisoner in Nazi concentration camps during World War II.  
“Frankl, one of my favourite authors, focused on the need for meaning and purpose in life – something that transcends our existence and taps the best energies within us,” he added.  
Although Ang graduated with a Bachelor of Science degree in Mechanical Engineering with First Class Honours from London’s Imperial College, he found that his interests lay elsewhere.  
“For my generation, studying engineering as a discipline was seen as the best way to unlock a great career and future, but I couldn’t envisage myself sitting at a drafting table for hours every day – I preferred a more frontline job,” he recalled.  
So in 1979, Ang began his career with Singapore’s Economic Development Board, rising up the ranks to become the Regional Director of EDB’s North America operations, during which he picked up effective policy-making and investment skills for a range of industries.  
That became a springboard for his subsequent career moves spanning a plethora of sectors: from Executive Director and Group General Manager of Armstrong Industrial Corporation running its manufacturing operations, to Senior Vice President of Vertex Management overseeing venture capital investments, and Executive Vice President of GIC Real Estate – which marked his first foray into the property sector.  
Ang, who also holds a Master of Business Administration degree from INSEAD, later went on to take up various CEO appointments within the ARA Group, including its flagship US$1.13 billion ARA Asia Dragon Fund, and Hong Kong-listed Fortune REIT.  Buoyant Prospects  
Ang – currently Singapore’s Non-Resident Ambassador to the Republic of Tunisia – was appointed to helm the manager of Sasseur REIT in 2017.  
“Looking back, you realise that life can change very quickly, but there’s no point worrying about what is to come,” he pointed out.  
“Instead, just do your best, be resilient – find ways around problems – and most importantly, stay positive and enjoy the journey. A belief in God can also be a positive anchor.”  
Making its trading debut on SGX Mainboard in March 2018, Sasseur REIT is the first listed retail outlet mall REIT in Asia. With an initial portfolio of four retail outlet malls located in the cities of Chongqing, Kunming and Hefei, the REIT offers investors the opportunity to invest in China’s fast-growing retail outlet mall sector.  
Some of the most popular brands in its portfolio include Coach, +39 Space (with Prada, Dior, Gucci and other Italian luxury brands), FILA, Adidas and Nike.  
Sasseur REIT is managed by Sasseur Asset Management Pte Ltd. Its Sponsor – Sasseur Cayman Holding Ltd – was founded in 1989 by Vito Xu, Chairman of both the Sponsor and the REIT manager. The Sponsor is one of the leading premium outlet mall groups in China, focused on the development and operation of retail outlet malls in the country.  
The Sponsor’s strategic shareholders are L Catterton Asia – a private equity fund partnership between L Capital of the LVMH Group and Catterton of the US – and Ping An Real Estate Co Ltd, a subsidiary of Ping An Insurance (Group) Co of China Ltd, a Fortune Global 500 enterprise.  
Through these parties, the REIT can forge strategic partnerships, as well as leverage an extensive real estate network to grow its portfolio of brands and assets.  
Last September, Sasseur REIT won Best Retail REIT (Platinum), Best CEO (Platinum) and Best Investor Relations (Gold) at the Asia Pacific Best of the Breeds REITs Awards™ 2019. Three months later, the REIT was included in FTSE EPRA NAREIT Global Emerging Index.  
Sasseur REIT has outperformed many of its Singapore REIT peers, ranking amongst the top five performers with a total return of 52% in 2019. It also emerged as the top-performing China S-REIT for the financial year ended 31 December 2019.  
One of the REIT’s key value propositions is its unique Entrusted Management Agreement (EMA) model, Ang noted. Under this lease arrangement, rental income paid to the REIT comprises a fixed component rent as well as a variable rent that is tied to the performance of underlying tenant sales.  
“This model provides a stable fixed income that grows at 3% annually, offering downside protection in unexpected situations and disruptions, such as COVID-19, which resulted in temporary closure of our outlet malls,” he said. “There is also the variable component that is pegged to sales in our outlets, offering potential income upside.”  
And Sasseur REIT has a radically different business model, Ang added. “We have a hybrid lease structure, comprising 100% sales-based leases with no fixed rental – where rental income for the outlet is collected as a percentage of sales of the branded goods tenants – as well as a combination of both sales-based and fixed rentals for some special tenants in lifestyle activities or F&amp;B.”  
