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 Capital Markets

Budweiser Brewing  APAC  / Equity Capital Markets

Belgium based <a href="https://www.smartkarma.com/entities/anheuser-busch-inbev-sa-nv" target="_blank" data-smartkarma-citation="entities:865:1">Anheuser Busch Inbev Sa/Nv (ABI BB)</a>, the world’s largest brewer and the owner of about 500 beer brands including iconic beer brands like Budweiser, Corona and Stella Artois announced that their Asian business has filed for an IPO on the Hong Kong stock exchange under the name <a href="https://www.smartkarma.com/entities/budweiser-brewing-company-apac-limited" target="_blank" data-smartkarma-citation="entities:28077:1">Budweiser Brewing Company APAC (0338867D HK)</a>. Through this IPO, Anheuser-Busch InBev intends to sell down a minority stake of the company in an attempt to reduce a portion of its more than $100bn debt balance owing to the acquisition of SABMiller a few years ago. It is rumoured that Budweiser Brewing Company APAC Limited could potentially be valued at about $70bn. If the rumours are something to go by, with a valuation of about $70b, the IPO has the potential to be the biggest IPO on the Hong Kong stock exchange so far for this year.
<a href="https://www.smartkarma.com/entities/budweiser-brewing-company-apac-limited" target="_blank" data-smartkarma-citation="entities:28077:1">Budweiser Brewing Company APAC (0338867D HK)</a> is yet to disclose the important details relating to the listing such as the number of shares being sold, expected deal size, use of proceeds and pro-forma statements etc. However, with the limited disclosure in the admission document, Anheuser-Busch InBev’s company disclosures and with our extensive financial analysis we come to a conclusion that despite the company’s healthy fundamentals, at a rumoured valuation of around $70b Budweiser Brewing Company APAC Limited could be extremely overvalued.

Belgium based Anheuser Busch Inbev Sa/Nv (ABI BB), the world’s largest brewer and the owner of about 500 beer brands including iconic beer brands like Budweiser, Corona and Stella Artois announced that their Asian business has filed for an IPO on the Hong Kong stock exchange under the name Budweiser Brewing Company APAC (0338867D HK). Through this IPO, Anheuser-Busch InBev intends to sell down a minority stake of the company in an attempt to reduce a portion of its more than $100bn debt balance owing to the acquisition of SABMiller a few years ago. It is rumoured that Budweiser Brewing Company APAC Limited could potentially be valued at about $70bn. If the rumours are something to go by, with a valuation of about $70b, the IPO has the potential to be the biggest IPO on the Hong Kong stock exchange so far for this year.
Budweiser Brewing Company APAC (0338867D HK) is yet to disclose the important details relating to the listing such as the number of shares being sold, expected deal size, use of proceeds and pro-forma statements etc. However, with the limited disclosure in the admission document, Anheuser-Busch InBev’s company disclosures and with our extensive financial analysis we come to a conclusion that despite the company’s healthy fundamentals, at a rumoured valuation of around $70b Budweiser Brewing Company APAC Limited could be extremely overvalued. 

