Consumer

Oriental Land (4661 JP) raised its FY23 revenue and OP guidance by 8.4% and 59.4% respectively last week sighting a recovery in demand for leisure during the second-half of the year.
The modest price reaction to upgraded guidance could be an indication that a breakdown is imminent.
Cost overruns of ¥70bn and a delay to the scheduled opening of Fantasy Springs from FY23 to FY24, could force investors to second guess consensus medium-term expectations.

Mercari – Q1 23 Results Reaction: Strong Domestic Drives OP Beat but Spending to Rise

By Kirk Boodry

Domestic results were better than we expected driving operating income to its highest level in six quarters. Management will launch credit card services to boost fintech exposure
The US business remains a drag on results with platform sales down 5% YoY and expanding operating losses. A downgrade to expectations is likely in the quarters ahead
Q1 results were better than we expected but a weak US business and higher spending ahead may disappoint markets that bid shares 28% higher over the last month

Vitasoy (345): Time to Bounce

By Henry Soediarko

Vitasoy Intl Holdings (345 HK) was shunned by investors last year as its products were taken off the shelves in China, causing its revenue from China to plummet.
Recently announced a substantial increase in net profit vs last year.
Despite the recent uptick, Vitasoy’s share price is still trading at 50% PBR vs 5 years ago.

Kino Indonesia (KINO IJ) – Staples with a Discretionary Edge

Kino Indonesia (KINO IJ) is one of Indonesia’s most interesting staples players with a strong share in a number of segments within beverages and personal care which dominate its sales.
The company has seen a decent rebound in its beverages business as mobility has improved but continues to face some headwinds from higher input costs and packaging for personal care.
Kino Indonesia (KINO IJ) has been selectively increasing prices to offset higher costs and is seeing an improvement in sales of some of its more discretionary products.

COP27: Agriculture and Food Stocks Likely to Be Most Affected by Conference Talks

By Kyle Rudden

COP27, the 27th annual United Nations international conference on climate change, starts on 6 November and runs through 18 November – in the Egyptian coastal city of Sharm el-Sheikh.
Whereas climate mitigation and clean energy were the main focus of prior conferences, climate adaptation and sustainable agriculture and food are top priorities for the COP26 Presidency.
Therefore, agriculture and food stocks are poised to be the most impacted on a relative basis by COP27 proceedings and outcomes. This Insight considers the potential “winners and losers.”

The Coca-Cola Co: Major Drivers

Despite a macroeconomic environment that remained difficult in the third quarter, Coca-Cola managed to deliver yet another all-around beat.
Utilizing their customer-centric marketing strategy, they are rapidly connecting consumption occasions with passion points through digital engagement.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Gaussian Robotics: Leading Provider of AI-Powered Cleaning Robots

By Andrei Zakharov

Gaussian Robotics sells a new generation of autonomous cleaning robots that can be applied in office buildings, shopping malls, indoor galleries, hotels, schools, healthcare facilities, and warehouses.
Shanghai-Based unicorn wants to disrupt the cleaning industry with automation, promoting the use of low-cost autonomous cleaning robots worldwide.
The company owns the world’s most advanced commercial cleaning robot portfolio offering cost-effective smart robotic solutions to 2,000+ customers in 40+ countries across 6 regions.

Trent Ltd: Trending Multi-Brand, Multi-Format Retailer. Value Fashion to Home Grocery

By Devi Subhakesan

Trent Ltd (TRENT IN), one of India’s leading apparel retailers led by the Tatas, is on an accelerated growth path helped by its recently expanded apparel retail chain, Zudio.
Zudio sells value fashion through its own stores targeted at India’s burgeoning youth that is high on aspiration while low on budget, a hitherto severely underserved category.
Star Bazaar, Trent’s grocery retail JV with Tesco PLC (TSCO LN), is also beginning to gain traction and has the potential to expand and grow its presence across the country.

COP27: Despite Limited Expectations There Are Several Potential Bright Spots

By Kyle Rudden

COP27, the 27th annual United Nations international conference on climate change, starts on 6 November and runs through 18 November – in the Egyptian coastal city of Sharm el-Sheikh.
World leaders and delegations from 196 nations and territories are expected to collaborate on a host of issues such as finance, decarbonisation, agriculture, water, energy, and biodiversity.
Overall expectations are being kept in check, but COP27 is likely to focus on climate adaptation and sectors like agriculture/food that heretofore have taken a back seat to clean energy.

