ConsumerDaily Briefs

Consumer: Fu Shou Yuan International, Nayuki Holdings, Zomato, Momo.Com Inc, Seven & I Holdings, Xpeng, WM Tech Corporation, SHEIN, Sands China Ltd, Carabao Group and more

In today’s briefing:

  • Fu Shou Yuan (1448 HK): No Stiff Competition
  • Nayuki (奈雪の茶): Teahouse Competition on the Ground
  • Zomato IPO – Strong 4Q21, Has a Very Long Runway
  • FTSE TWSE Taiwan 50 Index Rebalance Preview: Momo & Index Inclusion
  • 1QFY22 Results: Underperforms Consensus, A Minor Blip Could Be a Good Entry Point
  • Xpeng Rally Met Our 46 Target, Pullback in Progress
  • WM Tech Pre-IPO – Peer Comparison and Pre-IPO Valuation – Some Signs of Advantage
  • SHEIN: The Fastest Growing E-Commerce Company in the World & Ready to Overtake Zara in 2022?
  • Sands China – Tear Sheet – Lucror Analytics
  • CBG: Expect 2Q21 Earnings Improve QoQ

Fu Shou Yuan (1448 HK): No Stiff Competition

By David Blennerhassett

Headquartered in Shanghai, Fu Shou Yuan International (1448 HK) (FSY) is one of the largest funeral home companies worldwide with revenue of US$289mn in 2020.

China has high entry barriers for the death care industry as local governments enforce licensing caps. Coupled with a shortage of burial space, an increasing wealthy portion of the population, and the social stigma attached to the business, FSY enjoys high margins amid a relatively inelastic demand.

Shares are down 12% from the recent high in May. A sound investment or is this dead money?

Nayuki (奈雪の茶): Teahouse Competition on the Ground

By Ming Lu

  • We visited the stores of Nayuki and its competitors.
  • Nayuki has the No. 4 largest customer base among Chinese teahouses, but we believe Heytea is the only competitor to Nayuki.
  • Fruit tea is still popular, but customers are loyal to one or two brands.

Zomato IPO – Strong 4Q21, Has a Very Long Runway

By Sumeet Singh

Zomato (ZOM IN)  aims to raise US$1.3bn in its India IPO. This will be the largest listing in India from the technology sector.

Zomato operates a technology platform that provides services for restaurant partners, customers, and delivery partners. During FY20, Zomato recorded 41.5m average MAU and was one of the leading Food Services platforms in India, in terms of value of goods sold, according to RedSeer. As of 31 Dec 20, it had a presence in 526 Indian cities and had 350,174 active restaurant listings.

In this note, we will talk about the updates from the RHP and the deal pricing.

FTSE TWSE Taiwan 50 Index Rebalance Preview: Momo & Index Inclusion

By Brian Freitas

The FTSE TWSE Taiwan 50 Index is a market cap weighted index adjusted for free float and Foreign Ownership Limits and is designed to represent the performance of 50 of the largest and most liquid stocks that trade on the Taiwan stock market.

The next rebalance will be effective after the close of trading on 17 September and the changes will be announced on 3 September. The September review will use data from close of trading on 23 August to determine the stocks to be included and excluded.

As of the close on 7 July, we see Momo.Com Inc (8454 TT) being included in the index replacing Chang Hwa Commercial Bank (2801 TT).

There are no close adds at this time, so there is likely to be only one change at the review. Estimated one-way turnover is small at 0.35%.

Momo.Com Inc (8454 TT) has run up a lot over the last few months and has momentum going for it. Apart from being included in the FTSE TWSE Taiwan 50 Index, there is the possibility of the stock moving from the MSCI Small Cap index to the MSCI Standard index in August which would bring in additional passive inflows.

1QFY22 Results: Underperforms Consensus, A Minor Blip Could Be a Good Entry Point

By Oshadhi Kumarasiri

Our 2021 High Conviction call, Seven & I Holdings (3382 JP) delivered 1QFY22 results today with revenue surpassing consensus estimate by around 2.0%. The company’s 1QFY22 operating income was 10% below consensus.

Although Q1 results seemed a bit weak on profitability, we think the weakness is somewhat exaggerated by inflated consensus OP estimates. The consolidated OP increased 8.6% YoY in the quarter and the weak profitability in Superstores was the only real surprise. Weaknesses in superstore and department store business could provoke activists which might even be a good thing for Seven & I’s share price. Hence, there is not a lot to do here unless the shares fall 5-6% tomorrow, which we think could be a good entry point to ride a rally towards Seven & I’s all-time high of ¥5,906 per share in the short term.

