Consumer

• Fast Retailing (9983 JP)’s share price is up 10% after beating 1QFY22 consensus revenue and OP by 1.4% and 20.6% respectively.
• However, the share price move feels unwarranted given that the beat was driven by mostly one-off/temporary factors in the company’s less significant segments
• We think this is an opportunity to short Fast Retailing as Uniqlo seems to be slowing rapidly in the Chinese market.

• The company’s main product, filers, are no longer key features in Electric Vehicles thus earnings will be pressured. 
• Venture into air-purifying business is commendable yet it may not plug the hole immediately.
• Foreign investors in the company are mainly looking for exposure in the auto-related business, so the change into air purifier may cause them to sell. 

• On January 14, I attended a business strategy briefing of CanDo. This was the first business briefing after AEON (8267) consolidated CanDo.
• While CanDo’s sales are expected to increase mainly through consignment sales, profit margin will improve due to cost reduction, and the key will be to expand sales of attractive products.
• Since the management framework has changed by joining AEON, the corporate governance will be paid attention whether this change will be good for the sustainable growth of the corporate value.

4Q21F preview: Q

• 1Q (Sep-Nov) sales of 6.371bn yen, 37% of the company’s 1H guidance, may seem low at first glance, but were above the company’s target for the 1Q
• 1Q OP of -1.130bn yen was around 0.9bn yen above the company’s 1Q forecast. The company had expected a loss of nearly 2bn yen for 1Q
• 1Q RP of -196m yen includes 936m yen in subsidy income. The company’s policy is to book subsidy income on a payment basis

• Crown’s Board which  had rejected two prior Blackstone offers is now seen as embracing its latest bid, but negotiations will be non-exclusive.
• Our contention was that due diligence undertaken by Blackstone would result in a higher bid. They already hold 9.9%.
• Stock has long been dead pooled at AU$11 due to regulatory uncertainties prompted by New South Wales investigative report of alleged irregularities in VIP and money laundering.

• Spreads have generally tightened across our liquid universe, 450 bps in the case of Volkswagen.
• Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken, Investor AB.
• Recommendations Long prefs / short ords: BMW, Roche, Schroders, Telecom Italia, Volkswagen.

• Water Oasis (1161 HK) trades at a 6x FY22 ( Sept end ) PE with 31% of its market capitalization in cash ( implying ex-cash 4x PE ). 
• For FY21, Water Oasis (1161 HK) paid a 22 cent dividend implying a 12.43% dividend yield. We forecast a forward yield of 14%.
• The company will continue to execute as it opens newer stores and beds down its M&A for a 15% CAGR revenue growth.

• Sony had some interesting panels at CES 2022 focusing on immersion in entertainment on both the audio and visual fronts. 
• Following on from the PSVR2 announcement they help to outline Sony’s roadmap for driving forward entertainment technology. 
• And of course there were some links to Epic and Unreal Engine…

• Alibaba backed B2B e-commerce business, Huitongda (1566215D CH) is looking to test the HK IPO market with its $500m IPO while Beijing is on the attack on Chinese new economy stocks.
• The company’s focus on rural and lower tier markets sounds a promising prospect amidst the Chinese’s government’s push for common prosperity.
• Nevertheless, we think that investors are more likely to focus on the barrage of regulatory assaults and the fragilities of Huitongda’s business model.

• Huitongda (1566215D CH) is a fast-growing commerce and service platform focused on China’s lower-tier retail market. It is pre-marketing an HKEx IPO to raise US$400-500 million.
• The positives are a large addressable market, solid top-line growth and profitability. The key negative is the low margin profile which reflects a fragmented and competitive market. 
• Overall, we think that the positives outweigh the negatives and this IPO is worth a closer look.   