GTX: Free Cash Flow and Win Rate

By Hamed Khorsand

GTX experienced a recovery in its order trends from all segments in the third quarter leading to the Company reporting sales exceeding our expectations
GTX reported third quarter sales of $945 million compared to our lowered forecast of $908 million
GTX’s foray into EVs should have a positive impact on GTX’s sales and stock valuation. Investors have not been valuing GTX on the basis for having exposure to EVs

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Oct 31

Daily Brief Consumer: Shandong Fengxiang, Amorepacific Group, Aeon Co Ltd, Chipotle Mexican Grill, Home24, Alibaba Group, Ford Motor Co, General Motors, Kimberly Clark and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Fengxiang (9977 HK): PAG’s Unconditional MGO And Proposed Delisting
MSCI Korea IR: Market Cap Cutoff, NOC, & Constituent Changes
Aeon: Making Omnichannel a Reality
Chipotle Mexican Grill: Major Drivers
XXXLutz Consortium/Home24: Rescue Takeover
China Internet Weekly (31Oct2022): Alibaba, Tencent, Meituan, Kuaishou, S.F.
Ford Motors: Major Drivers
General Motors: Upgraded Ecosystem For EVs & Other Drivers
Kimberly-Clark Corporation: New Facility For Feminine Care & Other Drivers

Fengxiang (9977 HK): PAG’s Unconditional MGO And Proposed Delisting

PAG Capital has won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK).
The acquisition remains subject to regulatory clearance (including SAMR). Once greenlit, PAG will be required to make an unconditional Offer for the H-shares at HK$1.5132/share.
Separately, it is PAG’s intention to delist Fengxiang which involves Scheme-like delisting resolutions.

MSCI Korea IR: Market Cap Cutoff, NOC, & Constituent Changes

By Sanghyun Park

The NOC of MSCI Korea Standard is 111, and the market cap of the 111th-ranked company is ₩2.44T on Day 1 and ₩2.40T on Day 2.
In addition to Hyundai Mipo, Ecopro passed the screening. On the other hand, only Meritz Securities and CJ ENM managed to stay inside the safe zone among the deletion candidates.
The recently increased price fluctuations likely resulted in delaying the entry timing of flow trading. So, we should set the expected return of our basket trade a bit more aggressively.

Aeon: Making Omnichannel a Reality

By Michael Causton

In search of ¥1 trillion in ‘digital-related’ sales by 2026, Aeon opened its first, built-from-scratch online-offline marketing store in Yokohama this month.
The new Aeon SC introduces a range of features and processes to make e-commerce a natural supplement to the store and the shopping experience.
Aeon has a way to go to reach its targets for e-commerce but is moving in the right direction and has a clearer direction than rival, Seven & I.

Chipotle Mexican Grill: Major Drivers

Chipotle Mexican Grill delivered a mixed set of results.
In the quarter, Chipotle continues to view broadening trends by the income levels with the consumers with lower income reducing frequency.
We provide the stock of Chipotle Mexican Grill with a ‘Hold’ rating and a revision in the target price.

XXXLutz Consortium/Home24: Rescue Takeover

By Jesus Rodriguez Aguilar

An XXXLutz-led consortium offers €7.50/share in cash, 124% premium, c. 29.6x EV/Fwd NTM EBITDA and 1.4x P/NTM BV. With already 68.7% irrevocable undertakings secured, this looks a done deal.
FY2021 ROIC was -12%, home24 destroyed value as it grew; some willing buyers attended the call to steady the ship. Considering prospects, the offer looks fair (my TP is €7.85).
Gross spread is 0.54%, and the estimated annual return is 3.01% assuming settlement by 5 January. I would accept offer/set up a position in case of share price weakness.

China Internet Weekly (31Oct2022): Alibaba, Tencent, Meituan, Kuaishou, S.F.

By Ming Lu

In 3Q22, S. F. Holdings’s revenue grew by 45% YoY and net profit increased by 89% YoY.
Alibaba resumed its link on Kuaishou’s live streaming sales before Singles’ Day.
Tencent denied the rumor that it would be acquired by China Mobile.

