Consumer

• Although we were more optimistic about FY22, we still see recovery backed by a very healthy momentum in Q1 2022 with 33% YoY systemwide sales (mid-teens ex-Potato Corner).
• EBITDA margins were weaker in Q1 2022 at 18.2% (with Jan/Feb 2022 restrictions), but management guided a sequential improvement QoQ and a 20-21% EBITDA margin for FY22. 
• The stock trades at 16.6x FY12 and 11.1x FY23 on more conservatively guided numbers. (see: Shakey’s Pizza: High Conviction Three Bagger, Management Call Provides Superb Guidance For FY22 )

• We estimate that the revenue growth will rise to 11.5% YoY in 4Q22 from 9.7% YoY in 3Q22.
• Freshippo is the store chain closest to the operation before the lockdown among all large retailers.
• We believe the stock has an upside of 27% for March 2023.

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• Demand holds reasonably well: Demand continued to hold strong across segments and regions.

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• Tata Motors reported cons. revenue of Rs784.4bn, down 11.4% YoY but up 8.6% QoQ.

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• On Friday, Wacoal Holdings (3591 JP) announced earnings, adoption of IFRS this year (US GAAP til now), dividends, a div hike and higher earnings this year, and a HUGE buyback.
• The buyback is for up to 5.5mm share (8.95% of shares) spending up to ¥10bn.
• Given the structure of the shareholder base, this opens up interesting possibilities.

• For the first quarter, 1 Main Capital Partners, L.P.
• (the “Fund’s) returned (11.4)% net of fees and expenses, according to the “Fund’s” quarterly results.
• The first quarter of the first year, the fund returned 11.

• Polen International Growth Composite Portfolio returned -13.94% gross and -14.17% net of fees, respectively, versus the -5.45% return of the MSCI All Country World ex-USA Index.
• The most significant detractors from performance included ICON, Evolution AB, and Sage Group.

• 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 IPOs front, LIC’s lists tomorrow, while Delhivery’s bookbuild wasn’t great.
• There were no major placements this week, with even Air New Zealand failing to hold its deal price.

• For Asia Pacific, there are 48 adds/76 deletes across markets with the most changes in China and the highest net changes in Japan. We got 94% of the names right.
• Surprise names are MR D.I.Y. Group, AU Small Finance Bank, Guangzhou Automobile Group, Yunnan Botanee Bio-Technology, Westports Holdings, Indocement Tunggal Prakarsa, DiDi Global and Yantai Eddie Precision Mac-A.
• As expected, there are listing switches for Baidu (BIDU US), Bilibili Inc (BILI US), New Oriental Education (EDU US) and GDS Holdings (ADR) (GDS US). 

• Tabcorp Ltd (TAH AU)’s demerger to create two standalone companies listed on the ASX, The Lottery Corporation and New Tabcorp, was approved today.
• Subject to the scheme approved by the Court, the Lottery Corporation will trade on a deferred settlement basis on 24 May and a normal settlement basis on 2 June.
• Peer derating due to the market sell-off results in a lower SoTP valuation of A$5.62 per share, which is still a 13% upside to the last close.

• JD is facing a severe logistics problem due to the lockdowns in many cities of China.
• We believe JD is trying to secure its revenue no matter how large the fulfillment expense is.
• We believe the stock has a downside of 22% for the year end 2022.

• Coupang (CPNG US)’s 1Q22 results were mixed with revenue 2.5% below consensus but an operating loss of $205.7m was $94.3m lower than consensus through a 3% gross margin improvement.
• The company’s comments on the gross margin outlook are a bit concerning and make us think that the improvement in Q1 was just a one-off.
• Coupang is fundamentally expensive on EV/GMV+Retail Sales. With selling pressure from Softbank and a significant downside to revenue estimates, we remain Short Coupang.

• Subaru 4QFY22 was relatively strong compared to previous quarters with revenue of ¥737bn (+4.4% vs. consensus) but material prices pushed OP down to ¥13.3bn (-48.6% vs. consensus). 
• The FY23 guidance was relatively weak at just ¥3,500bn in revenue (+4.5% vs. consensus) and OP guidance of ¥200bn (-1.0% vs. consensus). 
• However with the yen where it is we believe Subaru is on track for a return to double digit OPM and OP of ¥370-450bn.

