Consumer

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
There were no major IPO launches during the week. Thai Life will list early next week
There were no major placements apart from ANZ and a smallish one in Xtep. There are two major lock-up expiries coming up.

Nagacorp: Six Month 2022 Results Validate Bullish Outlook for Year as Pandemic Wanes in Cambodia

By Howard J Klein

We have long been fans of this company due to its record of sound management decisions and asset allocation moves to expand steadily against demand.
Six month results support our thesis that ASEAN casinos that have reopened are re-ramping revenues apace as Macau remains dead pooled by Beijing zero tolerance covid policies.
At its current price we see mounting sentiment to the upside as sequential earnings improvements y.y can be expected in Qs 3 and 4.

General Mills Inc.: Focus On Innovation & Future Trends, The TNT Crust Acquisition & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

General Mills had a decent start to 2022 and its last quarter was another all-around beat.
Most of the media spend is now digital and General Mills is leveraging the same to build a solid databank that can be helpful in improved customer targeting.
We provide the stock of General Mills a ‘Hold’ rating with a revision in the target price.

McCormick & Company: Growth Story, Market Position, Cost Advantage & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

McCormick had a disappointing quarterly result as it failed to meet Wall Street expectations despite the fact that its revenues showed both volume and pricing growth.
The growth of the company in flavor solutions was decent but supply chain and high-cost inflation are continuing challenges for the company.
In EMEA, McCormick continues to have a robust share performance in most markets and categories.

Walgreens Boots Alliance Inc.: Digital Transformation, The Partnership With Adobe Expand, Strategy & Key Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

Walgreens Boots Alliance is off to a strong start to the year with growth in first-quarter sales and adjusted earnings, a performance that was beyond Wall Street experience.
The company had a particularly strong quarter online, which includes purchasing online pickup in-store.
We provide the stock of Walgreens Boots Alliance with a ‘Hold’ rating with a revision in the target price.

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Jul 23

Daily Brief Consumer: Lanzhou Zhuangyuan Pasture, Ishares Global Consumer Disc, BYD, Snap Inc, Kia Corp, Carmax Inc, Carnival Corp and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Zhuangyuan Pasture (1533 HK): Offer Now Unconditional
Positive Signals; Growth Sectors Gaining Momentum; Buy Ideas Within Global Growth Sectors
Shanghai/Shenzhen Southbound Connect: Weekly Moves (22 July 2022)
Snap 2Q22: Why We Buy Meta
Kia Corp: The Best Performing Stock Among Top 10 Market Cap Companies in KOSPI YTD
CarMax Inc: Digital Platform Upside, Marketing & New Sponsorships, Other Key Drivers, inancial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)
Carnival Corporation: Market Position, Resumption Update & Key Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

Zhuangyuan Pasture (1533 HK): Offer Now Unconditional

On the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share.
This two-step voluntary cash offer incorporated a Scheme-like vote and a 90% tendering condition.
Shareholders voted for the transaction on the 29 June. The tendering condition has now been satisfied. The last day of trading is on the 1 August.

Positive Signals; Growth Sectors Gaining Momentum; Buy Ideas Within Global Growth Sectors

By Joe Jasper

We are seeing some positive signals that suggest the lows for this bear market may have already been established, or at the very least, that downside is limited from here.
Still, YTD downtrends remain intact on the global MSCI equity indexes, and we need to see reversals of their downtrends in order to get more constructive at the index level.
Cyclical Growth Sectors continue to gain momentum and we are upgrading the MSCI ACWI Technology, Consumer Discretionary, and Communication Services Sectors from underweight to market weight. Add exposure.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (22 July 2022)

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
Overall, the net inflow over the past week was ~US$0.46bn, split (+US$0.36bn) for Shanghai and (+US$0.1bn) for Shenzhen.
The largest inflows were into Tencent (700 HK) and BYD (1211 HK). The largest outflow was in Pop Mart International Group Limited (9992 HK) and Great Wall Motor (2333 HK).

