Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

We continue to see a mixed market, and weak market dynamics lead us to be cautious. One of the primary issues is weak breadth; the large-cap indexes (S&amp;P 500 and Nasdaq) remain bullish despite being held up by a relatively small number of mega-cap growth stocks, a condition that can persist for weeks or months. Ultimately, as long as there continues to be an absence of breakdowns at the index and Sector level we remain constructive overall.

We continue to see a mixed market, and weak market dynamics lead us to be cautious. One of the primary issues is weak breadth; the large-cap indexes (S&amp;P 500 and Nasdaq) remain bullish despite being held up by a relatively small number of mega-cap growth stocks, a condition that can persist for weeks or months. Ultimately, as long as there continues to be an absence of breakdowns at the index and Sector level we remain constructive overall.

U.S. Equity Strategy: Cautious Overall; Favor Large-Caps & Growth; Key Supports Holding In The U.S.

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Bottom-Up

Q2 earnings combined with our ongoing checks into merchandisers lead us to believe that <a href="https://www.smartkarma.com/entities/baozun-inc" target="_blank" data-smartkarma-citation="entities:24184:1" rel="noopener">Baozun Inc. (BZUN US)</a> is using its balance sheet to finance customer inventory thus sacrificing cash flow to support earnings. At the same time, the addressable market for BZUN is shrinking as brand retailers take back their eCommerce operations as they have learned the ropes of running online stores.  All develop into following short thesis. <ol>
<li>Brand Operation SVP Departure to Join Topsports, Subsidiary of Belle and Competition to BZUN</li>
<li>Rising Debt to Finance Working Capital, Margin Expansion Reversed</li>
<li>Client Disintermediation</li>
</ol>Last but not least,<ol start="4"><li>CFO’s Consistently broken track record</li></ol>

Q2 earnings combined with our ongoing checks into merchandisers lead us to believe that Baozun Inc. (BZUN US) is using its balance sheet to finance customer inventory thus sacrificing cash flow to support earnings. At the same time, the addressable market for BZUN is shrinking as brand retailers take back their eCommerce operations as they have learned the ropes of running online stores.  All develop into following short thesis. 
Brand Operation SVP Departure to Join Topsports, Subsidiary of Belle and Competition to BZUN
Rising Debt to Finance Working Capital, Margin Expansion Reversed
Client Disintermediation
Last but not least,CFO’s Consistently broken track record

Baozun (NEGATIVE) Competition from Belle’s TopSports; Q2 Margin Miss; CFO’s Broken Record

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

Topsports International Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (TOP HK)</a> is the sportswear division of Belle International. Topsports is the largest sportswear retailer in China as measured by retail sales value, with a 15.9% market share in 2018, according to Frost &amp; Sullivan. Topsports has filed for a Hong Kong IPO to raise potentially $1 billion.<div class="content-highlight">With enviable exposure to two of the largest global sportswear brands and one of the largest sportswear markets in the world, Topsports looks well positioned to benefit from consumers embracing the latest healthy lifestyles, increased sports participation rates and supportive Government policies in China. Overall, we believe that Topsport’s fundamentals offer more positives than negatives.</div>

Topsports International (TOP HK) is the sportswear division of Belle International. Topsports is the largest sportswear retailer in China as measured by retail sales value, with a 15.9% market share in 2018, according to Frost &amp; Sullivan. Topsports has filed for a Hong Kong IPO to raise potentially $1 billion.With enviable exposure to two of the largest global sportswear brands and one of the largest sportswear markets in the world, Topsports looks well positioned to benefit from consumers embracing the latest healthy lifestyles, increased sports participation rates and supportive Government policies in China. Overall, we believe that Topsport’s fundamentals offer more positives than negatives.

Topsports International IPO Initiation: No Sweat

Our negative view on <a href="https://www.smartkarma.com/entities/24184" target="_blank" data-smartkarma-citation="entities:24184:1">Baozun Inc. (BZUN US)</a> stems from the company’s declining profit margin due to eroding pricing power to key customers, and chronic negative cash flow despite robust GMV growth.  The root cause of the problem is the strengthening of bargaining power from its key existing clients, as they demand fixed fees, rather than GMV based commission fees as online sales increases.  Many service contracts are renewable each year, and we see a weakening pricing trend as well as a bloated balance sheet as its distribution business re-accelerates growth.  An increasing distribution business sales mix implies rising inventory, which adds strain to working capital.   Unsurprisingly, on April 4th Baozun announced a convertible debt offering of $225M due in 2024, to primarily fund its working capital.