“We believe that this, together with the EMA income model, sets Sasseur apart from other REITs, as they align the interests of the manager with that of our tenants and the REIT, or our unitholders.”  Conspicuous Consumption   
Medium to longer term growth drivers for the REIT include burgeoning demand for luxury brands from China’s mushrooming middle class, and potential acquisitions in the form of mall assets owned by the Sponsor.  
“The outlet mall business is one of the country’s fastest growing retail segments, supported by increased spending power and aspirations of middle-class Chinese consumers,” Ang said.  
China’s outlet malls are forecast to become the largest globally, exceeding that of the US by 2030, according to independent research data.  
Outlet malls also function as counter-cyclical elements in the economy, benefiting from downturns when budgets shrink and consumers seek better value-for-money bargains, he added.  
As for the potential assets that can be injected into Sasseur REIT, the Sponsor has two right-of-first-refusal (ROFR) and nine pipeline properties. These include four new mall assets located along the more affluent coastal cities of Shenzhen, Xiamen, Yangzhou and Shanghai – scheduled to open later this year and over the next few years, operated by the Sponsor.  
ROFR assets are those where the REIT has priority of choice when the Sponsor decides to sell, while pipeline assets are third-party owned but operated by the Sponsor, and become ROFR assets for the REIT if acquired by the Sponsor.  
“When you look at the REIT industry, size matters. Currently, we have S$1.6 billion worth of assets under management, and if you do not have at least S$3 billion in AUM, you’re not considered significant, so acquisitions are key to our growth,” Ang pointed out.  
“We want to make an acquisition every two to three years – this is the kind of consistency that investors look for. And it’s not a problem to acquire every other year in the future, due to the number of ROFR and pipeline assets available, and also because our Sponsor is a leader in this industry.”  Lifestyle Destinations  
In terms of the challenges presented by the rise of e-commerce on the outlet mall industry, Ang sees mitigated impact. “We believe our outlets have competitive advantages over e-commerce, such as non-overlapping product segments, and lower sales commissions for merchants – they pay average sales commissions of approximately 20% on e-commerce platforms, versus 10%-16% on sales as rental at our outlet malls.”  
Sasseur’s outlet malls are also designed as lifestyle destinations, enhancing the shopping activity by offering multi-faceted experiences that include playgrounds, an indoor zoo and sports concepts. “That’s how we pull in our shoppers,” he added.  
Heightened marketing, robust safety measures at the outlets, as well as enhanced customer engagement efforts by the REIT, particularly during COVID-19 closures between January and March this year, have helped its outlet malls to reopen successfully and perform strongly.  
Its four outlet malls generated combined sales of 835.7 million yuan for the second quarter ended 30 June 2020, 18.6% lower year-on-year and comparing favourably with other retail businesses hit by the pandemic.  
This figure is also 56% higher than the combined sales of 534.5 million yuan in the first quarter, underscoring the fact that business recovery is well underway across its portfolio.  
“We believe the hit from COVID-19 on our outlet business will be short-lived,” Ang said. “As the situation in China continues to improve, we expect the remaining quarters of this year to deliver stronger performances, and sales to return to pre-pandemic levels.”  
China’s retail sales rose for the first time in August since the coronavirus pandemic began, gaining 0.5% year-on-year, reversing a drop of 1.1% in July and a plunge of 20.5% in the January to February period.  
Meanwhile, what keeps the genial 65-year-old going is the satisfaction he derives from playing the role of a rainmaker – effecting real and positive change, whether at work, at play, or just interacting with those who cross his path.  
“I enjoy solving a problem, figuring something out, or doing something completely new,” he said. “Of course, this involves human relationships – people must enjoy working with you, and be able to trust you, because that’s when things happen.”  
Key principles that he has passed on to his son, 28, and daughter 29, include a strong moral code, and the capacity to learn and adapt continually. “I always tell them, don’t worry about the future and stop comparing yourself with others,” he said with a chuckle.  
“In my mind, the key to success is very simple – have a goal but do not limit yourself; have the best possible education, gather as much life experience as you can, and always look for meaning in all you do.”

