Consumer

Sula Vineyards is looking to raise around US$117m in its upcoming India IPO.
Sula Vineyards (SV) distributes wines under a bouquet of brands. In addition to its flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia”.
We have looked at various aspects of the deal in our previous notes. In this note, we will talk about recent updates and valuations.

Getaround This SPAC Deal

By subSPAC

This week, digital car-sharing platform Getaround made the headlines as the latest De-SPAC casualty to crash and burn on its stock market debut.
After initially announcing plans to go public through a merger with interPrivate II Acquisition Corp in a deal valuing the combined company at $1.2 billion in May 2022, the company saw a decline of 65% on its debut.
Essentially, at its current valuation, the market thinks that Getaround is worth a little more than the cash generated from its SPAC deal and less than half of the total cash it has raised to date.

AutoZone Inc.: Initiation of Coverage – Business Model & Key Drivers

This is our first report on AutoZone, one of the largest distributors of automotive replacement parts and accessories in the U.S.
The company had a strong fourth quarter, and managed an all-around beat.
However, its domestic, commercial sales made up 30% of its domestic auto parts sales.

Sporting Crypto – Dec 12th: Starbucks Launch Web3 Loyalty Program; Odyssey

By Sporting Crypto

Starbucks have launched a Web3 loyalty program called Odyssey.
Members can engage in ‘journeys’, a series of activities, such as playing interactive games or taking on fun challenges to deepen their knowledge of coffee and Starbucks.
They will be rewarded with a digital collectable ‘journey stamp’ — and yep, you guessed it — they’re NFTs.

AutoZone Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

AutoZone is one of the largest players in the distribution of automotive replacement parts and accessories in the U.S.
The company has been delivering a decent set of results in recent times after the impact of the pandemic has gone down.
However, its domestic, commercial sales make up 30% of its domestic auto parts sales.

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Dec 12

Daily Brief Consumer: Haidilao, LG Energy Solution and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Haidilao’s Spin-Off of Super Hi: Index Implications
LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

Haidilao’s Spin-Off of Super Hi: Index Implications

By Brian Freitas

Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

By Sanghyun Park

The ESOP’s 3.5% stake will be released on January 27. Considering the extremely tight flow situation, this is by no means small. 3.48% is 20 times the recent ADTV.
NPS will likely move toward a minimum stake of 6% again for LG Energy, irrespective of LG Energy’s current valuation, despite its recent selling.
We should consider the possibility that NPS will contrarily utilize this ESOP lockup release, and we should also design a contrarian position for this lockup release.

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Dec 11

Daily Brief Consumer: Melco Resorts & Entertainment and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Asia Gaming: Raising Recent Guidance on Melco Resorts as Catalysts Begin to Move Market Sentiment

Asia Gaming: Raising Recent Guidance on Melco Resorts as Catalysts Begin to Move Market Sentiment

By Howard J Klein

In last month’s insight, we noted that Melco was poised for an upside as it was among the most seriously undervalued stock in the sector.
Despite continuing covid travel ban related losses in 3Q22 earnings release, we saw an upside coming in near term catalysts.
Improving performance by 1Q23 will turn sentiment even stronger as the bull case materializes due to positives now poised in place.

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Dec 10

Daily Brief Consumer: Jardine Cycle & Carriage, Yue Yuen Industrial Holdings, Dish TV India, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

JCNC Is Still Overstretched Vs. Astra
Yue Yuen (551 HK): Putting Their Best Feet Forward
Yue Yuen Industrial Holdings (551.HK) – Challenging Prospects Overshadow Undervaluation
Dish TV: Finale Still Awaits
Going Private Is an Option for Both the Companies and Investors

JCNC Is Still Overstretched Vs. Astra

Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~12% discount to NAV, just outside its narrowest post-Covid.
A key catalyst for the recent narrowing was JCNC’s inclusion in the SIMSCI Index at the end of last month.
JCNC is expensive here – relative to historical values – and from an implied stub perspective.

Yue Yuen (551 HK): Putting Their Best Feet Forward

Despite a softening global demand backdrop, Yue Yuen Industrial (551 HK), a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.
Yue Yuen’s shares have only just recovered from a 20-year low.
From both a historical perspective and relative to peers, Yue Yuen is undemanding here.

