Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

Philip Morris International / Equity Capital Markets

<ul><li>Philip Morris delivered a solid performance in the second quarter of 2021 which was driven by the continued strong growth of IQOS.</li><li>This alone made up 13% of their volumes and approximately 30% of their adjusted net revenues compared to 24% in the same quarter of 2020.</li><li>The combustible net revenues increased by 4% in the second quarter on an organic basis, reflecting a partial volume rebound compared to the weak performance in 2020 which was largely impacted by the Covid-19 pandemic.</li></ul>

Philip Morris delivered a solid performance in the second quarter of 2021 which was driven by the continued strong growth of IQOS.This alone made up 13% of their volumes and approximately 30% of their adjusted net revenues compared to 24% in the same quarter of 2020.The combustible net revenues increased by 4% in the second quarter on an organic basis, reflecting a partial volume rebound compared to the weak performance in 2020 which was largely impacted by the Covid-19 pandemic.

Philip Morris International Inc. - Investment Thesis

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

Allocations in Consumer Staples stocks are at decade-long lows.  Average fund weights among active Global managers stand at 7.65% following an aggressive slump after the onset of COVID-19 in early 2020.The spread between Consumer Discretionary weights and Consumer Staples weights in active Global portfolios is close to it's all-time wides, but is turning lower after peaking in April this this year.What stands out in our data is the cutting back of Consumer Staples allocations by Growth investors, with a number of high profile stocks cut from Aggressive Growth portfolios since last 2019 (<a href="https://www.smartkarma.com/entities/reckitt-benckiser-group-plc" target="_blank" data-smartkarma-citation="entities:22105:1" rel="noopener">Reckitt Benckiser (RB/ LN)</a>, <a href="https://www.smartkarma.com/entities/colgate-palmolive-co" target="_blank" data-smartkarma-citation="entities:15093:1" rel="noopener">Colgate Palmolive Co (CL US),</a><a href="https://www.smartkarma.com/entities/anheuser-busch-inbev-sa-nv" target="_blank" data-smartkarma-citation="entities:865:1" rel="noopener">Anheuser Busch Inbev Sa/Nv (ABI BB)</a> )For the Consumer Staples sector to see a turnaround, perhaps growth, or at least the perception of growth needs to return for these investors.

Allocations in Consumer Staples stocks are at decade-long lows.  Average fund weights among active Global managers stand at 7.65% following an aggressive slump after the onset of COVID-19 in early 2020.The spread between Consumer Discretionary weights and Consumer Staples weights in active Global portfolios is close to it's all-time wides, but is turning lower after peaking in April this this year.What stands out in our data is the cutting back of Consumer Staples allocations by Growth investors, with a number of high profile stocks cut from Aggressive Growth portfolios since last 2019 (Reckitt Benckiser (RB/ LN), Colgate Palmolive Co (CL US),Anheuser Busch Inbev Sa/Nv (ABI BB) )For the Consumer Staples sector to see a turnaround, perhaps growth, or at least the perception of growth needs to return for these investors.

Global Consumer Staples: Allocations at Rock Bottom as Growth Investors Flee

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>After a lengthy period of weakness which saw shares decline more than 62% to ¥1,812 per share by June 2020, <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a> seems to have turned a corner with the share price trending upwards (for a considerable period) for the first time in a 5-6 year time period.</li>
<li>JT’s valuation looks cheap and we think that there is potential for multiple expansion alongside a dividend hike and strong OP performance in the second half of the year.</li>
</ul>
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After a lengthy period of weakness which saw shares decline more than 62% to ¥1,812 per share by June 2020, Japan Tobacco (2914 JP) seems to have turned a corner with the share price trending upwards (for a considerable period) for the first time in a 5-6 year time period.
JT’s valuation looks cheap and we think that there is potential for multiple expansion alongside a dividend hike and strong OP performance in the second half of the year.



European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

As per <a href="https://www.reuters.com/world/uk/philip-morris-lifts-bid-uks-vectura-165-pence-per-share-2021-08-08/" target="_blank" rel="noopener">Reuters</a>, on 8 August <a href="https://www.smartkarma.com/entities/philip-morris-international" target="_blank" data-smartkarma-citation="entities:13328:1" rel="noopener">Philip Morris International (PM US)</a> raised its bid for <a href="https://www.smartkarma.com/entities/vectura-group-plc" target="_blank" data-smartkarma-citation="entities:22201:1" rel="noopener">Vectura (VEC LN)</a> to 165p/share, c. 6.5% higher than the last recommended 155p/share bid on 6 August by Murano Bidco (Carlyle).
The improved bid by Philip Morris is c. 2.5% above the TP in my last insight, and represents 17.3x EV/Fwd EBITDA. It reflects a full price, in my view. Vectura has strategic value for Philip Morris "PMI intends to operate Vectura as an autonomous business unit that will form the backbone of its inhaled therapeutics business".
My new TP is 165p, as I believe that the Board of Vectura will withdraw the recommendation issued for the last Carlyle offer and will recommend the last offer by Philip Morris, which is determined to win. On this basis, I reiterate long VEC LN. Gross spread is 0.6%, with limited downside, in my view.
Shares of Vectura may increase over the last offer by Philip Morris upon market opening on 9 August.

