Consumer

• Sony’s State of Play today highlighted a variety of games headlined by Capcom’s Street Fighter 6 and Resident Evil 4 Remake and Square Enix’s Final Fantasy 16. 
• The title line-up was strong but the standout in our view was the degree of support Sony appears to be getting for PSVR2. 
• We had commented on this previously but it is increasingly looking like a key differentiating factor for PlayStation and no longer a gimmick.

• Integra Indocabinet’s recent 1Q2022 results confirmed the strong momentum in its wooden furniture and component sales to the US, which have seen even stronger growth than last year.
• Manufactured exports saw growth of +114% YoY in 1Q2022, whilst wooden building components saw growth of +194% YoY, as the company continued to gain market share in the US market.
• Integra Indocabinet trades on 8.3x FY21E PER and 8.1x FY22E PER, with consensus forecast EPS growth of +2.6% and +11.6% for FY2022E and FY2022E looking too low. 

• 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 was ~US$0.8bn, split (roughly) US$0.2bn for Shanghai and US$0.6bn Shenzhen.
• The largest inflows were into  CNOOC Ltd (883 HK), China Mobile (941 HK), and Kuaishou Technology (1024 HK). The largest outflows were in Tencent (700 HK) and ICBC (1398 HK).

• Is Kakao Pay showing an upward trend after hitting bottom? It doesn’t seem to me yet. The NPS is the only buyer who has recently driven the share price up.
• I’d consider betting on the decline in Kakao Pay’s share price once this passive flow is completed. An ideal entry point? I would avoid the June 9 rebalancing trading day.
• However, it is unlikely that this passive flow factor will spill over after June 9. So I’d consider building up a short position from late June 9 towards the close.

• Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
• Called and Tendered securities continue to be a significant component of our purchases. The supply of these bonds remained ample during most of the period.
• In an unpredictable market, RiverPark Strategic Income continues to stay conservative, with an effective maturity a fraction of the indices while maintaining comparative yields.

• Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
• For our portfolio, that technical downward price pressure is abating, as the new issuance has been absorbed and as higher coupons have attracted new buyers.
• While we face challenges at home and abroad, we believe this is an excellent time to invest in the Fund.
• Inflation is our number one concern for the year ahead and ourportfolio is ideally positioned for it to maximize returns and to minimize rate driven losses.

• Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
• Longleaf Partners International Fund declined 12.04% in the first quarter, while the MSCI EAFE Index declined 5.91%.
• New investments have a high hurdle to qualify given our conviction in our current holdings and the steep discount of the portfolio.
• We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

• Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
• Longleaf Partners Global Fund declined 5.84% in the first quarter, roughly in line with the MSCI World’s 5.15% decline.
• In a volatile quarter for markets across the globe, we saw one of the largest disconnects between price and value per share performance that we have seen for our portfolio in a long time.
• We remain fully invested with less than 2% cash, and our on-deck list isgrowing longer amid market volatility.
• We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

• Genting Bhd (GENT MK) gains 10.3% following the completion of TauRx’s Alzheimer’s drug trial. That’s an RM1.9bn lift in its market cap, or US$0.43bn.
• Preceding my comments on Genting, Hanwha Solutions (009830 KS), and Semirara Mining And Power Corp (SCC PM) 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%.

For our next Corporate Webinar, we are glad to welcome China Shenshan Orchard (DKNG SP) Executive Director, David Zhao.

In the upcoming webinar, David will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 28 June 2022, 17:00 SGT.

