Daily BriefsGrowth Ideas

Brief Growth Ideas: Smoore International: Trading Well Over JUUL’s Peak Multiples and more

In this briefing:

  1. Smoore International: Trading Well Over JUUL’s Peak Multiples
  2. Smartkarma Webinar
  3. Perpetual Placement: Attractive Discount and EPS Accretiveness
  4. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June
  5. The Global Autos Break Down, Though Tesla on Full Charge

1. Smoore International: Trading Well Over JUUL’s Peak Multiples

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Smoore International (6969 HK) is the global leader in the manufacturing of vaping devices and components, having a market share of 16.5% in 2019. The company raised HK$918 million in an IPO and started trading on 10th July, and in its first nine trading days, the shares have risen by 206.5% from the IPO offer price. On 22nd July, Smoore warned that, as a result of fair value changes for convertible preferred shares and promissory notes and share-based payments as detailed below, net profit for the six months to 30th June will decline by 94.% year-on-year.

It is surprising that these fair-value adjustments were not revealed or anticipated in the prospectus. With Smoore’s multiples now exceeding those of its infamous peer, JUUL during its peak, in the DETAIL below we give the case for taking some profits.

Company Disclosures

2. Smartkarma Webinar

In this Smartkarma Webinar, we speak to David Huggins, CFA, Nutrition Portfolio Manager at Blackrock’s BGF Nutrition Fund. David will discuss current trends in food and nutrition, including plant-based protein, changing consumer behaviour, and the future of food technology.

The webinar will be hosted on Wednesday, 29/July/2020, 5.00pm SGT/HKT.



David is co-portfolio manager of the BGF Nutrition fund, a Blackrock sustainable thematic fund. Areas of expertise include nutrition, food & beverage, agriculture, and cannabis/CBD. He has a solid track record in public equity investing and is skilled in bottom-up investment analysis, modelling, and big-picture thinking. He graduated from the University of Bristol and is a CFA Charterholder.

3. Perpetual Placement: Attractive Discount and EPS Accretiveness

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Perpetual Limited launched an AUD 225 million placement and AUD 40 million share purchase plan (SPP) to fund the acquisition of a 75% stake in Barrow Hanley, Mewhinney & Struss LLC (Barrow Hanley). In this note, we will look at the details of the deal, the impact to the company’s financials, and score the deal in our ECM framework. We think the deal provides substantial upside for short term investors given its attractive discount to last close and its EPS accretiveness but we also remind investors that the fund under management has not really grown for both Perpetual and Barrow Hanley.

4. China Internet Weekly (27Jul2020): Online Retail Continued to Accelerate in June

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  • The growth rate of China online retail reached 19% YoY in June, higher than 15.6% YoY in May.
  • Chinese retailing e-commerce companies raised funds of RMB28.6 billion in 1H20, decreasing by 74.5% YoY.
  • Ministry of Human Resource and Social Security warned about “employee sharing”, which was started by Alibaba (BABA).

5. The Global Autos Break Down, Though Tesla on Full Charge

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  • Auto exposures are in decline among Global active investors.  Average holding weights are towards the lower end of the 9-year range, at 0.83%.  A record low of 49% of the 406 funds in our analysis have exposure to the Autos sector.
  • Fund activity over the last 6-months saw Global managers selling down stakes in Daimler AG (DAI GR) , Toyota Motor (7203 JP) and Ford Motor Co (F US) . Tesla Motors (TSLA US) and Volkswagen (Pref) (VOW3 GY) were the main bright spots as ownership levels grew over the period.
  • Overall, the auto industry is becoming increasingly unattractive to the average Global fund manager, with increases in Tesla Motors (TSLA US) exposure unable to counteract significant declines in ownership across the more traditional auto manufacturers.

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