Snap 2Q22: Why We Buy Meta

Snap had yet another earnings related meltdown as management has lost all credibility in forecasting its business.
Because co-founders Spiegel and Murphy have 99.5% voting shares, there is not an opportunity for an activist to fix the situation like Pinterest and Twitter.
The issues plaguing Snap are likely not hurting META as much given a broader ad base, better ROI on its ads, and a mgmt team that has already guided down.

Kia Corp: The Best Performing Stock Among Top 10 Market Cap Companies in KOSPI YTD

Amid a major decline in the Korean stock market (KOSPI down 19.6% YTD), one of the best outperformers has been Kia Corp (000270 KS) which is down only 2% YTD.
Kia Corp is well poised to continue to outperform KOSPI in the next 6-12 months, mainly driven by its increasing market share for EVs globally and cheap EV/EBITDA valuation multiples.
The company also reported outstanding 2Q 2022 results, which should boost near-term sentiment on the stock. Kia Corp plans to launch its flagship EV9 model (large sized SUV) in 2023.

CarMax Inc: Digital Platform Upside, Marketing & New Sponsorships, Other Key Drivers, inancial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

CarMax had a decent start to the 2023 fiscal and generated total sales of $9.3 billion in the first quarter, up 21% from the previous year’s period.
Total unit sales in their retail division fell by 11% in the first quarter, and used unit comps dropped by 12.7% from the same period in 2017.
The same broad macroeconomic factors that contributed to a market-wide decline in used car sales during the quarter drove CarMax’s performance.

Carnival Corporation: Market Position, Resumption Update & Key Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

Carnival Corporation continued its recovery story from the pandemic and delivered a decent quarterly result by restarting 20 more ships, using 74% of its fleet’s capacity for guest cruise operations throughout the entire period.
The company currently operates guest cruises with 91% of its fleet’s capacity which is a very positive sign.
Regarding the ships in operation, occupancy for the second quarter was 69%, a significant improvement over the first quarter’s 54%.

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Jul 22

Daily Brief Consumer: Emperador, Xtep International, Tesla Motors, Sanrio, Cocoaland Holdings, Amazon.com Inc, DiDi Global, PT Metrodata Electronics and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Emperador (EMI SP) Secondary Listing: Still a Borderline STI Inclusion, But Could Be a Double Up
Xtep International Placement – Parent Trimming at ATHs, Last Deal Didn’t Do Well
Tesla Q2 Results Beat, But Earnings Call Reveals Many Risks
Sanrio – Hello Kitty and Kuromi Characters to Expand in China But Valuations Remain Lofty
Cocoaland (COLA MK): Explanatory Statement Out. 18th August Court Meeting
Sanrio: The Market Is a Bit Too Excited About The Licensing Agreement With Alifish
Alphyn Capital Management Letter To Investors Q2 2022
Mayar Capital Q1 2022 Letter To Partners
Are Didi’s Regulatory Troubles Finally Over with a US$1.2bn Fine?
PT Metrodata Electronics (MTDL IJ) – Rising with the Digital Tide

Emperador (EMI SP) Secondary Listing: Still a Borderline STI Inclusion, But Could Be a Double Up

By Brian Freitas

Emperador (EMI SP) started trading on the SGX (SGX SP) on 14 July and so far meets all criteria to be included to the FTSE Straits Times Index (STI INDEX).
However, it is still a borderline inclusion on free float, market cap and liquidity and will need to pass all three criteria to be added to the index in September.
If added to the STI, the inclusion will take place on the same day as the potential inclusion of Emperador (EMP PM) in the FTSE All-World Index.

Xtep International Placement – Parent Trimming at ATHs, Last Deal Didn’t Do Well

By Clarence Chu

Group Success Investments is looking to raise up to US$133m by trimming its holdings in Xtep International (1368 HK).
We can’t say that the deal is expected and short interest on the stock hasn’t been creeping up as well.
While the deal won’t be a large one, representing just 5.7 days of three month ADV, the firm’s last deal hasn’t done well.

Tesla Q2 Results Beat, But Earnings Call Reveals Many Risks

By SC Capital

Tesla beat both our estimates and the Street’s by a wide margin, but the earnings call had some cautiousness regarding order backlogs, production ramps & 4680 cells.
Tesla sold 75% of their Bitcoin holdings at a gain in Q2, which largely accounts for the earnings beat. It is also a sign of larger cash needs than expected.
The stock was only +1.5% after hours and it was noteworthy that the biggest Tesla bull on the Street said this huge beat wasn’t a “step change” to consensus.