Strong Fundamentals: But Rumored $70b Valuation Is Beyond Our Imagination

Asia Consumer Sector Research, Investory

Devi Subhakesan

Asia Consumer Sector Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<a href="https://www.smartkarma.com/entities/28077" target="_blank" data-smartkarma-citation="entities:28077:1">Budweiser Brewing Company APAC (0338867D HK</a>), the Asia Pacific beer division of the AB InBev Group ( <a href="https://www.smartkarma.com/entities/865" target="_blank" data-smartkarma-citation="entities:865:1">Anheuser Busch Inbev Sa/Nv (ABI BB)</a> ) and the largest in the region by sales, has filed for its IPO at Hong Kong stock exchange. With a portfolio of over 50 beer brands, it is the market leader by value in China, Australia and South Korea. As for its other principal markets - India and Vietnam, it holds a position in top 3. <a href="https://www.ft.com/content/0b94b70c-7311-11e9-bf5c-6eeb837566c5" target="_blank">Reportedly</a>, <a href="https://www.smartkarma.com/entities/865" target="_blank" data-smartkarma-citation="entities:865:1">Anheuser Busch Inbev Sa/Nv (ABI BB)</a> is planning to raise around USD5bn+ and may be aiming for valuations in the range of USD65 bn, depending on market conditions to trim its USD100 bn+ debt, post the SAB-Miller acquisition. This implies an EV/EBITDA of around 22X (2018 normalized).  The IPO has undoubtedly drawn widespread investor and media attention given its discussed size/valuation;  the spotlight would be shared by the sector as well. If Budweiser's IPO gets priced at a higher range, there could be room for further sector re-rating. In the report below, we are NOT analysing the investment case for the upcoming <a href="https://www.smartkarma.com/entities/28077" target="_blank" data-smartkarma-citation="entities:28077:1">Budweiser Brewing Company APAC (0338867D HK)</a> IPO, yet. Instead we study the market with a quick overview of Asia Pacific beer market (it's not all roses as one might think), then look at each of the principal markets of Budweiser Brewing Company APAC limited for beer demand growth and consumption trends and map out the competitive scenario (listing the lead players) by country as a precursor to company analysis. Many of the lead beer players across the Asian markets are listed, but only a few are pure beer plays. We present quick data points on peer financials, valuations and stock performance as a screener for stocks with an investment case if Asian beer/spirits market gets further re-rated in the run-up to/post the upcoming <a href="https://www.smartkarma.com/entities/28077" target="_blank" data-smartkarma-citation="entities:28077:1">Budweiser Brewing Company APAC (0338867D HK</a>).

Budweiser Brewing Company APAC (0338867D HK), the Asia Pacific beer division of the AB InBev Group ( Anheuser Busch Inbev Sa/Nv (ABI BB) ) and the largest in the region by sales, has filed for its IPO at Hong Kong stock exchange. With a portfolio of over 50 beer brands, it is the market leader by value in China, Australia and South Korea. As for its other principal markets - India and Vietnam, it holds a position in top 3. Reportedly, Anheuser Busch Inbev Sa/Nv (ABI BB) is planning to raise around USD5bn+ and may be aiming for valuations in the range of USD65 bn, depending on market conditions to trim its USD100 bn+ debt, post the SAB-Miller acquisition. This implies an EV/EBITDA of around 22X (2018 normalized).  The IPO has undoubtedly drawn widespread investor and media attention given its discussed size/valuation;  the spotlight would be shared by the sector as well. If Budweiser's IPO gets priced at a higher range, there could be room for further sector re-rating. In the report below, we are NOT analysing the investment case for the upcoming Budweiser Brewing Company APAC (0338867D HK) IPO, yet. Instead we study the market with a quick overview of Asia Pacific beer market (it's not all roses as one might think), then look at each of the principal markets of Budweiser Brewing Company APAC limited for beer demand growth and consumption trends and map out the competitive scenario (listing the lead players) by country as a precursor to company analysis. Many of the lead beer players across the Asian markets are listed, but only a few are pure beer plays. We present quick data points on peer financials, valuations and stock performance as a screener for stocks with an investment case if Asian beer/spirits market gets further re-rated in the run-up to/post the upcoming Budweiser Brewing Company APAC (0338867D HK). 

Budweiser APAC IPO: Rising Tide Lifts All Boats - Beer Peers on a Valuation High

Equity Bottom-Up

In a recent news publication from the Japanese beverage company <a href="https://www.smartkarma.com/entities/16977" target="_blank" data-smartkarma-citation="entities:16977:1">Kirin Holdings (2503 JP)</a>, it was reported that the company entered into an agreement to sell its subsidiary Lion Pty Limited’s (Lion) speciality cheese segment to the Canadian dairy giant Saputo for $196.9m. It is a part of a sell down which Kirin initiated last October when the company decided to sell its Lion-Dairy and Drinks business (LDD) business of the Australian subsidiary Lion.
Lion Dairy and Drinks Business
The business was founded in 1960 and it mainly focuses on the production and distribution of fresh dairy food, fruit juices, soy milk products, cheese, yoghurts, dairy desserts and creams, flavoured and modified fresh and ultra-high-temperature (UHT) milk products. LDD became a part of Kirin in 2007 as Kirin acquired LDD for USD2.6bn (JPY294bn)
Saputo Inc.
The Canadian dairy company Saputo is one of the top 10 dairy manufacturers in the world and it is engaged in the production and distribution of dairy products such as cheese, fluid milk, extended shelf-life milk and cream products, cultured products and other dairy ingredients.

