Consumer

• We are value investors – business analysts with a long-term time horizon focused on purchasing publicly traded companies that are competitively entrenched at significant discounts to intrinsic worth.
• After very strong absolute and relative returns through the first nine months of the year, all of our investment strategies lagged their benchmarks during the fourth quarter.
• All of our portfolios are fully invested in world class businesses with stable values trading at a significant discount to intrinsic worth.

• Singapore Press Holdings (SPH SP)‘s comments and answers about the SPH REIT Chain Offer may be misleading. 
• China Mengniu (2319 HK) is in discussions regarding its holdings in Yashili (1230 HK) which may result in a number of “Potential Transactions”, and may include a pre-conditional privatisation offer.
• WH Group (288 HK) is two businesses – a US pork processor and a Chinese one – and both businesses are suffering lower margins than they’d like.

• Tencent (700 HK) will deliver shares of JD.com Inc. (9618 HK) this week in its in-specie distribution of 14.7% of the shares out of JD.com. 
• Some people will NEED to hold. Some will NEED to sell. On a net basis, it is a short-term sell and a longer-term overhang.
• The timing and execution are going to be quite interesting. There will be short-term opportunity.

• GreenWood Investors is a mostly-long, deep value investment firm focused on areas of extreme pessimism, structural inefficiencies and low competition.
• Our fourth quarter performance reflected a worldwide capitulation away from nearly everything except the large tech companies.
• We want to be optimized for both the short, medium and long-term, and seek rare investments that look attractive from all perspectives.
• We’ve given significant consideration to owning the big tech monopolies since 2012.
• We’ve been finding highly compelling short opportunities in addition to maintaining a high sense of urgency in sifting through the wreckage brought on by the most recent market turmoil.

• Demand recovery across segments to propel earnings Godrej Agrovet (GOAGRO) is likely to witness better demand across its segments of Palm Oil, Animal Feed (AF) and Crop Protection (CP).
• Conversely, the palm oil business is likely to be a beneficiary of rising prices.
• The palm oil prices rallied 42% YoY to USD1,383/t as of Jan’22..

• We have seen CEO changes for various other consumer companies in the past, and most changes have been value accretive.
• However, we remain cautious until the new CEO showcases his execution capability.
• His exit (along with past exits of many members of senior management) is certainly adding several risks.

• As automakers race to build the electric future, EV charging companies are looking to capitalize on the energy transformation by building out a national network of chargers to kill range anxiety.
• Despite these lofty ambitions, EV adoption remains slim across the US, with approximately 3% of all vehicles sold being electric
• Allego, which has gone public through a deal with Spartan Acquisition Corp, is a bet on the future of the European EV market

• Astra International (ASII IJ) held an informative post-results analyst briefing that provided a glimpse into its future plans, with capex set to double in 2022 with a war chest ready.
• Other than investing in expanding existing businesses and in areas such as EVs, Astra also has a pipeline of deals related to the growing digital ecosystem in Indonesia. 
• Astra International (ASII IJ) is a proxy for the recovery in Indonesia’s economy through cars, motorbikes, and commodities but has an emerging digital and sustainability edge plus reasonable valuations.

• China Mengniu (2319 HK) is in discussions regarding its holdings in Yashili (1230 HK) which may result in a number of Potential Transactions, and may include a pre-conditional privatisation offer.
• The Potential Offer would involve a cancellation price of HK$1.20/share, a 31.9% premium to last close, and a 161% premium to the undisturbed price. 
• The recent privatisation of key peer Ausnutria Dairy Corp (1717 HK) provides a guideline to the timeline from here.

• The pending IPO of Rakuten Bank could be worth ¥380bn (2x book) and boosts appreciation of a fintech business we think is worth ¥1,400/share
• That is well above the current share price reflecting the valuation drag of an expensive mobile segment, which is expected to hit peak losses in Q1 22
• We expect mobile break-even will take longer than expected and downside here offsets fintech excitement – we remain at Neutral

• Starting 18 March, the current $5,000 purchase limit at the domestic duty free shops will be abolished for the locals.
• The removal of the $5,000 purchase limit at duty free shops in Korea should encourage purchase of luxury women’s apparel, bags, and cosmetics.
• The removal of the purchase limit should help the major duty free operators in Korea including Hotel Shilla (008770 KS) and Shinsegae (004170 KS).  

