Consumer

With just over two months left in the review period, we expect three changes to the Nikkei 225 (NKY INDEX) at the March rebalance.
Lasertec Corp (6920 JP), Oriental Land (4661 JP) and Renesas Electronics (6723 JP) could replace Toyobo Co Ltd (3101 JP), Nippon Light Metal (5703 JP) and Toho Zinc (5707 JP).
As with the last rebalance, there will be a large funding trade estimated at JPY 417bn. There are many stocks with over 0.5x ADV to sell.

DPC Dash Pre-IPO – The Negatives – Lags the Leader, Remains Loss Making

DPC Dash aims to raise around US$100m in its Hong Kong IPO.
The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 562 stores across 13 cities, as of Nov 2022.
In this note, we will talk about the not-so-positive aspects of the deal.

2023 High Conviction: Workman’s Cost Performance Will Beat the Competition

By Michael Causton

Although spending on non-necessities withered from March 2020 onwards, some low-cost retailers of discretionary items continued to grow.
Workman’s mix of high cost performance and engagement with the ever more active outdoor market has, and will, support expansion, even if same-store sales growth has slowed.
Future category expansion will deliver higher same-store sales as well as top line growth. 1,500 stores (from 1,000) is certain but 2,000 is possible thanks to new categories like footwear.

Geely – ’22 Target Miss Already in Expectations, Catalysts for ’23

By Victoria Li

Sector headwinds including supply chain shortage and business interruptions from Covid lockdown is easing.
More new models in pipeline to drive sales volumes and earnings in 2023E
Valuation re-rating would be triggered with earning recovery, consensus estimate upgrades, Zeekr ramping up and potentially Zeekr spin off.

Small- And Mid-Cap Indexes Poised to Break Out?; Further Upside Expected; Buys Within Cyclicals

By Joe Jasper

Despite $IWM already hitting our price target at 200-day MA/YTD downtrend, and the $SPX getting to within 1% of our target at 200-day MA, we see this 1.5-month rally continuing.
We expect further upside as long as the 1.5-month uptrend channels remain intact on the SPX and IWM, and we believe that breakouts above their 200-day MAs could be coming
Breakouts above their 200-day MAs that would likely signal the end to this bear market.

China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign

By Osbert Tang, CFA

Lower losses for investment business and sportswear retailing have contributed to a 48.4% reduction in losses for 1H FY23 at China Dongxiang Group Co (3818 HK).
The resumption of interim special dividend is a welcoming sign. Inventory clearance, store optimisation, cost reduction and growth at the PHENIX ski wear brands are positive drivers.
Its market capitalisation of HK$1.88bn represents a steep discount of 79% to its cash and investment portfolio of Rmb8.46bn, and this also means sportswear business is free.

IPAR: Guidance Removes Overhang

By Hamed Khorsand

IPAR continues to experience a strong consumer spending environment for fragrances where it has become increasing difficult to have all the components to manufacture a bottle
IPAR reported third quarter sales of $280.5 million compared to our original estimate of $275.3 million. The increase in sales was the result of a strong showing from new licenses
At the start of 2022, our 2022 EPS forecast was $3.05. It is now $3.40. IPAR’s stock has shown little movement for such an achievement

Ambev SA: Initiation of Coverage – Improving Demand For Beer & Other Drivers

This is our first report on Brazilian beverage giant, Ambev SA.
In spite of the headwinds in a few of its international operations, Ambev delivered strong results in the previous quarter in terms of both organic growth and net revenue.
Non-alcoholic beverages also delivered a stellar quarter with volume growth.

Petrobras: Pricing Amargeddon, With a Muddle Through Likely

By Superfluous Value

I had to write a brief note about the panic whipped up by UBS’ downgrade of Petrobras, cutting its price target from R$47 to R$22 on fears of a policy shift under the incoming Lula administration.
This combined with quarterly ex-dividend day, to send the shares sharply lower and extend their slide since the election.
This Reuters article sums up recent events nicely- namely Lula is over-hauling PBR management and seeking a strategic shift from monster dividend pay-outs, towards increased investment in renewables and possible domestic price caps.