Sanrio – Hello Kitty and Kuromi Characters to Expand in China But Valuations Remain Lofty

On 30 June 2022, Sanrio reached a five year licensing deal with Alifish, which will cover Sanrio’s cast of popular characters including Hello Kitty and Kuromi in China.
In July 2020, Shintaro Tsuji (founder of the company) handed over control of Sanrio to his 31 year old (as of 2020) grandson Tomokuni Tsuji.
Despite the longevity of Hello Kitty as well as the recent partnership with Alifish (Alibaba’s subsidiary) to expand its business in China, we remain concerned with Sanrio’s lofty valuation multiples.

Cocoaland (COLA MK): Explanatory Statement Out. 18th August Court Meeting

On 3rd June, Fraser & Neave (FNH MK) announced it sought to take Cocoaland (COLA MK) private by way of a Scheme at RM1.50/share, a 26.1% premium to last close.
Board support was received on the 15 June. The Explanatory Statement is now out with a Court Meeting to vote on the Scheme to be held on the 18th August.
Management-Backed Leverage Success, the largest shareholder with 40.65%, has given an irrevocable to vote for the Scheme. This is done with payment late-October. The IFA says fair and reasonable.

Sanrio: The Market Is a Bit Too Excited About The Licensing Agreement With Alifish

By Shifara Samsudeen, ACMA, CGMA

Sanrio (8136 JP) , the company behind Hello Kitty, has bounced 12% since striking a deal with Alibaba’s IP licensing platform Alifish to produce and sell merchandise of 26 characters.
This seems like a way to combat copyright infringements. However, we are sceptical that this agreement could stop cheap counterfeits from entering the market.
Sanrio badly needs a revival. However, history is not on the company’s side as they have been trying to revive the business over the last 20 years.

Alphyn Capital Management Letter To Investors Q2 2022

By Fund Newsletters

Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
With the threat of increasing rates, investors have renewed their focus on profits.
I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

Mayar Capital Q1 2022 Letter To Partners

By Fund Newsletters

Mayar Capital provides investment management services to institutions, family offices, and high net-worth individuals.
For the three months ending March 31, 2021, Mayar Fund (Class A) was down 6.6% net of all expenses and fees.
Several of our SMA clients have chosen to switch their investment to the Fund, so we expect Fund assets to increase to approximately $170 million once the transfer is complete.

Are Didi’s Regulatory Troubles Finally Over with a US$1.2bn Fine?

The CAC of China said on Thursday that it has fined the country’s ride-hailing giant DiDi Global (DIDI US) with RMB8.03bn (US$1.2bn) for violating data protection rules since 2015.
According to their findings, Didi had been illegally collecting its users’ information which has been used in a manner which had endangered national security.
In addition to the above fine on the company, CAC also has imposed two fines of RMb1m each on Didi’s Chief Executive Cheng Wei and President Jean Liu.

PT Metrodata Electronics (MTDL IJ) – Rising with the Digital Tide

By Angus Mackintosh

PT Metrodata Electronics remains one of the key enablers for the digital economy and overall digitalisation of corporate Indonesia through both providing hardware, software, solutions, and consulting services.
The key driver for its ICT distribution comes from PCs, laptops, smartphones, and gaming whilst its solutions and consulting business is driven increasingly by the formation of digital banks.
PT Metrodata Electronics is benefitting from increasing mobility, which has started to boost its higher margin solutions and consulting business. Valuations are attractive and it’s in a net cash position.