• Auchan, together with private equity, explores a possible €23.5/share offer for Carrefour SA (CA FP) (pro forma €105 billion revenues and 500,000 employees), after last October’s attempt failed. Synergies should be sizeable. 
• On a simple LBO model, at year 5, the cumulative IRR would be 15.0%, and leverage would be 3.8x. Anti-trust and political hurdles are to be expected.
• The creation of a French champion, should likely be favoured by French politicians. Recommendation is long CA FP, underpinned by a 22e 9.6% FCF yield, with potential offer upside.

• Komeda Holdings (3543) announced 3Q FY2/22 results (IFRS). The impression continues to be positive.

• Monthly data announced by the company shows that the positive trend of wholesale sales continued in December (which is included in 4Q).

• Our impression is that store openings are progressing ahead of the company’s plan of 940-950 total stores at the end of FY2/22.

• It is going to be challenging for Fast Retailing (9983 JP) to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results next week.
• Comps were quite strong in the last year, driven by pent-up demand and consensus is expecting 1QFY22 to be marginally higher than the same period of the previous year.
• We think there could be a substantial miss in 1QFY22, driven by lower than expected performance in Uniqlo’s Japan and Chinese businesses.

Lower production in November; Expecting flat figures in December

• Last year was a very challenging one for Unilever and the company significantly underperformed other consumer staples.
• Exogenous factors, such as rising commodity inflation, are largely to blame for that performance.
• Underneath the surface, however, Unilever now appears to be in a much better position than a year ago, while valuation remains conservative.

• Tesla’s Q4 deliveries trounced market estimates thanks to a strong yearend push.
• The outlook for revenue and profit just got higher. A lot higher.
• Also true, Tesla’s easy comps may be coming to an end.

• Considering the geopolitical relationship over the last 100 years, it doesn’t take much for Chinese people to start developing an anti-Japan sentiment.
• The relationship between the two countries was already reaching nervy levels, before Tokyo’s decision to snub the 2022 Winter Olympics.
• We think the Japanese government’s decision to not send a government delegation to the Winter Olympics could be all that is needed to spark an anti-Japan sentiment among Chinese consumers.

• Sony announced details for the PlayStation VR2 today confirming many rumoured specifications. 
• In addition, it announced that a title from its key Horizon franchise would be coming to VR. 
• This points to a commitment from Sony to support AAA VR titles and should allow it to once again dominate VR.

• Keiyo announced a large (9.2% of shares out) ToSTNeT-3 buyback for tomorrow morning at JPY 855/share. 
• Normally this would be an occasion for looking at the significant accretion. 
• This time there are possible offsets which are less encouraging.

• The FTSE UK Index Series is a widely tracked family of sub-indices representing the  performance of the public equity market in the UK. 
• These indices are reviewed on a quarterly basis in March, June, September, and December. 
• In this insight, we take a look at the potential constituency changes that can happen in the March 2022 Rebalance for the FTSE 100 and FTSE 250 Indices.

• Numerous New Year developments suggest markets are heading towards a world where the worst of the Covid might be behind us and a better growth trajectory awaits
• Yields have moved higher, airlines & transport have performed well, Oil is up, and some Asian markets have started to rebound or breakout – Australia, Vietnam & India as examples
• This brings Thailand in focus as one of the major tourist destinations. The charts below show the breakouts and potential trends at work

• For a decade Adastria Co Ltd (2685 JP) was the fastest growing fashion retailer but, as it matured and the apparel market stagnated, growth rates declined.
• The company now wants to become a diversified lifestyle retailer with food as a major element so, to speed things along, it will acquire restaurant business Zetton Inc (3057 JP).
• It is also investing in overseas retailers to spearhead expansion abroad, a strategy that will include Zetton’s leading chain, Aloha Table.

• December SSS: Powerful “Demon Slayer” effect continues. Same-store sales were 117.5% vs. December 2020
• The number of stores at the end of December was as follows: 501 stores in Japan (+3 MoM); 35 stores in the U.S. (+2 MoM); and 42 stores in Taiwan (+/-0 MoM)
• The company plans to run the “BT21 campaign” in January and February. BT21 is a globally popular character brand