Yue Yuen Industrial Holdings (551.HK) – Challenging Prospects Overshadow Undervaluation

By Xinyao (Criss) Wang

Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China’s cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.
Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.
Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.

Dish TV: Finale Still Awaits

By Nitin Mangal

Dish TV India (DITV IN) has been under the limelight for quite a while. ever since the legal tussle with shareholders.
The last six months have seen several events happening at the corporate governance level; the trials of churn in board and the required shareholders approvals has troubled the company.
Even though there have been monumental changes in the board such as resignation of Mr.Goel, the battle with the shareholders is still far from the finale.

Going Private Is an Option for Both the Companies and Investors

By Aki Matsumoto

While it’s natural for a rational investor to disagree with a company that cannot generate a return commensurate with the risk, the existence of cross-shareholdings in Japanese companies complicates matters.
The benefit of listing is raising capital on favorable terms by trading shares at a value greater than shareholders’ equity, but there are not many Japanese companies trading at premium.
Going private is one option for companies that are unable to find growth investment opportunities and accumulate cash on their balance sheets. In this regard, Japanese equities are of interest.

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Dec 09

Daily Brief Consumer: I-Tail, Food & Life, Shenzhou Intl Group Holdings, Wynn Macau Ltd, VinFast and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

I-Tail Corporation IPO Trading – Should Be Able to Provide Some Holiday Cheer
Food & Life: Can’t Avoid Headlines For Too Long & Starting to Fall Back Towards The Rest of The Pack
I-Tail Corporation IPO: Trading Debut
Buy Shenzhou on Margin Recovery
Asia Gaming: Wynn Macau Poised to Move up as Balance Sheet Is Bolstered and Headwinds Begin to Ease
VinFast Auto IPO: The Bull Case
VinFast Auto Pre-IPO – The Negatives – … But Starting Low

I-Tail Corporation IPO Trading – Should Be Able to Provide Some Holiday Cheer

I-Tail, an OEM in the wet pet food category, raised around US$600m in its Thailand IPO. It is a subsidiary of Thai Union Group (TU TB).
As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
In our previous notes, we have looked at the company’s past performance, undertaken a peer comparison and spoken about valuation. In this note, we will talk about the trading dynamics

Food & Life: Can’t Avoid Headlines For Too Long & Starting to Fall Back Towards The Rest of The Pack

By Oshadhi Kumarasiri

Food & Life (3563 JP), best known for its affordable conveyor belt Sushi restaurant chain Sushiro, is looking to break out after dropping more than 60% in the last year.
This breakout coincides with Sushiro’s overseas growth as the segment revenue and OP grew 27% and 108% QoQ respectively in the previous quarter.
Given its tendency hit the headlines, mostly for the wrong reasons, risks rewards aren’t that great. Multiples have downside potential with Sushiro’s profitability falling towards peers.

I-Tail Corporation IPO: Trading Debut

I-Tail (ITC TB) priced its IPO at THB32 per share, the top-end of the price range, to raise gross proceeds of THB21,120m (US$608m). The shares will start trading tomorrow.
We previously discussed the IPO I-Tail Corporation IPO: The Bull Case, I-Tail Corporation IPO: The Bear Case, I-Tail Corporation IPO: A Strong 3Q Results Update, I-Tail Corporation IPO: Valuation Insights.
Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

Buy Shenzhou on Margin Recovery

By Xin Yu, CFA

Gross margin is under pressure throughout 2022 but will recover in 2023
Brands have been focusing on destocking and the inventory levels trend down
Capacity is expected to grow by 10% to low teens y/y in 2023

Asia Gaming: Wynn Macau Poised to Move up as Balance Sheet Is Bolstered and Headwinds Begin to Ease

By Howard J Klein

Parent Wynn Resorts Ltd’s. REIT deal for its Boston property, proceeds of US$1.7b rings its balance sheet cash to US$4.4b.
3Q22 results earnings miss entirely due to China zero covid policy that could begin to ease earlier than anticipated by the market.
At a P/E (ttm) of 8.44 the stock is yet to reflect a more positive tone of its strengthened balance sheet, 6.1% stake in the parent bought by an activist.

