Consumer

• On Friday, a Bloomberg article suggested Renault SA (RNO FP) is considering selling some of its 43% stake in Nissan Motor (7201 JP) to help fund its efforts in EVs.
• Sources were “people familiar with the matter.” Since 2018, Bloomberg and Les Echos have been the outlets which do “scoops” on the Renault/Nissan relationship, but they are not always right.
• However, it raises some interesting questions and possibilities. And given the prices, it makes the decision somewhat uncomfortable for both. 

• We have long been bullish on Nagacorp Ltd. on long term fundamentals. We are now seeing rising positivity as market sentiment begins to recognize ASEAN covid recovery coming.
• Stock is at midpoint of 52 week range at HKD$6.97. Our 1 year target is HKD$10.425 based on what we see trending from its 1Q22 unaudited results.
• All revenue segments up: Morgan Stanley report agrees with our view that shares present an immediate opportunity due to potential in cross border gamblers and ASEAN mass.

• More positive sentiment
• Vietnam subsidiary to list on HCM stock market
• CPV’s sales growing
• Improving swine prices to support earnings recovery

Upgrade to BUY from HOLD with TP of THB27.9. The upcoming IPO of subsidiary CP Vietnam (CPV) will give it more flexibility to raise funds for further business expansion as well as unlock value of CPV. This is a new development creating positive sentiment on CPF. CPF’s 1Q22 resultsare likely to be lacklustre but CPF’s share price dropped 5% in the past three months possibly pricing in the weak 1Q22 profit outlook. Besides, we see prospects for improvement in 2Q22 from the favourable livestock prices.

• We see upside to guidance; raising our earnings, TP
• 1Q22 sales growth likely driven by volume and price
• Recovery in gross margin to push profit higher
• Better prospects

• Encouraging 1Q22E recovery, maintain BUY
• Sales and occupancy rebounds drive earnings growth
• Inflationary pressures present but manageable
• Positive earnings bias

• We maintain BUY rating for VGI with the new target price of Bt6.20 (Previous TP: Bt6.50), derived from SOTP method or 50% premium to Thai media peers.  
• We anticipate revenue streams from media and commercial space (recently started to manage by NINE),to retreat to 70% of the level we have seen during pre-pandemic by late 2QFY23 (July’22-September’22)
• The management revenue target in FY2023 at Bt6.5bn-7.0bn is fairly optimistic as we anticipate OOH media revenue to not recover that quickly.

• HK F&B is set to have a reprieve as dine-in services at catering businesses can now remain open from 6 pm-10 pm ( max seating up to 4 people).
• We provide a list of 34 names that will benefit from the removal of restrictions ( some with further catalysts down the road as they are exposed to China)
• Our favorite pick remains Taste Gourmet Group (8371 HK) which we have written about in our insight Taste Gourmet: Multibagger Reopening Play.

• Nestle India (NEST) revenue reported in Q1CY22beat our estimates. However, the company’s EBITDA and PAT were a miss with clear signs of pressures noted on Gross Margins owing to inflationary RM in edible oil, milk & derivatives, and packing materials.
• Reported revenue grew 9.7% YoYto Rs 3,951Cr (~4% above our estimate of Rs 3,800Cr in Q1CY22)
• We maintain HOLD with revised TP of Rs 18,300 (60x Mar-24E) vs earlier TP of Rs 18,600 (60x CY23E).

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• ClearBridge is a leading global asset manager committed to active management.
• The market now has a clear call to action to solve the dual challenges of energy security and energy transition, requiring serious capital spending and innovation.
• We added to defensive sectors including utilities and health care, looking for true diversification with low price correlations and lower price volatility.

• Tesla should probably thank its China operations for another record quarter as strong pricing and lag in hits from cost inflation made profits soar. 
• Next quarter will be tougher as China’s business conditions rapidly deteriorate amid the worst Covid surge in two years.
• Meanwhile, CEO Elon Musk is on the hunt for cash to buy Twitter.