China Shenshan Orchard Holdings Co. Ltd. is a horticultural company in the business of planting, cultivating, and selling kiwi fruit in the People’s Republic of China (“PRC”). The Group holds forest use rights for eight strategically located orchards, spanning a total land area of 9,805 mu (approximately 6.5 million sqm), which is believed to be one of the largest domestic kiwi fruit orchards concentrated in Chibi City, Hubei, the PRC.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Founded in 2006 by Morty Schaja and Mitch Rubin, RiverPark manages research-driven, focused strategies in equities, fixed income and venture capital.
• Over this year’s first three months, the RiverPark Large Growth Fund (the “Fund”) lost 19.6%.
• Rather than follow the market’s so-called “de-risking” strategy, we “leaned in” to our higher growth positions (in some cases materially) at what we believe to be generationally attractive prices.
• While we are deeply disappointed by our recent losses, we believe thatwe are currently invested in an exceptional risk-reward portfolio and look forward to strongabsolute and relative returns in the quarters to come.

• We expect high-end musical instruments to be one of the worse affected among consumer discretionary names during a high inflationary environment.
• Although Roland Corp (7944 JP) says that demand remains strong, the numbers such as revenue and backlog suggest weakening conditions.
• In addition, there’s a risk of a recession and it appears that Roland has not made sufficient progress in streamlining operations to maintain profitability in a low revenue environment.

• Although the company implemented price hikes on May 14, the guest count continues to be solid, which gives us a positive impression.
• All-store sales of 7.384bn yen (120.3% vs. April 2021) were the record high for a single month. The company said that in-store dining sales recovered in a significant manner.
• In May, the company opened two new stores (one company-owned store and one franchised store) and closed one store (one franchised store)

• Same-store sales have been improving gradually on the back of the recovery of foot traffic, but still below the company’s target
• As the company has stores throughout Japan, there appears to be a mix of areas where the recovery has been progressing and areas where the recovery has been sluggish

• Since May 26, the company has been running aggressive promotions. We will watch closely to see if sales will recover in June.

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• Dongfeng Motor (489 HK) (DFMG) has entered into an agreement to buy back the controlling stake in Dongfeng Automobile (600006 CH) (DFAC) from Nissan Motor (7201 JP).
• DFMG and Nissan’s JV (split 50:50) holds a 60.1% stake in DFAC. Under the agreement, 29.9% of the JV’s stake in DFAC will be transferred to DFMG.
• Subsequent to the completion of the transfer, DFMG will launch a partial offer for 25.1% of DFAC, with a view to holding 55% of shares out in DFAC. 

• The correlation between Xinyi Glass Holdings (868 HK) and Flat Glass (6865 HK) has narrowed thus it is time to lock the profit while it is still possible.
• Xinyi Glass formed a JV with Xinyi Solar Holdings (968 HK) to set up a polysilicon manufacturing facility. 
• A 7% dividend with some potential growth juice from owning the shares at less than 7x PER is really quite a steal.

• The EGM to approve Dave & Buster’S Entertainment, Inc (PLAY US)‘s acquisition of Main Event is on 29 June. Ardent Leisure Group Ltd (ALG AU) will receive A$670.3 million.
• If the transaction is approved, shareholders will receive a total return of A$0.95 through capital return and special dividends. The independent expert opines that the transaction is fair and reasonable.
• At the last close price, the remaining business is valued at just 2 cents. Our SoTP valuation of A$1.65 per share is a 22% upside to the last close.

• The 18% spread suggests there the Apollo Global Management Inc (APO US) / Tenneco Inc (TEN US) transaction is fraught with risks which, we believe, are more imaginary than real
• With TEN shareholders expected to approve the merger next week, we assess regulatory obstacles low and the risk of APO reconsidering the transaction unlikely except in the most unexpected circumstances   
• Overall we believe the risk-reward for arbs skews to the attractive with the opportunity to game IRRs in excess of 30%

• Fast Retailing (9983 JP)’s share price rose 10% towards the top end of the trend channel since reporting 15.8% YoY same-store sales growth in April 2022.
• However, the growth rate was influenced by weak comps and in April 2022 domestic revenue was 9% below the pre-pandemic level.
• Meanwhile, Uniqlo’s growth drivers are faltering with China’s revenue near pandemic lows and North America, Europe and Asia affected by rising inflation.

