IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Blue Moon Group Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/guangzhou-blue-moon-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:29179:1" rel="noopener">Blue Moon Group Holdings (BMG HK)</a> is a leading consumer household care company in China. In 2019, Blue Moon ranked first in China’s liquid laundry detergent market, concentrated liquid laundry detergent market and liquid soap market as measured by retail sales value, with a market share of 24.4%, 27.9% and 17.4%, respectively, according to Frost &amp; Sullivan. Blue Moon has filed its PHIP and is pre-marketing for a Hong Kong IPO to raise $1 billion, according to press reports.<div class="content-highlight">In <a href="https://www.smartkarma.com/insights/blue-moon-ipo-initiation-laundry-list" target="_blank" data-smartkarma-citation="insights:41086" rel="noopener">Blue Moon IPO Initiation: Laundry List</a>, we stated that on balance we think the positives (market-leading brand, strong margin progression, solid cash generation) outweigh the negatives (declining revenue growth and short-term COVID-19 impact). The 1H20 results disclosed in the PHIP show that the Blue Moon has creditably navigated the adverse revenue decline on its core business due to the COVID-19 outbreak by improving margin and cash generation. With the impact of the COVID-19 outbreak gradually receding in China, Blue Moon has strong fundamentals to ride a recovery in demand for its core fabric care products. Overall, we continue to believe that Blue Moon’s fundamentals are attractive.</div>

Blue Moon Group Holdings (BMG HK) is a leading consumer household care company in China. In 2019, Blue Moon ranked first in China’s liquid laundry detergent market, concentrated liquid laundry detergent market and liquid soap market as measured by retail sales value, with a market share of 24.4%, 27.9% and 17.4%, respectively, according to Frost &amp; Sullivan. Blue Moon has filed its PHIP and is pre-marketing for a Hong Kong IPO to raise $1 billion, according to press reports.In Blue Moon IPO Initiation: Laundry List, we stated that on balance we think the positives (market-leading brand, strong margin progression, solid cash generation) outweigh the negatives (declining revenue growth and short-term COVID-19 impact). The 1H20 results disclosed in the PHIP show that the Blue Moon has creditably navigated the adverse revenue decline on its core business due to the COVID-19 outbreak by improving margin and cash generation. With the impact of the COVID-19 outbreak gradually receding in China, Blue Moon has strong fundamentals to ride a recovery in demand for its core fabric care products. Overall, we continue to believe that Blue Moon’s fundamentals are attractive.

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

Kao is a well-known Japanese conglomerate involved in various business activities ranging from FMCG products to chemicals. The company operates in five main segments which include the cosmetics business, hair care and skin care business, human health care business, fabric and home care business and the chemical business. The human health care segment is a key segment for Kao as it accounted for an average of 18.4% and 16.4% of Kao’s revenues and operating profits respectively in the past five years. The human health care business segment is centred around two main brands, the Merries diapers and Laurier sanitary napkins. Merries diapers account for about 50% of segment’s revenues and it is one of the biggest brands at Kao’s disposal. The main markets for Merries diapers include China, Japan and Indonesia. However, the company believes that about 50% of its sales in Japan are taken back to China to resell through unofficial e-commerce channels.

Kao is a well-known Japanese conglomerate involved in various business activities ranging from FMCG products to chemicals. The company operates in five main segments which include the cosmetics business, hair care and skin care business, human health care business, fabric and home care business and the chemical business. The human health care segment is a key segment for Kao as it accounted for an average of 18.4% and 16.4% of Kao’s revenues and operating profits respectively in the past five years. The human health care business segment is centred around two main brands, the Merries diapers and Laurier sanitary napkins. Merries diapers account for about 50% of segment’s revenues and it is one of the biggest brands at Kao’s disposal. The main markets for Merries diapers include China, Japan and Indonesia. However, the company believes that about 50% of its sales in Japan are taken back to China to resell through unofficial e-commerce channels.

Merries Baby Diaper Business: Struggles to Continue Despite Company Remarks a Quick Turnaround

Chacko Jacob

<a href="https://www.smartkarma.com/entities/6246" target="_blank" data-smartkarma-citation="entities:6246:1">Unicharm Corp (8113 JP)</a> is a Japanese consumer goods company that manufactures hygiene products for adults and infants. The company has a presence in 18 countries globally and is the market leader in Asia for baby and feminine products. Unicharm's overseas segment currently accounts for 60% of consolidated revenue and continues to buoy its growth story. In this report, we take a look at the Unicharm's operations and strategy in India and China specifically. We also look at the company's valuation which, at current levels, we think might have already priced in future growth and appears overvalued. The stock has already retreated 13% since touching the overbought line in September 2018 and could drop further.

