Consumer

Kingston Financial (1031 HK) announced a privatisation offer from Mrs Chu, the controlling shareholder, at HK$0.30 per share, a 47.8% premium to the undisturbed price. The offer price is final.
Key conditions include approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
The offer is light and the offeror is betting that the grim market conditions will sway the headcount test in its favour. Scheme document despatched by 21 December.

Will Elon Dump $10 Billion In Tesla This Week To Buy Twitter? Maybe Not.

By Vicki Bryan

Elon’s Twitter funding “plan” to buy Twitter has been a disaster, time is running out, and it’s mostly his fault.
Many in his equity pool raised back in May are trying to get out of the deal altogether.
He still has time to salvage it without selling more Tesla.

Will Philip Morris Succeed Now?

By Jesus Rodriguez Aguilar

PMI increased the offer price by 9.4% to SEK 116/share to overcome the resistance of shareholders. PMI warns it is its final offer and keeps the 90% minimum acceptance condition.
The revised offer represents an implied equity value of SEK 176.4 billion (USD15.8 billion, vs. USD16 billion last May) and 17.1x EV/NTM EBITDAe (vs. 17.5x in May).
Swedish Match is trading at SEK 112.5, c. 3.1% discount to the revised offer (settlement estimated on 11 November). The market believes the sweetened offer is final. Long & tender.

Matahari Department Store (LPPF IJ) – Freshening Merchandise Is Paying Dividends

By Angus Mackintosh

Matahari Department Store remains an unappreciated transformational retail growth story in Indonesia with the new management team improving the merchandise mix and restarting the company’s store expansion in earnest.
The company plans to add a total of 10 new stores this year and 12-15 new stores next year, as well as adopt an increasingly omnichannel approach to expansion.
Matahari Department Store remains attractive from a valuation perspective trading on 8x FY23E PER with a forecast dividend of 9.9% for FY2023E, which makes it look ripe for a rerating.

Kingston Financial (1031 HK): Chu’s Scheme At HK$0.30/Share

Chu Yuet Wah is Offering to take Kingston Financial (1031 HK) private by way of a Scheme at HK$0.30/share.
The Cancellation price is a 47.78% premium to last close. It will not be increased.
Disinterested shareholders comprise 25.073% of shares out, therefore a blocking stake at the Scheme meeting is 2.5073%. The headcount test also applies.

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Oct 24

Daily Brief Consumer: Welcia Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Welcia Challenges Cosmos in Kyushu

Welcia Challenges Cosmos in Kyushu

By Michael Causton

Welcia Holdings (3141 JP) and Tsuruha Holdings (3391 JP), the country’s leading drugstore chains, are both looking to expand quickly in Kyushu after only entering the market recently.
This won’t be easy. Kyushu is full of discount retailers led by one of the best discounters, Cosmos Pharmaceutical (3349 JP), which is also a leading drugstore chain.
But building a significant market share in the Kyushu market is crucial to competing nationally with these emerging discount leaders.

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Oct 23

Daily Brief Consumer: Carnival Corp, Carmax Inc, Philip Morris International, Sirius Xm Holdings, Walgreens Boots Alliance and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Carnival Corp: New Cruise Ship Additions & Other Drivers
CarMax Inc: Major Drivers
Philip Morris International: Expansion In The Philippines
Sirius XM Holding: Project Amplify Update & Key Drivers
Walgreens Boots Alliance: The CareCentrix Acquisition & Other Drivers

Carnival Corp: New Cruise Ship Additions & Other Drivers

Carnival Corp has continued its string of disappointing results and the company failed to meet Wall Street expectations in terms of revenues as well as earnings in the last quarter as well.
Given the resumption of the guest cruise operations, the company saw its adjusted EBITDA being positive for the first time.
The revenue of the last quarter increased by around 80% in comparison to the previous quarter.

CarMax Inc: Major Drivers

CarMax’s stock has been on a downward trajectory since the last quarterly result which had been a major disappointment.
In response to consumer demand and the current environment, CarMax continued to offer a higher mix of lower-priced vehicles.
We provide the stock of CarMax a ‘Hold’ rating with a revision in the target price.

