In this briefing:
- MINT’s First Post-Acquisition Update
- Dabur IN
- Dabur IN
- NIO (NIO US): Lock-Up Expiry – This Could Get Messy
- Matahari Department Store (LPPF IJ) – A Retail Conundrum
1. MINT’s First Post-Acquisition Update
We caught up with MINT and Bangkok Dec-Con today. Some highlights from the meeting:
- MINT has gained international presence following the acquisition of NH Hotels in Spain, but the first benefits is mainly coming from the top line side (34% revenue growth) rather than profit level at this stage. Having said that, NH itself has turned around significantly.
- Synergies expected through branding, loyalty programs, and cross-selling, though perhaps not all at once.
- Leverage reduction. Much has already been achieved by asset revaluation, but the next step involves sales of some selected Tivoli assets and issuance of new warrants entailing a maximum dilution of 20%.
- Bangkok Dec-Con acquired a 40% stake in Phuket water concessionaire Gold Shores in December for Bt600m. A sizable diversification, eventhough they are really growing their profits like crazy in 2018.
2. Dabur IN
This insight is jointly prepared by Nitin Mangal and Pranav Bhavsar.
Either Dabur India Ltd (DABUR IN) should change the crystal ball or those responsible for gazing at it. Going by its trajectory of strategies in the recent past, the narrative that emerges is that of confusion. Confusion has been a constant about whom Dabur perceived its competitors, its perception of the market while the disruptors reigned and what is and what should be its core strengths.
In this summary insight, we find Dabur heading to hibernation in summers. We believe this confused state of mind at Dabur will lead to lower than expected growth rates and an impact on margins. Our arguments are based on in-depth analysis of over 3 years of conference calls, past 5 year financial statements, competitors balance sheets and primary research covering different parts of the country. Our base case FY 21 EPS is 21% lower than consensus estimates and a potential aggressive case EPS is 26% lower than consensus. We argue for a 35x forward multiple giving us a target price of INR 322 for the base case and an aggressive case target price of INR 305 indicating a potential 26% & 30% downside from the latest close price of INR 437.
A Detailed Insight that includes our detailed arguments and financial forecasts can be found elsewhere here on Smartkarma using the company’s ticker.
3. Dabur IN
This insight is jointly prepared by Nitin Mangal and Pranav Bhavsar.
Either Dabur India Ltd (DABUR IN) should change the crystal ball or those responsible for gazing at it. Going by its trajectory of strategies in the recent past, the narrative that emerges is that of confusion. Confusion has been a constant about whom Dabur perceived its competitors, its perception of the market while the disruptors reigned and what is and what should be its core strengths.
In this insight, we find Dabur heading to hibernation in summers. We believe this confused state of mind at Dabur will lead to lower than expected growth rates and an impact on margins. Our arguments are based on in-depth analysis of over 3 years of conference calls, past 5 year financial statements, competitors balance sheets and primary research covering different parts of the country. Our base case FY 21 EPS is 21% lower than consensus estimates and a potential aggressive case EPS is 26% lower than consensus. We argue for a 35x forward multiple giving us a target price of INR 322 for the base case and an aggressive case target price of INR 305 indicating a potential 26% & 30% downside from the latest close price of INR 437.
How the Insight is Structured
The Insight begins with a background on Dabur’s Catch 22 Situation followed by a Brief Overviewof Dabur. We highlight the story so far and where we think is the disconnect. We discuss key takeaways from our field findings (primary research) and lay out our assumptions on how we think management will respond. We present where and how we differ from consensus and what does it mean for the stock price. We conclude the Insight by highlighting where we could be wrong along with key financials and an appendix about our primary research.
4. NIO (NIO US): Lock-Up Expiry – This Could Get Messy
Yesterday, NIO Inc (NIO US)’s share tumbled 20% on the back of poor 1Q19 guidance. NIO warned that deliveries of ES8, its electric SUV, have been sluggish so far in 2019 and scrapped plans to build its Shanghai Manufacturing Plant. NIO blamed the slump on uncertainty over government subsidies for electric vehicles, China’s slowing economy and disruption caused by the Chinese New Year holidays.
The weak guidance could not come at a worse time as its six-month lock-up period expires on 11 March 2019. We continue to remain bears on NIO and believe that the lock-up expiry will lead to further share price weakness.
5. Matahari Department Store (LPPF IJ) – A Retail Conundrum
Pt Matahari Department Store (LPPF IJ)‘s FY18 results call was an interesting combination of kitchen sinking, a cautious outlook, combined with some more optimistic strategies on specialty stores with new brands and smaller format stores for regional expansion. The big question is whether these strategies will win out or will the company continue to underwhelm on its growth prospects?
Pt Matahari Department Store (LPPF IJ) remains a market leader in its space with 159 departments stores across Indonesia selling affordable fashion to the middle classes but it has underwhelmed on a few occasions on its growth and guidance. It is reducing its dividend payout to facilitate the build-out of specialty stores with new brands on board.
Valuations do now look interesting with the company trading on 6.0x FY19E PER and 5.4x FY20E PER. It generates a forecast ROE of 70% and ROE of 30%, which is extremely high for a retailer. The question is how much analysts will downgrade and whether investors will look through its Lippo connection. After another 9% fall in the share price today after 22% yesterday, a lot does seem to have been factored in already.
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