Ford Motors: Major Drivers

Ford’s stock has seen some recovery off-late despite a mixed result for the third quarter.
The company surpassed the revenue expectations of Wall Street but missed out on earnings and ended up with nearly $50 billion in liquidity.
The only silver lining in the quarter was Ford Credit which delivered another healthy quarter with an EBT of $600 million.

General Motors: Upgraded Ecosystem For EVs & Other Drivers

General Motors has seen a sharp recovery in its stock price after the company demonstrated its ability to deliver robust results while managing multiple headwinds and executing its growth strategies.
GM delivered an all-around beat in its latest result as it translated improved supply chain performance into a solid full-size SUV sales leadership with a strong pricing mix.
We provide the stock of General Motors with a ‘Hold’ rating and a revision in the target price.

Kimberly-Clark Corporation: New Facility For Feminine Care & Other Drivers

Kimberly-Clark had a mediocre performance in its recent results.
The company surpassed the revenue expectations of Wall Street but missed out on earnings given the ongoing volatility in operating environment that continues to pressure the operating margin and the overall bottom-line.
We provide the stock of Kimberly-Clark with a ‘Hold’ rating and a revision in the target price.

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Oct 30

Daily Brief Consumer: Shandong Fengxiang, Tesla Motors, Suzuki Motor, Giant Biogene Holding, Haichang Ocean Park Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG
Elon Has “Freed” Twitter: Send The Ravens
Suzuki (7269 JT) | Way Too Cheap Ahead of 2Q Earnings – India’s Maruti (MSIL IN) Shows the Way
ECM Weekly (30th Oct 2022) – Giant Biogene, Sunshine, I-Tail, Global Health, Lygend, Fusion, Blibli
Hong Kong CEO & Director Dealings: 28th Oct: Haichang Ocean Park, CC Land, GBA

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG

By Arun George

PAG is the successful bidder for Shandong Fengxiang (9977 HK)‘s controlling shareholder’s 70.92% stake at HK$1.5132 per H Share (RMB1.3822 per domestic share).
As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
The share sale transfer requires SAMR approval which will be forthcoming. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.

Elon Has “Freed” Twitter: Send The Ravens

By Vicki Bryan

Elon Musk closed his Twitter deal Thursday as confirmed today via a filing with the SEC to delist its stock.
We don’t know if Elon sold more Tesla to cover his cash shortfall. If not, where did he get it?
He also sent Tesla’s engineers to assess how to fix Twitter. Like, sharing resources. Establishing synergies. Maybe creating an excuse to direct Tesla to “invest” into Twitter, as I suspected.

Suzuki (7269 JT) | Way Too Cheap Ahead of 2Q Earnings – India’s Maruti (MSIL IN) Shows the Way

By Mark Chadwick

Maruti Suzuki reported above Consensus 2Q driven by strong volumes and improved margins
Earnings bode well for Suzuki’s 2Q earnings on Nov 8. Also, Maruti indicated significant easing of semi-driven supply constraints. Positive readacross for Suzuki.
Suzuki’s ex-Maruti operations are now cheaper than ever at under 2.5x PER. We see upside to earnings vs. Consensus and keep our bullish stance on the stock.

ECM Weekly (30th Oct 2022) – Giant Biogene, Sunshine, I-Tail, Global Health, Lygend, Fusion, Blibli

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Blibli managed to upsize its IPO, while a few companies will launch their Indian IPOs in the coming week.
There were no notable placements this week, which wasn’t surprising after Monday’s market turmoil.

Hong Kong CEO & Director Dealings: 28th Oct: Haichang Ocean Park, CC Land, GBA

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 Haichang Ocean Park Holdings (2255 HK), C C Land (1224 HK), and GBA Holdings (261 HK).

