Consumer

• China Education Group (839 HK) demonstrates resilience amid market concerns on policy uncertainties by posting a 40.5% growth in 1H22 reported net profit and 20.1% growth in adjusted net profit. 
• Higher education segment saw 44% profit growth and strengths will sustain into 2H22. Weaker secondary vocational and global education segments will witness a sharp recovery, based on latest application statistics.
• CEG has secured increase in tuition and quota in the coming school year, and this will boost FY23 outlook. It opts for an Rmb500m buyback, instead of paying interim dividend.

• PPI has begun roll out of new, specialty food stores designed to slot into a variety of shopping malls. 
• On the surface, these stores look like mini-Don Quijote stores, emphasising low prices and a dazzling density of product, but focused on sweets, liquor, cosmetics, or a combination.
• Expansion will help reach new customers, reduce the expense of opening new stores, and help with building scale for private brands. 

• Campus Activewear Ltd (1535013D IN) is about to go public soon. 
• The RHP has portrayed Campus’s return ratios such as ROCE to be one of the highest in its peer group, inching past the likes of Bata India Ltd (BATA IN).
• However, upon further investigation of the financials, the return ratios seem to be mysterious, simply because of capital reserve arising from acquisition of promoter-companies, back when Ind AS was adopted.

• Astra International 1Q2022 numbers reflect its prime positioning as a beneficiary of recovering domestic growth in Indonesia and its exposure to the commodities boom through United Tractors (UNTR IJ).
• It has increased market share in autos through Toyota and Daihatsu plus holds a strong position in providing auto, motorcycle, and heavy equipment financing providing further geared exposure. 
• Astra International has a war chest from the sale of Bank Permata which is yet to be deployed but could be in the digital space as a future potential catalyst.

For our next Corporate Webinar, we are glad to welcome Taste Gourmet Group (8371 HK) CFO and Company Secretary, Gerald Yu. In the upcoming webinar, Gerald will share a short company presentation with on-the-ground insights from Hong Kong, after which he will engage in a fireside chat with Smartkarma Analyst Sameer Taneja. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 17 May 2022, 17:00 SGT.

Taste Gourmet Group Limited is a Hong Kong-based restaurant group offering a variety of cuisines, under a portfolio of brands, to a diversified customer base. Since the opening of its first restaurant in 2007, the group has owned and operated a total of 34 restaurants offering Vietnamese, Japanese, Chinese, Western, and Drink under 14 brands, including 11 self-owned brands such as La’taste Vietnamese Cuisine, Dab-Pa Peking & Szechuan Cuisine, Dab-Pa Peking & Szechuan Bistro, Dab-pa Modern Chinese Cuisine, Urawa Japanese Restaurant, Nabe Urawa, Rakuraku Ramen, Wasyohuya Yamaichi, Moments Together, Yakiniku Guu, San-Kinn, three licensed brands known as Parkview, Takano Ramen, and Tirpse, and one joint venture brand known as Xianghui.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Channel checks with Merida Industry (9914 TT) and Giant Manufacturing (9921 TT) on the Asia order book provide color on Shimano’s results so far. 
• Channel checks with the Dutch Accell Group (ACCEL NA) also do not show any encouraging data either. 
• Share buyback will provide short term relief but it won’t make revenue growth rate to be as high as early 2021. 

• Oriental Land (4661 JP) fell more than 10% today after a strong earnings beat in 4QFY22, which saw revenue and OP beat consensus by ¥7.0bn and ¥8.6bn respectively.
• The medium-term outlook is very disappointing with the company expecting no pricing growth and low park attendance.
• After moving up nonsensically during COVID due to extremely inflated medium-term consensus, we think Oriental Land’s share price could start falling apart after this medium-term plan announcement.

• FY22 EBITDA guidance is disappointing as strategic investments accelerate yet again and leaving investors uncertain on whether previous guidance for FY23 can be met
• We think ZHD’s FY23 target of ¥ 390bn in EBITDA is reachable but a meaningful beat, which is factored into consensus, is less likely
• So FY22 is another transition year but without the excitement on the potential for LINE as an alternative theme. It is better to be on the sidelines. 