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Nov 23

Daily Brief Consumer: DPC Dash, Fu Shou Yuan International, The Keepers Holdings, Inc., Save Foods Inc and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

DPC Dash Pre-IPO – The Positives – On a Rapid Expansion Spree
China Funeral Industry – Investment Opportunity with Both Alpha and Beta Superposition
Keepers Holdings: Highlights From The Q3 2022 Call / A Multibagger In The Making
Save Foods Inc. – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 11/22

DPC Dash Pre-IPO – The Positives – On a Rapid Expansion Spree

DPC Dash aims to raise around US$100m in its Hong Kong IPO.
The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 562 stores across 13 cities, as of Nov 2022.
In this note, we will talk about the positive aspects of the deal.

China Funeral Industry – Investment Opportunity with Both Alpha and Beta Superposition

By Xinyao (Criss) Wang

China funeral industry has large growth potential.The total market scale would be about RMB400 billion if based on annual death toll of 10 million and per capita expenditure of RMB40,000.
Information asymmetry weakens the bargaining power of buyers. Administrative barriers raise the threshold of market access and weaken competition. So, related companies usually have high profitability and return on capital.
Changes in population structure would have a negative impact on most consumer goods, but demand of funeral industry would continue to rise. Investors would have both alpha and beta superposition.

Keepers Holdings: Highlights From The Q3 2022 Call / A Multibagger In The Making

By Sameer Taneja

The Keepers Holdings, Inc. (KEEPR PM) trades at 7.1x/5.6x FY22e/FY23e on revised numbers (including earnings from the W&H acquisition) and has 10% of its market cap in net cash.
The outlook from the conference call was bullish, and the Q4 2022 revenue growth trend is expected to be similar to the 9M2022 (34% YoY) and future structural teens growth.
At a 300 mn USD market cap, you get a virtual monopoly (>70% marketshare by volume) of the imported spirits business with sole distributorship of the most recognizable brands.

Save Foods Inc. – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 11/22

This is our first report on Save Foods and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
Despite catering to a sizable addressable market, Save Foods is currently trading at valuation ratios far lower than its competitors.
Baptista Research looks to evaluate the different factors that could influence Save Foods’ price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology to determine a suitable price for the company’s stock.

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Nov 22

Daily Brief Consumer: AXXZIA Inc, Mandarin Oriental International, Lifestyle International Holdings, Ql Resources, JD Health, JD.com Inc., The Walt Disney Co, Honda Motor and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

AXXZIA (4936 JP) – TOPIX Inclusion Is Likely In February
Mandarin Oriental (MAND SP): Life Is Suite
Lifestyle (1212 HK)’s Scheme Gets Up
KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)
FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
Lifestyle International (1212 HK)’s Court Meeting – And that Is a Pass
JD.com (9618 HK): 3Q22, Growth Recovered, Margin Reached Historical High
Disney: Could Iger Sell to Apple?
Honda Motor ADR: Initiation of Coverage – Recent JVs & Key Drivers
Disney Replaces Bob Chapek with Bob Iger – Will The Magic Return at Disney?

AXXZIA (4936 JP) – TOPIX Inclusion Is Likely In February

By Travis Lundy

Just under two weeks ago, AXXZIA Inc (4936 JP) announced it had on that day (9 November) applied to move to TSE Prime from TSE Growth.
It’s an interesting one because of the strange differential between “tradable shares” and “float.”
After some study, I think this could be a TOPIX inclusion at end-Feb 2023, but there are steps to take between now and then.

Mandarin Oriental (MAND SP): Life Is Suite

By David Blennerhassett

Hong Kong is – very gradually – rolling back Covid restrictions
That’s a welcome relief for tourists, and for hospitality companies dependent on tourism.
Mandarin Oriental International (MAND SP) is trading cheap at 0.7x P/B against 1.8x on average (five years) pre-Covid.

Lifestyle (1212 HK)’s Scheme Gets Up

By David Blennerhassett

Independent shareholders of Lifestyle International Holdings (1212 HK) comfortably voted through the Scheme resolution.
94.93% of stakeholders present (and via proxy) voted FOR, with 5.07% voting AGAINST.
The last day of trading is the 6 December with payment expected on or before the 30 December.

KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

Ql Resources (QLG MK) and AMMB Holdings (AMM MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX).
If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the FBMKLCI INDEX.
One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.

FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng

At the end of the review period for the December rebalance, we see JD Health (6618 HK) replacing XPeng (9868 HK) in the FTSE China 50 Index.
There is a very slim possibility of Longfor Properties (960) being deleted; it could be replaced with either Yum China Holdings Inc (9987) or PICC Property & Casualty H (2328).
Short interest has stayed rangebound on JD Health (6618 HK) this year, while shorts have gone parabolic on XPeng (9868 HK) over the last few months.