As per Reuters, on 8 August Philip Morris International (PM US) raised its bid for Vectura (VEC LN) to 165p/share, c. 6.5% higher than the last recommended 155p/share bid on 6 August by Murano Bidco (Carlyle).
The improved bid by Philip Morris is c. 2.5% above the TP in my last insight, and represents 17.3x EV/Fwd EBITDA. It reflects a full price, in my view. Vectura has strategic value for Philip Morris "PMI intends to operate Vectura as an autonomous business unit that will form the backbone of its inhaled therapeutics business".
My new TP is 165p, as I believe that the Board of Vectura will withdraw the recommendation issued for the last Carlyle offer and will recommend the last offer by Philip Morris, which is determined to win. On this basis, I reiterate long VEC LN. Gross spread is 0.6%, with limited downside, in my view.
Shares of Vectura may increase over the last offer by Philip Morris upon market opening on 9 August. 

On 9 July, <a href="https://www.smartkarma.com/entities/philip-morris-international" target="_blank" data-smartkarma-citation="entities:13328:1" rel="noopener">Philip Morris International (PM US)</a> agreed to acquire <a href="https://www.smartkarma.com/entities/vectura-group-plc" target="_blank" data-smartkarma-citation="entities:22201:1" rel="noopener">Vectura (VEC LN)</a> for 150p/share, approximately £918 mn via a scheme of arrangement.
<ul class="">
<li>This is a 10.3% increase over Carlyle's offer and 3.4% above my TP ex-dividend.</li>
<li>In my prior insight <a href="https://www.smartkarma.com/insights/carlyle-vectura-group-expectations-of-a-sweetened-bid" target="_blank" data-smartkarma-citation="insights:52066" rel="noopener">Carlyle/Vectura Group: Expectations of a Sweetened Bid</a>, I mentioned the market expected a sweetened bid.</li>
<li>Vectura paid a 19p dividend on 11 June.</li>
</ul>
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Philip Morris is expanding into products beyond tobacco and nicotine, as part of a natural evolution into a broader healthcare and wellness company. In February 2021, it announced its ambition to generate at least $1 bn in annual net revenues from Beyond Nicotine products by 2025 and identified respiratory drug delivery and self-care wellness as a key focus, for which it is expanding its capabilities in inhaled and oral product formulations.
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The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings convened for 12 July 2021.
The market expects a raised offer by Carlyle, which seeks to scale Vectura's business. At the same time, Vectura is strategic in the new quest of Philip Morris.
New TP (comps based) of 161p ($2.24). This is 7% above Philip Morris's offer, and 3.9% over the closing share price of 9 July.
Recommendation is long VEC LN.

On 9 July, Philip Morris International (PM US) agreed to acquire Vectura (VEC LN) for 150p/share, approximately £918 mn via a scheme of arrangement.

This is a 10.3% increase over Carlyle's offer and 3.4% above my TP ex-dividend.
In my prior insight Carlyle/Vectura Group: Expectations of a Sweetened Bid, I mentioned the market expected a sweetened bid.
Vectura paid a 19p dividend on 11 June.




Philip Morris is expanding into products beyond tobacco and nicotine, as part of a natural evolution into a broader healthcare and wellness company. In February 2021, it announced its ambition to generate at least $1 bn in annual net revenues from Beyond Nicotine products by 2025 and identified respiratory drug delivery and self-care wellness as a key focus, for which it is expanding its capabilities in inhaled and oral product formulations.



The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings convened for 12 July 2021.
The market expects a raised offer by Carlyle, which seeks to scale Vectura's business. At the same time, Vectura is strategic in the new quest of Philip Morris.
New TP (comps based) of 161p ($2.24). This is 7% above Philip Morris's offer, and 3.9% over the closing share price of 9 July.
Recommendation is long VEC LN.

Philip Morris Outbids Carlyle in Healthcare Push

United States

Philip Morris International Inc., through its subsidiaries, affiliates and their licensees, produces, sells, distributes, and markets a wide range of branded cigarettes and tobacco products in markets outside of the United States of America.  The Company's portfolio comprises both international and local brands.

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Philip Morris International (PM US)

Philip Morris International Inc. - Investment Thesis

Philip Morris delivered a solid performance in the second quarter of 2021 which was driven by the continued strong growth of IQOS. This alone made...

Baptista Research

Global Consumer Staples: Allocations at Rock Bottom as Growth Investors Flee

Allocations in Consumer Staples stocks are at decade-long lows. Average fund weights among active Global managers stand at 7.65% following an...

Steven Holden

Japan Tobacco: Turning a Corner

After a lengthy period of weakness which saw shares decline more than 62% by June 2020, JT seems to have turned a corner with the share price...

Oshadhi Kumarasiri

Race for Vectura Continues

New TP is 165p. I believe the Board of Vectura will withdraw the recommendation for last Carlyle offer and will recommend Philip Morris's....

Jesus Rodriguez Aguilar

Philip Morris Outbids Carlyle in Healthcare Push

The market expects a raised offer by Carlyle, which seeks to scale Vectura's business. But Vectura is strategic in the new quest of Philip Morris....

Jesus Rodriguez Aguilar

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