• Today is the last day of the review period for the June review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close on 17 June. 
• We see Tata Motors Ltd (TTMT IN) and Tata Motors DVR (TTMT/A IN) replacing Dr. Reddy’s Laboratories (DRRD IN). Hindalco Industries (HNDL IN) is a close add on sector balance.
• The impact on DRRD IN will be higher than on TTMT IN, in terms of days of ADV to trade and days of delivery volume that needs to change hands.

• Solid earnings call heightened our conviction in Facebook as a terrific long for the next year.
• Reels monetization headwind will become a tailwind… just a question of when. TikTok threat is real, but Facebook knows how to clone other’s innovations.
• Apple IDFA issues not worsening, Facebook will figure this out eventually.

• Chungdam Global is getting ready to complete its IPO in the next several weeks. The expected market cap after the IPO is from 179 billion won to 204 billion won.
• Chungdam Global sells Korean cosmetics and other global beauty brands to e-commerce companies in China and other countries. It generated more than 75% of its sales in 2021 from JD.com.
• The company experienced exceptional growth in sales and profits in the past several years. Its sales and operating profits jumped by 97.4% and 204% CAGR from 2019 to 2021, respectively

• Koito reported 4QFY22 results on the 27th of April and had a 16% revenue miss despite a 3% revenue beat for the quarter. 
• Top line momentum remains strong overseas but material costs continue to pressure gross margins. 
• Guidance for ¥67bn in OP was a significant miss vs. consensus at ¥92.3bn.

• A noteworthy flow trend in the Korean stock market is the National Pension Service’s local equity purchase. For this, they tend to overweight those previously underweighted blue-chip stocks. 
• All of the top 10 most net-bought stocks by local pensions on April 18-26 are KOSPI 200 constituents. And most of them all have a relatively small NPS-owned stake.
• Most of them have significantly outperformed the KOSPI 200 (-0.90%) during this period.

• Ownership in Tesla hits record levels among Global managers. Of the 371 Global equity funds in our analysis, a record 15.1% now have exposure to the stock.
• GARP managers are the most aggressively allocated, with a 0.42% holding on average, though the larger individual positions are held by Growth and Aggressive Growth strategies.
• Despite this record, Tesla remains under-owned by Global active managers compared to large cap peers, and is the second largest underweight in the World

• Results for Q4 and FY22 guidance were mixed with platform sales and revenue largely in-line but margins slightly weaker
• The loss of a major B2B customer wipes out almost all the growth in that segment but core consumer growth remains solid (10%+) as do operating KPIs 
• The read across to parent Z Holdings is limited as the difference in company guidance and consensus operating profit is less than 1% of ZHD consolidated

• Zozo reported yesterday missing slightly across the board with OP missing consensus by 6.7% on a 0.7% miss at the top line. 
• GMV was reasonable due to apparent generosity on reward points and strong promotional spending. 
• OP guidance of ¥51.5bn was noticeably below consensus and while Zozo is considered conservative we expect a miss and long-term stagnation.

• Asahi Group Holdings (2502 JP) announced yesterday that it will raise the prices of a majority of its domestic beverage brands to pass the rising cost of raw materials to customers.
• Although beers as a whole has a relatively inelastic demand, the price elasticity in different categories of beer varies quite a bit with high malt beers having highly elastic demand.
• We think the price hike could be more detrimental to Asahi than its competitors as the company generates most of its domestic revenue from the price-sensitive high malt beer segment.

• Like Netflix, Spotify is increasing spend on proprietary content… at the same time rivals are, which makes the ROI on this spend worth less.
• Promised margin inflection no where in sight. Have to wait for Analyst Day for more clarity. 
• While we could justify a share price in the $70s, we no longer think Spotify is as compelling a risk reward short as it has for the past two years.