VinFast Auto IPO: The Bull Case

VinFast (1905332D VN), a Vietnamese EV (electric vehicle) manufacturer and a majority-owned affiliate of Vingroup Jsc (VIC VN), has filed for a US$1.0 billion IPO to list on Nasdaq.
VinFast is in the middle of a transition from an ICE to a pure-play EV manufacturer. VF 8, its second EV SUV, will be delivered in the US in 4Q22.
The key elements of the bull case rest on a credible EV roadmap, speed-to-market, solid consumer interest and models with attractive range-to-price ratios and total cost of ownership.

VinFast Auto Pre-IPO – The Negatives – … But Starting Low

VinFast (1905332D VN) is looking to raise up to US$1bn in its upcoming US IPO.
VinFast is a full-scale mobility platform focused primarily on designing and manufacturing premium EVs, electric scooters and electric buses.
In this note, we talk about the not-so-positive aspects of the deal.

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Dec 08

Daily Brief Consumer: Xingda International, Shimano Inc, VinFast, Anta Sports Products, Kroger Co, Ulta Beauty, Inc., General Mills and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Xingda Int’l (1899 HK): Kicking The Tyres
Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control
Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?
Shimano (7309) | Value Drivers in an Age of Sobriety
VinFast Auto Pre-IPO – The Positives – Aiming High…
Anta Sports (2020 HK): Assessing the Impact of a Potential Amer Sports IPO
Xingda Int’l (1899 HK): Partial MBO
Kroger Co: Merger With Albertsons & Other Drivers
Ulta Beauty: Major Drivers
General Mills: Delivering High Returns During Market Downturns

Xingda Int’l (1899 HK): Kicking The Tyres

Xingda International (1899 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
The controlling shareholders – more commonly known as the Five Parties – hold 45.6% of shares out.
Two years ago, Xingda sought to spin-off its key operating vehicle. Perhaps the Five Parties are privatising Xingda, then IPOing Xingda Steel Tyre Cord. Or, cashing out their positions.

Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control

Xingda International (1899 HK) disclosed a partial offer from management to acquire a maximum of 80.0 million shares at HK$1.88 per share, a 24.50% premium to the undisturbed price.
The pre-condition is Executive approval. The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
The partial offer is an opportunistic foray to seize statutory control as it would not be sufficiently enticing to overcome FIL’s 9.99% blocking stake in a privatisation scheme.

Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?

Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers.
It is likely that the management, representing 45.60% of ordinary shares (through a five parties agreement), is seeking to privatise Xingda.
The bid is likely privatisation through a scheme. Due to FIL’s blocking stake, a decent premium is required, such as an offer approaching HK$2.00 (33% premium to the last close).

Shimano (7309) | Value Drivers in an Age of Sobriety

By Mark Chadwick

Shimano’s stock has declined by 26% YTD reflecting concerns over an economic recession and sales normalization post pandemic
We believe that Shimano is a key beneficiary of government policy aimed at decarbonization
We analyse Shimano’s core value drivers and see at around 23% upside for the stock

VinFast Auto Pre-IPO – The Positives – Aiming High…

VinFast Auto (1905332D VN) is looking to raise up to US$1bn in its upcoming US IPO.
VinFast is a full-scale mobility platform focused primarily on designing and manufacturing premium EVs, electric scooters and electric buses.
In this note, we talk about the positive aspects of the deal.

Anta Sports (2020 HK): Assessing the Impact of a Potential Amer Sports IPO

By Osbert Tang, CFA

The potential IPO of Anta Sports Products (2020 HK)‘s 52.7% owned Amer Sports is positive in unlocking the latter’s underlying value, though the impact is quite limited.
Assuming a P/S of 1.8x (30% discount to peers) and 25% enlargement in share capital, we estimate the exercise may bring ~HK$6n of potential pre-tax deemed disposal gain.
Although Anta Sports may not receive any cash, it can still pay out special dividends given its Rmb12bn net cash, and this will raise FY23 dividend yield to 3.1%.

Xingda Int’l (1899 HK): Partial MBO

Late night Xingda (1899 HK) announced a partial Offer from a consortium comprising management – known as the Five parties – at HK$1.88/share – a 24.5% premium to last close.
The consortium – widely known as the Five Parties – currently holds 45.6%, and the intention of the Offer is to hold 50.01%, or a controlling stake.
There is a minimum/maximum number shares to be acquired under the Offer. I’d expect the minimum acceptance condition to be met.