In this report, we analyse the impact of the Ukraine-Russia conflict on the various sectors and companies in our European coverage universe. We also include a list of bonds for which we see good value. The direct impact from the actions taken to stop the war (including sanctions) should be insignificant or moderate for most companies under our coverage, but these names could be severely affected: Air Baltic, Consolis, Kem One, KME, Lecta, Naviera Armas, Nobian, Nordex, Norican, Oriflame, Pro-Gest, Profine, Raffinerie Heide, Stada and Vedanta Resources.

• According to our channel checks, the new smaller compact feature stores (of 20k-25k sqft) enjoy significantly better revenue/sqft (of ~1.5x) v/s the existing bigger stores (of 40k-50k sqft).
• Management targets to double revenue over the next 3-4 years backed by: its strategy of adding 10-12% new stores annually, its initiative to revive SSSG to high single or double digit on improved new store productivity and focus on private labels, strong growth in the Beauty segment and ecommerce initiatives.
• However, our revenue estimates are nearly 40% below the management.

• South Australian telecommunications company Uniti Group Ltd (UWL AU) has announced it has entered into “exclusive discussions” with infrastructure investor HRL Morrison & Co for a potential acquisition.
• Morrison & Co’s non-binding proposal has an indicative price of $4.50/share, valuing Uniti at A$3.1 billion.
• The proposal has an exclusivity period up to 22 April.

• Yashili International Holdings (1230 HK) announced its controlling shareholder, China Mengniu Dairy Co (2319 HK), is in discussions regarding its holdings in Yashili and several potential transactions.
• If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).
• The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  

• Mediaset SpA (MS IM) intends to launch a takeover bid for Mediaset Espana Comunicacion S (TL5 SM). Consideration is €1.86 + 4.5 MFEA IM (€5.613 based on €0.834/ordinary share A).
• 12% premium. Conditional on reaching 90% of voting rights (excluding those already controlled by MFE, implies 39.88%). Cash component to be fully funded by target’s net cash position.
• The offer price seems reasonable. Gross spread is 7.3%, an interesting level considering that the offer will likely be successful and Mediaset España delisted in less than 6 months.

• Indonesia’s leading mass-market bread producer PT Nippon Indosari Corpindo (ROTI IJ) booked a strong set of FY2021, with general trade driving growth, and greater efficiencies enhancing margins and FY2021 growth.
• The company continues to improve its product mix and distribution to cater for more home consumption and also continues to push out into East and West Indonesia geographically.
• Higher wheat prices are a risk but the company has bought forward and will increase prices if needs to be offset higher cost. Valuations are attractive versus history. 

• With Omicron under control, Japan is expected to relax home quarantine requirements for foreign travellers some time or the other.
• Meanwhile, Google Mobility data hints that domestic customers are starting to head back to places like shopping centres, suggesting an improvement in demand conditions.
• Based on valuation and the price performance trend, long time underperformer Pola Orbis Holdings (4927 JP) seems like the best option to capitalise on the reopening of Japan to foreign tourists.

• Q3 22 results were in-line/ahead of consensus expectations but shares fell 7% today anyway
• Operating profit fell 10% as improvements in operating losses for new businesses like Lohaco and logistics were not enough to make up for higher spending in the core B2B segment
• Despite the decline, Askul shares have largely outperformed peers YTD on optimism over the planned launch of quick commerce business Yahoo!Mart announced in late January

• Ferretti is a leading yacht builder based in Italy. The company is looking to raise up to USD 300m via a Hong Kong listing.
• In our previous note, we looked at the company’s key product segments, operating metrics, financials, and industry.
• In this note, we compare the company with its close peer and provide our thoughts on valuation.