• We update our earnings forecast and valuation model for IBJ (6071, the company) and adjust our target price to 1,300 yen
• The number of marriages has continued to decline over the past two years due to the pandemic, and we believe that latent demand for marriage among singles has been increasing
• Directly-owned stores and party business: As consumer activity recovers, the number of party participants, as well as the number of members and successful marriages at directly- owned stores, is expected to recover

• The Okada Manila gaming property will finally become investible by 3Q22 with the Spac IPO now planned for debut by June.
• US based 26 Capital Acquisition company aims for US trading on the NASDAQ and UE’S alternate subsidiary, Asiabest will trade on Manila exchange.
• The Okada property leads the entertainment zone properties in market share.

• We expect the company’s earnings to expand YoY in every quarter of 2022 which will be supported by strong recovery in a media revenue together with solid operating margin
• Bt250m per year after the asset acquisition in 2021. •Expect the company to report net profit in 1Q22 at Bt90m (+142%YoY -41%QoQ) YoY expansion will be due to a 20% 
• Media revenue is expected to grow 31%CAGR in 2022-23E, driven by revenue recognition of new media capacity in digital, static segments (mainly from Aqua), and, retail media in 7-eleven stores

• The review period for the KOSPI 200 June rebalancing ends this Friday. This June rebalancing will have seven additions and seven deletions.
• Additions: F&F (383220 KS), Meritz Fire (000060 KS), SD Biosensor (137310 KS), Iljin Hysolus (271940 KS), Hanil Cement (300720 KS), K Car (381970 KS), and Hana Tour (039130 KS).
• Deletions: CJ CGV (079160 KS), Yungjin Pharmaceutical (003520 KS), Bukwang Pharmaceutical (003000 KS), Sk Discovery (006120 KS), S&T Motiv (064960 KS), Cuckoo Holdings (192400 KS), and Nexen Tire (002350 KS). 

• We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
• There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
• We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place

• Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
• LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
• These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.

• Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
• The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
• It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
• We are posting updated company forecasts/estimates including a separate table for PayPay

• Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
• It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
• The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.

• Maintain BUY rating with a new TP of Bt9.60 (revise up by 16%) as we roll forward valuation base to 30xPE’23E which is -1SD of 5-years trading mean. 
• We expect 1Q22E operation to be the bottom quarter at a net loss of Bt55m,ahead of earnings modestly gearing up in 2Q22 and onwards, on the back of tourism recovery.
• In our view, recovery trend to continue into 2H22, based on full reopening country for foreign tourists post COVID crisis, with upside risk from new branches and products. 

• Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
• The best companies tend to weather crises better than average ones, Poppe says.

• Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
• Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
• Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.

• This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
• The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
• Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom

• On Friday, a Bloomberg article suggested Renault SA (RNO FP) is considering selling some of its 43% stake in Nissan Motor (7201 JP) to help fund its efforts in EVs.
• Sources were “people familiar with the matter.” Since 2018, Bloomberg and Les Echos have been the outlets which do “scoops” on the Renault/Nissan relationship, but they are not always right.
• However, it raises some interesting questions and possibilities. And given the prices, it makes the decision somewhat uncomfortable for both. 

• We have long been bullish on Nagacorp Ltd. on long term fundamentals. We are now seeing rising positivity as market sentiment begins to recognize ASEAN covid recovery coming.
• Stock is at midpoint of 52 week range at HKD$6.97. Our 1 year target is HKD$10.425 based on what we see trending from its 1Q22 unaudited results.
• All revenue segments up: Morgan Stanley report agrees with our view that shares present an immediate opportunity due to potential in cross border gamblers and ASEAN mass.

• More positive sentiment
• Vietnam subsidiary to list on HCM stock market
• CPV’s sales growing
• Improving swine prices to support earnings recovery

Upgrade to BUY from HOLD with TP of THB27.9. The upcoming IPO of subsidiary CP Vietnam (CPV) will give it more flexibility to raise funds for further business expansion as well as unlock value of CPV. This is a new development creating positive sentiment on CPF. CPF’s 1Q22 resultsare likely to be lacklustre but CPF’s share price dropped 5% in the past three months possibly pricing in the weak 1Q22 profit outlook. Besides, we see prospects for improvement in 2Q22 from the favourable livestock prices.