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Oct 29

Daily Brief Consumer: Atour Lifestyle Holdings, Nike, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Atour Lifestyle Holdings IPO Analysis
Nike Inc: The Connected Partnership & Other Drivers
Hostile Takeovers Should Be Well Thought Out on Fair Basis, Both in Boardroom and in Judicial Arena

Atour Lifestyle Holdings IPO Analysis

By Douglas Kim

Atour Lifestyle Holdings (ATAT US) is a leading upper midscale hotel chain group in China is getting ready for an IPO in the US.
We believe that a valuation range of RMB12.8 billion ($1.8 billion) to RMB16.9 billion ($2.3 billion) is appropriate for Atour Lifestyle Holdings.
Unless the IPO is priced sufficiently lower than the intrinsic value of the company, many institutional investors will likely pass on the IPO given the Bearish market sentiment.

Nike Inc: The Connected Partnership & Other Drivers

Nike successfully delivered yet another all-around beat in the first quarter of the new fiscal with its key brands, Nike, Jordan, and Converse continue to enjoy strong consumer affinity and demand.
For the quarter, their revenue grew by double-digits and the company generated the highest net revenue quarter ever for Nike Digital.
Customers are still supporting Nike Digital, as evidenced by the Nike commerce app’s record-breaking Q1 traffic.

Hostile Takeovers Should Be Well Thought Out on Fair Basis, Both in Boardroom and in Judicial Arena

By Aki Matsumoto

Since hostile takeovers are one of the key strategies to quickly gain market share in domestic market with limited growth, more hostile takeovers are expected to occur in the future.
Only 12.1% of prime market companies have majority of independent directors. This raises concerns about whether the opinions of independent directors in minority position will be heard by the boards.
The court’s decision to dismiss the claims of companies that proposed hostile takeovers makes us think about whether hostile takeovers are being considered on fair standpoint, even in judicial arena.

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Oct 28

Daily Brief Consumer: Lifestyle International Holdings, Z Holdings, Tod’s SpA, NagaCorp Ltd, Porsche AG, PT Nippon Indosari Corpindo Tbk. (ROTI), Jago and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov
Z Holdings (Neutral) – Quick Thoughts on the Read Across from Google, Meta, and CyberAgent
Lowball Offer Fell Through
Nagacorp: Contrary News Flow Is a Symptom of How Volatility Can Hide True Value
STOXX Europe Quiddity Leaderboard Dec 22: Two Intra-Review Changes & Porsche Addition Likely In Nov
PT Nippon Indosari Corpindo (ROTI IJ) – The Nation’s Baker
Ex-Gojek VP’s Mobile Café Network Jago Nets US$2.2M Pre-Series A

Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov

Back on the 5 August, Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, tabled a Scheme at HK$5/share, a 62.3% premium to last close.
The Scheme Doc is now out with the Court Meeting on the 21st of November. The outcome of this transaction will pivot off the reassessed net asset value of HK$10.60/share.
Trading at a gross spread of 9.6% using yesterday’s close, reflecting the perceived opportunistic nature of the Offer. Yet Hong Kong’s 2018 visitor glory days remain a long way off.

Z Holdings (Neutral) – Quick Thoughts on the Read Across from Google, Meta, and CyberAgent

By Kirk Boodry

Internet advertising revenue growth has come in below expectations for Google, Meta and CyberAgent as ad budgets appear to be shrinking
There is an indirect read-across to Z Holdings which has almost always posted slower ad growth although it has some insulation from volatility with eCommerce and LINE official accounts
Sill, management targets for ad revenue growth of 5-10% look increasingly challenging which is an issue when Media generates c. 80% of profitability. We remain cautious

Lowball Offer Fell Through

By Jesus Rodriguez Aguilar

Borsa Italiana reported a take-up in bid for Tod’s of c. 48.91%. DeVa Finance and (concerted) LVMH would have controlled 86.95%, below the 90% minimum acceptance condition and pulled out.
The offer price seemed cheap on any measure (the shares traded above it since the offer period kicked off). A 20% share price drop means it looks good value now.
If the Della Valles merged Tod’s with Deva Finance, they would offer c. €37/share. Either way, it should pay off to set up a long position in the stock now.

Nagacorp: Contrary News Flow Is a Symptom of How Volatility Can Hide True Value

By Howard J Klein

Within days of each other, news reports both bullish and bearish for the shares of this sector leader have diluted visibility of a strong bull case intermediate term.
Moody’s downgraded Nagacorp debt due to continuing concerns about China’s zero tolerance policy seeming to have no defined duration ahead. Lowered VIP also seen as bearish.
Another report within two weeks showed evidence of continuing strong recovery of Nagaworld GGR in VIP, premium mass and mass. Context is needed on all coveage.