Lifestyle International (1212 HK)’s Court Meeting – And that Is a Pass

By Arun George

Lifestyle International Holdings (1212 HK)’s scheme resolution was approved at today’s court meeting – 94.93% of independent share votes cast FOR (2.31% of all independent shareholders AGAINST).
This is in line with our expectations – in Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote that despite the wide spread, the offer would succeed.
At the last close and for the 30 December payment date, the gross and annualised spread to the offer is 2.0% and 20.6%, respectively.

JD.com (9618 HK): 3Q22, Growth Recovered, Margin Reached Historical High

By Ming Lu

The revenue growth rate bounced back to 11% YoY in 3Q22.
The operating margin improved to a historical high at 3.1%.
We believe the stock price has an upside of 27% for year end 2023.

Disney: Could Iger Sell to Apple?

By Aaron Gabin

The suprise return of Bob Iger as Disney CEO can fix certain Bob Chapek specific issues: relationships with investors, politicians, and creative types.
But Iger faces similar intractable issues: accelerating cord cutting, a transition to a less profitable form of media distribution, and a potential recession.
We think Iger will refocus investors on revenues/profits at Disney+ rather than subscribers, will more efficiently spend on content through decentralizing decision making… and potentially sell Disney to Apple.

Honda Motor ADR: Initiation of Coverage – Recent JVs & Key Drivers

This is our first report on global automobile behemoth, Honda Motors.
The Shanghai lockdown and semiconductor supply shortage resulted in a drop in unit sales and automobile production of Honda in the quarter, mainly in North America and China.
However, despite soaring raw material costs and a drop in automobile unit sales, the sales of motorcycle units were up which led to the revenue beat.

Disney Replaces Bob Chapek with Bob Iger – Will The Magic Return at Disney?

By Douglas Kim

On 21 November, The Walt Disney Co announced that it has replaced the incumbent CEO Bob Chapek with Bob Iger who has successfully headed Disney previously for nearly 15 years.
We believe this is a wonderful change and will have a huge impact in turning around Disney’s share price which is down nearly 50% from its peak in March 2021.
The previous CEO Bob Chapek did not focus enough on delivery great contents. Rather, the company got involved too much in politics turning off millions of customers.

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Nov 21

Daily Brief Consumer: Haier Smart Home Co Ltd, Golden Agri Resources, Sapporo Holdings, Galaxy Entertainment Group, Hyundai Motor and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Hang Seng Index Dec22 Rebal – 3 IN, None Out (The March to 80 Continues)
FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery
Sapporo Holdings: Activist Investor, 3D Investment Partners Is Just A Few Steps From Turning Hostile
Galaxy Entertainment Group: Its 4.5% of Wynn Shares Key if the Stock Is in Play
Lowering Tick Sizes for KOSPI & KOSDAQ Starting Next January

Hang Seng Index Dec22 Rebal – 3 IN, None Out (The March to 80 Continues)

By Travis Lundy

Hang Seng Index continues its march to 80 names, after which it will commence a march, or a slog, to 100 names in an effort to gain more comprehensive coverage
Doing so will admit names which move to Hong Kong from New York and will make way for more dynamism and lower SOE weights.
The three ADDs are Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK), and Haier Smart Home Co Ltd (6690 HK) with a pro-forma combined weight just <1%.

FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery

For Asia Pacific, there are 2 adds to the FTSE All-World Index, 2 adds to the FTSE All-Cap Index and 2 deletions from the FTSE All-World Index.
All changes are on expected lines. The one surprise is the non-inclusion of Rainbow Children’s Hospital (RAINBOW IN) to the All-Cap Index where it likely just failed investable market cap.
Sungeel Hitech (365340 KS) is also an add to the KOSDAQ 150 Index at the close on 8 December, while there is a huge lock-up expiry for Delhivery (DELHIVER IN).

Sapporo Holdings: Activist Investor, 3D Investment Partners Is Just A Few Steps From Turning Hostile

By Oshadhi Kumarasiri

Following a couple of investor-activism campaigns against Toshiba Corp (6502 JP) and Fuji Soft Inc (9749 JP), Singapore-based Japan-focused activist investor, 3D-Investment-Partners seems to be turning its attention towards Sapporo.
Earlier this month, 3D Investment Partners requested Sapporo’s outside directors to postpone the announcement of the new Medium Term Plan until they hear out opinions and new ideas from shareholders.
We believe that there’s a chance that 3D Investment Partners could turn hostile as Sapporo Holdings (2501 JP) seems to be completely ignoring the activist investor’s requests and proposals.