Kroger Co: Merger With Albertsons & Other Drivers

Kroger announced another quarter of quite strong results powered by its strategy of accelerating with digital and leading with fresh.
Kroger, along with Albertsons Companies, announces a definitive merger agreement whereby the companies will merge two complementary organizations with deep roots and iconic brands in their local communities.
It launched its foremost in-app flash sales and also enabled its customers to clip the digital offers from their cart directly.

Ulta Beauty: Major Drivers

By Shifara Samsudeen, ACMA, CGMA

Ulta Beauty delivered a good performance in the last quarter with robust revenue growth driving double-digit earnings growth and operating margin expansion.
The double-digit comp of Ulta Beauty in this quarter was an outcome of growth from its core assortment, compelling newness, and price increases.
To support guest education and drive discovery, this quarter Ulta Beauty introduced its Skincare We Love All in every store.

General Mills: Delivering High Returns During Market Downturns

By Vladimir Dimitrov, CFA

General Mills has significantly outperformed the broader equity market and the consumer staples industry as a whole.
The share price seems to be running ahead of fundamentals which reduces expected returns going forward.
The company would also need to dial-up investments in the coming year to secure its strong competitive positioning, according to the company.

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Dec 07

Daily Brief Consumer: Pinduoduo, Shiseido Company, Weilong Delicious Global, China Tourism Group Duty Free Corp Ltd, Porsche AG, S&P 500, JD.com Inc. and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Pinduoduo (PDD): High-Performing Financials, But Low-Profile Management, 23% Downside
Shiseido: Outperforms With Relaxation Of China’s COVID Restrictions, Long Term We Are a Bit Cautious
Weilong Delicious IPO: Peer Comparison and Valuation
CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All
DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News
Failed Breakouts, Banks Crumbling — Get Defensive; Buy Ideas Within Consumer Staples
JD.com Inc ADR: Initiation of Coverage – Business Strategy & Other Drivers

Pinduoduo (PDD): High-Performing Financials, But Low-Profile Management, 23% Downside

By Ming Lu

The revenue growth accelerated and the operating margin improved in 3Q22.
However, management said the performance may not continue and profit is not their target.
We believe the stock has a downside of 23% for year end 2023.

Shiseido: Outperforms With Relaxation Of China’s COVID Restrictions, Long Term We Are a Bit Cautious

By Oshadhi Kumarasiri

The indication that China is prepared to scrap its strict Zero-COVID policy has gotten Shiseido Company (4911 JP) going again after an earnings beat in Q3 saw shares climb almost 20%.
Given that the shares have been range bound throughout the COVID crisis, we think Shiseido could reach near the upper limit of the COVID-range in the near-term to around ¥8,000.
Nevertheless, we would approach this trade with caution and only with a short time horizon as we see a lot of downside risks in the medium to long term.

Weilong Delicious IPO: Peer Comparison and Valuation

Weilong Delicious has downsized its IPO to raise around HK$942m (US$121.3m). The company also has the flexibility to set its IPO price at a 10% discount to the bottom.
The company’s top line growth has slowed down in 1H2022 and margins have been under pressure with increased S&M spending to further penetrate into online channels.
Weilong’s IPO is priced at a significant premium to domestic as well as multinational peers which do not justify the growth prospects.

CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All

By Osbert Tang, CFA

In the near-term, China’s relaxation of COVID-combating measures will boost consumption and demand for cross-province travel. China Tourism Group Duty Free Corp Ltd (1880 HK) is a beneficiary.
Hotel bookings in Sanya have surged over the last two days, reflecting positive demand reaction. However, China’s full border opening likely in 2023 is a challenge to CDFC.
Low base in FY22 will drive 45% earnings growth for FY23. However, valuations are not cheap at 33.8x PER for FY23, a significant premium to consumption sector and international peers.

DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

By Janaghan Jeyakumar, CFA

The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).
Porsche AG (P911 GR)‘s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

Failed Breakouts, Banks Crumbling — Get Defensive; Buy Ideas Within Consumer Staples

By Joe Jasper

Charts have not changed much from the prior week, with there actually being some deterioration within banks (KRE, KBE).
The $SPX has been unable to sustain a breakout above its 200-day MA/YTD downtrend, the $IWM remains below $190 resistance, and the DJIA could not sustain a breakout above 34,280
As long as these indexes are below these levels, we continue to see this as a good time to shift to more defensive areas and/or take profits.