• Hong Kong’s hospitality industry has endured three years of upheaval, first with the democracy protestors in 2019, which slowed inbound, followed by the onset of Covid in early 2020.
• Beginning today, 21 April, the Government commenced the relaxation of most social distancing measures, to be eased over three phases.
• This evolving dynamic is welcome, yet the progress and recovery for many operators may be gradual.

• JD.com met our 240+ short zone and has gapped below immediate 215 support, opening the way for  C wave decline to our target and buy zone near 180.
• RSI trendline rejection sets up a slide to the sub 30 area which mean we will at least hit 180 if not reach for 160.
• Holding the 160 low sets up an intermediate long trade. Be aware that there will be some wide tactical swing over the turbulent summer cycle.

• Campus Activewear Ltd (1535013D IN) is looking to raise about US$184m in its India IPO, via a 100% secondary selldown.
• While there are other domestically listed footwear makers, Campus’ competitors generally market a broader product offering, ranging from casual, formal or outdoor shoes etc.. 
• Campus’ performance was amongst the most resilient during the pandemic, but its margins continues to trail peers. 

• Campus Activewear Ltd (1535013D IN) is looking to raise about US$200m in its India IPO, via a 100% secondary selldown.
• Campus Activewear is a lifestyle-oriented sports and athleisure footwear firm based in India. 
• Operating under the “CAMPUS” brand, the firm offers a diverse portfolio of styles, color palettes, and price points.

• The market position of Japanese cosmetics in China is weakening with Japanese exports declining around 5.0% YoY in January and February 2022.
• With Shanghai under a strict lockdown and the recovery of inbound demand taking more time than expected, it is possible that Shiseido Company (4911 JP) could downgrade its 2022 guidance.
• These forces could take Shiseido’s valuation multiples to the pre-2013 level, resulting in a downside of close to 30%.

• Laughing Water Capital returned approximately -12.5% in the first quarter of 2022.
• Most of the quarter our results tracked the indexes pretty closely, but as the indexes rallied into quarter end, our portfolio did not.

• Fosun Tourism (1992 HK) (FTG) is not a China play and, instead, it has excellent exposure to the global travel industry recovery particularly through its ownership in Club Med.
• 1Q22 showcased a very solid 306.6% rebound in business volume of resorts and tourism destination operations and tourism and leisure services and solutions business, and the trend will continue.
• We think Club Med’s exposure to overseas recovery, Atlantis Sanya’s ride on domestic demand and new resorts’ good position to capture China’s travel recovery are key drivers for FTG.

• A passive play opportunity for Kakao Pay (377300 KS) is approaching.
• Its float rate will likely be raised in the KOSPI 200 June rebalancing. Then, in the KOSPI 200 IT Sector Index, it will again experience the most significant passive inflow.
• The recent share price volatility has increased considerably. So, instead of a preemptive position buildup, a shorter-window passive play seems more appropriate just before the rebalancing trading day.

• Tesla’s Q1 results on April 20th (after market) will likely beat Street estimates, but the overshoot may not be as important as profit margins, which should decline versus Q4 2021.
• Q2 outlook is grim, given the lockdown of Tesla’s Shanghai factory. Even if output ramps up in May, exports–which are 40% of output–may not recover due to epic port congestion. 
• Tesla has 2 new factories ramping up as of this month. A slowdown at its most profitable plant amid start-up costs could raise the need for equity financing.  

• Tesla is losing ground in China, which it needs to juice its margins, create *all* its profits & cash flow, & fund most of billions spent on capex. 
• Aging Model Y—its last and only thriving model—won’t save it.
• Sales in China were weakening even before what now has become an extended disruption as China fights its worst Covid surge in two years.

• Netflix management came off as unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years.
• Competitive responses sounded half baked: increasing price to deter password sharing and launching advertising tiers…in 2 years?
• The viability of the longterm growth algorithm and 10 year DCFs that Netflix investors have leaned on for years has been rightfully vaporized. 