Galaxy Entertainment Group: Its 4.5% of Wynn Shares Key if the Stock Is in Play

By Howard J Klein

In 2018, shortly after the departure of Wynn founder Steve Wynn, Galaxy bought 4.9% of his shares atUS$175. The shares have been under water. But a new player has entered.
Gaming, restaurant and sports entrepreneur Tillman Fertitta has just bought 6.1% of Wynn shares setting up a possible play on the shares, or a total takeover move.
There are three scenarios that could play bullish for Galaxy if Wynn is in play. All auger well for movement on the stock.

Lowering Tick Sizes for KOSPI & KOSDAQ Starting Next January

By Sanghyun Park

KRX will lower the tick sizes for KOSPI and KOSDAQ starting next January to reduce actual transaction costs and increase market liquidity by attracting more high-frequency traders.
KRX’s acceptance of the market’s long-standing demand at this point can be seen as primarily driven by the purpose of resolving the problem of reduced market liquidity.
We need to design a setup that takes a tighter holding period of event and flow trading in the Korean local market from next year.

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Nov 20

Daily Brief Consumer: Haier Smart Home Co Ltd, Zhongsheng Group, Oriental Watch, LG Household & Health Care, Tata Motors Ltd, Home Depot Inc, Target Corp, Lowe’s Companies Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
Light at the End of the Dark Tunnel for Korean Cosmetics?
SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)
Home Depot Inc: Managing Labor Shortages & Other Developments
Target Corporation: Partnership With Apple & Other Drivers
Lowe’s Companies: Divestment Of Canadian Retail Operations & Other Drivers
Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home

The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

By Sameer Taneja

Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash. In slightly better market conditions, this could be a 6 HKD stock.

Light at the End of the Dark Tunnel for Korean Cosmetics?

By Douglas Kim

We believe that there is finally some light showing at the end of the dark tunnel for the two leading Korean cosmetics companies LG H&H and Amorepacific Corp.
These two stocks have underperformed the market in the past year but have started to outperform the market in the past three weeks.
There are credible signs that indoor mask wearing in Korea will be eliminated in Korea on/near March 2023 and that the inbound visitors to Korea will continue to increase significantly.

SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)

As forecast, Tata Motors Ltd (TTMT IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX) in December to replace Dr. Reddy’s Laboratories (DRRD IN).
We estimate passive trackers will need to buy 2.3x ADV (7.2x delivery volume) on Tata Motors Ltd (TTMT) while selling 5x ADV (10.5x delivery volume) on Dr. Reddy’s Laboratories (DRRD).
The HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger should see Adani Enterprises (ADE IN) added to the S&P BSE SENSEX Index (SENSEX INDEX) prior to the June rebalance.

Home Depot Inc: Managing Labor Shortages & Other Developments

Home Depot delivered another good result and surpassed Wall Street expectations in terms of revenues as well as earnings.
The company continued to observe high demand for home renovation projects throughout the third quarter.
Sales growth for both Pro and DIY was good, with Pro surpassing DIY.

Target Corporation: Partnership With Apple & Other Drivers

Target’s third quarter results were a mixed bag as the company’s revenues surpassed Wall Street expectations but it missed out on meeting earnings expectations.
Their top-line continues to profit from increases in guest visitation and unit share gains across all of their main categories.
While their performance in the third quarter compared favorably with the previous one, the period’s tendencies were very different.

Lowe’s Companies: Divestment Of Canadian Retail Operations & Other Drivers

Lowe’s delivered an impressive set of results this quarter and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
The company’s Pro business maintained its momentum, resulting from the success of its Pro efforts and the tenacity of the demand for home renovation.
Their ongoing focus on productivity and solid sales growth contributed to improved operating performance which ensured the earnings beat.

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

By Aki Matsumoto

72.9% of companies in prime market complied with the principles of Corporate Governance Code, which defines the concept of ensuring diversity, but no specific targets were set in their disclosures.
If % female directors were raised to 30%, they should be recruited from within the company to executive directors, but very few companies have % female managers exceeding 30%.
Gender discrimination in hiring, gender disparity in access to higher education, issues of leaving/returning to work due to childbirth and child rearing, and gender discrimination in workplace must be resolved.