Unicharm Corp (8113 JP) is a Japanese consumer goods company that manufactures hygiene products for adults and infants. The company has a presence in 18 countries globally and is the market leader in Asia for baby and feminine products. Unicharm's overseas segment currently accounts for 60% of consolidated revenue and continues to buoy its growth story. In this report, we take a look at the Unicharm's operations and strategy in India and China specifically. We also look at the company's valuation which, at current levels, we think might have already priced in future growth and appears overvalued. The stock has already retreated 13% since touching the overbought line in September 2018 and could drop further.

Unicharm (8113 JP): High Valuation Overshadows Steady Growth Story

Director | Exposing Creative Accounting, Bucephalus Research Partnership

Robert Medd

Director | Exposing Creative Accounting

Exposing Creative Accounting

Bucephalus Research Partnership

Bucephalus Research Partnership Limited. Exposing Creative Accounting.

At the Bucephalus Research Partnership (BRP) we analyse financial statements using our accountant's practical experience and our own quantitative algorithms for corporate governance, accounting risk and peer performance.

Our thematic research refines our unique algorithms while our single stock research focuses on examples where we discover a significant gap between published accounts and business reality.

​Bucephalus Research Partnership:
- Is an independent fee-based research service
- Does not take proprietary positions, long or short
- Does not solicit business or fees from the corporates we review

Forensic Accounting

Vinda International / Forensic Accounting

In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to improve returns across the group. Historically, management prioritised growth over margins and the stock underperformed. Changing the incentives should change the outcomes.Their overall Governance, Accounting risk and Peer performance score, 104, is unexceptional. We worry about their payables, leverage and the fixed margin related party contracts…

In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to improve returns across the group. Historically, management prioritised growth over margins and the stock underperformed. Changing the incentives should change the outcomes.Their overall Governance, Accounting risk and Peer performance score, 104, is unexceptional. We worry about their payables, leverage and the fixed margin related party contracts…

Buy Vinda (3331 HK): New Incentives, Leverage & Margins - Target HK$25.2 (Up 80%+)

Hengan International Group / Forensic Accounting

We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business performance is unsustainable.The overall Governance, Accounting risk and Performance score of 119 is not very bad, but the aggregate hides extreme scores for debt churn, margins and leverage.With limited revenue growth, the stock’s premium valuation relies on its high margins. If they prove to be unsustainable, investors could be in for a shock.…

We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business performance is unsustainable.The overall Governance, Accounting risk and Performance score of 119 is not very bad, but the aggregate hides extreme scores for debt churn, margins and leverage.With limited revenue growth, the stock’s premium valuation relies on its high margins. If they prove to be unsustainable, investors could be in for a shock.…

Sell Hengan (1044 HK): Relationships, Churn & Margin Pressure. Target HK$38 (Down 50%)

United States

Kimberly-Clark Corporation is a global health and hygiene company that manufactures and provides consumer products. The Company's products include diapers, tissues, paper towels, incontinence care products, surgical gowns, and disposable face masks.  Kimberly-Clark's products are sold in countries around the world.

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Kimberly Clark (KMB US)

Blue Moon IPO: Doing the Wash

Blue Moon is pre-marketing for an HK IPO to raise $1 billion. With the impact of the COVID-19 outbreak receding, Blue Moon has strong fundamentals...

Arun George

Merries Baby Diaper Business: Struggles to Continue Despite Company Remarks a Quick Turnaround

Kao is a well-known Japanese conglomerate involved in various business activities ranging from FMCG products to chemicals. The company operates in...

Oshadhi Kumarasiri

Unicharm (8113 JP): High Valuation Overshadows Steady Growth Story

Unicharm Corp (8113 JP) is a Japanese consumer goods company that manufactures hygiene products for adults and infants. The company has a presence...

Chacko Jacob

Buy Vinda (3331 HK): New Incentives, Leverage & Margins - Target HK$25.2 (Up 80%+)

In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to...

Bucephalus Research Partnership

Sell Hengan (1044 HK): Relationships, Churn & Margin Pressure. Target HK$38 (Down 50%)

We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business...

Bucephalus Research Partnership

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