Brief USA: Beyond Meat (Post IPO) Goes Beyond Valuations – More than Just a Vegan Burger and more

In this briefing:

  1. Beyond Meat (Post IPO) Goes Beyond Valuations – More than Just a Vegan Burger
  2. Green Shoots, Rotten Roots?
  3. Warning For Markets: There Is No Quantitative Easing…QT Re-Engaged!
  4. Another Strong U.S. Jobs Report; Concerns About Slowing Growth Appear Unfounded
  5. So-Young (新氧) Trading Update –  Getting Ahead of Itself

1. Beyond Meat (Post IPO) Goes Beyond Valuations – More than Just a Vegan Burger

Positioning

Beyond Meat Inc (BYND US), a fast-growing US-based plant-based meat (substitute) maker, tripled its billion-dollar valuations on listing, last week – the best IPO debut pop for any US listing since 2008 financial crisis (for companies that raised at least USD 200 mn, says Bloomberg). The loss-making company, now valued at USD3.5bn, raised US$240 mn from IPO at the issue price of USD25/share (post upward revision), to fund its expansion plans.

The 10-years-old Los Angeles-based company has been in the limelight for pioneering the concept of research-backed high-quality plant-based meat (substitute). But the brand’s loyal fan base is built on something bigger – its broader philosophy of providing healthy, earth-friendly and animal-friendly food solutions to those who care. This value proposition has also attracted a line up of loyal celebrity backers/investors including Bill Gates and Leonardo DiCaprio. However financial investors need to note that competition is heating up and it may not be all smooth sailing unless Beyond Meat can commercially scale up faster.

Climate change: activism & awareness go beyond street protests, and have been influencing consumer choices. Beyond Meat has positioned itself as a food solution to the problem of rising greenhouse gas from livestock rearing; mainstream customers, not just vegans, are buying it. It is a case study worth looking at in terms of shifting consumer preferences and opportunities, hitherto overlooked by established bigger food companies. Our earlier report Climate Action – School Strikes Hit a Spot, Carbon Emitters Face Heat. Investors Take Note had highlighted how rising climate awareness/activism was impacting various sectors and the opportunities offered by changing consumer preferences including the Vegan movement.

In the report below we look at the likely factors driving investor euphoria over Beyond Meat – its products, the wider market opportunity and the positioning/philosophy. We also highlight the various risks involved in this early stage/new product company apart from rising competition

2. Green Shoots, Rotten Roots?

Just when you think the global economy is starting to spring green shoots, the skies have darkened and some of those shoots may be turning brown. In the U.S., ISM Manufacturing fell and missed expectations.

In China, both the official PMI, which is tilted toward larger SOEs, and the Cain PMI, which measures SMEs, fell and missed expectations. These readings have cast doubt on the longevity of Beijing’s stimulus-driven rebound.

On the other hand, the Non-Farm Payroll report came in ahead of expectations. In Europe, the PMIs for peripheral countries like Italy and Greece are outperforming Germany. In addition, exports from Korea and Taiwan, which are highly globally sensitive, have rebounded, indicating recovery.

How do investors interpret these cross-currents?

We concur with Rob Hanna of Quantifiable Edges, who made an insightful comment that “Tops Wobble Before Falling Over”. Our review of the market’s technical conditions reveals the market is not wobbling yet.

Any market wobble would be seen in NASDAQ and semiconductor stocks. Until Technology and NASDAQ leadership starts to falter, and if their leadership is not replaced by the reflation-sensitive cyclical groups, we remain bullish on equities.

3. Warning For Markets: There Is No Quantitative Easing…QT Re-Engaged!

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  • Latest data to early-May warn that Central Banks have re-engaged quantitative tightening
  • Both the US Fed and the People’s Bank (PBoC) are withdrawing funds at a more rapid pace
  • Global Central Bank Liquidity sliding at minus 4& annualised clip. This is NOT QE
  • Small off-sets to this drain from BoE and BoJ, which is loosest of majors

4. Another Strong U.S. Jobs Report; Concerns About Slowing Growth Appear Unfounded

The April employment report was strong with nonfarm payrolls rising 263,000 and the unemployment rate falling to the lowest level since December 1969.  Average hourly earnings increased 0.2% in April and year-over-year wage growth held at 3.2%.

5. So-Young (新氧) Trading Update –  Getting Ahead of Itself

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So-Young (SY US) raised US$179m at US$13.80 per share, the top of its IPO price range. We have previously analyzed the IPO in:

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

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