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Nov 19

Daily Brief Consumer: Zomato, Alibaba Group, Lifestyle International Holdings, RPSG Ventures Limited, Midea Group Co Ltd A, Walmart, Tapestry Inc, Ralph Lauren, Tyson Foods Inc Cl A and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

2023 High Conviction: Zomato – Home Delivering Laziness
Alibaba – OP Beat Driven By Cost Cutting Masks Dissapointments Everywhere Else
Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote
RPSG Ventures: FMCG Business Is Scaling Up; VC Business Is Germinating to the Next-Level
Shanghai/Shenzhen Northbound Connect: Weekly Moves (18 November 2022)
Walmart Inc: The Walmart Creator Platform & Other Drivers
Tapestry Inc: Major Drivers
Ralph Lauren: Collaboration With Fortnite & Other Developments
Tyson Foods: Major Drivers

2023 High Conviction: Zomato – Home Delivering Laziness

Zomato is one of the largest food delivery platforms in India. It was listed in Jul 21 and after initially doubling, its shares are now trading below its IPO price.
It has grown its food delivery GOV by 3.5x over FY19-22 and growth remains strong, while profitablity has been improving.
Its recent venture into quick commerce should allow for better fleet utilisation and hence, better longer term growth and profitability.

Alibaba – OP Beat Driven By Cost Cutting Masks Dissapointments Everywhere Else

By Oshadhi Kumarasiri

Alibaba Group (9988 HK) bounced 7.8% yesterday following an OP beat of 24.4% through cost-controls but overall results were quite disappointing with revenue falling a touch below consensus at RMB 207.2bn.
Alibaba’s cash cows are growing no more, Thus, the company is focusing on ways to improve its profitability.
Meanwhile, the other growth avenues that Alibaba was proudly speaking of have pretty much disappeared with the company forced to cut down investments in these growing businesses.

Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote

By Arun George

Lifestyle International Holdings (1212 HK)’s vote on Mr Lau’s offer of HK$5.00 per share is at 10 am on Monday, 21 November. The wide spread of 6.6% reflects vote risk.
Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection). No shareholder holds a blocking stake.
Ongoing weak Hong Kong retail sales and peers’ slightly de-rating should lower the vote risk. Headcount test not applicable. While light, we continue to expect the offer to succeed.

RPSG Ventures: FMCG Business Is Scaling Up; VC Business Is Germinating to the Next-Level

By Ankit Agrawal, CFA

Key highlight of RPSG Ventures’ (RPSGV) Q2FY23 results was the FMCG business which reported revenues of INR 125cr, suggesting an annualized run-rate of INR 500cr vs INR 430cr QoQ.
RPSGV is doing all the right things to scale up its FMCG business. Its Sports venture also holds lot of promise.
RPSGV’s Venture Capital (VC) Fund that focuses on investing in D2C startups made a lucrative exit in one of its investments which generated 7x MOIC in just 4 years.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (18 November 2022)

By David Blennerhassett

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net inflow over the past week was ~US$5.7bn, split between Shanghai (+US$2.98bn) and Shenzhen (+US$2.8bn).
The largest inflows were into Kweichow Moutai (600519 CH) and Midea Group (000333 CH). The largest outflows were in NARI Technology (600406 CH) and China Yangtze Power (600900 CH).

Walmart Inc: The Walmart Creator Platform & Other Drivers

Walmart’s stock has climbed to a new high after the company delivered strong results and surpassed Wall Street expectations in terms of revenues as well as earnings.
In Q3, strong sales were achieved in each of its segments and its U.S. comparable sales increased sequentially by 8.2% thanks to higher average ticket sizes and more transactions.
Walmart International experienced strong constant currency sales growth of 13.3%, driven primarily by Flipkart and Walmex, while Sam’s Club USA posted double-digit comps growth of 10.3%, excluding fuel and tobacco, for the 11th consecutive quarter.

Tapestry Inc: Major Drivers

Despite the challenging environment, Tapestry’s first quarter results were strong and the company’s performance exceeded market expectations in terms of revenues as well as earnings.
This result highlights the company’s transformation into a customer-centric and data-driven organization, which have helped it effectively navigate the challenging climate.
Their direct-to-consumer operations grew again in this quarter thanks to the strong management focus on building omnichannel experiences.

Ralph Lauren: Collaboration With Fortnite & Other Developments

Ralph Lauren’s previous quarter results were strong and the company managed an all-around beat.
Their top-line continued to increase in the previous quarter, with revenues rising 13% in constant currency and 5% on a reported basis.
The success for this quarter was once again aided by good constant currency growth across all 3 regions.

