ConsumerDaily Briefs

Consumer: Alibaba Group, DiDi Chuxing, Youfoodz Holdings, Mayora Indah, Fast Retailing, Daily Mail & General Trust, Lotte Rental, Union Auction, Crompton Greaves Consumer Electricals and more

In today’s briefing:

  • Alibaba (9988 HK): Passive Inflow from HSI, HSCEI, HSTECH Trackers in July
  • Didi: Meituan Quietly Relaunches Ride-Hailing App Amid Didi App Removal to Grab Some Market Share
  • Youfoodz (YFZ AU): HelloFresh’s Lowball Takeover Offer Difficult to Block But Not UnBumbable
  • Mayora Indah (MYOR IJ) – Lovely Biscuits
  • Consensus Continues to Course Correct While Fast Retailing Prepares to Report Q3
  • Many Moving Parts in Rothermere’s Bid to Take DMGT Private
  • Lotte Rental IPO Valuation Analysis
  • AUCT: Expect 2Q21 Earnings Should Be the Bottom Quarter of the Year
  • Strong FCF with robust balance sheet

Alibaba (9988 HK): Passive Inflow from HSI, HSCEI, HSTECH Trackers in July

By Brian Freitas

Hang Seng Indexes has increased the number of index shares and free float for Alibaba Group (9988 HK) in the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX), with no change made to the capping factor.

This will lead to an increase in the index weight for Alibaba Group (9988 HK) and passive funds benchmarked to the indices will need to buy the stock at the close of trading on 16 July while selling the other index constituents.

For July, we estimate passive funds will need to buy 45.52m shares (HK$9.34bn; 2 days of ADV) of Alibaba Group (9988 HK). The largest impact of passive selling in terms of days of ADV will be on HSBC Holdings (5 HK), CLP Holdings (2 HK), China Construction Bank H (939 HK), Hang Lung Properties (101 HK) and Country Garden Holdings Co (2007 HK).

However, passive funds will need to sell Alibaba Group (9988 HK) at the implementation of the quarterly rebalance in September when the capping factor will be lowered to cap the weight of the stock at 8% in the three indices.


Didi: Meituan Quietly Relaunches Ride-Hailing App Amid Didi App Removal to Grab Some Market Share

By Shifara Samsudeen, ACMA, CGMA

As the Chinese regulators have ordered DiDi Chuxing (DIDI US) to remove its app from app stores citing privacy concerns, Meituan (3690 HK)  re-launched its stand-alone app for ride-hailing on app stores on Friday. Didi was ordered to remove its app from app stores on 04th of July over violating personal data of its users two days after its US IPO.

Meituan’s ride-hailing app known as “Meituan Dache” was launched as a stand-alone app in 2017, however, the company merged the app into the Meituan Super App in 2019 due to heavy costs of running the app.  

The Meituan ride-hailing app not only offers its own ride-hailing services but also has partnered with other ride-hailing companies including Shouqi Car-Hailing Services, Shenzhou Special Car Service and Caocao to aggregate their services.


Youfoodz (YFZ AU): HelloFresh’s Lowball Takeover Offer Difficult to Block But Not UnBumbable

By Janaghan Jeyakumar, CFA

On 13th July 2021, Australia-based ready-made meal delivery company Youfoodz Holdings (YFZ AU) announced they had entered into a Scheme Implementation Deed with multinational meal-kit delivery company HelloFresh AG (HFG GR) which will see them get acquired in an all-cash transaction that valued the company at a market cap of A$125mn. 

The Offer Price is A$0.93/share in cash. The transaction will be conditional on the receipt of regulatory approvals and Target shareholder approval.

The Deal is expected to be completed in October/November 2021. 

More below the fold. 

For more information about M&A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&A Guide 2019 and Quiddity M&A: Australia Foreign Investment Reforms 


Mayora Indah (MYOR IJ) – Lovely Biscuits

By Angus Mackintosh

A rare post-results call with leading Indonesian consumer staples company Mayora Indah (MYOR IJ) management revealed a company well-positioned to take advantage of the recovery in 2H2021, with a good number of new products launches likely to help drive growth both domestically and overseas.

Rising commodity prices are a potential threat to margins but management has outlined a number of strategies to cope with this including price increases.

Mayora Indah (MYOR IJ) saw strong growth in sales and operating profits reflecting the strength of the recovery domestically and especially in the export of its products. 