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO in Jan 22. Its three-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Tesla’s Q1 operating income beat consensus estimates by 38% (ours by 26%), while GAAP net income came in 42% above consensus (36% above ours). 
• The highly focused automotive gross margin (Ex-ZEV credits) came to 30% versus consensus estimates of 27.8% and ours of 27.5%. Costs were booked in R&D rather than COGS.
• The results were solid, but the CFO cautioned on Q2 headwinds. Tesla was up by 5.6% in the after hours on these results, ignoring Tesla’s cautious Q2 outlook. 

• Kura Sushi is a dinky (~$540M market cap) sushi business that I have reported on for a little over one year.
• The US subsidiary is das kind (German for ‘the child’ because, why not) of a well-capitalised parent with over 450 stores in Japan.
• It’s a proof of concept venture in a new market, with a tried-and-tested business model, and a parent that provides ample liquidity to its fledging offspring.

• With a limited upside to our target price and concern over decreasing people purchasing power following a rise in inflation, we downgrade our recommendation from BUY to HOLD 
• We expect HMPRO to report 1Q22 net profit at Bt1.49bn (+9%YoY, -16%QoQ),
• YoY growth will be supported by solid demand for WFH products, government stimulus scheme (Shop Dee Mee Khuen in Jan –15 Feb 2022), and solid revenue growth from Mega Home

• The company was told a year ago that it had data problems. It was then told in June it had serious data problems and was given 15 days to fix.
• It did not. It listed itself, against the wishes of the regulators. Then it got in serious hot water. And it has only been getting hotter. 
• A hoped-for HK Listing By Introduction was nixed 5 weeks ago. Now the Company is simply going to delist to try to solve its problems behind closed doors before relisting.

• DiDi Global (DIDI US) will hold an EGM on 23 May to vote to delist the ADS from the NYSE. The shares will not be listed on another exchange before delisting. 
• Due to the regulatory restrictions, DiDi is losing market share and pricing power to competitors in China. The 4Q21 results were poor. 
• Directors and key pre-IPO investors together account for 48.2% of outstanding shares, suggesting that the ordinary resolution will pass. 

• Euglena could be the most important sustainable aviation fuel company in Japan and a world leader in using micro algae as a feedstock
• The company looks set to become the largest provider of SAF in Japan by 2025
• Assuming the company can hit its commercial SAF production target, we think the stock could easily double

• Leading up to the GoTo IPO, Beenos Inc (3328 JP) shares rallied more than 80% to ¥2,364 per share, possibly expecting substantial listing gains from the “conservatively” priced GoTo IPO.
• GoTo (GOTO IJ) opened around 18% above its IPO price on 11th April 2022, but Beenos fell by around 7% and 8% on 11th and 12th April 2022 respectively.
• It may be too late to ride the GoTo IPO rally, but exposure to a high-profile company like GoTo brings visibility, resulting in a much narrower NAV discount.

• We have a non-consensus Bullish call on Rakuten and see over 60% upside to the share price
• The key driver will be a recovery in the Mobile Business
• We expect losses to gradually improve as roaming fees and customer acquisition costs start to decline

• Giant Manufacturing (9921 TT) , one of Shimano’s top customers, is reportedly having a production issue and can only sort it out by the end of this year. 
• Shimano Inc (7309 JP) is no longer Japan-centric but a global company with customers all over the world. 
• Low valuation gives an illusion that it is cheap historically but expects a bumpy road ahead.

• The E-Commerce Model, which is a source of revenue, is seeing a decline in profit margins while marketing costs remain high.
• In the Delivery Model, the profitability of Outsourced Delivery is improving, but it has yet to break even. Demae-Can intends to seek opportunities in retail delivery to accelerate break-even process.
• Demae-Can plans to achieve the operating loss for FY8/2022 to 50 billion yen, but hasn’t indicated when it returns to black-ink due to the competitive environment in food delivery business.

• Many automakers said they suspended their productions due to the lockdown of Shanghai.
• A vice minister of Industry and Information Technology announced that 666 companies will resume production in Shanghai.
• We believe it is hard to resume the automobile soon because of the complication of a vehicle and the traffic jams around Shanghai.