• Founded by value investor Wally Weitz in 1983, Weitz Investment Management, Inc. is a boutique, employee-owned asset management firm headquartered in Omaha, Nebraska.
• The Partners Value Fund’s Institutional Class returned -8.68% for the first quarter.
• Our company value estimates are mostly steady or increasing, with a few notable exceptions.
• Our team estimatesthat theportfolio trades at a price-to-valuein thelow 80s,which provides a healthycushion against near-term forecasting errors.

• United Spirits (UNSP IN) Q4F22 results have shown some good improvement.
• There is all round progress witnessed, including debt reduction, focus on gaining market share, better scope of working capital management. There is an intent of supporting premiumization as well.
• The results and strategic decision making reinforces our bullish stance on United Spirits; the cherry on top is that there is further room for improvement in the short-mid term.

• Founded by value investor Wally Weitz in 1983, Weitz Investment Management, Inc. is a boutique, employee-owned asset management firm headquartered in Omaha, Nebraska.
• The Hickory Fund returned -13.15% in the first quarter of 2022.
• Portfolio returns for the quarter and fiscal year were disappointing on both a relative and absolute basis.
• In our opinion, however, the near-term (at least) investment landscape remains fluid.

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• F&F Holdings is a single-subsidiary PURE STUB PLAY with no operating assets. It currently trades at a 54.30% discount to its NAV, and its 20-day MA sigma sits below -2.0.
• The pair is currently in a substantial diversion. The passive inflow caused by F&F’s KOSPI 200 inclusion appears to have caused a flow imbalance.
• F&F is becoming a primary target for KOSPI 200’s post-rebalancing shorting events. Then, we can consider using F&F Holdings as a long hedge, in addition to outright shorting for F&F.

• Life opened a new, upscale supermarket last month in central Tokyo that is designed to process online orders as easily as serving in-store customers.
• The new store, replacing Mitsukoshi in Ebisu Garden Place, includes a backroom that acts as a dark store for online orders.
• This frees up space in the store for higher margin items like deli foods and is a sign of the supermarket’s intentions going forward.

• Takashimaya will close its store in Tachikawa early next year.
• This can be seen as a further sign of an improving outlook for a smaller department store sector. 
• More closures will rid the sector of excess capacity and solidify positioning as a genuinely upscale format for the affluent.

• Chinese lockdowns are taking their toll on Q2 sales. We expect the upcoming report to be much worse than the last 
• Estee Lauder’s recent results suggest that travel retail will be a negative shock too 
• We believe there is one large downgrade to full-year guidance and consensus numbers. Too early turn bullish 

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• In the past couple of weeks, big box retail stocks got hammered. The largest retailer Walmart missed EPS expectations by a large margin
• The results certainly caught investors and analysts by surprise, and it seemed like their management was surprised too
• Some item sales (grills, plants, and pool chemicals) were impacted by weather, and high inflation was causing consumers to buy cheaper goods

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• Mitra Adiperkasa‘s recent 1Q2022 results and a follow up conversation with management confirmed continuing momentum in the recovery with a lot more to come in the next few quarters.
• Sports, digital, and F&B are leading the recovery with greater mobility boosting sales but online sales remain strong reflecting changing consumer habits and the success of the company’s strategy there.
• Mitra Adiperkasa is back on an expansion tack both in Indonesia and in Thailand, Vietnam, and the Philippines, with capex forecast at 2019 levels this year. Valuations are attractive.

• Inside is a recap of movements in the last week relating to the Hong Kong Stock-Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry. 
• Overall, net inflow was ~US$0.7bn, split between Shanghai (+US$1bn) and Shenzhen (-US$0.3bn)  
• The largest inflows were into China Yangtze Power (600900 CH) and Cosco Shipping Holdings (601919 CH). The largest outflows were in Kweichow Moutai (600519 CH)and CATL (A) (300750 CH).