• We see upside to guidance; raising our earnings, TP
• 1Q22 sales growth likely driven by volume and price
• Recovery in gross margin to push profit higher
• Better prospects

• Encouraging 1Q22E recovery, maintain BUY
• Sales and occupancy rebounds drive earnings growth
• Inflationary pressures present but manageable
• Positive earnings bias

• We maintain BUY rating for VGI with the new target price of Bt6.20 (Previous TP: Bt6.50), derived from SOTP method or 50% premium to Thai media peers.  
• We anticipate revenue streams from media and commercial space (recently started to manage by NINE),to retreat to 70% of the level we have seen during pre-pandemic by late 2QFY23 (July’22-September’22)
• The management revenue target in FY2023 at Bt6.5bn-7.0bn is fairly optimistic as we anticipate OOH media revenue to not recover that quickly.

• HK F&B is set to have a reprieve as dine-in services at catering businesses can now remain open from 6 pm-10 pm ( max seating up to 4 people).
• We provide a list of 34 names that will benefit from the removal of restrictions ( some with further catalysts down the road as they are exposed to China)
• Our favorite pick remains Taste Gourmet Group (8371 HK) which we have written about in our insight Taste Gourmet: Multibagger Reopening Play.

• Nestle India (NEST) revenue reported in Q1CY22beat our estimates. However, the company’s EBITDA and PAT were a miss with clear signs of pressures noted on Gross Margins owing to inflationary RM in edible oil, milk & derivatives, and packing materials.
• Reported revenue grew 9.7% YoYto Rs 3,951Cr (~4% above our estimate of Rs 3,800Cr in Q1CY22)
• We maintain HOLD with revised TP of Rs 18,300 (60x Mar-24E) vs earlier TP of Rs 18,600 (60x CY23E).

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• ClearBridge is a leading global asset manager committed to active management.
• The market now has a clear call to action to solve the dual challenges of energy security and energy transition, requiring serious capital spending and innovation.
• We added to defensive sectors including utilities and health care, looking for true diversification with low price correlations and lower price volatility.

• Tesla should probably thank its China operations for another record quarter as strong pricing and lag in hits from cost inflation made profits soar. 
• Next quarter will be tougher as China’s business conditions rapidly deteriorate amid the worst Covid surge in two years.
• Meanwhile, CEO Elon Musk is on the hunt for cash to buy Twitter.

• Hong Kong’s hospitality industry has endured three years of upheaval, first with the democracy protestors in 2019, which slowed inbound, followed by the onset of Covid in early 2020.
• Beginning today, 21 April, the Government commenced the relaxation of most social distancing measures, to be eased over three phases.
• This evolving dynamic is welcome, yet the progress and recovery for many operators may be gradual.

• JD.com met our 240+ short zone and has gapped below immediate 215 support, opening the way for  C wave decline to our target and buy zone near 180.
• RSI trendline rejection sets up a slide to the sub 30 area which mean we will at least hit 180 if not reach for 160.
• Holding the 160 low sets up an intermediate long trade. Be aware that there will be some wide tactical swing over the turbulent summer cycle.

• Campus Activewear Ltd (1535013D IN) is looking to raise about US$184m in its India IPO, via a 100% secondary selldown.
• While there are other domestically listed footwear makers, Campus’ competitors generally market a broader product offering, ranging from casual, formal or outdoor shoes etc.. 
• Campus’ performance was amongst the most resilient during the pandemic, but its margins continues to trail peers. 

• Campus Activewear Ltd (1535013D IN) is looking to raise about US$200m in its India IPO, via a 100% secondary selldown.
• Campus Activewear is a lifestyle-oriented sports and athleisure footwear firm based in India. 
• Operating under the “CAMPUS” brand, the firm offers a diverse portfolio of styles, color palettes, and price points.