Our negative view on Baozun Inc. (BZUN US) stems from the company’s declining profit margin due to eroding pricing power to key customers, and chronic negative cash flow despite robust GMV growth.  The root cause of the problem is the strengthening of bargaining power from its key existing clients, as they demand fixed fees, rather than GMV based commission fees as online sales increases.  Many service contracts are renewable each year, and we see a weakening pricing trend as well as a bloated balance sheet as its distribution business re-accelerates growth.  An increasing distribution business sales mix implies rising inventory, which adds strain to working capital.   Unsurprisingly, on April 4th Baozun announced a convertible debt offering of $225M due in 2024, to primarily fund its working capital.

BZUN Q1 Preview: Eroding GMV Quality, Margin Squeeze by Top Customers

Event-Driven

A consortium led by <a href="https://www.smartkarma.com/entities/10261" target="_blank" data-smartkarma-citation="entities:10261:1">Anta Sports Products (2020 HK)</a> launched a recommended public cash tender offer for <a href="https://www.smartkarma.com/entities/21751" target="_blank" data-smartkarma-citation="entities:21751:1">Amer Sports Oyj (AMEAS FH)</a> last Friday. The tender offer of €40 per share values Amer Sports at an EV of €5.5 billion. The proposed acquisition would be the largest outbound deal into Europe by a Chinese company in 2018. If successful, the deal would mark the culmination of a multi-month negotiation that has seen Amer Sports resist the advances of ANTA Sports as it preferred to stay independent.<div class="content-highlight">Our analysis suggests that the proposed acquisition and deal structure is good for Amer Sports’ shareholders and FountainVest. However, ANTA Sports' shareholders appear to be getting the short end of the stick.</div>

A consortium led by Anta Sports Products (2020 HK) launched a recommended public cash tender offer for Amer Sports Oyj (AMEAS FH) last Friday. The tender offer of €40 per share values Amer Sports at an EV of €5.5 billion. The proposed acquisition would be the largest outbound deal into Europe by a Chinese company in 2018. If successful, the deal would mark the culmination of a multi-month negotiation that has seen Amer Sports resist the advances of ANTA Sports as it preferred to stay independent.Our analysis suggests that the proposed acquisition and deal structure is good for Amer Sports’ shareholders and FountainVest. However, ANTA Sports' shareholders appear to be getting the short end of the stick.

ANTA/Amer: Good Deal for Amer and FountainVest, a Poor Deal for ANTA

United States

Skechers U.S.A., Inc. designs and markets branded contemporary casual, active, rugged, and lifestyle footwear for men, women, and children.  The Company sells its products to department stores and specialty retailers.  Skechers also sells its products internationally through distributors and directly to consumers through its own retail stores.

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Skechers Usa Inc Cl A (SKX US)

U.S. Equity Strategy: Cautious Overall; Favor Large-Caps & Growth; Key Supports Holding In The U.S.

The S&P 500 remains bullish, recently hitting our 4400-4406 target as large-caps remain attractive. As long as support at the 50-day MA and 4257...

Vermilion Research

Baozun (NEGATIVE) Competition from Belle’s TopSports; Q2 Margin Miss; CFO’s Broken Record

Q2 earnings combined with our ongoing checks into merchandisers lead us to believe that Baozun Inc. (BZUN US) is using its balance sheet to finance...

JL Warren Capital

Topsports International IPO Initiation: No Sweat

Topsports International (TOP HK) is the sportswear division of Belle International. Topsports is the largest sportswear retailer in China as...

Arun George

BZUN Q1 Preview: Eroding GMV Quality, Margin Squeeze by Top Customers

Our negative view on Baozun Inc. (BZUN US) stems from the company’s declining profit margin due to eroding pricing power to key customers, and...

JL Warren Capital

ANTA/Amer: Good Deal for Amer and FountainVest, a Poor Deal for ANTA

A consortium led by Anta Sports Products (2020 HK) launched a recommended public cash tender offer for Amer Sports Oyj (AMEAS FH) last Friday. The...

Arun George

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