Philip Morris International: Expansion In The Philippines

Philip Morris continued to demonstrate a strong underlying momentum with positive volume that supported a better than expected top-line growth in the last quarter.
The company delivered yet another all-around beat as net revenues of pro forma grew organically, which reflects continued strong growth in IQOS as well as the ongoing recovery of combustible business in various markets.
Strong quarter pro forma user growth and continued excellent IQOS performance were very impressive.

Sirius XM Holding: Project Amplify Update & Key Drivers

Sirius XM has had a volatile trajectory off late in terms of its stock price performance and with its results around the corner, another key factor that must be remembered is its history of below par earnings.
The company is making progress in deploying its 360L platform, and it is making progress with various EV start-ups.
We provide the stock of Sirius with a ‘Hold’ rating with a revision in the target price.

Walgreens Boots Alliance: The CareCentrix Acquisition & Other Drivers

Walgreens’ stock had a disappointing performance during the course of the year but there as been some recovery after a decent result.
In the quarter pharmacy performance benefitted from the improved trends from maintenance medications and seasonal scripts.
We provide the stock of Walgreens with a ‘Hold’ rating and a revision in the target price.dditional workstreams for its consumer-facing digital assistant.

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Oct 22

Daily Brief Consumer: Cafe De Coral Holdings, Japan Tobacco, Snap Inc and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Cafe De Coral (341): Start to Show Positive Result
Japan Tobacco High Conviction Update: Guidance Has Upside Potential, The Market Is Pass Russia Fears
Snap 3Q22: Tik Tik Tik (Tok) …BOOM

Cafe De Coral (341): Start to Show Positive Result

By Henry Soediarko

The share price was beaten down during COVID thanks to the lockdown and further restrictive policy.
The recent result has been encouraging especially with the loosening of the restrictive measures.
Cafe De Coral Holdings (341 HK) is trading at a deep discount to its peers.

Japan Tobacco High Conviction Update: Guidance Has Upside Potential, The Market Is Pass Russia Fears

By Oshadhi Kumarasiri

Just eight months into Russia’s Ukraine invasion, Japan Tobacco (2914 JP)’s share price has moved back above the pre-Ukraine invasion level suggesting that investors are over with Russia exposure fears.
Based on the company’s guidance upgrade trend historically and YTD financial performance, we are expecting around ¥70bn upside to 2022 OP guidance in 3Q22.
With earnings back on a growth trajectory, we are expecting a reversal of the 2017-21 share price to earnings trend to take Japan Tobacco shares over ¥3,500 in the short-term.

Snap 3Q22: Tik Tik Tik (Tok) …BOOM

By Aaron Gabin

How long until SNAP gets back to Zuck’s original $3B buyout offer?!
Key negative point: US engagement dropped 5% despite user growth +4%…we think its BeReal as much as TikTok.
Uninvestable or Long Time Horizon? Least visibility of any major public company we’ve ever followed. Don’t know the answer!

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Oct 19

Daily Brief Consumer: Perfect Medical Health, LG Electronics, Tokyo Stock Exchange Tokyo Price Index Topix, General Mills, McCormick & Company and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Perfect Medical: Correction Provides An Opportunity For Entry
A Pair Trade Between LG Corp & LG Electronics
The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point
General Mills Inc: Major Drivers
McCormick & Co.: Major Drivers

Perfect Medical: Correction Provides An Opportunity For Entry

By Sameer Taneja

Post the massive correction in the China market, Perfect Medical Health (1830 HK) trades at 9.6x/6.9x PE FY23e/24e with a 10.4%/14.6% dividend yield assuming a 100% payout ratio.
From interactions with the management, HK’s operations are in good health, with Q2 revenues normalizing to precovid levels. China has yet to recover as intermittent lockdowns plague its operations.
With cash and financial investments over 550 mn HKD ( 16% of market capitalization ), the company has the opportunity to make accretive acquisitions to grow its business.