STOXX Europe Quiddity Leaderboard Dec 22: Two Intra-Review Changes & Porsche Addition Likely In Nov

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EuroSTOXX Indices for the December 2022 Rebalance.
I expect at least two STOXX Europe 600 constituents involved in M&A deals to get deleted in November 2022. There could be more in December 2022.
Porsche AG (P911 GR) is currently the highest ranked non-constituent and is leading the race to become an intra-review add in November 2022.

PT Nippon Indosari Corpindo (ROTI IJ) – The Nation’s Baker

PT Nippon Indosari Corpindo (ROTI IJ) released a strong set of 3Q2022 results against all odds given the increased pressure from higher raw material prices and specifically wheat.
Quarterly sales hit record levels with modern trade driving growth and the company improved margins despite surging raw material costs and saved on operational costs through reduced ad spend.
Wheat prices are now -34% from peak levels which should be positive for ROTI’s margins and it continues to expand distribution and new products, driving growth. Valuations are attractive.

Ex-Gojek VP’s Mobile Café Network Jago Nets US$2.2M Pre-Series A

By e27

Jago offers a hyperlocal approach to retail by serving neighbourhoods within a 1-2km radius to prepare and deliver fresh beverages within minutes quickly
Jago, an Indonesia-based mobile café network, today announced the completion of a US$2.2 million pre-Series A round of financing
The funds will be directed towards expanding to over 200 mobile cafés, covering 20 hyperlocal areas in Jakarta. The company will also strengthen its core team in operations and technology.

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Oct 27

Daily Brief Consumer: Oriental Watch, I-Tail, KT&G Corporation, Lifestyle International Holdings, Porsche AG, Giant Biogene Holding, Calbee Inc, Ultrajaya Milk, CyberAgent Inc and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash
I-Tail Corporation Pre-IPO – Peer Comparison
Flashlight Capital Partners Goes Activist on KT&G
Lifestyle International’s Court Meeting on 21 November
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!
Pre-IPO Giant Biogene (2367 HK) – Some Unstable Factors
Calbee – Price Hikes Are Appealing to Institutional Investors
I-Tail Corporation Pre-IPO – Initial Thoughts on Valuation
Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend
CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles

Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash

By Sameer Taneja

We remain cautious on Oriental Watch (398 HK) despite the recovery in sales in June this year. Wealth destruction in financial markets could impact sales in the short term.
Having said that, the stock is extremely cheap at 6.7x FY23 earnings (-32% YoY from FY22), with more than one bn HKD in cash (60% of market capitalization).
With a generous payout ratio of >100%, the stock trades at >17% yield. We believe the company will dip into cash reserves to maintain a high yield.

I-Tail Corporation Pre-IPO – Peer Comparison

I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC 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. In this note, we undertake a peer comparison.

Flashlight Capital Partners Goes Activist on KT&G

By Douglas Kim

On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng business to improve shareholder value.
While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
Back in June 2022, we wrote a prescient insight called KT&G Is a Prime Candidate for Corporate Activism in Korea.

Lifestyle International’s Court Meeting on 21 November

By Arun George

The Lifestyle International Holdings (1212 HK) scheme document is out with the court meeting scheduled for 21 November. The IFA considers the HK$5.00 offer to be fair and reasonable.
Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Headcount test not applicable. No shareholder holds a blocking stake.
The offer is light but likely to succeed. At last close and for a 30 December payment, the gross and annualised spread to the offer is 9.6% and 65.7%, respectively.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Based on current rankings, Commerzbank AG (CBK GR) could move from MDAX to DAX and Puma SE (PUM GR) could move from DAX to MDAX.
I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed Porsche AG (P911 GR).