• Nissan generated total revenue of ¥2,271bn (-12.0% vs. consensus) and OP of ¥56bn (+33.3% vs. consensus) in 4QFY22. 
• This enabled the company to hit ¥247bn in OP vs. our start of year projection of ¥250bn (when guidance was for breakeven). 
• Guidance looked superficially weak at ¥10trn in revenue (-0.4% vs. consensus) and ¥250bn in OP ¥250bn (-21.1% vs. consensus) but margin assumptions are silly and we expect ¥500bn in OP. 

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• EV Startup Canoo confirmed this week what most market participants had been anticipating for months.
• Management at Canoo warned investors that it might not have enough cash to ramp up operations and make it to the start of production.
• Canoo isn’t the only one who has issued a going concern warning over the last few months.

• The market has zoomed in on the flat operating profit growth forecast and the stock is 4% lower post results
• As long as the income statement is not bleeding red ink (and it isn’t) we are more focused on the balance sheet and shareholder returns
• Nikon’s stock price is now offering a total shareholder return of 8%, while trading below book value. 

• FPA Queens Road Small Cap Value Fund returned -3.3% in the first quarter of 2022.
• First quarter performance was negatively impacted by the Fund’s overweight position in the technology sector.
• The Fund’s overweight position in technology sector also negatively impacted the Fund’s first quarter performance.

• Toyota results were weak missing by 2.9% and OP by 8.5% due to weak volumes, material costs and some evidence of pulling forward costs. 
• Guidance was for a sharp YoY decline from ¥3trn in OP to just ¥2.4trn but this assumes limited price hikes and ¥115/$ so… who cares? 
• We expect the weak yen, rising hybrid penetration and volume recovery to drive OP into the ¥3.6-4.0trn range.

• EV start-up Faraday Future (FF) will be de-listed by the Nasdaq if it fails to file its 2021 annual report & Q1 2022 results by May 16th.   
• FF has no revenues yet, but plans to start production in Q3. Cash as of March-end was only $273m vs cash burn of $181m & payment obligations of $193m.
• FF’s growth strategy is risky & relies on the ultra-luxury car market, which is peaking. Without financing, FF may struggle to survive this year.    

• Beenos Inc (3328 JP) results beat with revenue at ¥7.2bn (+4.6% vs consensus) and OP of ¥431m (+21.4% vs consensus).
• FY22 guidance was raised across Beenos’ core e-commerce businesses due to the favourable impact of the yen depreciation on overseas demand and changes to shipping methods and rates.
• What caught our eye the most was Beenos’ decision to gradually realise gains from its VC investments.

• Toyota is famous for conservative guidance, but today’s FY3/23 estimates of a 22% decline in pretax profit raised some eyebrows. Raw materials & logistics are to blame. 
• Adjusting for various conservative assumptions by Toyota for FY3/23, flat profits are possible, but margin deterioration appears unavoidable.  
• On flat profits in FY3/23, the 12x PER & 5.5x EV/EBITDA are not particularly cheap. Toyota is in the “Guidance Dog House” until it can produce a significant beat. 

• The Nikkei Shimbun published an article titled “Matsukyo Cococala & Co. 6 Months After Inauguration, Integration Effects Begin Here,” and I have considered the issues discussed in that article.
• The integration effect will raise the profit, but further improvement is less likely without recovery in same-store sales, as the profit margin for prescription will decline amid intensifying competition.
• Tsuruha and Matsukiyo Cococala, which belong to group (C) where family members are leading the company while the family’s shareholding has been reduced to less than 20%, are facing difficulties.

• On 5th May 2022, Thai Beverage announced that BeerCo will resume its Proposed Spin-off Listing. This time the company is aiming to raise less than US$1bn, as per media reports.
• We have looked at various aspects of the deal earlier, as the company had tried to spin-off BeerCo in 2021 as well before finally calling it off in April 2021.
• In this note we undertake a peer comparison and talk about valuations

• Suzuki’s 4Q revenue beat consensus by 7.2% but OP missed by 8.9% as a result of raw material costs and a sudden surge in depreciation and R&D. 
• Guidance was typically conservative at revenue of ¥3,900bn (-4.1% vs. consensus) and OP of ¥195bn (-28.9% vs. consensus). 
• We believe margin assumptions are too conservative, as are assumptions for volumes and JPY/INR.