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Jul 21

Daily Brief Consumer: Tassal, Beneunder, Cocoaland Holdings, Netflix Inc, Uni President Enterprises, Faraday Future Intelligent Electric, Central Plaza Hotel, Swedish Match AB and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Tassal: Cooke Increases Its Stake to 10.49%
Beneunder Pre-IPO – The Positives – Basking in the Sun
Cocoaland’s Court Meeting on 18 August, IA’s Opinion
Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction
Uni President Enterprises: Positive Catalyst from Additional Stake Purchase of Carrefour Taiwan
Faraday Future’s Proxy Fight Intensifies: $100M Financing Offer Ignored
CENTEL : Expect CENTEL to Make Profit in 2Q22
Beneunder Pre-IPO – The Negatives – Doubts Remain, Including Related Party Dealings
Philip Morris/Swedish Match: Trading Tight to Terms
Sirius XM Holdings Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks & ESG Assessment (07/2022)

Tassal: Cooke Increases Its Stake to 10.49%

On 19 July, Cooke, the spurned suitor, increased its stake in Tassal (TGR AU) to 10.49%. The average price to build the 10.49% stake is A$4.14 per share.
Cooke also hired Phil Wiese, the former CEO of Huon Aquaculture (HUO AU), as a MD in Canada. Mr Wiese is well qualified to run Tassal should Cooke acquire it.
With shareholders happy to sell to Cooke despite the Board’s assertions that the previous bid undervalued Tassal, a new offer will force the Board to engage.

Beneunder Pre-IPO – The Positives – Basking in the Sun

Beneunder Limited (BL) aims to raise around US$500m in its Hong Kong IPO.
According to CIC, it was the largest sunprotection apparel brand in China in terms of both total retail sales value and online retail sales value with 5.0% and 12.9% marketshare.
In this note, we will talk about the positive aspects of the deal.

Cocoaland’s Court Meeting on 18 August, IA’s Opinion

The independent advisor considers Fraser & Neave Holdings (FNH MK)‘s RM1.50 offer for Cocoaland Holdings (COLA MK) fair as it falls within its valuation range of RM1.21-1.66 per share.
The key conditions are the headcount test and <10% rejection from all disinterested shareholders. The shareholder with a blocking stake has provided an irrevocable.
We continue to think that offer is attractive. At the last close and for the end of October payment date, the gross and annualised spread is 1.4% and 4.8%, respectively.

Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction

Netflix’s quarter was modestly better than reset bearish expectations…but not by much. 1M subscriber gains projected for 3Q below consensus 1.7M.
Timeline for reaccelerating subscriber growth from advertising and password sharing still seems shockingly long.
Netflix remains a top funding short for the forseeable future, we think $210 is the high end of the range, $170 the low end, but could justify $150.

Uni President Enterprises: Positive Catalyst from Additional Stake Purchase of Carrefour Taiwan

Uni President Enterprises and President Chain Store Corp (an affiliate of Uni-President Group) have agreed to acquire a controlling 60% stake ownership of Carrefour Taiwan from Carrefour SA (CA FP).
We believe the acquisition of the additional 49.5% stake in Carrefour Taiwan is likely to have a positive impact on Uni President Enterprises (1216 TT).
Uni President Enterprises is trading at P/S multiple of 0.77x so the acquisition multiple of 0.6x would be slightly lower than Uni President Enterprises’ current valuation multiple.

Faraday Future’s Proxy Fight Intensifies: $100M Financing Offer Ignored

By SC Capital

The proxy fight between Faraday’s founder and its Board has heated up further, with the founder making two 13D filings to the Board in just 3 days.
The founder wants to replace a certain Board member with a candidate of his choice and said he has third party investors willing to inject $100M+ if the Board agrees.
The Board never replied and this shows how tight the cash crunch at Faraday has become. Q2 cash should come to only $60M, or roughly 1 month of operations.

CENTEL : Expect CENTEL to Make Profit in 2Q22

By Pi Research

Maintain BUY recommendation for CENTEL with a target price of Bt49.0. We expect the company performance to turn a profit at Bt57m in 2Q22 from Bt44m loss in 1Q22
Strong recovery in hospitality business. We expect hotel revenue to hit nine quarter high at Bt1.4bn thanks to impressive performance for Thai hotels as RevPar for Bangkok and Upcountry hotels
Food revenue is expected to hit 11 quarter high at Bt2.9bn (+24%YoY+11%QoQ) as we anticipate continuing SSSG at 6.1% compared with 0% and 10% in 2Q21 and 1Q22 respectively.