The company continues to gain market share in a number of categories and especially in biscuits, wafers, and coffee. It continues to broaden the range of products available in export markets such as the Philippines and Thailand.

Mayora Indah (MYOR IJ)‘s valuations look attractive versus history with the company trading on 19.6x FY21E PER and 17.2x FY22E PER versus its 5-year average forward PER of 27x.

Consensus Continues to Course Correct While Fast Retailing Prepares to Report Q3

By Oshadhi Kumarasiri

Japan’s largest apparel retailer, Fast Retailing (9983 JP) is scheduled to release the third quarter ended May 2021 results tomorrow, at a time 3QFY22 consensus revenue and OP were lowered for three consecutive months.

We think consensus has not lowered the 3QFY21 EBIT sufficiently during the last three months and Fast Retailing could miss the consensus EBIT estimate. With the market sentiment regarding Fast Retailing on a declining trend and valuation multiples near the all-time high level, an earnings miss could have significant implications on the company’s share price.


Many Moving Parts in Rothermere’s Bid to Take DMGT Private

By Jesus Rodriguez Aguilar

The shares of DMGT suffer from a double discount because of both the conglomerate structure and the unusual governance (the founding family has a 36% economic interest but all the voting power).

This would be an opportunistic bid where the family uses the cash from the special dividend to fund their take-private deal, for the very same reason that the Daily Mail charges against American private equity plunderers of listed UK companies: price.

I estimate that the whole package would be worth 1131p-1277p, therefore a 1%-15% premium to the closing price on 14 July. Beware though of the many moving parts and lack of clarity on the tax consequences of the RMS divestment and Cazoo listing. 

The price mooted for the newspaper and the rump businesses does not look particularly generous on 0.7x EV/Fwd sales, 6x EV/Fwd EBITDA, as most of those businesses have been hard hit by the pandemic.

Considering that the Rothermeres own all the voting shares, it is highly unlikely that there will be any interloper risk. It also seems difficult that the family will abuse its power to rip off minority shareholders. I reckon that the initial figures may be sweetened.

Further upside (around 100p/share) may come from a fairer valuation of consumer publishing and the other businesses, that would take the total package to a 24% premium to 14 July closing price.


Lotte Rental IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Lotte Rental is implied market cap of 2.9 trillion won or implied price of 79,679 won per share, which would represent a 35% upside to the high end of the IPO price range of 59,000 won per share. Given the solid upside, we have a Positive view of the Lotte Rental IPO. We would take the deal. 

  • Our base case valuation is based on a 6.1x EV/EBITDA using 2020 EBITDA of 1,055 billion won. The EV/EBITDA multiple of 6.1x is at a 5% premium to the comps’ valuation multiple.
  • We believe this is justified given higher ROE and EBITDA margins of Lotte Rental as compared to its peers.
  • In addition, Lotte Rental enjoys higher market share, higher revenues, and better brand recognition than its peers and as a result, the slight premium valuation multiples to its peers is justified, in our view. 

AUCT: Expect 2Q21 Earnings Should Be the Bottom Quarter of the Year

By Research Group at Country Group Securities

We reiterate our BUY rating with a target price of Bt15.75 derived from 25xPE’22E, which is its five-years average trading range, implying a 25% premium to the world consumer discretionary sector.

• We expect AUCT to report 2Q21 net profit of Bt59m (-17%YoY, -15%QoQ) caused by lower-than-expected auctioned volume as a result in delay in vehicle seizing activity in 4Q20 due to the debt relief measure.
• Statistically, number of auctioned vehicles have a strong correlation with NPL ratio. In 1Q21, BOT reported number of NPLs ratio increased to 1.56% from 1.44% in 4Q20. We expect auction volume will continue to increase in 2H21 supported by a rise in NPLs as a consequence of the impact from 3rd wave of COVID-19.
• The special mention ratio (SM) remain high level at between 9.2%-9.75% in 1Q20-1Q21. This implies that NPL will rise after the maturity of debt moratorium measure implemented by Bank of Thailand. Therefore, we expect auctioned vehicle volume to accelerate in 2H21.  

Strong FCF with robust balance sheet

By Motilal Oswal

Crompton’s FY21 Annual Report focuses on the five-dimensional growth strategy adopted over the pandemic-affected year. Launching new products and deepening the reach within existing product categories were among the key focus areas for the year…

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