• Silver Ring Value Partners serves investors in the State of Massachusetts.
• The portfolio’s market value is roughly unchanged thus far in 2022 despite an environment in which both stocks and bonds have begun to experience substantial declines.
• The Company offers portfolio management, financial planning, and trading services.

• Starbucks continues to demonstrate a robust recovery in its domestic territory, with International (Ex-China) playing catch up.
• The focal point of Q2 earnings, however, was the temporal deterioration of the China business.
• Plagued so badly by zero-covid policy closures, the contagion from the China arm of the business resulted in Starbucks withdrawing guidance for the remainder of the year.

• The Mittleman Global Value Equity Fund (MGVEF) declined 13.1% in Q1 2022.
• MIM believes that the businesses in which it has invested retain the features necessary to endure and surmount transitory setbacks.
• The company is an SEC-registered investment adviser that provides discretionary portfolio management to institutional investors.

• A release showed up on TDNET last week that Sony Corp (6758 JP) had completed its ¥200bn 25mm share (2.02%) buyback program announced 28 April 2021. 
• The details showed they had actually bought back 8.2mm shares spending only ¥97bn, despite the shares trading below T-1 Announcement Date Price for four months straight. 
• Today, with earnings, SONY announced a NEW buyback. ¥200bn, 25mm shares, 2.02%. Same as last year. 

• Sony results were in-line with revenue of ¥9.92trn barely below ¥10trn consensus and OP of ¥1.20trn also just below consensus at ¥1.21trn. 
• Guidance was interesting however as Sony guided for revenue of ¥11.4trn and a slight decline in OP. 
• We believe that is either extreme conservatism or potentially a sign of very aggressive and interesting investment plans.

• In a regulatory filing last Thursday, Thai Beverage (THBEV SP) said that it had restarted its Beer Unit IPO at a much lower valuation than before.
• Based on the current NAV discount of 13%, we think this is already priced-in Thai Bev’s share price.
• Nonetheless, a 13% NAV discount could be too light in our opinion and there could be downside potential to the NAV discount following the completion of the Beer Unit IPO.

• We forecast 8 potential inclusions to the All-World Index and 11 potential inclusions to the All-Cap Index at the FTSE June QIR. Most are high probability inclusions.
• LG Energy Solution (373220 KS), Mitratel (MTEL IJ), Adani Wilmar (AWLTD IN), Kakao Pay (377300 KS) and FSN E-Commerce Ventures (Nykaa) (NYKAA IN) are expected to have the largest passive inflows.
• Local institutions have been selling LG Energy Solution (373220 KS) and Kakao Pay (377300 KS) over the last few weeks while retail investors have been buyers.

• CJ Cheiljedang (097950 KS) reported better than expected earnings in 1Q 2022 and we continue to have a POSITIVE view of this stock.
• Bio business sales increased by 39.3% YoY to 1.08 trillion won and operating profit jumped by 128% YoY 175.8 billion won in 1Q 2022, driven by strong demand for lysine. 
• We also like a pair trade between CJ Cheiljedang and CJ Logistics at current prices. We recommend on going long on CJ Cheiljedang and going short on CJ Logistics.

• On 5th May 2022, Thai Beverage announced that BeerCo will resume its Proposed Spin-off Listing. This time the company is aiming to raise less than US$1bn, as per media reports.
• We have looked at various aspects of the deal earlier, as the company had tried to spin-off BeerCo in 2021 as well before finally calling it off in April 2021.
• In this note, we talk about the recent updates for BeerCo.

• For the first quarter of 2022, Aristotle Atlantic’s Large Cap Growth Composite posted a total return of -9.61% gross of fees.
• We have also entered a period of increased geopolitical risks that will add to market volatility, according to Aristotle Atlantic’s Large Cap growth Composite.

• For the first quarter of 2022, Aristotle Atlantic’s Core Equity Composite posted a total return of -6.79% gross of fees.
• The outlook for the U.S.
• large cap equity market for the balance of 2022 will be impacted by the pace and size of tightening by the Federal Reserve.

• For the first quarter of 2022, the Aristotle Small/Mid Cap Equity Composite generated a total return of -4.38% gross of fees.
• We remain optimistic about the prospects for small/mid cap equities going forward, according to the company.
• The Aristotle Small and Mid Cap Equity composite generated atotal return of 4.