• We maintain BUY rating and raise TP by +25% to Bt4.50 derived from 1x PBV’22E, to reflect better outlook post-COVDID crisis.
• About 98%of its hotel properties have already resumed operation by the late last year.This along with complete opening up of international borders will be the key earnings drivers for 2022 
• Maldives and Thailand international demand has shown growing trend since 2Q21 and been in continuing growth in 1Q22 following reopening countries especially in UK and Maldives.We expect strong earnings recovery 

• A quick memo this morning, as I perused the headlines and found that Howard Schultz, founder and two-time CEO of Starbucks, will be coming back to the company
• The transition will be effective on April 4th, and Howard is expected to assist with succession planning
• I am a big fan of Schultz, having read both ‘Pour Your Heart into It’ and ‘Onward’ in my younger years

• Green Tea Group (GT HK) is looking to raise about US$150m in its upcoming Hong Kong IPO. 
• Green Tea Group is a restaurant chain operator for fusion cuisine in China. 
• As of the latest practicable date (LPD), it had a restaurant network of 236 restaurants covering 18 provinces, four municipalities and three autonomous regions in the PRC.

• On 23rd Dec, Tencent declared a dividend in the form of distribution in specie of 457.326m shares of JD.com, i.e. 1 share of JD.com for every 21 shares of Tencent.
• While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.
• In this note, we talk about the likely impact of Prosus’ shareholding on passive flows at the time of settlement.

• Over the last two days on Weibo there was a lot of noise regarding massive layoffs at Chinese tech giants such as Alibaba Group (BABA US) and Tencent (700 HK).
• Local news outlet “Yilanshangye”, called that Alibaba’s community group buying platform MMC is planning to release around 20% of its employees, with several business lines already finalising their layoff lists.
• With investor appetite for growth companies changing rapidly over the last few months, it seems Alibaba Group (9988 HK) could be struggling to finance several of its loss-making ventures.

• Infant formula play Yashili International Holdings (1230 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
• Shares closed up 98% yesterday, on clear news leakage, before shares were suspended. China Mengniu Dairy Co (2319 HK) holds 51.04% with Danone SA (BN FP) another 25%.  
• This trading halt follows the recent successful Offer for Ausnutria Dairy Corp (1717 HK), one of Yashili’s key peers.

• WH Group (288 HK) is two businesses – a US pork processor and a Chinese one – and both businesses are suffering lower margins than they’d like.
• But they are doing better than and are cheaper than peers. And still the stock falls. Today, the stock price hit a 6-year low on dramatic underperformance of peers.
• The question is what the proper discount would be for people who question its governance credentials. It’s a really big discount now.

• Morrison & Co will offer A$4.50 cash per share, a 42.9% premium to the unaffected price of A$3.15 (on 13 March).
• We think that the Morrison offer is attractive in the context of historical multiples and share prices. At last close, the gross spread is 12.2%.
• Uniti Group Ltd (UWL AU) flagged in January that it had received takeover approaches from more than one party. Consequently, the Morrison offer could force out other bidders. 

• I first screened those with a sigma below -1.0 on a 20D MA relative to Ords. I then filtered those having underperformed the common shares on a YTD price performance.
• As a result, I have the following four preferred shares: Samsung Electronics 1P, Hyundai Motor 1P, Daishin Securities 1P, and Doosan Corp 1P.
• As for the pref/ord dividend yield difference, Hyundai Motor 1P’s dividend yield difference has widened considerably compared to the past three years.

• In this insight, we discuss two major issues impacting the Korean hotels, travel, duty free shops, cosmetics, leisure, & casino related companies.
• First is that the South Korean government announced that it will drop quarantine requirement for international arrivals from 21 March.
• Second is the potential ramifications of Yoon Suk-Yeol (newly elected South Korean President) who has a relatively hard line stance on North Korea. 

