Daily Consumer: Orion Holdco Trade: Current Status & Trade Approach and more

In this briefing:

1. Orion Holdco Trade: Current Status & Trade Approach
2. Nexen Holdco Trade: Quick Reversion on Yesterday’s 2σ Price Divergence
3. U.S. Equity Strategy: Has “the Pullback” Begun?
4. New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside
5. Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets

1. Orion Holdco Trade: Current Status & Trade Approach

• Orion sub is now falling 6% this morning. Holdco is currently down only 1.6%. They are currently above +2.2σ on a 20D MA. This is a 120D high. Price ratio wise, they are at 0.16549. This is a little above 120D mean. Holdco discount is now 50% to NAV.
• Sub’s 6% fall this morning should be due to the market speculation that 4Q numbers may be worse than expected. But there are still more signals of improving fundamentals going forward. Weaker 4Q numbers do not indicate that Sub is entering a dull cycle business wise.
• Current +2.2σ on a 20D MA is something rare to see. It should be rare even if we look much beyond 120 days. Given the market’s favorable sentiments on Sub’s mid-term outlook, current +2.2σ should be  held here and reverted pretty soon. I’d go long Sub and short Holdco until +0~0.5σ.

2. Nexen Holdco Trade: Quick Reversion on Yesterday’s 2σ Price Divergence

• Nexen Sub made a run yesterday. It climbed 6% yesterday. Holdco stayed flat with a 0.34% gain. This created a huge price divergence. The duo made nearly 2σ gap in one single day. They are now slightly below -1σ on a 20D MA. Holdco discount is 46% to NAV.
• This much divergence in a single day is very rare for the Nexen duo. Sub’s stronger 4Q numbers should have been already priced in. Yesterday was more of a sentimental boost, thanks to HMG. Short-term wise, further price pushing up on Sub is unlikely.
• The duo is well below 120D mean and 2Y mean on a 20D MA price ratio. Price divergence should be held back at the current level. I’d go for a quick reversion in favor of Holdco. Just, Holdco liquidity can be a major issue to many of us here.

3. U.S. Equity Strategy: Has “the Pullback” Begun?

The weight of the evidence suggests that the pullback has begun. This belief is supported by overbought conditions combined with the S&P 500, MSCI ACWI, and nearly all Sectors hitting logical resistance. Assuming the pullback continues, the next question is how deep or damaging will it be? In this report we highlight various market/technical indicators we are monitoring, as well as pointing out attractive set ups within Consumer Discretionary and Health Care Sectors.

4. New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside

• The record net losses were mainly due to a seasonally weak quarter and recognition of the impairment in a subsidiary.
• Q2 revenues did not slow down and management does not believe Q3 revenues will slow down.
• EDU will not be negatively impacted by the new law from the Ministry of Education.
• The P/E band suggests an upside of 27% and a price target of USD90.

5. Meet, Beat or Miss Q4 Estimates, Both Las Vegas Sands and Sands China Are Solid Bets

• LVS shot at Japan license enhanced by his role in lobbying US Justice Department’s reverse opinion on online gambling published last week. Read why in this insight.
• Owning Sands China makes a strong case based on an ROCE analysis vs. the hospitality sector.
• Owning both at current trade is one of the screaming bargains in the entire sector