 

Sasseur REIT  
Sasseur REIT is the first retail outlet mall REIT listed in Asia. Sasseur REIT offers investors the unique opportunity to invest in the fast-growing retail outlet mall sector in the People’s Republic of China through its initial portfolio of four quality retail outlet mall assets strategically located in fast-growing cities in China, such as Chongqing, Kunming and Hefei, with a net lettable area of 312,844 square metres. The REIT is established to invest principally, directly or indirectly, in a diversified portfolio of income-producing real estate, as well as real estate-related assets, which are used primarily for retail outlet mall purposes, with an initial focus on Asia.

Sasseur REIT is managed by the Manager, an indirect wholly owned subsidiary of the Sponsor, Sasseur Cayman Holding Ltd. The Sponsor Group is one of the leading premium outlet groups in China, and ranked within the top 500 service companies in the country. With about 30 years of experience in art-commerce, the Sponsor Group has attained recognition in Asia as a leading outlet operator that adopts the strategic approach of integrating emotion, aesthetics, scenario planning and prudent capital management.  
The company website is: www.sasseurreit.com.  
Click here for the company's StockFacts page.  
For the three months ended 30 June 2020 financial results, click here.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Sasseur REIT Taps Aspirations of China’s Middle Class

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

MSCI Emerging Markets Index / Technical Analysis

Global equities continue to trend higher following breakouts that have occurred during the past two weeks. Over this timeframe we have been recommending adding exposure to cyclical Sectors and, despite them getting near-term extended, we believe these upside moves are likely just getting going. Additionally, the US dollar is breaking below support and EM equities are breaking above resistance, only adding to our bullish outlook on global equities. We highlight actionable set-ups within the Consumer Discretionary, Global Real Estate and Utilities Sectors.

Global equities continue to trend higher following breakouts that have occurred during the past two weeks. Over this timeframe we have been recommending adding exposure to cyclical Sectors and, despite them getting near-term extended, we believe these upside moves are likely just getting going. Additionally, the US dollar is breaking below support and EM equities are breaking above resistance, only adding to our bullish outlook on global equities. We highlight actionable set-ups within the Consumer Discretionary, Global Real Estate and Utilities Sectors.

Global Equity Strategy: Still Bullish, But Extended Near-Term

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

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.

Event-Driven

LVMH Moet Hennessy Louis Vuitton SE / Event-Driven

In a surprising twist, Victoria’s Secret parent owner <a href="https://www.smartkarma.com/entities/l-brands-inc" target="_blank" data-smartkarma-citation="entities:20339:1" rel="noopener">L Brands Inc (LB US)</a>  decided to drop its countersuit against private equity firm Sycamore Partners, who had decided to walk away from its 525mn USD deal to purchase Victoria’s Secret based on an argument surrounding the breach of an Ordinary Course covenant. L Brands shares have languished since this announcement six days ago. We discuss the implications for the LVMH/Tiffany deal below as well as our updated thoughts.Our previous research on LVMH/Tiffany can be found here:<a href="https://www.smartkarma.com/insights/lvmh-tiffany-deal-victoria-s-secret-deal-collapses-is-bernard-arnault-also-cautious" target="_blank" data-smartkarma-citation="insights:38695" rel="noopener">LVMH- Tiffany Deal: Victoria’s Secret Deal Collapses – Is Bernard Arnault Also Cautious?</a> <a href="https://www.smartkarma.com/insights/lvmh-tiffany-deal-bernard-arnault-makes-another-big-splash" target="_blank" data-smartkarma-citation="insights:37988" rel="noopener">LVMH – Tiffany Deal: Bernard Arnault Makes Another Big Splash</a> <a href="https://www.smartkarma.com/insights/lvmh-tiffany-deal-bernard-arnault-makes-another-big-splash" target="_blank" rel="noopener"></a>

