Consumer

• With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
• We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
• There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

• ZJLD Group (ZJLD HK), a baijiu company in China, is set to launch an HKEx IPO to raise US$800-900 million next week, according to press reports.
• We previously discussed the IPO in ZJLD Group IPO: The Bull Case and ZJLD Group IPO: The Bear Case. 
• In this note, we present our forecasts and take the first look at ZJLD’s potential valuation range. 

• Consensus FY+2 EBIT seems inflated by around 16%, driven by optimistic assumptions of recovery in China and growth in North America and Europe.
• However, apparel demand in China was lower than expected, while wage hikes and a potential US recession could negatively impact profitability in the short-medium term.
• As risks are skewed to the downside, we remain short Fast Retailing (9983 JP) leading up to 2QFY23 results.

• Although women should be appointed to the board of executive directors to bring women’s perspectives into management, many companies actually only appoint a few women to “non-statutory executive officer” positions.
• A survey shows that the percentage of women in management positions is about 10%, and even now there’re no signs of an increase in the number of female management executives.
• Companies seem to be reluctant to act on their own to address the obstacles that prevent women from becoming board members as a social issue.

Ebiquity reported strong FY22 results, with revenue and operating profits increasing in line with expectations. The complexity of the media market provides a supportive backdrop to its offering, designed to help brand owners optimise the efficiency of their marketing spend. The acquisitions of US-based MMi and Swedish-based Media Path in FY22 significantly scale Ebiquity’s potential revenue base, while productisation, efficiency gains, and the transition to a common technology platform give a clear path to improving margins. The company also announced the forthcoming retirement of CFO, Alan Newman, with the search for his successor well underway. The share price remains at a significant discount to peers.

• Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 111% higher than the high end of the IPO price range.
• We estimate the company to generate sales of 147.7 billion won in 2023 (up 45.1% YoY) and its operating margins to improve from 24.1% in 2022 to 24.7% in 2023. 
• We believe a 20% premium valuation multiple to the comps is appropriate due to its higher sales growth rate, higher operating margins, and higher ROE than the comps.

• Sumber Alfaria Trijaya (AMRT IJ) remains one of the most interesting proxies for retail spending in Indonesia, with a nationwide Alfamart footprint in the most popular mini-market format. 
• The company’s latest numbers confirm the momentum behind and the recovery with improving margins. Alfamart expanded its store numbers aggressively in FY2022 and will continue into 2023. 
• Sumber Alfaria Trijaya will push aggressively in expanding its Lawson convenience stores this year on top of its mini-market expansion as a future growth driver. 

• PDD’s small retailers bought out products of direct sales and claimed full refund.
• The story happened to Alibaba more than ten years ago.
• It can be hard for PDD to enter the high quality market.

• A lot has been said and written about Trial’s IPO but much of this relates to pass performance and comparing it to supermarkets.
• As the company’s latest Trial Go store in Fukuoka shows,  Trial is a tech-based retailer and a true discounter, and discounting is where the growth is in Japanese FMCG.
• Trial thinks its technology can reduce costs significantly, improving margins while allowing it to roll out more small format stores to compete with convenience stores. It may be right.

• Seven & I Holdings (3382 JP) was down as much as 5% on Friday on weak FQ4 earnings as the company’s revenue and OP missed consensus by 1.9% and 2.6% respectively.
• Earnings likely peaked in FQ3 as fuel retail margin and merchandise sales trend reversed in FQ4.
• Given the reversal of fuel retail margin and merchandise sales trend and the negative impact of the exchange rate, the risk rewards appear favourable for a short trade.

• Manyo Factory is well known for its functional skin care products made from naural ingredients. Its products have been enjoying excellent sales in Japan and Korea.
• Given the company’s superior sales growth and operating margins than its peers combined with the large IPO discount, there is likely to be a strong interest in Manyo Factory IPO. 
• Unlike other major Korean cosmetic companies with poor sales and operating profit in the past three years, Manyo Factory experienced excellent growth of its sales and profits in this period. 

• Phonepe Pvt Ltd (1732974D IN) ‘s new app, “Pincode”, is based on the ONDC platform and offers hyperlocal e-commerce.
• ONDC-Enabled Pincode could disrupt Zomato (ZOMATO IN) food delivery and grocery businesses.
• Loyal restaurants may choose to offer discounts via ONDC, putting pressure on Zomato (ZOMATO IN)  and Swiggy (1255298D IN) to compete bringing back cash burn and discounting. 