Beneunder Pre-IPO – The Negatives – Doubts Remain, Including Related Party Dealings

Beneunder Limited (BL) aims to raise around US$500m in its Hong Kong IPO.
According to CIC, it was the largest sunprotection apparel brand in China in terms of both total retail sales value and online retail sales value with 5.0% and 12.9% marketshare.
In this note, we will talk about the not-so-positive aspects of the deal.

Philip Morris/Swedish Match: Trading Tight to Terms

By Jesus Rodriguez Aguilar

Since Bloomberg reported that Elliot is amassing a stake, the shares have traded tight to terms, even rebasing the offer price. Uncertainty is growing around the deal.
The squeeze-out threshold is 90%, and reaching it seems increasingly difficult, in spite of a generous premium. Philip Morris could lower the acceptance threshold and/or extend the offer period.
My DCF valuation is SEK 113.17, potentially a 13% upside, although it would be difficult to twist Philip Morris’s arm. I’d still be long just under the offer price.

Sirius XM Holdings Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks & ESG Assessment (07/2022)

Sirius XM Holdings is one of the largest subscription-based satellite radio broadcasting companies in the U.S.
The company also has a music streaming service called as Pandora which competes with the likes of Apple Music and Spotify.
Sirius XM Holdings has been performing well since the start of 2022 with growth in subscription and advertising revenue, as well as strong cash flow generation to use for investments in the company.

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Jul 20

Daily Brief Consumer: Coupang, Britannia Industries, Beijing UBOX Online Technology, Fosun Tourism, Zomato and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Coupang: Maverick Capital’s Supersized Exposure Is Too Big of a Risk
India Channel Insight #42 | Britannia, Dabur
Beijing UBOX Online Technology Pre-IPO – Trimming Losses, but yet to Factor in 2022 Lockdowns
Fosun Tourism (1992 HK): Positive Profit Alert and Improving Outlook Guidances
Zomato IPO Lock-Up – A US$3.4bn Lockup Release Test Case for India

Coupang: Maverick Capital’s Supersized Exposure Is Too Big of a Risk

Coupang (CPNG US) has bounced sharply following a 13G filling which indicated a change of heart from the pre-IPO investor, Maverick Capital with the purchase of an additional 7.7m Coupang shares.
Maverick seems to be expecting a significant improvement in profitability, in line with Q1. However, we think this is unrealistic, given Coupang’s marginal cost trends.
Maverick’s investment decisions on Coupang lack objectivity and its supersized exposure create too big of a risk to Coupang’s share price.

India Channel Insight #42 | Britannia, Dabur

By Pranav Bhavsar

The current excess rainfall across India is so far not leading to any material damage in rural India.
Britannia Industries (BRIT IN) continues to operate in a favourable environment and is possibly even immune to down trading.
Dabur India Ltd (DABUR IN) channels remain optimistic about matching YoY value growth, however, in terms of volume there still is quite a bit of ambiguity.

Beijing UBOX Online Technology Pre-IPO – Trimming Losses, but yet to Factor in 2022 Lockdowns

By Clarence Chu

Beijing UBOX Online Technology (1741985D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
Beijing UBOX Online Technology (UBOX) is an unmanned retail operator (vending machine) in China.
As per F&S, it was the largest unmanned retail operator in China, with the largest retail machine network in the country.

Fosun Tourism (1992 HK): Positive Profit Alert and Improving Outlook Guidances

By Osbert Tang, CFA

Fosun Tourism (1992 HK) expects a sharp 87.5-92.5% reduction in its losses in 1H22, driven primarily by significant revival in its Club Med business, though China is weak.
Outlook for 2H22 looks very encouraging as booking figures indicate good YoY volume growth and double-digit rate improvement in EMEA and Americas.
China also witnessed solid rebound in Jul and Aug after removal of lockdowns in 2Q22. New Club Med Joyview resorts including Changbaishan and Qiandaohu are added contributors.

Zomato IPO Lock-Up – A US$3.4bn Lockup Release Test Case for India

Zomato (Zomato IN) raised US$1.3bn in its India IPO in Jul 2021. At that time, it was the largest technology sector listing in India.
Zomato is one of two leading food delivery app operators in India. It recently acquired Blinkit marking its foray into the instant grocery segment.
In this note, we will talk about the lock-up dynamics and updates since our last note.