Pre-IPO Giant Biogene (2367 HK) – Some Unstable Factors

By Xinyao (Criss) Wang

Although the recombinant collagen with relatively low price is “subversive” in the preparation process, animal-derived collagen is still more widely used, covering larger markets with various products.
Either for business diversification or to avoid policy risks, how to explore the second growth point is important to Giant Biogene.Otherwise,the Company’s hard to improve the resilience to market/policy changes.
Bloomage would have higher valuation expansion potential than Giant Biogene in mid- to long-term. In other words, if the valuation of Giant Biogene is higher than Bloomage, there’s overvaluation risk.

Calbee – Price Hikes Are Appealing to Institutional Investors

Japan’s largest snacks maker, Calbee Inc (2229 JP) is raising prices by 10-20% for almost 75% of its product range.
These price hikes have boded well with institutional investors with a vast most of them deciding to up their stake in the company following the first price hike announcement.
While institutional-investors bet on earnings growth over long-term through regular price revisions, we think there could also be short and medium-term gains as OP growth turns positive after many years.

I-Tail Corporation Pre-IPO – Initial Thoughts on Valuation

I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC 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 and undertaken a peer comparison. In this note, we talk about valuations.

Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend

By Shifara Samsudeen, ACMA, CGMA

Ultrajaya Milk Industry & Trading‘s last set of results reflected both the recovery in sales as mobility improved as well the pressure from rising packaging and imported milk powder prices.
Both whole milk powder and skimmed milk powder prices have declined by around 30% from the peak in April this year, which should help to underpin better margins in 2H2022.
Ultrajaya Milk Industry & Trading has increased its advertising and promotional spending to take advantage of improved mobility, with strong growth momentum likely to persist in 2H2022 and into FY2023.

CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles

CyberAgent Inc (4751 JP) reported 4QFY09/22 financial results after the market closed on 26th. Revenue for the quarter decreased 1.9% YoY to JPY 176.2bn vs consensus revenue of JPY 175.5bn.
OP declined 50.8% YoY to JPY 13.2bn vs consensus JPY 16.0bn (miss of 9%) due to decline in profits from gaming business. OPM declined to 7.5% from 14.9% in 4QFY09/21.
CA’s earnings have come under pressure with absence of new hit game titles. Media segment continues to see strong growth and FIFA World Cup is only a one-off boost.

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Oct 26

Daily Brief Consumer: Yamazaki Baking, Giant Biogene Holding, Costa Group Holdings, Melco Resorts & Entertainment, Tokyo Stock Exchange Tokyo Price Index Topix, Netflix Inc, Omnicom Group, Domino’s Pizza and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Yamazaki Baking: Profitability to Double Over The Next Few Years
Giant Biogene IPO – Reasonable Valuation but in Unreasonable Markets
Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest
Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail
Little Discussion of Listing Criteria Appropriate for Prime Market Listed Companies
Netflix Inc: Subscriber Growth
Omnicom Group Inc: Launch of Transact & Other Drivers
Domino’s Pizza: Major Drivers

Yamazaki Baking: Profitability to Double Over The Next Few Years

Yamazaki Baking (2212 JP)’s Q3 was mixed with revenue growing 5.6% YoY to surpass consensus by 3% but OP of ¥1.6bn was ¥650m below consensus.
However, this was mostly priced-in, as shares are currently trading at the bottom end of the upward trend channel.
With wheat prices down 23% from the peak, pressure from input price inflation should alleviate, resulting in margin upside in the fourth quarter.

Giant Biogene IPO – Reasonable Valuation but in Unreasonable Markets

Giant Biogene (GB) is now looking to raise around US$80m in its Hong Kong IPO, down from its earlier target of US$500m raising.
GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
We had looked at the company’s past performance and undertaken a peer comparison in our previous notes. In this note, we’ll talk about valuations and other deal dynamics.

Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest

Costa Group Holdings (CGC AU), one of Australia’s largest fresh fruit and vegetable producer, is understood to be in the cross-hairs of Paine Schwartz Partners.
According to the AFR, Paine is using Citi to buy shares up to $2.60/share a 16.6% premium to last close, with a 15% stake in mind.
There’s a whiff of opportunism here after Costa’s recent EBITDA downgrade. However, the return of its major shareholder suggests value has emerged.

Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail

By Howard J Klein

Melco Resorts & Entertainment will report 3Q22 results by November 11th. We expect sustaining recovery for its Manila and temporary Cyprus properties.
Current valuations of the shares do not yet reflect some recovery expected from increased arrivals due to the re-opening of 4 China provinces and Shanghai, Sporadic closures happen.
Threats of delisting fron last spring have significantly diminished as MLCO moved aggressively to meet NASDAQ concerns.