• In a bull market, favorable developments lead to price rises and lift investor psychology.
• Raging bull markets are examples of mass hysteria. At the extreme, thinking and thus behavior become unmoored from reality.
• Bull markets don’t treat all sectors the same. In bull markets, optimism coalesces most powerfully around certain groups of securities, such as “the new thing” or “super stocks.”.

• There was far too much “easy money” made for too long and now many new investors have finally encountered their first excruciating rite of passage following the selloff this year.
• Because we are finding so many fast-growing companies with good operating visibility and low leverage at very high FCF yields, we have not become too bearish on the market as a whole.
• As of the middle of May, we estimate that the upside to our long book exceeds 100% in the next 12-18 months.

• Sony’s hosted its 2022 Corporate Strategy Meeting last week. Our key takeaway is that SONY is shifting towards greater investment in Content, Creators, and Communities.  
• Sony recognizes that technology is changing the way that content is produced and consumed and is responding with new experiences and monetization models.  
• Sony will continue to benefit from the evolution of the internet as it becomes more social, immersive and financialized (otherwise known as the metaverse). 

• Operating margin improved in 4Q22 due to well controlled expenses in minor businesses.
• We believe the state council meeting will provide a turning point in June.
• We set an upside of 31% and a price target at HK$106.

• Sony held the first of their two investor days yesterday presenting on the Game & Network Services, Music and Pictures segments. 
• While there was nothing especially new for those paying attention to the broad flow of news conditions for the content businesses remain strong. 
• What was interesting to us was the degree of collaboration with Kadokawa.

• LG Energy Solution’s real-world free-float rate should be around 5%, or 12.3M shares. We will see two additional passive inflows with the real-world float this tight.
• KOSPI 200 up-weight and FTSE June QIR New Entry’s combined inflow will be 0.6% of SO, enough for us to expect a short-term flow crunch.
• Then, there will likely be a share let-go event (block deals) by LG Chem to lessen the tight float situation, just like what KSOE had done for HHI.

• ITC Ltd (ITC IN) ‘s core cigarette portfolio is relatively inelastic to the current commodity inflation. With the reopening of offices and social events, volumes are likely to trend higher. 
• A renewed focus on FMCG is likely to aid volumes for the non-cigarette segment. 
• Valuations are in favor and we see limited scope for de-rating if not re-rating.

• Tidefall is a concentrated, unconstrained investment fund that attempts to compound its capital at an attractive rate of return. Our investment advantage comes from our in-depth research, long-term time horizon and appreciation of biases.
• With Netflix stock down by more than 50% since its high in November (and 10% below Reed Hastings’ $20m purchase in January) we re-entered the position in April.
• We believe the current price of Netflix shares creates a compelling long term investment opportunity.

• Hindustan Unilever (HUVR IN) is focusing on protecting its business model and market share, which is the key in such an operating environment. 
• Presence across multiple price points and playing a targeted game in target geographies will aid in maintaining steady-state growth. 
• Current valuations, lack of trigger for driving exponential volume growth and expected slowing pace of premiumisation warrant caution. 

• Analyst meeting came out with a positive tone regarding 2022 outlook.We maintain BUY rating  while roll out the new 2023 TP of Bt4.8 (+7% from previous TP),pegged to 1x PBV’23E.
• We expect  its 2022 EBITDA to grow 4 times, in-line with management target with 61% growth in revenue backed by global tourism recovery.
• UK portfolio will grow steady from a dull 1Q22 performance owing to low season and will ramp up to pre-Covid levels by the end of2022 while Maldives portfolio will enter 

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• Minda Industries Ltd. (MIL) reported a strong set of results (slightly ahead of our estimates) despite a tough operating environment.
• MIL posted a robust revenue growth led by an increase in content per vehicle, addition of new customers and products, and growth across segments as well as due to the ramp-up of new order wins
• We maintain our BUY rating with a revised target price of Rs 1,100/share (Rs 1,250 earlier), valuing the stock at 32x FY24E EPS, indicating an upside of 32% from the CMP.

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