• On 6 April, Bidco and Dignity confirmed that the FCA Change in Control Condition had been satisfied on 5 April. The new Unconditional Date is 4 May 2023.
• Bidco has so far irrevocables and letters of intent in respect of 39.12%. The end of the life of Dignity as a listed company is nigh.
• Spread to cash offer is 3.6%/42% (gross/annualised, assuming settlement on 18 May). Long/tender to the cash offer. The Alternative Offers are either Valderrama D shares (unlisted) or Castelnau shares (illiquid).

• As the new season commences in April, Brazil is predicted to manufacture 40.3 million tonnes of sugar, marking the second highest yield ever recorded.
• This is primarily due to the favorable climate conditions and the sufficient capitalization of mills, allowing for the proper care of crops.
• As per a report by Job Economia, mills are likely to concentrate on sugar production, reducing ethanol production, since the cost of sugar futures is at its highest in over six years.

• WDFC reported fiscal second quarter (February) results continuing to depict a soft demand environment. WDFC reported a decline in unit volume across all major geographies
• WDFC reported fiscal second quarter sales of $130.2 million compared to $124.9 million achieved in fiscal first quarter.
• The Company reduced its inventory level only to raise its accounts receivable by more than the decline in inventory and the increase in sales

• ChopValue, a Canadian startup designing and manufacturing products using an innovative, high-performance material engineered from recycled chopsticks, has closed a US$7.7 million funding round.
• Two unnamed high-profile technology entrepreneurs with expansion interests in Asia Pacific and Europe led the round.
• Several corporate VC funds and existing investors (VC funds in the climate-tech space and institutional investors such as EDC and BDC) also participated.

• Markets expect Popmart to deliver fast growth for years to come, yet we are skeptical because the pop toy business, by definition, is a niche market.
• Blaming COVID for Popmart’s weak results risks focusing too much on near-term cyclical recovery but overlooking structural bottlenecks to growth.
• While we are cautious for long term, continued improvement in business and news flow leading to 1H results will likely result in share price rebound and provide tactical trading opportunity.

• ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we discuss our earnings assumptions and share our thoughts on ZJLD’s valuation.

• ROE has not risen at the pace expected, but dividends have begun to increase, and in FY2021 DOE rose to the 3% range for the first time.
• While ROE alone will not surpass the record high of FY2017, ROE plus DOE (ROE+DOE) is expected to slightly surpass the record high of FY2017 in FY2022.
• Even in FY2021, when DOE increased, Equity Ratio increased (and total assets also increased), so there is still room to increase shareholder returns, given that cash on hand increased.

• Keurig Dr Pepper share price has been under pressure over the recent months due to higher than expected drop in profitability.
• Beverage segments, however, continue to perform well and would most likely offset weaknesses in coffee.
• Investors should not expect a quick rebound in the company’s free cash flow.

• We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. 
• We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;
• We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.

• PT Surya Citra Media Tbk (SCMA IJ) had an exciting 2022, with a ramp-up in new audience share-winning original content along with the boost from the Word Cup rights. 
• Both SCTV and IVM gained significant audience share in 2022, and Vidio led the charge on OTT driven by killer content, finishing the year with 5m paying subscribers. 
• Profitability was hit by a sharp rise in production costs and investment in Vidio but we expect significant improvement in 2023. Valuations are attractive with SCMA on 12x FY2023E PER. 

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear, with a core colour range supplemented by regular limited-edition releases, all with FSC (Forest Stewardship Council) certification throughout the supply chain.
• The company has operations in Australia (67% of sales), UK, (30% of sales) and the US (3% of sales). A H1 FY23 sales decline of 5.7% was better than our industry average estimate of-19% cycling lockdown, while lower sales and marketing spend saw EBITDA in-line with the pcp at $7.6m, the highest of any industry peer.
• H2 FY23 should see similar trends and deliver EBITDA well above consensus.