Little Discussion of Listing Criteria Appropriate for Prime Market Listed Companies

By Aki Matsumoto

It is anticipated that the plenary session will now begin the process of determining a deadline for transitional measures based on public comments.
It is likely that a decision will be made on the direction to proceed with English disclosure with respect to the prime market and other market segments.
In the meantime, a full-scale discussion on the listing criteria appropriate for prime market listed companies is awaited.

Netflix Inc: Subscriber Growth

Netflix shareholders finally got some good news this quarter as the leading streaming entertainment company in the world finally posted some subscriber growth.
Netflix successfully added a further 2.41 million net subscribers and now has 223.09 million paid subscribers globally.
The management forecast indicates that it is expected to add more 4.5 million subscribers in the ongoing quarter.

Omnicom Group Inc: Launch of Transact & Other Drivers

Omnicom had a decent financial performance this quarter with organic growth that was broad-based across its client sectors, regions, disciplines, and agencies.
The introduction of Transact by Omnicom follows the blossoming interest from the agencies in getting a piece of the retail media pie.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Domino’s Pizza: Major Drivers

Domino’s Pizza delivered a disappointing result barely managing to meet analyst expectations with respect to its revenues and missing out on earnings.
The company, along with its franchisees, opened more than 200 net new stores with net new store additions in 44 markets.
We provide the stock of Domino’s Pizza with a ‘Hold’ rating and a revision in the target price.

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Oct 25

Daily Brief Consumer: Alibaba Group, Pinduoduo, Kingston Financial, Tesla Motors, Swedish Match AB, Matahari Department Store and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

China Internet Weekly (24Oct2022): Tencent, Alibaba, Kuaishou, JD.com, NetEase, Zhihu
Pinduoduo: The US Expansion Could Slash Profitability While Risking Xi’s Wrath
Kingston Financial’s HK$0.30 Privatisation Bid from Mrs Chu
Will Elon Dump $10 Billion In Tesla This Week To Buy Twitter? Maybe Not.
Will Philip Morris Succeed Now?
Matahari Department Store (LPPF IJ) – Freshening Merchandise Is Paying Dividends
Kingston Financial (1031 HK): Chu’s Scheme At HK$0.30/Share

China Internet Weekly (24Oct2022): Tencent, Alibaba, Kuaishou, JD.com, NetEase, Zhihu

By Ming Lu

Chinese online game market size decreased by 19.1% YoY and 12.6% QoQ in 3Q22.
Tmall, Alibaba’s direct sales app, started a mini-program in Tencent’s WeChat.
State Post Bureau announced that it would revise the express delivery rules, especially for green packaging.

Pinduoduo: The US Expansion Could Slash Profitability While Risking Xi’s Wrath

With growth fading in the domestic market, the Chinese e-commerce company, Pinduoduo (PDD US) has made its first overseas push with the launch of Temu.com in the US.
However, the launch was less than impressive, especially considering that the company created a lot of excitement about its US expansion in the previous earnings call.
Selling $10.00 earbuds at $3.70, Temu could eat a significant chunk off of Pinduoduo’s profitability in the next couple of quarters.

Kingston Financial’s HK$0.30 Privatisation Bid from Mrs Chu

By Arun George

Kingston Financial (1031 HK) announced a privatisation offer from Mrs Chu, the controlling shareholder, at HK$0.30 per share, a 47.8% premium to the undisturbed price. The offer price is final.
Key conditions include approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
The offer is light and the offeror is betting that the grim market conditions will sway the headcount test in its favour. Scheme document despatched by 21 December.

Will Elon Dump $10 Billion In Tesla This Week To Buy Twitter? Maybe Not.

By Vicki Bryan

Elon’s Twitter funding “plan” to buy Twitter has been a disaster, time is running out, and it’s mostly his fault.
Many in his equity pool raised back in May are trying to get out of the deal altogether.
He still has time to salvage it without selling more Tesla.

Will Philip Morris Succeed Now?