JD.com Inc ADR: Initiation of Coverage – Business Strategy & Other Drivers

This is our first report on Chinese e-commerce giant, JD.com.
Although 2022 has been a difficult year, JD achieved a number of encouraging milestones and improved metrics in its financial and business operations, especially during the third quarter.
We initiate coverage on the stock of JD.com Inc. with a ‘Hold’ rating.

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Dec 06

Daily Brief Consumer: Melco International Development, ATRenew, JD.com Inc., LG Energy Solution, DPC Dash, Weilong Delicious Global and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Where Does Melco’s Discount To NAV Go From Here?
ATRenew (RERE US): Pre-Owned Satisfaction
China Internet Weekly (5Dec2022): JD.com, Baidu, IQiyi, Alibaba Health, ZTO, Pinduoduo, KE
KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern
DPC Dash IPO: Dominos Getting Dominated
Weilong Delicious Global IPO – Tepid Recent Performance Still Makes It Look Expensive
Weilong Delicious IPO: Valuation Insights
ATRenew: Round & Round It Goes

Where Does Melco’s Discount To NAV Go From Here?

On the 26 November, Macau’s government renewed the concession periods of the city’s six incumbent gambling concessionaires for another 10 years.
Genting Malaysia (GENM MK), a last-minute interloper, failed in its bid to secure a license. It scored lowest under the government’s bidding review. MGM China (2282 HK) topped the scoresheets.
As with all incumbents, Melco International (200 HK) and Melco Resorts & Entertainment (MLCO US) eked out strong gains following the renewal. Melco’s current discount to NAV is currently 20%.

ATRenew (RERE US): Pre-Owned Satisfaction

ATRenew (RERE US) operates the largest pre-owned consumer electronics transactions and services platform in China. It is listed in June 2021 at US$14 per ADS.
The shares are down 63% YTD largely due to the tech market sell-off. Unlike most tech companies, ATRenew is starting to deliver growth with profits, cash generation and share buybacks.
The valuation is undemanding compared to a peer group of pre-owned marketplaces and global online retail marketplaces. It will also appeal to investors with an ESG mandate.

China Internet Weekly (5Dec2022): JD.com, Baidu, IQiyi, Alibaba Health, ZTO, Pinduoduo, KE

By Ming Lu

Richard Liu came back to manage JD.com after he resigned half a year ago.
Alibaba Health revenue increased 23% YoY in 1H23, which benefited from hospitals being closed.
Pinduoduo revenue increased by 65% YoY and operating profit increased 388% YoY in 3Q22.

KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern

By Sanghyun Park

We should set the minimum level of the target size to estimate the flow impact on T-1 Effective at ₩15T from ETFs.
We then need to pay attention to the recent trend that an additional flow from NPS appears post-Effective, with a significant portion on T+1~3.
We should revise down our expected rate of return on our early-phase setup aiming at the preemptive trading (T-6W Effective) by NPS.

DPC Dash IPO: Dominos Getting Dominated

By Oshadhi Kumarasiri

DPC Dash (DPC HK) is the exclusive master franchisee of Domino’s Pizza (DPZ US) in mainland China, Hong Kong and Macau with around 546 stores as of 9M2022.
The company has refiled for an IPO on the Hong Kong Stock Exchange after failing the first time to raise around US $100m in March 2022.
Discounted pricing has failed to propel the Dominos brand to the top in many Asian markets where pizza is considered a luxury meal. DPC-Dash is experiencing the same in China.

Weilong Delicious Global IPO – Tepid Recent Performance Still Makes It Look Expensive

Weilong Delicious Global (WDG HK) a spicy snack food company in China, aims to raise around US$140m in its Hong Kong IPO.
According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
We have covered various aspects of the deal in our previous notes, in this note, we will talk about the final valuations.