Tyson Foods: Major Drivers

Tyson Foods’ stock has been on a downward trajectory for a while and the recent results did not help the situation.
Consumer demand for protein is largely stable in this difficult macroeconomic context with record-high inflation.
Volume performance increased in the fourth quarter because of their investments in brands and merchandising, which raised portfolio market share.

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Nov 18

Daily Brief Consumer: Oriental Land, Alibaba Group, Taste Gourmet Group, Shimamura, Porsche AG, Adeia, Lear Corp, Capri Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)
Alibaba (9988 HK): 2Q23, Better Growth, Better Margin, 38% Upside
Taste Gourmet: Cash Generation Par Excellence
Shimamura Set for Another Record
STOXX Europe Quiddity Leaderboard Dec 22: ~7 Regular ADDs/DELs & ~5 Intra-Review ADDs/DELs Possible
ADEA: Free Cash Flow & Valuation
Lear Corporation: New Sustainability Solutions Addition & Other Developments
Capri Holdings: Major Drivers

Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)

By Travis Lundy

Early predictions for the March 2023 Nikkei rebalance (TBA early Feb) are little changed. One way turnover would still be about 1.4%. I see 3 ADDs and 3 DELETEs.
The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723), and Japan Airlines (9201). The 3 DELETES Toho Zinc (5707), Toyobo (3101), and Nippon Light Metal (5703).
Oriental Land is the one to watch in March. The Sep 2023 rebalance and subsequent ones are smaller in size but more interesting in impact.

Alibaba (9988 HK): 2Q23, Better Growth, Better Margin, 38% Upside

By Ming Lu

Revenue began to grow in 2Q23 after the zero growth in 1Q23.
The operating margin improved to 12.1% in 2Q23 versus 7.5% in 2Q22.
We believe the stock has an upside of 38% and a price target of HK$108.

Taste Gourmet: Cash Generation Par Excellence

By Sameer Taneja

Taste Gourmet Group (8371 HK) reported its H1 2023 result with profit of 32 mn HKD up 28% YoY, backed by subsidies due to restrictions earlier in the year.
Net cash rose by 52 mn HKD (almost 12.4% of market capitalization) to 117 mn HKD HoH (28% of market cap). Nine mn HKD in subsidies are outstanding.
The company declared 4.8 cents of dividend (9.1% annualized yield), in addition to repurchasing and canceling >2% of the shares outstanding recently.

Shimamura Set for Another Record

By Michael Causton

Like Workman Co Ltd (7564 JP) and Honeys Holdings Co., Ltd. (2792 JP), Shimamura (8227 JP) has been a beneficiary of both household budget worries during Covid and inflation concerns since.
The apparel retailer has also worked hard to develop better cost performance ranges and more exciting marketing through collaborations with influencers, helping regain footfall levels.
Shimamura has clearly regained momentum and looks set to continue to benefit from consumer fears over inflation and ongoing shifts in spending towards low-price retailers.

STOXX Europe Quiddity Leaderboard Dec 22: ~7 Regular ADDs/DELs & ~5 Intra-Review ADDs/DELs Possible

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EuroSTOXX Indices for the December 2022 Rebalance.
Including the addition of Porsche AG (P911 GR), there could be around 7 ADDs/DELs during the December 2022 Rebalance.
In addition, there could be as many as five more intra-review changes before the end of the year.

ADEA: Free Cash Flow & Valuation

By Hamed Khorsand

ADEA reported third quarter results that still included the financial results of its products business prior to the spin-off. ADEA generates revenue from IP licenses, creating a steady revenue stream
ADEA expanding its base of licensees over the next year should set a pathway to ADEA reaching baseline revenue of $500 million a year from $375 million currently
ADEA applying free cash flow to reducing its debt balance should yield a higher valuation for the stock price

Lear Corporation: New Sustainability Solutions Addition & Other Developments

Lear Corporation saw a significantly improved set of results in the last quarter and it managed to surpass Wall Street expectations on all fronts.
The improved results reflect higher production volumes as well as its strong new business backlog.
Core operating earnings and sales increased and in both e-Systems and seating, operating margins improved as compared to the previous year.

Capri Holdings: Major Drivers

Capri Holdings delivered quite a strong result which happened to be an all-around beat.
With the three pillars, Greca, Virtus, and La Medusa making significant progress, the goal of the company is to position Versace as the prominent luxury leather house.
Capri also expanded its core lines that incorporate iconic house codes for broadening the reach of Versace.