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Jul 19

Daily Brief Consumer: LG Energy Solution, SOCAR, AirCloset, Super Hi International Holding, Tesla Motors, Netflix Inc and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Korea’s New SSF/SSO Listing on July 25 & LG Energy’s Massive Lockup Release on July 27
SoCar IPO – Refiling Updates – Latest Earnings Do Not Change Investment Thesis
Air Closet Files for IPO
Super Hi Spin-Off: Unexciting Fundamentals
Tesla Q2 EPS Should Miss, But Beware of Musk’s Need for Strong Results
Tactical TMT 2Q Earnings Trading Idea: Short Tesla
Tactical TMT 2Q Earnings Trading Idea: Short NFLX

Korea’s New SSF/SSO Listing on July 25 & LG Energy’s Massive Lockup Release on July 27

By Sanghyun Park

The KRX will list 20 new single stock futures (SSF) and 5 single stock options (SSO) next Monday, July 25, including LG Energy Solution (373220 KS).
It seems very probable that the replacement demand for futures (short) will increase substantially due to a possible saturation of the loan market.
This situation, coupled with local pensions’ basis trading, can lead to a significantly distorted basis. We should do basis trading or play pair trading (with LG Chem) on this.

SoCar IPO – Refiling Updates – Latest Earnings Do Not Change Investment Thesis

By Ethan Aw

SOCAR (403550 KS) is looking to raise up to US$157m in its upcoming Korea IPO.
SoCar is a Korean car sharing business which aims to become an all-in-one mobility solutions provider beyond car sharing, with approximately 80% domestic market share in the car sharing space.
The firm remains loss-making with no signs of being profitable in the near/medium term. In this note, we will take a look at its refiling updates.

Air Closet Files for IPO

By Michael Causton

Subscription rental services have become increasingly mainstream and the earlier start ups are now maturing into larger businesses. One of the first, Air Closet, plans an IPO later this month.
Air Closet specialises in renting out clothing from major labels but also in taking away the burden of choice by arranging for styles to be picked in-house.
As well as this growing service, Air Closet has also just launched a rental service for gadgets ranging from kitchen appliances to cameras.

Super Hi Spin-Off: Unexciting Fundamentals

By Ke Yan, CFA, FRM

Haidilao International announced the spin-off plan of its overseas arm, Super Hi.
We take a quick look at Super Hi’s fundamentals. We think it is unlikely for Super Hi to achieve the level of economy of scale as Haidilao in China.
We think the valuation of Super Hi should be compared to F&B peers in the ASEAN region given that its business is mainly focused on the ASEAN region.

Tesla Q2 EPS Should Miss, But Beware of Musk’s Need for Strong Results

By SC Capital

We see Tesla’s Q2 GAAP EPS at $1.01, which is 34% below consensus estimates of $1.53.
Tesla’s Q2 should be horrible given the lockdown of its Shanghai factory and huge startup costs at its 2 new factories, but beware of FSD revenue recognition.
Elon Musk needs Tesla’s share price to be high, in light of how many shares he may need to sell if forced to buy Twitter. Q2 numbers could be “massaged”.

Tactical TMT 2Q Earnings Trading Idea: Short Tesla

We think Tesla’s FSD narrative is ready to crack: head of autopilot departed, 200 employees fired, and no progress on FSD.
Tesla has to guide down full year production and gross margin targets (for reasonable reasons…will this be ignored this time?)
Ever increasing competition from the low end may eventually confine LT sellside DCF based estimates.

Tactical TMT 2Q Earnings Trading Idea: Short NFLX

Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.
BBG was bullish on NFLX’s quarter recently, but we think misses the forest from the trees regarding ever ramping competition.
Ad-Based Netflix subs *might* hit by end of 2022, but won’t move the needle for 18 months.

