In this briefing:
- Lawson’s New Online Service Is Working, Doubles Coverage
- MCX: The Pieces of the Puzzle Have Fallen in Place, BUY for 32% Upside
1. Lawson’s New Online Service Is Working, Doubles Coverage
Lawson (2651 JP) Fresh Pick is the convenience store operator’s new e-commerce solution for food launched earlier this year, and replacing various other less successful experiments.
Unlike competing services, Lawson’s service is limited to just 600 SKUs (stock keeping units), all fresh foods, and Lawson offers no home delivery, only click-and-collect.
In the nine months since launch, the service has expanded from 200 to 1,200 stores, currently concentrated in west Tokyo and Kanagawa.
It is a model that will expand rapidly across the rest of the country because Lawson has to invest so little to make this happen.
2. MCX: The Pieces of the Puzzle Have Fallen in Place, BUY for 32% Upside
- Multi Commodity Exch India (MCX IN) is the leading commodity futures exchange in India with ~90% market share. It enjoys ~100% market share in each of the top 7 products traded on its exchange.
- Average Daily Turnover (ADT) is up 24% YoY over YTD-Nov-18 after 4 years of stagnation on the back of increase in volatility of key commodity prices.
- We see 50-60% increase in ADT over FY18-21 on the back of Mutual Funds entering commodity futures trading creating enough liquidity for large industries like refineries shifting to MCX for hedging, bank distribution of commodity trading products and monetization of commodity options trading.
- MCX’s volumes are unlikely to be impacted by new entrants like NSE and BSE since none of the new entrants can offer any meaningful improvement over MCX’s offering in terms of lower cost, higher speed or tax friendliness. This makes MCX a ripe acquisition candidate going by global experience.
- We expect 16% Revenue Cagr, 20% EPS Cagr over FY18-21. Our target price for MCX at 28x Dec-20 EPS is Rs 950- implying 32% upside.