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Nov 17

Daily Brief Consumer: Samyang Holdings, Lotte Confectionery, Tencent Music and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

KOSPI200 Index Rebalance: Just One Change
KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
TME: Online Music Biz Resumes Growth but Social Entertainment Further Drops

KOSPI200 Index Rebalance: Just One Change

By Shifara Samsudeen, ACMA, CGMA

There will be 1 addition and 1 deletion for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 8 December.
Lotte Confectionery (280360 KS) was a high probability add while Samyang Holdings (000070 KS) was the second delete on the list. Hyundai Home Shopping Network (057050 KS) avoided deletion.
Passive trackers will need to buy around 14 days of ADV on Lotte Confectionery (280360 KS) and sell nearly 13 days of ADV on Samyang Holdings (000070 KS).

KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023

By Douglas Kim

Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December.
The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping.

TME: Online Music Biz Resumes Growth but Social Entertainment Further Drops

Tencent Music (TME US) reported 3Q2022 results yesterday. Revenue declined 5.6% YoY to RMB7.4bn (vs consensus RMB7.0bn) while adjusted OP for the quarter increased 14.0% YoY to RMB765m.
Revenue from social entertainment services decreased 20% YoY which was partially helped offset by 18.8% YoY increase in online music services revenues.
GPM and OPM improved due to huge spending cuts on content, revenue sharing and S&M and we are yet to see if TME can sustain this without compromising user growth.

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Nov 16

Daily Brief Consumer: I-Tail, Sapphire Foods, Bikaji Foods, Dollar Index, Hyatt Hotels Corp Cl A, The Walt Disney Co, Vivid Seats, Kura Sushi Inc, Hershey Co/The and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation
Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry
Bikaji Foods International IPO Trading – One of the Strongest Demand This Year
I-Tail Corporation IPO: Valuation Insights
Rally Continues Following Breaks in USD & 10-Yr Yield; Buy Ideas in Energy & Consumer Discretionary
Hyatt Hotels Corporation: The Find Platform & Other Drivers
Walt Disney Company: Merchandise Marketing Through Disney+ & Other Drivers
Riding The Entertainment Boom
That’s a Wrap, Kura Exits 2022 on a High Note
Hershey Co: Major Drivers

I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation

I-Tail, an OEM in the wet pet food category, aims to raise around US$600m in its Thailand IPO. It is a subsidiary of Thai Union Group (TU TB) .
As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
In our previous notes, we have looked at various aspects of the deal. In this note, we talk about its 3Q22 updates and run the deal through our ECM framework.

Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry

In Nov 2021, Sapphire Foods Limited (SFL), one of Yum Brand’s franchisees in the Indian subcontinent, raised around US$280m in its Indian IPO.
The lock-up on its shareholders will expire soon, with a number of PE funds on its register
In this note, we will talk about the upcoming lockup expiry.

Bikaji Foods International IPO Trading – One of the Strongest Demand This Year

Bikaji Foods (BIKAJI IN) , an ethnic snacks company, raised approximately US$107m in its India IPO.
Its product range includes six principal categories: bhujia, namkeen, packaged sweets, papad, western snacks as well as other snacks which primarily include gift packs, frozen food, mathri range and cookies.
We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand for the deal and the trading dynamics.

I-Tail Corporation IPO: Valuation Insights

By Arun George

I-Tail (ITC TB), Thai Union Group (TU TB)’s pet care division, has launched its SET listing at THB30-32 per share to raise up to US$593 million.
We previously discussed the IPO in I–Tail Corporation IPO: The Bull Case, I-Tail Corporation IPO: The Bear Case and I-Tail Corporation IPO: A Strong 3Q Results Update.
I-Tail is attractively valued at the IPO price range. We would participate. Pricing will be announced on 28 November.

Rally Continues Following Breaks in USD & 10-Yr Yield; Buy Ideas in Energy & Consumer Discretionary

By Joe Jasper

Our Russell 2000 (IWM) and S&P 500 targets for this rally have been the 200-day MAs, coinciding with YTD downtrends.
The Russell already hit this target while the S&P is closing in, less than 1% away.
Still, the vast majority of signals point to further upside ahead for the market indexes, and a possible end to the bear market.

Hyatt Hotels Corporation: The Find Platform & Other Drivers

Hyatt delivered a strong performance in the quarter and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
With outstanding bookings for upcoming periods during the quarter, group room revenue also saw growth during the third quarter.
Besides, they launched The Find platform, a new experiences platform, for members of its World of Hyatt loyalty program.