By Jesus Rodriguez Aguilar

PMI increased the offer price by 9.4% to SEK 116/share to overcome the resistance of shareholders. PMI warns it is its final offer and keeps the 90% minimum acceptance condition.
The revised offer represents an implied equity value of SEK 176.4 billion (USD15.8 billion, vs. USD16 billion last May) and 17.1x EV/NTM EBITDAe (vs. 17.5x in May).
Swedish Match is trading at SEK 112.5, c. 3.1% discount to the revised offer (settlement estimated on 11 November). The market believes the sweetened offer is final. Long & tender.

Matahari Department Store (LPPF IJ) – Freshening Merchandise Is Paying Dividends

Matahari Department Store remains an unappreciated transformational retail growth story in Indonesia with the new management team improving the merchandise mix and restarting the company’s store expansion in earnest.
The company plans to add a total of 10 new stores this year and 12-15 new stores next year, as well as adopt an increasingly omnichannel approach to expansion.
Matahari Department Store remains attractive from a valuation perspective trading on 8x FY23E PER with a forecast dividend of 9.9% for FY2023E, which makes it look ripe for a rerating.

Kingston Financial (1031 HK): Chu’s Scheme At HK$0.30/Share

Chu Yuet Wah is Offering to take Kingston Financial (1031 HK) private by way of a Scheme at HK$0.30/share.
The Cancellation price is a 47.78% premium to last close. It will not be increased.
Disinterested shareholders comprise 25.073% of shares out, therefore a blocking stake at the Scheme meeting is 2.5073%. The headcount test also applies.

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Oct 24

Daily Brief Consumer: Welcia Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Welcia Challenges Cosmos in Kyushu

Welcia Challenges Cosmos in Kyushu

By Michael Causton

Welcia Holdings (3141 JP) and Tsuruha Holdings (3391 JP), the country’s leading drugstore chains, are both looking to expand quickly in Kyushu after only entering the market recently.
This won’t be easy. Kyushu is full of discount retailers led by one of the best discounters, Cosmos Pharmaceutical (3349 JP), which is also a leading drugstore chain.
But building a significant market share in the Kyushu market is crucial to competing nationally with these emerging discount leaders.

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Oct 23

Daily Brief Consumer: Carnival Corp, Carmax Inc, Philip Morris International, Sirius Xm Holdings, Walgreens Boots Alliance and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Carnival Corp: New Cruise Ship Additions & Other Drivers
CarMax Inc: Major Drivers
Philip Morris International: Expansion In The Philippines
Sirius XM Holding: Project Amplify Update & Key Drivers
Walgreens Boots Alliance: The CareCentrix Acquisition & Other Drivers

Carnival Corp: New Cruise Ship Additions & Other Drivers

Carnival Corp has continued its string of disappointing results and the company failed to meet Wall Street expectations in terms of revenues as well as earnings in the last quarter as well.
Given the resumption of the guest cruise operations, the company saw its adjusted EBITDA being positive for the first time.
The revenue of the last quarter increased by around 80% in comparison to the previous quarter.

CarMax Inc: Major Drivers

CarMax’s stock has been on a downward trajectory since the last quarterly result which had been a major disappointment.
In response to consumer demand and the current environment, CarMax continued to offer a higher mix of lower-priced vehicles.
We provide the stock of CarMax a ‘Hold’ rating with a revision in the target price.

Philip Morris International: Expansion In The Philippines

Philip Morris continued to demonstrate a strong underlying momentum with positive volume that supported a better than expected top-line growth in the last quarter.
The company delivered yet another all-around beat as net revenues of pro forma grew organically, which reflects continued strong growth in IQOS as well as the ongoing recovery of combustible business in various markets.
Strong quarter pro forma user growth and continued excellent IQOS performance were very impressive.

Sirius XM Holding: Project Amplify Update & Key Drivers

Sirius XM has had a volatile trajectory off late in terms of its stock price performance and with its results around the corner, another key factor that must be remembered is its history of below par earnings.
The company is making progress in deploying its 360L platform, and it is making progress with various EV start-ups.
We provide the stock of Sirius with a ‘Hold’ rating with a revision in the target price.

Walgreens Boots Alliance: The CareCentrix Acquisition & Other Drivers