• Nayuki reported C2H22 top line 0.9% below our estimate but 18% below consensus，due to deteriorating cost ratios; 
• Company chose to drastically expand store count by ~600 in 2023. Our concern is that Nayuki stores now are drastically different from its past.
• The company is abandoning its premium teahouse position, which begets unknown consequences in our opinion; We keep the TP unchanged at HK 3.1 and maintain SELL.

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear.,
• A H1 FY23 sales decline of 5.7% was better than our industry average estimate of -19%, while  EBITDA was in-line with the pcp, the highest of any industry peer.
• On our estimates this superior business model currently trades at a PER of 1.0x ex-cash. Inventory is the key risk, currently representing ~two years’ sales, but is low fashion risk.leared.

• For Japanese companies that take time to take action while watching their surroundings, it’s skeptical of the expectation that individual managers will initiate measures in response to a “TSE request.
• The shift from deflation to inflation won’t only affect company’s profit structure and balance-sheet, but will also force Japanese companies to change as it resets the mindset of all managers.
• Since there’s little economic rationale for holding cash under inflation, all companies, rather than individual management decisions, will be forced to use cash for investment in growth and shareholder returns.

• Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004. 
• The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
• There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic. 

• PT Metrodata Electronics had a strong finish to the year with FY2022 net profit growth of +14.1% YoY driven by both its ICT distribution and Solutions & Consulting (S&C) businesses.
• The S&C business continues to thrive on Indonesia’s ongoing digitalisation, especially in the financial sector with the advent of digital banking but also in the telecom and oil&gas sectors. 
• PT Metrodata sees a slower outlook for the consumer outlook but strong momentum behind commercial sales and S&C as digitalisation continues, and new growth from the Public Sector. Valuations attractive.

• This is our first report on a global media and entertainment player, Formula One Group.
• Its fourth quarter result was mixed and the company surpassed the revenue expectations of Wall Street but missed out on meeting earnings expectations.
• The company introduced a new brand campaign in the quarter to demonstrate F1’s position in the sporting and entertainment worlds.

• Formula One Group is major global media and entertainment company with decent fundamentals.
• The management anticipates Ford’s contribution as a technical engine supplier will be valuable for the sport and Red Bull.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Nagacorp’s 1Q23 and full year 2022 results confirm our prior call that Nagacorp revenues would ramp faster back to baseline 2019 than the market anticipates.
• Trading at HKD$5.97 with a forward P/E of 13.18 makes the stock attractive early in the recovery cycle and headed higher as 1Q23 results indicate.
• Superior management has always been a strength of Nagacorp. It has been recognized by Institutional Investor as Asia’s #1 most honored company for investor relations and returns.

• Not because TSE requires it, but because management should provide shareholders with a concrete plan and outlook for cash allocation based on the company’s growth stage and the external environment.
• For companies that disclosed improvement measures before TSE requested them and saw their stock price rise significantly, the sustainability of the stock price depends on the feasibility of the plan.
• The stock market jumped the gun and rallied in anticipation of the company’s announcement of feasible plan as expected, even though the company has yet to disclose any improvement plan.

• ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we discuss the industry dynamics and undertake a peer comparison.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• This week’s decline is deemed counter-trend and is in stark conflict with the bullish MT and LT triggers detailed in our bullish publication on 29 March 2023.
• Key support levels often combine a number of important moving averages.  92.00/94.50 combines the 20/50 week MA’s / 12/26 week EMA’s. High risk MT bottom at 92.00/94.50. Target 118.50.

• Lalatech Holdings Co Ltd (LALA HK) is looking to raise about US$1bn in its upcoming HK IPO. The deal will be run by BofA, JP Morgan and Goldman Sachs.
• Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services. 
• In 2022, Lalatech facilitated over 427.5m fulfilled orders with a global freight GTV of US$6.7bn, with approximately 50.4m merchants served and business brought to approximately 2.3m carriers. 

• JD Health’s 2022 results were more optimistic than expected. We think the past three-year pandemic as well as the broadening of service scenarios are main drivers for rapid performance/user growth.
• If turning losses into profits is “a phased victory”,striving for higher profit margins and healthier revenue structure is the key task in next stage,but JD Health may fail this transformation. 
• After China reopens, JD Health’s user scale could be difficult to maintain such rapid growth in 2023 and onwards. Without breakthrough in service revenue, its valuation expansion potential could be limited. 