A Pair Trade Between LG Corp & LG Electronics

By Douglas Kim

In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).
LG Electronics is likely to have continued weakening results, due to rising interest rates on the household disposable income in major countries.
Our base case valuation analysis of LG Corp suggests an implied price of 93,905 won per share, representing 19% upside from current levels.

The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point

By Aki Matsumoto

It is useful for statutory documents disclosing a company’s medium-to-long-term management strategy to include information on “human capital,” which plays a role in sustainable growth.
If the mandatory timing of the information to be disclosed in annual securities report is accelerated, there is risk that the information will be similar to that of other companies.
The government should not stick to 2023 for the mandatory inclusion in annual securities reports, but should give companies time to encourage them to deepen what they include.

General Mills Inc: Major Drivers

General Mills delivered a mixed result for the previous quarter, failing to meet market expectations on the revenue front but delivering an earnings beat.
The HMM cost savings, along with gains from pricing mix, offset inflation, deleverage, and the other types of operating costs benefitted General Mills’ bottom-line and helped deliver an earnings beat.
The good news was that General Mills’ service levels increased slightly.

McCormick & Co.: Major Drivers

McCormick had a disappointing quarter with a 3% top-line growth from the same quarter last year, just on par with expectations.
The management remains focused on managing inventory levels and removing inefficiencies across the supply chain.
High meat prices had an influence on grilling-related items compared to last year, although grilling is remains popular compared to pre=pandemic levels.

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Oct 18

Daily Brief Consumer: Stock Exchange of Thailand SET 50 Index, Tesla Motors, Fast Retailing and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Thailand SET50 and SET100: Quiddity Index Rebalance Primer
EQD | Tesla (TSLA US): How to Play Earnings Via Options
Fast Retailing – The New Medium-Term Plan For Europe Is As Ambitious As The North America Plan

Thailand SET50 and SET100: Quiddity Index Rebalance Primer

By Janaghan Jeyakumar, CFA

Thailand SET Index (SET INDEX) is a composite index which represents the price movement for all common stocks trading on the SET.
SET50 and SET100 indices are calculated, respectively, from the stock prices of the top 50 and 100 listed companies on SET in terms of market capitalization and liquidity.
In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.

EQD | Tesla (TSLA US): How to Play Earnings Via Options

By Simon Harris

TS LA reports earnings on October 19th, and we analyse expected moves using the options market
Stock has suffered some production issues, but we think company has potential to beat the lowered estimates
We identify some option strategies to play the event with goof risk/reward

Fast Retailing – The New Medium-Term Plan For Europe Is As Ambitious As The North America Plan

By Oshadhi Kumarasiri

Fast Retailing (9983 JP)’s 4QFY22 was yet again a surprise to the upside as revenue grew 23.2% YoY to ¥536.0bn while OP grew 24.3% YoY to ¥26.2bn.
Having rallied close to 60% following an earnings beat in 3QFY22, we were bearish on the company expecting weak guidance for FY23, but the company surprised with optimistic FY23 guidance.
With China struggling to maintain the historical growth momentum and North-America falling short of its medium-term plan, we anticipate downside to Fast Retailing’s FY23 guidance over the next 12 months.

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Oct 17

Daily Brief Consumer: Shandong Fengxiang, Yashili International Holdings, Tokyo Stock Exchange Tokyo Price Index Topix, Alibaba Group, Xinhua Winshare and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Fengxiang’s Judical Auction Successful, MGO Upcoming
Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors
China Internet Weekly (17Oct2022): Alibaba, JD, Tencent, 37, S.F., YTO
Fengxiang (9977 HK): Unconditional MGO Imminent
Xinhua Winshare (811 HK): Revisiting a Solid Yield Play Fully Backed by Net Cash

Fengxiang’s Judical Auction Successful, MGO Upcoming

A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).
The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%.

Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Giant Biogene Holding (GBH HK) pre-marketing a US$500 million HKEx IPO. Betagro (BTG TB) closes its books early for its THB17.4 billion (US$462 million) IPO.
Event-Driven developments – Kingston Financial (1031 HK), Yashili International Holdings (1230 HK), China Vast Industrial Urban Development (6166 HK), Elmo Software (ELO AU), Pushpay Holdings (PPH NZ), DTAC/True.

In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors

By Aki Matsumoto

TSE published “English Disclosure Practice Guide” for companies with the aim of promoting disclosure in English for communicating with foreign investors, who have significant presence in TSE and Japanese companies.
The purpose of English-language disclosure is to attract investment from overseas investors and improve valuations, but there is mismatch between information needs of overseas investors and English-language disclosure of companies.
While this handbook is helpful for companies attempting to disclose in English for the first time, in-depth approach may be necessary for companies that need further communications with overseas investors.

China Internet Weekly (17Oct2022): Alibaba, JD, Tencent, 37, S.F., YTO

By Ming Lu

Two logistics companies expected that their net profits to rise significantly in 3Q22.
Alibaba’s Freshippo closed its community group purchase business after many small companies did.
Tencent gave up on acquiring Black Shark, a mobile game handset producer.

Fengxiang (9977 HK): Unconditional MGO Imminent

Shandong Fengxiang (9977 HK) is a company engaged in chicken breeding, slaughtering, and processing.
Its controlling shareholder with 70.9% of shares out, via domestic shares, was unable to meet its debts, and had been forced into a judicial auction to sell its holding.
The auction has completed. This forced stake sale should trigger an MGO, one that is likely to be unconditional. Expect an official announcement shortly.

Xinhua Winshare (811 HK): Revisiting a Solid Yield Play Fully Backed by Net Cash

By Osbert Tang, CFA

Including dividends, Xinhua Winshare (811 HK) has returned 26.8% since end-2019, significantly outperformed the market. We expect it to maintain a secured 7% dividend yield in next two years.
Without any outstanding borrowings, it has net cash of HK$5.23 at end-1H22. This equals to 103.5% of share price. Such a strong financial position means dividend stream can be sustained.
Its businesses of textbook and supplementary materials publication and distribution are well insulated from economic slowdown. It does not face the same regulatory risks given its ownership by local SASAC.

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Oct 16

Daily Brief Consumer: Kingston Financial, LOTTE Corporation, Plenus Co Ltd, Diageo PLC, Unilever PLC and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Kingston’s All-Time Lows to Draw an Offer from Mrs Chu?
MSCI Korea November SAIR: Three Adds & Four Deletes
Plenus (9945) To Go Private in MBO – Looks Like a Done Deal
Diageo ADR: Initiation of Coverage – Portfolio Split
Unilever ADR: Initiation of Coverage – Recent Strategic Shift

Kingston’s All-Time Lows to Draw an Offer from Mrs Chu?

Kingston Financial (1031 HK) entered a trading halt pending an announcement under the Hong Kong Code on Takeovers and Mergers on 14 October. The shares are at all-time lows.
It is likely that Pollyanna Chu Yuet Wah (CEO and co-founder), the largest shareholder representing 75.61% of ordinary shares (80.09% of diluted shares), is seeking to privatise Kingston.
As privatisation through a Bermuda scheme involves the headcount test, a decent premium is required – an offer at the 1-year average price of HK$0.33 implies a 63% premium.

MSCI Korea November SAIR: Three Adds & Four Deletes

By Sanghyun Park

As the recent share price volatility has grown, there have been significant changes in those on the borderline at the MSCI November SAIR.
Additions: Hyundai Mipo Dockyard (010620), LOTTE Corp (004990), and Ecopro (086520) & Deletions: Meritz Financial Group (138040), Amorepacific Group (002790), SK Chemicals (285130), and Green Cross (006280).
We must wait on many names until the end, making the price impact more dramatic than usual, as the flow can be concentrated after the announcement.