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Jul 18

Daily Brief Consumer: BYD, Fast Retailing and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Weekly Deals Digest (17 Jul): WCP, BYD, Link, Genting Singapore, DTAC/True, AOF, ResApp
Fast Retailing: Guidance Upgraded, Yet The Upside Seems Limited Due to Stretched Valuations

Weekly Deals Digest (17 Jul): WCP, BYD, Link, Genting Singapore, DTAC/True, AOF, ResApp

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea and Chinese ADRs.
On the ECM front, Tianqi Lithium (9696 HK) listed its H Shares, WCP (WCP KS) plans to launch a KRW900 billion (US$692 million) IPO in August.
Event-Driven developments at Link Administration (LNK AU), DTAC/True, BYD (1211 HK), Genting Singapore (GENS SP), Tassal (TGR AU), Resapp Health (RAP AU), Dongzheng Automotive Finance (2718 HK).

Fast Retailing: Guidance Upgraded, Yet The Upside Seems Limited Due to Stretched Valuations

With discounting delayed, Fast Retailing (9983 JP)’s 3QFY22 was a surprise to the upside as its OP grew 36.5% YoY to ¥81.8bn (consensus:¥65.8bn) to exceed the pre-COVID level by 9.7%.
Nevertheless, the upside seems limited in the short-term, with shares already trading at a stretched valuation of 22.2x consensus FY+2 OP, compared to the historical median of 15.5x.
At around ¥290.0bn FY+1 OP, a fair price should be somewhere around ¥58,000-60,000, which implies a downside of around 25%.

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Jul 17

Daily Brief Consumer: Galaxy Entertainment Group, BYD, SOCAR, Genting Singapore and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Asia Gaming: The Compelling Case for Galaxy Entertainment Group Founded on Balance Sheet Strength
Last Week in Event SPACE: BYD, Astra/United Tractor, Japan Passive, AGL, Genting Singapore
Socar IPO: Slightly Revises IPO Prospectus Details
ECM Weekly (17th Jul 2022) – Tianqi, Emperador, Soosan, SoCar, WCP, Deewin, Bharat FIH, BYD
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Kanemi, AGL, Link Admin, Genting Singapore, Glory Star Media

Asia Gaming: The Compelling Case for Galaxy Entertainment Group Founded on Balance Sheet Strength

By Howard J Klein

Galaxy presents a bull case as Macau still struggles with Beijing zero tolerance policy.
Its huge cash position will comfortably outlast the monthly burn rate for at least three to five years ahead by which time, covid might be long gone.
Galaxy stock is caught in the overall bearish outlook on the sector. Time to accumulate with a relatively low risk on.

Last Week in Event SPACE: BYD, Astra/United Tractor, Japan Passive, AGL, Genting Singapore

Berkshire appears set to exit BYD (1211 HK) partially or in full. But why signal to market well in advance?
United Tractors (UNTR IJ)‘s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.
The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.

Socar IPO: Slightly Revises IPO Prospectus Details

SOCAR revised its IPO prospectus. What has changed is the date when the book building for the institutional investors starts (4 August).
The IPO price range remains at 34,000 won to 45,000 won. The IPO base offering size is also between US$120 million to US$159 million.
We maintain our base case valuation of Socar (target price of 27,967 won), which is 18% lower than the low end of the IPO price range of 34,000 won.

ECM Weekly (17th Jul 2022) – Tianqi, Emperador, Soosan, SoCar, WCP, Deewin, Bharat FIH, BYD

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
Tianqi’s soggy debut in Hong Kong despite its wide discount will probably put Hong Kong ECM back in snooze mode for a while
There were no major placements this week and its likely to remain that was as we approach the half-yearly results season.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Kanemi, AGL, Link Admin, Genting Singapore, Glory Star Media

There are 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals this week: Kanemi Co Ltd (2669 JP)‘s tender Offer, and Glory Star New Media Group Holdings (GSMG US)‘s underwhelming MBO.
Key updates took place for: AGL Energy Ltd (AGL AU), Link Administration (LNK AU) & Genting Singapore (GENS SP)

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Jul 16

Daily Brief Consumer: Genting Singapore, MK Restaurants Group, Tata Motors Ltd, Geely Auto, SOCAR and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Punters Take A Gamble on Genting Singapore
Genting Singapore in the Crosshairs of Potential Suitors
M : Time to Harvest
India EV Sector: Electric Cars in Demand, but Limited Options. Tata’s Nexon EV Leads
Shanghai/Shenzhen Southbound Connect: Weekly Moves (15 July 2022)
SOCAR Revised Prospectus: Critical Issues Still Not Addressed

Punters Take A Gamble on Genting Singapore

Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base.
But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.