Weilong Delicious IPO: Valuation Insights

Weilong Delicious Global (WDG HK), a leading spicy snack food company in China, has launched its IPO to raise up to US$141 million.
We previously discussed the IPO in Weilong Delicious IPO: Remains in a Pickle, Weilong Delicious IPO: In a Pickle, Weilong Delicious IPO: Mixed Update, Weilong Delicious IPO Initiation: Tasty Bite.
In this note, we present our forecasts and look at valuation. Weilong is unattractively valued at the IPO price range. We would pass on the IPO.

ATRenew: Round & Round It Goes

JD.com Inc. (9618 HK)-backed ATRenew (RERE US), one of the pioneers of China’s circular economy, registered its first non-GAAP net profit in the 3Q22.
The improvement pivoted off core business stability (consumer electronic devices recycling and sales) and an increasing revenue stream from its multi-category recycling business, including luxury goods.
This is all positive. However ATR, like all US-listed China plays, faces the prospect of a potential delisting under the HFCAA just 16 months away.

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Dec 05

Daily Brief Consumer: Hope Education Group Co Ltd, Melco Resorts & Entertainment, Shakey’s Pizza, Goldlion Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Hope Education (1765 HK): Have We Reached the Bottom?
Weekly Stock Bullfinder – Week of 12/5
Shakey’s Pizza: Brace For Yourselves For An Epic Q4 2022
Closing Some Idea’s

Hope Education (1765 HK): Have We Reached the Bottom?

By Osbert Tang, CFA

Despite the plunge in share price after FY22 result, we think Hope Education Group Co Ltd (1765 HK) has not yet reached its bottom given the challenging outlook faced.
We are concerned about stretched financial position with gearing surged 32.5pp in last year. Heavy capex and need to repay outstanding convertible bonds will strain its cash flow.
Market earnings expectations are still overly optimistic. New schools looks to drag on near-term margins while surge in staffing, primarily teacher, costs is an added pressure.

Weekly Stock Bullfinder – Week of 12/5

By Weekly Stock Bull Finder

As investors we are faced with a deluge of noisy breaking news, business media talking heads, and what has felt like non-stop Fed speakers offering their differing views on the economy and the path of rate hikes going in 2023.
This week was no different. Fed Chair Jay Powell was front and center suggesting that interest rate hikes will likely be stepped down to 50bps in the upcoming December Fed meeting in a few weeks.
This was already discounted and expected by the market and effectively didn’t offer much of anything Wall St. didn’t already know.

Shakey’s Pizza: Brace For Yourselves For An Epic Q4 2022

By Sameer Taneja

Shakey’s Pizza (PIZZA PM) is on the cusp of reporting a stellar Q4 2022. The stock trades at 16.2x FY22e/10.4x FY23e, with massive scope for upgrades from the street.
With the addition of brands like Potato Corner, Peri-Peri, and R&B Tea, the company has sustainably solidified its scope for mid-teens CAGR growth from 2023 onwards.
The company continues to lower its leverage, and net-debt equity was 0.75x in Q3 2022 as cash generation from its operations solidified the balance sheet.

Closing Some Idea’s

By Turtles all the way down

In this post I tracked my performance on stock mentioned in my blog, and I would like to officially close some ideas here.
I will start doing that from now on. Something I did privately but not on the blog publicly.
Either because they have worked out and upside is no more attractive, or because the facts have changed.

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Dec 04

Daily Brief Consumer: Perfect Medical Health, Inner Mongolia Yili Industrial Group (A), Warner Music Group and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Hong Kong CEO & Director Dealings (2 Dec): Perfect Medical, Hong Kong Aerospace, ESR Group, Tian An
High Conviction Idea: Yili
Warner Music Group Corp.: Detailed Credit Analysis & Financial Strength Evaluation Report

Hong Kong CEO & Director Dealings (2 Dec): Perfect Medical, Hong Kong Aerospace, ESR Group, Tian An

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include: Perfect Medical Health (1830 HK), Hong Kong Aerospace Technology (1725 HK), and ESR Group (1821 HK).

High Conviction Idea: Yili

By Xin Yu, CFA

Yili is the largest dairy company in China with established entry barriers of brand and products.
Yili aims to join the world’s top three dairy enterprises by 2025 and strives to seize first place by 2030.
Management announced the plan of a revenue CAGR of ~10% y/y between 2021 and 2025 and margin improvement of 50bps each year.

Warner Music Group Corp.: Detailed Credit Analysis & Financial Strength Evaluation Report