In a recent news publication from the Japanese beverage company Kirin Holdings (2503 JP), it was reported that the company entered into an agreement to sell its subsidiary Lion Pty Limited’s (Lion) speciality cheese segment to the Canadian dairy giant Saputo for $196.9m. It is a part of a sell down which Kirin initiated last October when the company decided to sell its Lion-Dairy and Drinks business (LDD) business of the Australian subsidiary Lion.
Lion Dairy and Drinks Business
The business was founded in 1960 and it mainly focuses on the production and distribution of fresh dairy food, fruit juices, soy milk products, cheese, yoghurts, dairy desserts and creams, flavoured and modified fresh and ultra-high-temperature (UHT) milk products. LDD became a part of Kirin in 2007 as Kirin acquired LDD for USD2.6bn (JPY294bn)
Saputo Inc.
The Canadian dairy company Saputo is one of the top 10 dairy manufacturers in the world and it is engaged in the production and distribution of dairy products such as cheese, fluid milk, extended shelf-life milk and cream products, cultured products and other dairy ingredients.

Second Overseas Business Disposal for Kirin in Two Years: Lion to Sell Its Specialty Cheese Business

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/034/original/2018-08-16_19-07-34.png?1534672507" class="editor-image img-responsive" data-smartkarma-image-id="61034"></figure><div class="content-caption">Source: Japan Analytics</div>A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our '<a href="https://www.smartkarma.com/insights/japan-most-overbought-most-oversold-the-relative-price-score" target="_blank" data-smartkarma-citation="insights:21149">Nifty 50</a>' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.<div class="content-highlight">MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.</div>SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post [6178 JP</a>]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.<div class="content-highlight">
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
</div>SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.<div class="content-highlight">
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
</div>TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/038/original/2018-08-19_19-33-03.png?1534674804" class="editor-image img-responsive" data-smartkarma-image-id="61038"></figure>

Source: Japan AnalyticsA GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our 'Nifty 50' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is Japan Post [6178 JP]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

GOOD RESULTS/WEAK MARKET - It may just be because the ‘Obon’ holidays start next week, but the Japanese equity market has greeted the seventh straight quarter of improved earnings results with a ‘raspberry’. Almost all of the previous two week's gains have been unwound; the 50-day moving average has been breached on the downside and volumes have continued to grind lower. The Market Composite trailing-twelve-month (TTM) PE is now just 14.2x and the lowest level of the soon-to-be-extended ‘era’ of…

GOOD RESULTS/WEAK MARKET - It may just be because the ‘Obon’ holidays start next week, but the Japanese equity market has greeted the seventh straight quarter of improved earnings results with a ‘raspberry’. Almost all of the previous two week's gains have been unwound; the 50-day moving average has been breached on the downside and volumes have continued to grind lower. The Market Composite trailing-twelve-month (TTM) PE is now just 14.2x and the lowest level of the soon-to-be-extended ‘era’ of…

Japan Fortnightly Update: Market PE at ‘Abe-Era’ Low

Japan

Asahi Group Holdings, Ltd. produces beer and other beverages including non-alcoholic drinks. The Company sells its products in Japan and overseas.

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Asahi Group Holdings (2502 JP)

Strong Fundamentals: But Rumored $70b Valuation Is Beyond Our Imagination

Belgium based Anheuser Busch Inbev Sa/Nv (ABI BB), the world’s largest brewer and the owner of about 500 beer brands including iconic beer brands...

Oshadhi Kumarasiri

Budweiser APAC IPO: Rising Tide Lifts All Boats - Beer Peers on a Valuation High

Budweiser Brewing Company APAC (0338867D HK), the Asia Pacific beer division of the AB InBev Group ( Anheuser Busch Inbev Sa/Nv (ABI BB) ) and the...

Devi Subhakesan

Second Overseas Business Disposal for Kirin in Two Years: Lion to Sell Its Specialty Cheese Business

In a recent news publication from the Japanese beverage company Kirin Holdings (2503 JP), it was reported that the company entered into an...

Oshadhi Kumarasiri

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in...

Campbell Gunn

Japan Fortnightly Update: Market PE at ‘Abe-Era’ Low

GOOD RESULTS/WEAK MARKET - It may just be because the ‘Obon’ holidays start next week, but the Japanese equity market has greeted the seventh...

Campbell Gunn

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