• Pan Pacific International Holdings (7532 JP) is Japan’s largest discount retailer but also a major GMS operator. 
• It is on track to achieve consolidated sales around ¥1.87 trillion by the end of the year, 85% of this in Japan despite the lack of inbound tourists.
• PPI also has a great retail proposition in Asia which is proving popular. The long-term outlook at home and overseas looks solid.

• Apollo approached educational conglomerate Pearson Plc (PSON LN) regarding a 854.2p prospective offer for 100%, rejected by the Board. Value creation should come from further divesting businesses. PUSU deadline is 8 April. 
• Cevian, top shareholder, has a 10.24% stake, and bargaining power (it could prevent a delisting). Using DCF, base-case TP is 742p, best case is 834p. Comps-based valuation is 815p.
• The market’s gone beyond initial doubts, shares closed at 827.6p on 15 March (3.3% gross spread), betting Apollo will succeed (probably raising the offer). The CDS market already believed it.

• We have seen CEO changes for various other consumer companies in the past, and most changes have been value accretive.
• However, we remain cautious until the new CEO showcases his execution capability.
• His exit (along with past exits of many members of senior management) is certainly adding several risks.

• The US traded unit of China’s Tencent entry into digital music has lost exclusive rights to its foundational music and entertainment content due to Beijing policies.
• Stock price has been in free fall from a $31 high last March to $3.44.
• The historic term “fallen angel: applies to bonds but TME ‘s current trade suggests it could well apply to special situations in common.

• Jubilant Foodworks (JUBI IN) announced the departure of its CEO Mr Pratik Pota. 
• The timing of departure coupled with recent disappointment around disclosures is making the market nervous. 
• As the “sea” gets stormy thanks to high food inflation and pressured “Dine-Ins”, who would be JUBI’s new captain is the key. 

• On 23rd Dec, Tencent declared a dividend in the form of distribution in specie of 457.326m shares of JD.com, i.e. 1 share of JD.com for every 21 shares of Tencent.
• While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.
• In this note, we look at Tencent’s shareholding in order to decipher the impact on JD.com’s shares once the distribution is settled to determine who the sellers could be.

• Workman has consolidated its position as a leading domestic outdoor/sports casual retailer in the last two years.
• Growth has been less dramatic but it has developed more infrastructure and brand foundations for what it hopes will be the next big expansion.
• It is expanding the number of banners, increasing the ratio of private label and widening the number of categories it sells, including footwear and camping. 

• We downgrade to HOLD rating with a new TP of Bt38.75 derived from 28.9xPE’22E (-0.5SD of 5-Yr trading average)to factor in negative impact from stock dividend on 22E EPS growth
• COM7 announced annual cash dividend of Bt1.00 and stock dividend (Bt0.25), XD date on 11 Mar.
• We believe the dilution effect will have a negative impact on the company’s shareholders.Recurring EPS growth should drop to-38.4%YoYin 22E,down from 23.2%YoYpre-dilution,while dividend yield will also be halved to 1.2%.

• EV SPACs have been all the rage over the last few years, as OEMs have raced to become the next Tesla, yet have failed to live up to the hype.
• With intense competition, production delays due to supply shortages, and high Capital Expenditure, it is clear that many of these EV startups will fail to cross the finishing line
• Taiwan based electric two-wheeler manufacturer Gogoro is looking to merge with SPAC Poema Global to boost its international expansion plans

• Early reports of Tesla’s “strong” Feb “sales” left out critical data, 
• Like Model 3 deliveries sunk like an anchor, as I expected, and Model Y pace may already be slowing. 
• Critical March is now hit with a major Covid outbreak—and lockdowns.

• We believe, it would be tough for Asahi India Glass (AIG) to sustain its present elevated profitability levels amidst steep rise in energy costs.
• We expect it to surge a further ~400bps by Q1FY23E, assuming present natural gas and crude oil prices.
• Also, logistics cost to sales is ~5-6%, and ~20% increase in fuel costs would add a further 100bps pressure on margins.