• JD.com (9618 HK)‘s CCASS movements are a thing, and there are things going on in the background, but the things in the foreground are not as menacing as they appear. 
• Suzuki Co Ltd (6785 JP)‘s NAV discount and implied stub plumb new lows. Again.
• Musk has made a non-binding proposal for Twitter Inc (TWTR US) at US$54.20/share. Get it? Get it? Nudge nudge wink wink. That’s all part of the fun for him.

• Since the Russian invasion of Ukraine on February 24, the market has moved in somewhat of a barbell fashion.
• If higher interest rates and inflation characterize the landscape for the next several years, it likely spells the end of the era of unbridled speculation and high multiples, says FMI.

• Legal casino gaming is limited to only three of India’s states, including Goa, Sikkim and Daman. But nationally US$60b is wagered legally and in grey area sites.
• Delta’s gambling ships and casinos lie within a roughly 2.5 hour flight from population centers like Mumbai and Delhi.
• Latest operating results indicate strong gains despite lingering Omicron spurts positioning the stock for a strong upside ahead.

• FMI’s equity investing strategies apply a value discipline, with a focused approach firmly rooted in fundamental research.
• The FMI International portfolios’ exposure to Russia and Ukraine is quite limited, with no direct investments in either country.

• Shares in Singapore Press Holdings (SPH SP) stopped trading a week ago. The election period to choose cash or cash and SPH REIT shares started yesterday.
• The OBVIOUS choice is to take the cash. But you have ten days to see SPH REIT gain 2% to change your mind. 
• I note Keppel wanted SPH back when SPHREIT was worth a fair bit less, but at that time they didn’t want SPHREIT when an MGO would have been cheaper.

• Tesla CEO Elon Musk bid $43 billion to buy Twitter and take it private. 
• Better odds: Elon was bored. Pulled the stunt to irritate the SEC.
• Musk gets attention. Collects cash! Bolts before paying the check…on 4/20

• Interim results were surprisingly strong considering the headwinds from China and rising costs
• 2H guidance looks optimistic. China remains a key risk and we still see risks to the gross margin
• The “R” word. Rising inflation, Rising Interest rates = Recession. Probably not good for consumers and certainly not good for high stock multiples

• Ace Hardware Indonesia (ACES IJ) recently released its FY2021 results which reflected the intermittent lockdowns on the top line but cost controls meant the bottom line finish almost flat.
• The company benefitted from its regional diversity during the pandemic as not all cities were affected in the same way but its exposure to malls is quite high.
• Ace Hardware will resume its expansion plans in 2022 with plans for 15 new stores plus it will be a big beneficiary of easing mobility, given low online sales.

• Tailim Paper is the number one company in Korea specializing in the production of corrugated cardboard.
• Tailim Paper is getting ready to complete an IPO towards the end of May. The IPO price range is from 19,000 won to 22,000 won.
• According to the bankers’ valuation, the expected market cap of Tailim Paper is from 616 billion won  to 713 billion won.

• Small cap growth stocks entered bear market territory during the quarter, buffeted by the prospects of monetary tightening, spiking inflation and the uncertainties wrought by Russia’s invasion of Ukraine.

• Even though 2QFY22 results were broadly in line with consensus, Fast Retailing (9983 JP)’s share price rose 8.8% as markets expected the worst amidst the Russian controversy and Shanghai lockdowns.
• However, this price movement seems unwarranted given the impact of Shanghai lockdowns could only be seen in the 3QFY22 financial statements.
• During earnings, FR introduced North America & Europe as new growth drivers to replace the declining Chinese market. But we are not convinced that they are up to the task.

• Small cap stocks had a rough ride during the first quarter, as increases in market volatility and investor uncertainty from major macro catalysts weighed on performance.
• The process of ending a decade of cheap and available capital has begun, creating headwinds that pose a challenge for the market as a whole.