• GTX updated its annual outlook by forecasting results would be towards the high end of the previous guidance range.
• GTX also highlighted the opportunity to force the conversion of the Series A Preferred stock by the middle of the year.
• GTX had previously issued a sales outlook of $3.55 billion to $3.85 billion and adjusted EBITDA of $555 million to $615 million

• Last week, Filipino food manufacturer Monde Nissin Corp (MONDE PM) announced FY22 top-line growth of 6.7%. 
• However, the bottom line spilled red ink after booking impairment losses relating to its Quorn meat alternative ops. 
• The thrust of Quorn/Impossible/Beyond alternatives was that meat eaters would sacrifice their burgers without having to sacrifice anything at all. Yet the Big Meat appetite is not so easily swayed. 

• Monde Nissin Corp (MONDE PM) shares are down 18% on the back of FY22 results which revealed a net loss of PHP13 billion mainly due to a large impairment charge.
• While softening demand in meat alternatives is a headwind, Monde should benefit from the tailwinds of market share gains (in APAC BFB) and margin improvement (easing cost inflation).
• The valuation is undemanding (SOTP valuation of PHP10.21 per share) and will prove attractive to investors with a longer-term investment horizon.

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise up to US$400 million, according to press reports.
• In ZJLD Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on the sharpest revenue slowdown, lowest operating margin and FCF margin vs peers along with a deterioration in lead growth indicators.

• This is our first report on global food processing giant, Archer-Daniels-Midland.
• Low water conditions limited North American export volumes, which were largely offset by a strong performance by the South American business.
• The North American business produced excellent volumes and margins in both starches and sweeteners, slightly offsetting decreased ethanol margins.

• Archer-Daniels-Midland is one of the largest food processing companies in the world.
• Low water conditions limited North American export volumes, which were largely offset by a strong performance by the South American business.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise upto US$400 million, according to press reports.
• ZJLD is the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types, in terms of revenue in 2021.
• The key elements of the bull case rest on market share gains, competitive production capacity, premiumization, rising gross margin and inventory days in good shape vs peers.

• Tesla managed the late hour surge it needed to “beat” rapidly falling market estimates
• But results were still shy of management’s target for more than 37% y/y growth (much less its abandoned goal for more than 50% growth y/y)
• Drastic measures to meet expectations likely came at the cost of already waning revenue quality and shrinking profit margins.

• Lalatech Holdings, one of the largest Asia-based providers of on-demand delivery platform, filed for Hong Kong IPO, with Goldman Sachs, BofA Securities and J.P. Morgan leading the offering.
• I like profitable growth at tremendous scale, hybrid monetization model and leadership position in Mainland China with a 40%+ share, well ahead of its major peers.
• Lalatech Holdings was backed by top-tier VC investors, including Hillhouse Capital Group, Sequoia Capital, Shunwei Capital, MindWorks Capital and Vitruvian Partners, among others. 

• Even though OP Margin has been stagnant, NP Margin has improved due to the corporate tax rate cut, and the increased free cash flow has been less directed to investments.
• The fact that OP Margin didn’t rise much while personnel and R&D costs were curbed and there wasn’t much investment simply implies a lower gross margin in the core business.
• With ROE growth sluggish and cash accumulating, it’s reasonable that investors demand further shareholder returns. If asset turnover declines while OP Margin slows, there’s little reason to hold cross-held shares.

• It’s skeptical that managers before the bubble economy really took risks. They no longer are protected by regulations  as they were before, and must take risks on their own initiative.
• The Stewardship Code and Corporate Governance Code were introduced in the hope that they would provide a boost to standstill managers to improve profitability to increase corporate value.
• Exit from the market is an important factor, but it can decelerate the speed at which exits are facilitated, such as maintaining listing through transitional measures or changing TOB rules.

• Burlington Stores is one of the major off-price retailer chains in the U.S.
• The company has strong fundamentals and has seen sizable, consecutive improvement in its sales trends in recent times.
• The management interprets this increase in traffic as a sign that the macro headwinds may be beginning to weaken.

• This is our first report on Burlington Stores, Inc., one of the major off-price retailer chains in the U.S.
• The company delivered a strong quarter, with sizable, consecutive improvement in its sales trends.
• Comparable store sales increased by 6% and the the result was an all-around beat.