Consumer

• Weak deliveries tracked my cautious estimate, but fell near the low end of rapidly declining market consensus as investors grapple with Tesla’s struggles;
• I expect weak sales in China and Europe, the world’s largest EV markets, likely accounted for most of the sizable drop versus the past two quarters;
• The biggest question for investors: is Tesla stabilizing or will it continue to fall behind more robust competitors. 

• Elon Musk suddenly admitted Tesla is burning billions at its Austin & Berlin plants.
• This happened to come just as he likely saw Q2 becoming “super bad,” as I had warned, since plunging China sales mean Tesla can’t mask big losses as usual.
• Tesla’s problems are bigger than second quarter woes—and they’re not going away anytime soon.

• Kirin Holdings (2503 JP) announced yesterday that it will transfer its stake in the Myanmar business (51% of share capital) to its JV partner MEHL, via a share buyback of ¥22.4bn.
• Having disposed most of the other underperforming assets during 2018-21, the Myanmar business was the main issue holding back Kirin’s share price performance.
• With the Myanmar issue resolved better than anticipated, it seems like the right time for Kirin to get a move on.

• The near term impact of ONDC on OFD platforms like Zomato & Swiggy is limited, longer term they will have to move from platform to a network centric model.
• An external shock will be required to drive faster ONDC adaption as we have seen in the case of UPI.
• Logistics companies especially the ones with express capabilities are likely beneficiaries in case ONDC scales up rapidly. 

• 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, net inflow over the past week was ~US$1.5bn, split US$0.4bn for Shanghai and US$1.2bn for Shenzhen.
• He largest inflows were into Geely Auto (175 HK), Li Auto (2015 HK), and HKEX (388 HK). The largest outflow was in China Mobile (941 HK) and CCB (939 HK).

• J Front reported strong Q1 numbers with OP recovering to +¥7.5b from red ink a year ago
• The company is reaping the benefits of restructuring and better cost control
• A recovery in domestic consumption and the opening of borders will drive further appreciation in the share price

• Broad global MSCI equity indexes (ACWI,ACWI ex-U.S.,EAFE, and EM) remain bearish with YTD downtrends intact. Until these indexes reverse downtrends, we are bearish and view bounces as bear market rallies.
• Major non-U.S. countries appear to be much further along in the bottoming process, a potential sign that U.S. indexes could take a back seat once global equities finally bottom.
• Indexes that have not made a new low since March: Nikkei 225, TOPIX, TOPIX Small, Hang Seng, Europe’s EURO STOXX 50, and China’s MSCI China (MCHI-US) and China Internet (KWEB-US).

• Oasis Corp is the market leader of organic foods online sales in Korea. 
• Oasis Corp generated sales of 356.9 billion won (up 49.6% YoY) and an operating margin of 1.6% in 2021. From 2017 to 2021, Oasis Corp’s sales increased by 45.9% CAGR.
• Oasis Corp has been consistently profitable unlike its competitors such as Kurly, Coupang, and SSG.com.

• Askul posted Q4 results that were largely in-line and issued FY23 targets that are robust for revenue growth (+6%) but accompanied by upfront investment
• Management also announced it would prepare subsidiary AlphaPurchase for a public listing although the timing has not been determined
• The miss on profitability guidance is not ideal but the acceleration of top-line growth is attractive

• Ohsho Food Service (9936, the company) disclosed monthly data for its company-owned stores in June (on a preliminary basis)
• All-store sales of 6.609bn yen (109.0% vs. June 2021) were the record high for June.
• In June, the company opened one new store (one company-owned store) and closed one store (one franchised store)

• Notwithstanding bright spots and positive long-term outlook, the ESG gold rush has created an acute state of chaos. Regulatory flux. Rampant greenwashing. ESG litigation. Elon and S&P.
• The silver lining? New ESG-related investing opportunities emerging from all the chaos; stocks poised to benefit, regardless of who else wins or losses. The new shovel-sellers, as it were.
• One large opportunity is driven by new greenhouse gas (GHG) reporting regulations, specifcally leading GHG emissions software-as-a-service (SaaS) and platform-as-a-service (PaaS) stocks.

• PT Nippon Indosari Corpindo (ROTI IJ) recently announced that it will launch two new product lines away from bread including Sari Roti chocolate spread and UHT Milk. 
• Investment in these products will be relatively small but it will increase the visibility of Sari Roti brands on the shelves of modern retail adding to its bread and cakes. 
• Wheat prices have stabilised recently but ROTI may consider raising prices further after assessing June performance. 2Q2022 performance has been stronger than expected post-Lebaran, as demand improved with greater mobility.

• SOCAR (403550 KS) is looking to raise up to US$159m 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.
• As of May 2022, SoCar has over 8m subscribers and over 10m SoCar app downloads. However, the firm remains loss-making with no signs of being profitable in the near/medium term.

• Zomato (ZOMATO IN) ‘s announcement to acquire Blinkit (BCPL) for all-stock deal worth INR 44.5 bn has rattled the market price of the stock in the trading sessions that followed.
• While the management focuses on the cost synergies and the bigger picture, the acquisition has left several doubts, including the valuation and cash burning nature of Blinkit.
• More importantly, it is the corporate governance that should be looked at, especially since this is an indirect RPT, as mentioned in our earlier report Zomato’s Investments Game: Stain on Governance.

• De-SPACs have wiped off a combined $150 billion in market capitalization since the height the bubble back in February 2021.
• One company that has bucked the trend of the Downward Spiral in valuations is Bowlero.
• Bowlero certainly has a lot of qualities that separate it from most De-SPACs.