• MMC results beat with revenue at ¥623bn (+4.2% vs. consensus) and OP of ¥31.4bn (+38.4% vs. consensus). 
• FY23 guidance was also above consensus with revenue of ¥2,290bn (+1.6% vs. consensus at +% YoY) and OP of ¥90bn (+4.7% vs. consensus). 
• We believe OP guidance is somewhat conservative as volume growth and a weak yen should more than offset raw material costs.

• Match is down 52% over the past 6 months and at $71, Match trades at a 5% FCF yield, ~17x Fwd EBITDA, for ~20% growth / ~35% EBITDA margin
• Covid restrictions lifted in Japan (2nd biggest market) should be tailwind for 2H22
• New CEO from Zynga brings unique mobile monetization skillset ideally suited for coming Tinder Coins summer launch.

• Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus). 
• The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).  
• We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.

• Same-store sales were in line with the pre-pandemic levels, and our impression is neutral.
• Same-store sales of other revolving sushi formats in April (compared to April 2021 and April 2019) were 105.3% and 104.2% for Sushiro (Food & Life Companies), 108.4% and 94.5% for Genki Sushi, and 103.7% and 87.1% for Kappa Sushi, respectively.
• The number of stores at the end of April was 512 in Japan (+2MoM), 37 in the U.S. (+/-0 MoM), and 45 in Taiwan (+/-0 MoM)

• Skylark Holdings (3197, the company) disclosed monthly data for April (on a preliminary basis). All of its restaurants resumed normal operations on March 22
• April same-store sales were significantly higher than in April 2021. Although the sales are still weaker than the pre-pandemic levels, the situation has been improving.
• Same-store sales were 110.6% vs. April 2021 (99.0% for March), 182.0% vs. April 2020 (92.8% for March), and 77.4% vs. April 2019 (71.0% for March)

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• Invests ~INR14.2b in FY22 on acquisitions, subsidiaries, and associates

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• Result in line; material cost outlook benign – MRCO’s 4QFY22 result was in line our estimates.

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• Lost in all the hoopla of the annual Berkshire Hathaway annual meeting this past year was the significant investments Warren Buffett has made over the past 6 months in the oil and gas energy sector.
• MGP Ingredients, Inc., together with its subsidiaries, produces and supplies distilled spirits, branded spirits, and food ingredients.
• The Chemours Company provides performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America

• Asics reports Q1 results on 11 May – we expect a beat to consensus numbers 
• We are bullish on Asics for the long term market share opportunity in China and margin expansion driven by digital
• The rather amazing tie-up with STEPN for NFTs highlights potential new ways to monetise Asics brand value

• Highly leveraged Balance sheet and a USD350 mn bridge loan that needs refinancing, amidst rising interest rates, have alarmed investors, thus driving Health And Happiness (H&H) (1112 HK) stock south.
• With its core Baby nutrition segment sales declining and Adult, Pet nutrition still in ramp up phase, the going has been tough for H&H as operating margins weakened.
• Even as its near term concerns seem daunting, long term prospects are good with a diversified premium-brand portfolio that can moderate long term risk to growth from declining birth rate.

• Aisin’s 4QFY22 was weak on margins with revenue of ¥1,049bn (+3.9% vs. consensus) and OP of ¥43bn (-33.4% vs. consensus). 
• Guidance had a similar tone with the company projecting ¥4,450bn in revenue (+2.4% vs. consensus) but OP of ¥190bn (-29.6% vs. consensus) which we think is too conservative. 
• While results were disappointing we expect volume growth to be the key catalyst next year and cheap valuations should support strong upside.

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• Merger synergies such as integrated purchasing will result in higher gross margins. A more efficient cost structure and sales synergies will boost the bottom line 
• We expect consumption to normalize in Japan as people get used to “living with covid.”  Higher foot traffic will drive a resumption of high margin cosmetics 
• Inbound travel should be partially normalized this year and we believe the market will quickly price this in once borders reopen. We see 21% upside 

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• China Meidong Auto (1268 HK) trades at a 12x/9x PE FY22/23E with a 6.5% dividend yield at a 20 HKD/share price (assuming an 80% payout ratio).
• In buying China Meidong Auto (1268 HK), you get an industry leader in the dealership space with supreme execution (35% ROE/47% CAGR profit growth/best capital allocator).
• The integration of the Starchase Porsche Dealerships provides an upside potential, as the management, with their superior track record, can significantly improve the target’s operations.