In a surprising twist, Victoria’s Secret parent owner L Brands Inc (LB US)  decided to drop its countersuit against private equity firm Sycamore Partners, who had decided to walk away from its 525mn USD deal to purchase Victoria’s Secret based on an argument surrounding the breach of an Ordinary Course covenant. L Brands shares have languished since this announcement six days ago. We discuss the implications for the LVMH/Tiffany deal below as well as our updated thoughts.Our previous research on LVMH/Tiffany can be found here:LVMH- Tiffany Deal: Victoria’s Secret Deal Collapses – Is Bernard Arnault Also Cautious? LVMH – Tiffany Deal: Bernard Arnault Makes Another Big Splash 

LVMH/Tiffany: Victoria’s Secret Doesn't Challenge Deal Collapse: An Increased Risk of Deal-Breaks?

<a href="https://www.smartkarma.com/entities/tiffany-co" target="_blank" data-smartkarma-citation="entities:14729:1" rel="noopener">Tiffany (TIF US)</a> is an American jewellery company focused on hard luxury items such as jewellery and as well as silver and diamond engagement/wedding rings. Tiffany was founded in 1837 and had net sales of 4.4bn USD as of FY19. Tiffany received a friendly takeover offer of $135 per share in an all-cash deal from <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>  in November 2019 with an expected completion date in mid-2020 with a completion date no later than August 24, 2020. LVMH is one of the largest luxury brands in the world and owns brands such as Dom Perignon, Bulgari, Marc Jacobs and Hublot.The bid and acquisition price may not come as a surprise given LVMH CEO Bernard Arnault has had a penchant for big acquisitions, even if oddly timed. There is scant evidence that Mr Arnault is likely to back away from a deal, despite the scope for deteriorating market conditions ( <a href="https://www.smartkarma.com/entities/carrefour-sa" target="_blank" data-smartkarma-citation="entities:21409:1" rel="noopener">Carrefour SA (CA FP)</a> in 2007 with Colony Capital as an example).Below, we look at the deal below and assess whether Arnault and LVMH are likely to complete the deal with Tiffany. More thoughts below.

Tiffany (TIF US) is an American jewellery company focused on hard luxury items such as jewellery and as well as silver and diamond engagement/wedding rings. Tiffany was founded in 1837 and had net sales of 4.4bn USD as of FY19. Tiffany received a friendly takeover offer of $135 per share in an all-cash deal from Lvmh Moet Hennessy Louis Vuitton (MC FP)  in November 2019 with an expected completion date in mid-2020 with a completion date no later than August 24, 2020. LVMH is one of the largest luxury brands in the world and owns brands such as Dom Perignon, Bulgari, Marc Jacobs and Hublot.The bid and acquisition price may not come as a surprise given LVMH CEO Bernard Arnault has had a penchant for big acquisitions, even if oddly timed. There is scant evidence that Mr Arnault is likely to back away from a deal, despite the scope for deteriorating market conditions ( Carrefour SA (CA FP) in 2007 with Colony Capital as an example).Below, we look at the deal below and assess whether Arnault and LVMH are likely to complete the deal with Tiffany. More thoughts below.

LVMH – Tiffany Deal: Bernard Arnault Makes Another Big Splash

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.

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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

Italy

Prada S.p.A. is an Italian fashion company that designs, manufactures, promotes and sells high-end leather goods, ready-to-wear and footwear through various brands.

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Prada S.P.A. (1913 HK)

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LVMH – Tiffany Deal: Bernard Arnault Makes Another Big Splash

Tiffany (TIF US) is an American jewellery company focused on hard luxury items such as jewellery and as well as silver and diamond...

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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...

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