Xpeng Rally Met Our 46 Target, Pullback in Progress

By Thomas Schroeder

Xpeng has rallied nicely from our buy in level at 23 and met our ideal target at 46, a pullback is now in the cards back to the old pivot support at 31.

Trendline resistance was cleared back at 27 and does represent a macro breakout, suggesting the next pullback is a higher degree buying opportunity that will lead to highs back above 46.

RSI has not confirmed recent new highs and is a negative tactically once below 39.

WM Tech Pre-IPO – Peer Comparison and Pre-IPO Valuation – Some Signs of Advantage

By Zhen Zhou, Toh

WM Tech Corporation (WMT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO. 

WM Tech (WMT) is a fresh food and FMCG retailer in China. The company operates its business primarily through two brands, Wumart (物美) and Metro (麦德龙). The Metro brand belonged to Metro China in which WMT acquired an 80% stake in and started consolidating in April 2020.

In this note, we have  compared WMT to other supermarket operators.

We have previously covered the IPO in:

SHEIN: The Fastest Growing E-Commerce Company in the World & Ready to Overtake Zara in 2022?

By Douglas Kim

Shein is a monster e-commerce company based in China. Shein is the fastest growing e-commerce company in the world. The company generated nearly $10 billion in revenues in 2020, up nearly 250% YoY. Shein could realistically overtake Zara in terms of revenues by 2022. 

Shein’s core business model is to sell clothing (mostly women’s apparel) online to the younger generation consumers in the US, Europe, and other parts of the world. Shein is especially popular among the budget conscious younger generation in the Americas, Europe, and Asia (excluding China). 

The following are the key competitive advantages of Shein:

  • Superb execution of “art of trend setting” in apparel products
  • Extremely attractive pricing
  • Faster adoption of new fashion styles
  • Aggressive promotions through influencers and discount codes
  • Effective use of data analytics and technology
  • Capitalize on the tax loop holes between the US and China

The tremendous growth of Shein and other pure-play fashion companies have had major negative impact on some of the largest apparel companies with signficant brick and mortar operations such as Fast Retailing (9983 JP), Gap Inc/The (GPS US), and Industria De Diseno Textil Sa (ITX SM).

Sands China – Tear Sheet – Lucror Analytics

By Leonard Law, CFA

We initiate coverage of Sands China, with a “Hold” recommendation on the SANLTD Notes. 

We view Sands China as “Low Risk” on the LARA scale. Parent Las Vegas Sands Corp​ (LVSC) is a pioneer of the integrated resorts business model, which combines casino gaming with ancillary facilities such as MICE and entertainment. Among the six concession/sub-concession holders in Macau, Sands China has the largest scale and the highest market share in the territory’s fast-growing mass-market gaming segment. Our view also considers the company’s track record of strong operations and sound financial management, with a robust leverage profile prior to the COVID-19 pandemic. 

Our fundamental Credit Bias on Sands China is “Negative”, as the company is still incurring an operating cash burn due to the pandemic. We expect the company’s OCF to turn positive towards FYE 2021, assuming the Macau/Mainland travel visa requirements continue to ease. That said, its FCF should remain negative in FY 2021, owing to planned capex for The Londoner Macao. Hence, we foresee that the company’s debt will increase further throughout the year. 

We view Sands China’s corporate governance as “Effective” on the LAGA scale. We believe the company is now run by professional managers, following the death of founder Sheldon Adelson. This is despite the 57% stake that his wife, Miriam Adelson, and family hold in LVSC. Related party transactions are immaterial. That said, the absence of an independent chairman is a minor negative.

CBG: Expect 2Q21 Earnings Improve QoQ

By Research Group at Country Group Securities

We reiterate our BUY rating with a higher target price of Bt165 (+5% from Previous TP) based on 35xPE’22E, the average of the Thailand energy drink stocks.

• We expect CBG to report 2Q21 net profit of Bt894m (+1%YoY, +28%QoQ) support by re-stocking products in CLMV market, solid China sales growth at triple digit growth, new functional Drink product (Woody C+ Lock Vitamin C Drink Mixed Berry) on  19 April 2021, two new alcohol products distribution in 2Q21.
• In 2H21, we expect CBG earnings to improve HoH caused by (1) Recovering sales in CLMV market, (2) Solid china sales growth, and (3) Reduction of excise tax and lower sugar costs after the company gradually adjust sugar formula by 2H21.
• Revised up 2021-22E earnings to factor in reduction of excise tax and lower sugar costs.

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