In today’s briefing:
- FTSE China A50 Index Rebalance: Three Changes, As We Expected
- WM Motor IPO Initiation: Electric Jitters
- Significant MoM Increase in Inbound & Outbound Visitors in Korea in April 2022
- USJ – Beneficiary of Reopening and Growing Popularity of Anime and Gaming
- United Spirits – Robust Operating Performance; Strategic Review a Positive for Medium-Term
- Jubilant FoodWorks – Operating Performance In-Line; Mr. Khetarpal Comes in as CEO & MD from Amazon
- Greenlight Capital Q1 2022 Letter
- La Opala RG – Tracking Expectations; Demand Outlook Is Positive
- Restaurant Brands Asia – Slight Miss; Guidance Upped for India Business
- Dixon Technologies (India) – Robust Quarter Amid a Challenging Environment
FTSE China A50 Index Rebalance: Three Changes, As We Expected
- Anhui Conch Cement, China Citic Bank and Tongwei will replace Chongqing Zhifei Biological, Gree Electric Appliances and PetroChina in the FTSE China A50 Index at the close on 17 June.
- All changes are as we expected, but there are still trades to do off the back of the announced changes.
- Estimated one-way index turnover at the rebalance is 2.83% and will result in a one-way trade of CNY1,436m. There is negligible impact of the funding trade on the other stocks.
WM Motor IPO Initiation: Electric Jitters
- WM Motor Technology Co Ltd (WMT CH), an EV manufacturer, has filed for a US$1 billion IPO on the HKEx. It recently raised US$595.7 million at a US$7 billion valuation.
- In line with industry trends and listed Chinese peers, WM Motor rapidly grew its vehicle deliveries in 2021. Price increases and a good roadmap support future growth.
- WM Motor is sub-scale vs peers pointing to an uncertain path to profitability. As the era of being rewarded for growth at any cost is over, the timing feels off.
Significant MoM Increase in Inbound & Outbound Visitors in Korea in April 2022
- There were 128k visitors to South Korea in April, up 32% MoM which was the biggest jump in MoM change in visitors to South Korea in the past year.
- There were 215k outbound people from South Korea in April 2022, up 48% MoM and up 202% YoY.
- Among the 21 major reopening plays in Korea, we prefer certain sectors including casino related plays (GKL, Paradise, and Kangwon Land) as well as F&B related (Hitejinro and CJ Cheiljedang).
USJ – Beneficiary of Reopening and Growing Popularity of Anime and Gaming
- Universal Studios Japan has suffered significantly from the COVID pandemic just as Oriental Land has.
- However, as Japan reopens the company should benefit from a resurgence in tourist arrivals.
- In addition, it could emerge as a key play on expanding the popularity of Japanese IP overseas.
United Spirits – Robust Operating Performance; Strategic Review a Positive for Medium-Term
- 4QFY22 headline performance: Standalone net sales grew by 9.5% YoY to Rs24.4bn (v/s est. Rs25bn).
- FY22 performance: Revenue and EBITDA grew by 18.9% (led by ~12% volume growth) and >50%, respectively.
- Other highlights: (1) ENA and Glass are ~2/3rd of the company’s raw material basket and both the commodities are under inflationary pressure, witnessing inflation in double digits. (2) Recently received price increases from Assam, Rajasthan and Madhya Pradesh. (3) UNSP maintained its guidance to deliver mid to high teen operating margin.
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Jubilant FoodWorks – Operating Performance In-Line; Mr. Khetarpal Comes in as CEO & MD from Amazon
- 4QFY22 headline performance: Standalone topline was up 12.9% YoY at Rs11.6bn, in-line with our estimate of Rs11.4bn.
- Store additions in 4QFY22: The company again created a new all-time record with the opening of 80 new Domino’s stores, taking the network strength to 1,567 stores as of 31st March’22.
- FY22 standalone performance: Revenue, EBITDA and APAT grew by 32.5%, 44.1% and 89.6% YoY, respectively.
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Greenlight Capital Q1 2022 Letter
- Green Light Capital is a privately owned hedge fund sponsor. The firm invests in the public equity and fixed income markets of the United States. It primarily invests in value.
- The Greenlight Capital funds (the “Partnerships”) returned 4.4%1 in the first quarter of 2022, compared to a 4.6% decline for the S&P 500 index.
- Our short portfolio had a strong result this quarter. The gains were broad- based, led by falling values for our basket of bubble stocks and a substantial fall in the price of a medical device company that reported disappointing results.
La Opala RG – Tracking Expectations; Demand Outlook Is Positive
- 4QFY22 performance: LOG’s 4QFY22 revenue at Rs896mn (up 12% YoY) came in line with our estimate.
- Revenue was well ahead of pre-Covid level. The management indicated that growth was equally strong across channels.
- EBITDA margin witnessed 520bps QoQ moderation despite strong gross margin, mainly on account of higher other expenses (4Q other expenses are always high on account of director commissions and channel partners incentives etc.)
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Restaurant Brands Asia – Slight Miss; Guidance Upped for India Business
- 4QFY22 standalone topline grew by 37% YoY to Rs2.7bn (vs est. Rs2.8bn).
- 4QFY22 consolidated topline grew by 24.4% YoY to Rs4bn. Gross margin expanded by 100bps YoY to 63.6% (down 30bps QoQ).
- FY22 performance: Standalone revenue and EBITDA grew by 90.9% YoY and 175.7% YoY, respectively.
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Dixon Technologies (India) – Robust Quarter Amid a Challenging Environment
- Consumer Electronics update: Consumer Electronics (LED TV) segment sales declined by 14.3% YoY to Rs10.1bn with EBITDA margin coming in at 2.8% (+40bps YoY).
- Lighting update: Lighting segment revenue declined by 20.2% YoY to Rs3.05bn with an EBITDA margin of 7.1% (down 100bps YoY).
- Outlook and valuation: Led by the strong scale-up opportunities across multiple product categories, we expect 69.3% earnings CAGR for Dixon over FY22-FY24E.
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