• The market position of Japanese cosmetics in China is weakening with Japanese exports declining around 5.0% YoY in January and February 2022.
• With Shanghai under a strict lockdown and the recovery of inbound demand taking more time than expected, it is possible that Shiseido Company (4911 JP) could downgrade its 2022 guidance.
• These forces could take Shiseido’s valuation multiples to the pre-2013 level, resulting in a downside of close to 30%.

• Laughing Water Capital returned approximately -12.5% in the first quarter of 2022.
• Most of the quarter our results tracked the indexes pretty closely, but as the indexes rallied into quarter end, our portfolio did not.

• Fosun Tourism (1992 HK) (FTG) is not a China play and, instead, it has excellent exposure to the global travel industry recovery particularly through its ownership in Club Med.
• 1Q22 showcased a very solid 306.6% rebound in business volume of resorts and tourism destination operations and tourism and leisure services and solutions business, and the trend will continue.
• We think Club Med’s exposure to overseas recovery, Atlantis Sanya’s ride on domestic demand and new resorts’ good position to capture China’s travel recovery are key drivers for FTG.

• A passive play opportunity for Kakao Pay (377300 KS) is approaching.
• Its float rate will likely be raised in the KOSPI 200 June rebalancing. Then, in the KOSPI 200 IT Sector Index, it will again experience the most significant passive inflow.
• The recent share price volatility has increased considerably. So, instead of a preemptive position buildup, a shorter-window passive play seems more appropriate just before the rebalancing trading day.

• Tesla’s Q1 results on April 20th (after market) will likely beat Street estimates, but the overshoot may not be as important as profit margins, which should decline versus Q4 2021.
• Q2 outlook is grim, given the lockdown of Tesla’s Shanghai factory. Even if output ramps up in May, exports–which are 40% of output–may not recover due to epic port congestion. 
• Tesla has 2 new factories ramping up as of this month. A slowdown at its most profitable plant amid start-up costs could raise the need for equity financing.  

• Tesla is losing ground in China, which it needs to juice its margins, create *all* its profits & cash flow, & fund most of billions spent on capex. 
• Aging Model Y—its last and only thriving model—won’t save it.
• Sales in China were weakening even before what now has become an extended disruption as China fights its worst Covid surge in two years.

• Netflix management came off as unprepared for its current circumstances. Ramping competition and TAM saturation have been known for 2 years.
• Competitive responses sounded half baked: increasing price to deter password sharing and launching advertising tiers…in 2 years?
• The viability of the longterm growth algorithm and 10 year DCFs that Netflix investors have leaned on for years has been rightfully vaporized. 

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO in Jan 22. Its three-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Tesla’s Q1 operating income beat consensus estimates by 38% (ours by 26%), while GAAP net income came in 42% above consensus (36% above ours). 
• The highly focused automotive gross margin (Ex-ZEV credits) came to 30% versus consensus estimates of 27.8% and ours of 27.5%. Costs were booked in R&D rather than COGS.
• The results were solid, but the CFO cautioned on Q2 headwinds. Tesla was up by 5.6% in the after hours on these results, ignoring Tesla’s cautious Q2 outlook. 

• Kura Sushi is a dinky (~$540M market cap) sushi business that I have reported on for a little over one year.
• The US subsidiary is das kind (German for ‘the child’ because, why not) of a well-capitalised parent with over 450 stores in Japan.
• It’s a proof of concept venture in a new market, with a tried-and-tested business model, and a parent that provides ample liquidity to its fledging offspring.

• With a limited upside to our target price and concern over decreasing people purchasing power following a rise in inflation, we downgrade our recommendation from BUY to HOLD 
• We expect HMPRO to report 1Q22 net profit at Bt1.49bn (+9%YoY, -16%QoQ),
• YoY growth will be supported by solid demand for WFH products, government stimulus scheme (Shop Dee Mee Khuen in Jan –15 Feb 2022), and solid revenue growth from Mega Home