Genting Singapore in the Crosshairs of Potential Suitors

Bloomberg reported MGM Resorts International (MGM US) recently approached Genting Singapore (GENS SP)’s controlling shareholder, Genting Bhd (GENT MK), to express an interest in a deal.
While the discussions with MGM Resorts have fizzled out, other potential suitors are reportedly interested. Shares are in a trading halt pending a response to an SGX query.
Genting Singapore trades at a discount to peers. Precedent transactions suggest a potential privatisation price of at least S$1.00 per share, a 33% premium to the last close.

M : Time to Harvest

By Pi Research

We recommend BUY for M supported by three main reason:1) a strong earnings recovery outlook in 2022-24,2) net cash position with upside from new M&A deal and LCS franchise fees
Earnings is expected to turn positive and strongly QoQ improvement in 2Q22 We expect 2Q22 net profit to be at Bt444m (+64%QoQ), recovery from a loss of Bt99m in 2Q21
Rising food costs are manageable Most of costs are raw material costs and the major portion of food cost are pork and poultry.

India EV Sector: Electric Cars in Demand, but Limited Options. Tata’s Nexon EV Leads

By Devi Subhakesan

Tatas are scripting India’s early journey in electric cars – Tata Motors Ltd (TTMT IN) accounted for 87% of the 8077 electric cars sold in Q1FY23 (1605 units in Q1FY22).
The rapid roll-out of charging infrastructure across the country by Tata Power (TPWR IN) and the success of Tata’s electric car (compact SUV). Tata Nexon EV, are key factors.
Demand and infrastructure for electric cars seem to be in place but market growth is restricted by a lack of choice/adequate supply in the popular price range (<USD 20K).

Shanghai/Shenzhen Southbound Connect: Weekly Moves (15 July 2022)

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
Overall, the net outflow over the past week was ~US$0.56bn, split (-US$0.44bn) for Shanghai and (-US$0.12bn) for Shenzhen.
The largest inflows were into Geely Auto (175 HK) and Hang Seng H Share Index ETF (2828 HK). The largest outflow was in Meituan (3690 HK) and CNOOC (883 HK).

SOCAR Revised Prospectus: Critical Issues Still Not Addressed

By Sanghyun Park

There must be a rationale for car sharing to receive a higher valuation than the traditional rental car business. For this, profit per vehicle must be provided, not sales.
Also, whether SOCAR can justify its valuation built on the relatively high valuation premiums granted to ccOS and FMS companies is still questionable.
Concerning fund flow, it is positive that SOCAR can aim for LG Energy’s six-month lockup release. But it is unclear how much flow will be left for SOCAR after WCP.

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Jul 15

Daily Brief Consumer: Astra International, Alibaba Group, Yamazaki Baking, Wolters Kluwer Nv, Wd 40 Co, Innova Captab and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

StubWorld: Astra Trading Cheap. So Is United Tractor
Alibaba: Freshippo Seeks Funding at a Lowered $6.0bn Valuation, An Indication of Financial Troubles
Yamazaki Baking (2212) | Price Hikes to Test Consumer Appetite
Euro Stoxx 50 Quiddity Leaderboard for Sep 22: Eurozone’s Annual Big Impact Rebal Trades
WDFC: Spraying on a Sell Rating, Initiating
Innova Captab Pre-IPO Tearsheet

StubWorld: Astra Trading Cheap. So Is United Tractor

Astra International (ASII IJ) is coming up cheap after United Tractors (UNTR IJ) positively responded to its large share buyback announcement. Yet both companies are looking attractive here.
Preceding my comments on Astra and United Tractor are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Alibaba: Freshippo Seeks Funding at a Lowered $6.0bn Valuation, An Indication of Financial Troubles