Walt Disney Company: Merchandise Marketing Through Disney+ & Other Drivers

Disney had highly disappointing quarter and failed to meet the market expectations in terms of revenues as well as earnings.
The quarter saw the company reaching the highest point in DTC operating losses to date which is why operating margins were significantly below analyst expectations.
This quarter was strong for products, experiences, and parks that continue to deliver good results despite Hurricane Lan.

Riding The Entertainment Boom

By subSPAC

Online Ticketing platform SeatGeek has seen a surge in demand from the pandemic reopening, as consumers have spent extravagantly on entertainment experiences such as concerts, theatre, and sporting events.
With fewer live events and supply shortages due to prevailing scalpers, fans have increasingly turned to online resellers to access these experiences.
However, the company is now expected to face significant challenges, including a slowdown in demand and a regulatory crackdown from the government limiting the potential fees that can be charged.

That’s a Wrap, Kura Exits 2022 on a High Note

By Investment Talk

Despite now being valued at ~$635 million (down ~32% from ATHs) Kura Sushi, the small-time restaurant operator with 40 stores across the United States, continues to boast an overzealous market valuation.
Perhaps it’s their ability to consistently beat expectations. Perhaps it’s because they remain undercovered and somewhat illiquid for their size (the parent organisation owns a considerable amount of outstanding shares).
I can’t be sure, nor do I really care. After reporting Q4 earnings last week, Kura rounded off the year in style, continuing to demonstrate a healthy recovery in demand for their service.

Hershey Co: Major Drivers

Hershey had a decent result and managed to deliver another all-around beat despite the impact of inflationary headwinds and supply chain issues.
The company managed to produce a substantial volume growth despite price increases to counter inflation.
The consumer continues to place a high priority on snacks, especially sweet sweets which is why the trends within their categories have really held strong.

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Nov 15

Daily Brief Consumer: Brilliance China Automotive, Rakuten Inc, Haier Smart Home Co Ltd, Starbucks Corp, Marriott International, Mcdonald’s Corp, Monster Beverage and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

HSCI Index Rebalance and Stock Connect: Changes at the Margins
Rakuten Mobile: Expecting Losses To Shrink With Symphony & Energy Turning Profitable
Back in Hong Kong stocks
Starbucks Inc: Divestment Of Seattle’s Best Coffee & Other Developments
Marriott International: Acquiring The City Express Brand Portfolio & Other Developments
McDonald’s Corporation: Major Drivers
Monster Beverages: Major Drivers

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Rakuten Mobile: Expecting Losses To Shrink With Symphony & Energy Turning Profitable

By Oshadhi Kumarasiri

With e-commerce and fintech segments performing reasonably well, Rakuten Inc (4755 JP)’s Q3 results were mostly in line with expectations.
However, the Mobile segment failed to live up to expectations with the segment’s operating loss narrowing by just ¥3.4bn to ¥120.9bn in 3Q22.
Nonetheless, we are excited about the prospects of Rakuten Mobile through the success of Rakuten Symphony as the business is close to signing 12 new corporate customers.

Back in Hong Kong stocks

By Turtles all the way down

Early this year I was quite pessimistic on Hong Kong stocks.
But since then the Hang Seng is down another 20% or so. A lot of stocks with 9-10%+ dividend yields are laying around.
I should have been a bit quicker writing this up, but then you are getting it for free.

Starbucks Inc: Divestment Of Seattle’s Best Coffee & Other Developments

Starbucks’ stock has been on a roll after a solid Q4 and fiscal 2022 which surpassed Wall Street expectations on all counts.
With improving foot traffic, the company recently expanded its presence in the Italian market as well.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Marriott International: Acquiring The City Express Brand Portfolio & Other Developments

Marriott delivered a mixed set of results for the third quarter.
The leisure demand for the quarter remained strong and far above 2019 levels.
Travelers are apparently continuing to mix pleasure and work visits, according to third quarter day-of-the-week trends.

McDonald’s Corporation: Major Drivers

McDonald’s delivered a solid Q3 performance surpassing Wall Street expectations on all counts which is why its stock price has been surging over the past few weeks.
The company’s sustained resiliency is demonstrated by its quarterly global comp sales, which increased by 9.5%.
In the quarter, the chicken was a significant contributor to comp sales growth across all of their key markets, and they will continue to concentrate on expanding their worldwide market share in this significant category.

Monster Beverages: Major Drivers