• Revenue grew rapidly by 23% in 4Q21 and we believe revenue will grow by 18% in 2022.
• We are not concerned about the zero net margin, because operating cash flows were still strong in 2021.
• We believe the stock has a price target of US$73, which is 18% over last closing price.

• KOSPI 200’s June rebalancing review period is six months, from November 1 to April 30. So, we are now over 70% of the review period.
• The addition result is similar to the screening results last month. However, one stock was newly screened. Hana Tour Service sits at the filtering borderline within the Consumer Discretionary Sector.
• As for deletions, Bukwang Pharmaceutical is screened in the healthcare sector instead of Yungjin Pharmaceutical. S&T Motiv in the Consumer Discretionary Sector is additionally listed as a deletion candidate.

• Norges Bank excludes Li Ning (2331 HK) from its list due to poor labor practices/human rights issues.
• Today’s share price could be a telltale sign of the near-term prospect, down when the majority are up. 
• Will the other international shareholders follow suit on dumping the shares because of the human rights abuse? Potentially yes. 

• Green Tea Group (GT HK) received the Hong Kong Stock Exchange approval to launch its IPO on 7th March 2022, almost a year after filing its first application.
• The company expects to raise around US$100-200m via an IPO jointly sponsored by Citi and CMB International.
• Growth prospects look decent with plans to open 75-100 new restaurants each year. However, We aren’t excited about the IPO as the Company’s business model seems significantly weaker than peers.

• Ferretti is a leading yacht builder based in Italy. The company is looking to raise up to USD 500 m via a Hong Kong listing.
• We look at the company’s key product segments, operating metrics, financials, and industry.
• We provide our quick thoughts on the industry, valuation, and our concerns.

• Q4 net revenues: $2.1 bln (60.5% YoY and 73.9% YoY on an FX neutral basis). Growth was led by the Fintech division (+70% YoY).
• Gross profit came in at $853.2 mln (40.0% gross margin from 36.8% in Q4 2020) and Income from operations reached $23.3 mln (a loss of $25.1 mln in Q4 2020).
• FX losses were $56.9 mln mainly due to the buyback of shares in Argentina. The Net loss was $46.1 mln equal to a negative EPS of $0.92.

• We reiterate our BUY rating for ICHI with a target price of Bt13.0 based on 25xPE’22E, the five-years average trading range and close to Thailand consumer staples.
• We expect strong earnings momentum to continue to grow both YoY and QoQ in 1Q22 and continue in 2Q22 from high season quarter.Currently,ICHI trading at 20xPE’22E cheaper than its five-years
• We expect earnings to grow at CAGR of11%in the next three year to reach Bt742m by 2024 supported by launching new products and new markets expansion,as well as margin expansion 

• Yesterday analyst meeting came out with a positive tone.We maintain BUY rating with a target price of Bt21.0, derived from 18xPE’22E,+1SD from three years average trading range or 50% discount
• We expect earnings to grow to Bt764m in 2024E or +19%CAGR (2022-24E) from -5%CAGR(2019-21), driven by 1) solid SSSG and online sales, 2) solid recovery in rental income
• To implement a more aggressive strategy after COVID-19, the management aims to expand 1-2 new stores per year from 2023 onwards.

• We upgrade COM7 to BUY and raise TP by 34% to Bt92.50 derived from 34.5xPE’22E (+0.25SD of 5-Yr trading average).Our rating reflects a positive outlook toward its strong potential growth 
• We downgrade our target PE to 34.5xPE’22 (+0.25SD) from 39.0xPE’22 (+1SD) previously to reflect declining earnings momentum. We believe recurring earnings growth at CAGR of 45% over past two years 
• We expect strong earnings growth in 2022 at +23% driven by strong iPhone 14 sales due to growing 5G device penetration.

• Komeda’s February same-store wholesale sales 97.2% vs. 2021, 102.9% vs. 2019

• SSS vs. 2019 for food service companies: Omicron impact in February

• Stock price trends for restaurant companies: Outperforming TOPIX despite downtrend