• Ryohin Keikaku (Muji) slashed its earnings guidance for FY8/22 by 32%
• The retailer is facing a number of headwinds, only some of which are industry wide
• We remain bearish as Muji lacks the pricing power to push through higher input costs

• Nio Inc. was targeted by Grizzly Research and accused of likely using an unconsolidated related party to exaggerate revenue and profitability. This unconsolidated related party was named as Wuhan Weineng.
• As per the report, Weineng had helped Nio inflate revenue and net income by approx. 10% and 95% respectively in 9M2021, and FY2021 earnings beat by at least 60%.
• In this insight, we take a look some of the allegations and have assessed the merits of the claims by Grizzly Research.

• As the mismatch between short-term assets and liabilities expands, GOME is raising HK$776.5m at HK$0.40 per-share, which is a 12.1% discount to the closing price on 27th June 2022.
• This is clearly insufficient to pay down GOME Retail Holdings (493 HK)‘s RMB 40.0bn short term debt and accounts payable obligations falling due in the next 12 months.
• With the omni-channel transformation taking longer than expected to turn around performance, the company might find it difficult to refinance the debt and maintain the supply chain as usual.

• Tesla faces stiffer competition in 2H 2022 as chip supplies at rivals recover faster than expected. This will put pricing pressure on Tesla amid rising costs. 
• Cash could be tight in 2H 2022 as Tesla ramps up 2 new factories. There is a distinct possibility of Tesla resorting to equity financing.
• If the drop in Q2 earnings doesn’t return to high growth again from Q3, Tesla could finally see its valuation fall down to earth. Its premium has already shrunk.  

• Weilong Delicious Global (WDG HK) has refiled its PHIP with an aim to raise US$500 million, half of its previous ambition to raise US$1 billion. 
• We have previously discussed the IPO in Weilong Delicious IPO Initiation: Tasty Bite and Weilong Delicious IPO: Mixed Update. 
• The PHIP which discloses the 2021 results and recent developments point to reducing growth rates and cost pressures. We would pass on the IPO.

• Ardent Leisure Group Ltd (ALG AU)‘s shareholders have approved Dave & Buster’S Entertainment, Inc (PLAY US) acquisition of Main Event business. Ardent will receive A$670.3 million.
• Shareholders will receive a total return of A$0.95 through capital return (A$0.46) and unfranked special dividends (A$0.49) on 13 July. 
• Precedent transactions and peer multiples suggest that the remaining business is worth A$0.23-0.30, implying a 16%-21% upside to the last close. The remaining business would be attractive to private equity. 

• Our checks suggest Hitachi Home & Life Solutions India Ltd (JCHAC IN) has lost market share this season. 
• Market share loss has come on the back of poor product quality due to focus on costs and competition, which is irreparable in spite of the strong dealer network. 
• Poor capital allocation, high receivables and low-profit margins, all warrant attention. 

• The legal tussle between promoters of Dish TV India (DITV IN) and Yes Bank (YES IN) has again entered into the limelight.
• The promoters of Dish TV, after repeatedly attempting to block Yes Bank from voting, have been left in the dark by the Bombay High Court’s verdict. 
• However, Mr. Goel still continues to sit on the board which irked several investors. This indicates that the story is not over and there are still some grey areas.

• In SOCAR’s IPO, the early investors’ post-listing flow direction draws the market’s attention as much as the valuation issue.
• Even this pricing level is high enough to infer that these VCs will be tempted to consider exiting after listing. A significant level of short-term overhang risk is inevitable.
• Then, we need to factor in the Lotte factor, which will likely expand its stake after listing to secure management rights for Socar.

• Pinterest co-founder/CEO Ben Silbermann is replaced by Google exec Bill Ready.
• Ready is a payments industry veteran and is perfectly suited to drive commerce adoption at Pinterest. 
• Unique pay package incentivizes Ready to succesfully pivot the business. 

• Liquidity shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements. 
• Liquidity shorts have built-in catalysts, have moderate to higher betas,  and can have strong down moves if a crisis develops.  They can go bankrupt, pushing the stock price near zero.
• Today we are flagging Carvana, Exact Sciences, Inspire Med, Freshpet, Enviva .

• Li Auto Inc. (LI US) has announced an ATM offering to sell US$2.0 billion of ADS. The offering appears to be timed to take advantage of the share price rally.
• Li Auto (2015 HK)‘s strong balance sheet and cash generation do not necessitate the need for the offering. The impending launch of the Li L9 underpins its prospects. 
• However, with the recent rally, the shares are at best fully valued at the last close. We prefer remaining on the sidelines for now. 

• Tasmanian salmon producer Tassal (TGR AU) has rejected Canadian aquaculture play Cooke Inc’s $4.85/share offer – its third proposal and a 42.2% premium to the undisturbed price.
• Cooke commenced buying shares in Tassal around ten days ago and has built a 5.4% stake. 
• Tassal considers the Offer does not reflect the fundamental value of the business and has determined not to engage with Cooke.

• MINISO Group Holdings (MNSO US) rallied more than 70% this month before receiving approval for a $100m placement on the Hong Kong Stock Exchange yesterday (27th June 2022).
• The company has no requirement for extra cash and this Hong Kong listing is mostly a precautionary measure against a potential delisting of Chinese companies from US markets.
• Overall, we are positive about this placement on account of momentum, reasonableness of current valuation and positive reception of what we would regard as an intention to accelerate expansion.

• Rakuten’s stake in Goto is worth ¥13bn and the IPO of the latter in April and the subsequent value re-rating could provide some (very) modest offset to operating losses
• Our forecasts remain unchanged from our mid-month update although we would flag up potential electricity resale upside for Rakuten and the sector from utility resale 
• We have lowered our price target to ¥1,000 from ¥1,150 but uncertainty over the timing of a Bank listing, mobile recovery and return to profitability keep us cautious

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