• H&H is faced with multiple challenges. Internally, the performance is under pressure, with stagnating revenue, decreasing profits, cash flow shortage and bankruptcy risk.It’s difficult for H&H to turn things around.
• Externally, factors such as the declining birth rate, lower demand, fierce competition in the infant formulas market, rising costs due to inflation, and economic slowdown worsen the Company’s prospects.
• Based on our 2022 forecast (14% or lower adjusted EBITDA margin,1%-2% or flat revenue growth), we do not think H&H is a good investment. We are conservative about its outlook.

• Yamada Denki (9831 JP) reported earnings (Revs -7.6% (slight beat), OP -28.6% (slight miss), NP -2.4% (slight miss)), and slightly upbeat forecasts to Mar-2023 (Revs +4.6%, OP +12.5%, NP +2.9%) 
• They also announced an unchanged dividend at ¥18/share, and a VERY BIG BUYBACK. This is one of the largest, most aggressive, on-market buyback programs I have ever seen.
• Previous buybacks have been duds. Yamada Denki is not playing around this time. This time it will be a buy.

• Campus Activewear Ltd (1535013D IN) India IPO raised around US$184m. The IPO was a 100% secondary selldown.
• The overall subscription rate for Campus had led the likes of Zomato, PAYTM and PB Fintech, and was most similar to that of Polycab India.
• Campus’ growth outlook and vertically integrated model should warrant it to trade at a premium to Metro Brands, while at a discount to Relaxo, given the latter’s more diversified offering. 

• FY 2021 was a difficult period for Health And Happiness (H&H) (1112 HK) with the lower than usual sales growth and a big one-off expenses. 
• It is true that the D/E ratio has gone up to 161% but this is not the first time it happened. 
• FCF/Sales remain at low double-digit and cash/TA is also at low double-digit so it is far from going bust.

• Doordash’s multiple has come in from 14x to 4x, it is no longer a good standalone short, but its valuation discrepancy vs. Uber means it is a good paired short.
• Solid quarter overall, but commentary about pushing on investments remains openended, and with little quantification of unit economics, Dash remains uninvestable to us.
• We still prefer Uber to Dash on valuation and long term profitability.

• Tis diverse maker of land based gaming machines and publisher of social games platforms has sustained strong growth and built value at the same time over the years.
• The company’s core strategy involves a strong commitment to M&A that will continue to bring accretive EBITDA to its long range performance.
• A strong balance sheet suggests plenty of financial strength to fulfill its M&A goals.

• NFLX’s share price has since fallen by -68% YTD, resulting in their current valuation of 17x trailing PE. This was likely due to three recent changes from the status quo: 1) negative 1Q22 subscriber growth, 2) password sharing crackdown, and 3) their entry into an ad-supported business model.

• NFLX’s reporting of their Amortization of content assets reflects a true & fair view of their consumption patterns; and their outsized Commitments & Contingencies are all above board. No hanky panky going on here.

• We’ve actually seen this story before – Investors seem to have forgotten that NFLX actually experienced similar concerns during 2015, 2018 and 2019 – when their share price experienced drawdowns of -30%, -40% and -30% respectively.

• All-store sales of 6.649bn yen (107.7% vs. April 2021) were the record high for April. In-store dining sales were 118.4% vs. April 2021, and delivery sales were 111.8% vs. April 2021.
• In April, the company opened two new stores (two directly-owned stores) and closed one store (one franchised store)
• The company announced that it would raise the retail price of approximately 20% of all items on its grand menu by 20 to 30 yen excluding tax, effective May 14

• We upgrade to BUY rating from SELL rating and raise TP by +75% to Bt4.2 derived from DCF valuation (WACC=7% & Terminal growth= 2%) implying 10% discount to 23.1xPE’23. 
• We expect ERW to post net loss of Bt296m  against loss of Bt492m in 1Q21 and Bt246 in 4Q21 despite strong  revenue growth.
• Strong revenue growth is underpinned by the growth in domestic and international tourism due to the introduction of Test and go scheme and ‘Rao Tiew Duay Kan phase-4’ in 1Q22