ConsumerDaily Briefs

Consumer: Nayuki Holdings, giftee Inc, China Tourism Group Duty Free Corp Ltd, Chongqing Changan Automobile-A, MercadoLibre Inc, Sun Tv Network and more

In today’s briefing:

  • Nayuki Holdings IPO: Valuation First-Look
  • Japan Small Cap Growth: Giftee (4449) – Q1 Wrap
  • CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO
  • Nayuki IPO: Not Our Cup of Tea
  • Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price
  • MercadoLibre:  The Jewel in the Latam Crown
  • Sharp cost savings in a weak environment aid earnings

Nayuki Holdings IPO: Valuation First-Look

By Arun George

Nayuki Holdings (NYK HK) is the second-largest premium teahouse chain in China accounting for 18.9% of China’s premium modern teahouse market as measured by total retail consumption value in 2020, according to CIC. It is pre-marketing an HKEx IPO to raise up to $500 million, according to press reports.

In Nayuki Holdings IPO Initiation: A New Leaf, we noted that premium teahouses have rapidly gained popularity in China as they bring new tea-drinking experiences and benefit from the structural trend of consumer’s consumption upgrades driven by higher disposable income. We opined that Nayuki has the right ingredients to offer investors an attractive play on this market.

In Nayuki Holdings IPO: Drinking Habits, we noted that recent results (disclosed in the PHIP) show that Nayuki is well-positioned as a post-COVID-19 recovery play. In this note, we take the first look at Nayuki’s potential valuation. 


Japan Small Cap Growth: Giftee (4449) – Q1 Wrap

By Mark Chadwick

  • Giftee’s stock price rose 20 percent after strong 1Q results were announced in mid-May. Since then, the stock has fallen back to its 200-day moving average. Now is a good time to revisit the name
  • Giftee for Business remains the primary revenue generator as record numbers of companies join the platform, resulting in a 50% growth in the number of marketing campaigns. 
  • Giftee is a leading distributor of e-gifts for individuals, corporations, and local governments in Japan. As offline activities move online, e-gifts are likely to see continued growth.  

CTG Duty Free (601888 CH): Latest Updates and Moving Ahead on H-Share IPO

By Osbert Tang, CFA

We believe China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) will maintain its solid sales momentum in 2Q21, given the positive Hainan duty free sales figures (estimated monthly average of Rmb5bn in Apr and May) as released by the Department of Commerce and good tourist arrival trend in Apr (-1.3% MoM, vs. -13.1% MoM in Apr 2019). We also project an EPS CAGR of 49.2% between FY20 and FY23 with ROE of over 40% consistently.

CTG Duty Free’s Board has approved its proposed H-share issue, with new shares to be issued amounting to 9.2% of existing capital (including greenshoe). We estimate that the issue may raise HK$47-66bn, making it one of the largest IPOs in Hong Kong in this year.  In our view, the stock should attract good interests given its unique consumption exposure, leadership position and sizeable market capitalisation. 


Nayuki IPO: Not Our Cup of Tea

By Oshadhi Kumarasiri

We have a different take on the Nayuki Holdings (NYK HK) IPO to some of the other insight providers on the Smartkarma platform. We think Nayuki is trying to raise money through an IPO just as it approaches the tail end of the bubble tea and fruit tea growth trends that started in 2014-15. We also think that bubble tea and fruit tea lack the ability to encourage consumers to make regular purchases, making them less profitable than coffee, which encourages consumers to walk into coffee shops daily.


Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price

By Victoria Li

We believe Chongqing Changan’s share price has overshot compared to its fundamental outlook. Its local brand contributed first positive operating profit in 1Q2021, which is exciting. However its 24x.3 P/E on 2021E Bloomberg consensus has fully priced in this positive. 

Current valuation may also have priced in positive effect from Changan’s planned brand new EV model with HI(Huawei Inside) system, which is still at very initial stage; and possible IPOs of Avetar Technology (previously known as Changan NIO) and Changan New Energy, whose business plans are still very blurry.

Fundamentally, earnings outlook for Changan Ford, Chongqing Changan’s key earnings contributor, is unclear. Changan Ford’s Acceleration plan started in 2019 would not be able to bring this company’s earnings back to a reasonable level by the end of 2021. While its outlook for the next three years is unclear after latest leadership change.


MercadoLibre:  The Jewel in the Latam Crown

By Steven Holden

MercadoLibre Inc (MELI US) is the most widely held stock in the South American region among active Global managers. 

Though the majority of funds hold less than 1% in MercadoLibre Inc (MELI US) , there are those who hold significantly more, led by Loomis Sayles Global Growth (5.34%) and MFAM Global Opportunities (5.23%).  

The trajectory of ownership growth is tracking a similar path to stocks such as Facebook Inc A (FB US) , Tencent (700 HK) and Alibaba Group (BABA US), who were at a similar point to MercadoLibre Inc (MELI US) some 5-6 years ago.  If the path of returns follows any one of those 3 stocks, then MercadoLibre Inc (MELI US) is one to hold.

Taken from our Global fund research, covering 378 strategies with AUM of $1.1tr.


Sharp cost savings in a weak environment aid earnings

By Motilal Oswal

Production costs were up 23% YoY on the low base of 4QFY20. However, tight cost measures in employee/SG&A; (down 8%/17%) kept the overall operating cost flattish (up just 1.5%). EBITDA subsequently improved 9% YoY to INR5.5b (in-line); EBITDA margins stood at 69.9% (up 140bps YoY). Net profits were flattish (up 2% YoY) at INR4.5b (6% above estimate) on…

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