Plenus (9945) To Go Private in MBO – Looks Like a Done Deal

By Travis Lundy

Kyushu-Based food services business and restaurant operator Plenus Co Ltd (9945 JP) announced Friday that its main holder had announced a Tender Offer. The Board voted to support the effort.
The Tender Offer is at ¥2,640/share, a 37.5% premium to last, and which is just higher than the highest closing price since listing.
This looks like a deal easy to get done. Decent premium, well above book, lifetime high on a low vol stock, not an awful multiple, and founder+cross-holders have 50%.

Diageo ADR: Initiation of Coverage – Portfolio Split

This is our first report on global alcoholic beverage major, Diageo.
Volume increased by 10%, while price/mix growth increased by 11 points, with pricing contributing to the balanced growth of the mid-single digits.
Overall, they are well positioned for the spirits category’s sustained premiumization and market share increases within the overall beverage alcohol market.

Unilever ADR: Initiation of Coverage – Recent Strategic Shift

This is our first report on global consumer goods giant, Unilever.
The company had a decent performance in 2021 and its growth continues to build in its first-half performance.
Unilever also uses its extensive market experience to deal with inflation.

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Oct 15

Daily Brief Consumer: Kingston Financial, Blink Charging Co, Meta Platforms (Facebook), Garrett Motion and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Kingston Financial (1031 HK): What Will Chu Choose To Do?
Liquidity Risk Short Candidates: Blink Charging, Natera, Axonics, Enviva
What Are the Prospects for a Meta Rebound?
GTX: The Macro Adjustment

Kingston Financial (1031 HK): What Will Chu Choose To Do?

Hong Kong brokerage Kingston Financial (1031 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code.
Chu Yuet Wah is the largest shareholder with 74.6% of shares out.
Shares are down 98% from the January 2018 peak. A chunky premium may be on the cards if a firm Offer unfolds.

Liquidity Risk Short Candidates: Blink Charging, Natera, Axonics, Enviva

By Eric Fernandez, CFA

Liquidity shorts can be great short candidates. The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements.
Liquidity shorts have built-in catalysts, have moderate to higher betas, and can have strong down moves if a crisis develops. They can go bankrupt, pushing the stock price near zero.
Today we are flagging Blink Charging., Natera, Axonics, and Enviva.

What Are the Prospects for a Meta Rebound?

By Aaron Gabin

Meta now trades at 14x P/E and 6x fwd EV/EBITDA…valuation inline with Paramount and Warner Brothers Discovery. This is nuts!
While the drumbeat of competitive concerns and self inflicted wounds has piled up in the past month, even core Facebook is not in a death spiral of engagement.
META is investing in new ad tech and ad formats, and has the ability to cut significant opex from its budget that could yield 10-20% upside to current 2023 consensus.

GTX: The Macro Adjustment

By Hamed Khorsand

Continued improvement in automobile inventory levels should benefit Garrett Motion (GTX)
GTX has experienced a decline in turbochargers sold over the past year due to supply chain issues causing carmakers to have lumpy ordering rates.
Ahead of the second quarter results, we had highlighted the foreign exchange headwind the weaker Euro could play. The Euro continued to depreciate versus the US Dollar in the third quarter

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Oct 14

Daily Brief Consumer: Fast Retailing, Melco International Development, Suzuki Motor, The Keepers Holdings, Inc., Euromoney Institutional Invest, Alibaba Group, CJ ENM, Tokyo Stock Exchange Tokyo Price Index Topix, Piktina and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation
StubWorld: Macau Plays Need To Up Non-Gaming Game
Suzuki (7269) | Small Cars at Tiny Valuations
Keepers Holdings: Global Market Weakness Creates Opportunity
Becketts/Euromoney Institutional Investor: Spread
Alibaba, JD.Com, Longfor Group, and Country Garden
Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)
Review of TSE Market Reclassification Requires a Big Cleanup, Not a Small Cleanup as It Should Be
Vietnamese Fashion Recommerce Firm Raises US$1 Million

Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation

By Mark Chadwick

We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers

StubWorld: Macau Plays Need To Up Non-Gaming Game