In today’s briefing:
- Toyota – Guidance Meaningless With A ¥115 Assumption
- Faraday Future (FFIE): Not Looking So Bright
- Beenos Decides to Lock-In Profits from Incubator Investments
- Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Japan’s Governance: About an Article on Matsukiyo Cococala & Co.
- ThaiBev BeerCo 2022 Pre-IPO – Peer Comp and Thoughts on Valuation
- Suzuki – MSIL In The Driver’s Seat Again
- Silver Ring Value Partners Q1 2022 Partner Letter
- SBUX: “We’re Playing the Long Game”
- Mittleman Global Value Equity Fund Class P Quarterly Report Q1 2022
Toyota – Guidance Meaningless With A ¥115 Assumption
- Toyota results were weak missing by 2.9% and OP by 8.5% due to weak volumes, material costs and some evidence of pulling forward costs.
- Guidance was for a sharp YoY decline from ¥3trn in OP to just ¥2.4trn but this assumes limited price hikes and ¥115/$ so… who cares?
- We expect the weak yen, rising hybrid penetration and volume recovery to drive OP into the ¥3.6-4.0trn range.
Faraday Future (FFIE): Not Looking So Bright
- EV start-up Faraday Future (FF) will be de-listed by the Nasdaq if it fails to file its 2021 annual report & Q1 2022 results by May 16th.
- FF has no revenues yet, but plans to start production in Q3. Cash as of March-end was only $273m vs cash burn of $181m & payment obligations of $193m.
- FF’s growth strategy is risky & relies on the ultra-luxury car market, which is peaking. Without financing, FF may struggle to survive this year.
Beenos Decides to Lock-In Profits from Incubator Investments
- Beenos Inc (3328 JP) results beat with revenue at ¥7.2bn (+4.6% vs consensus) and OP of ¥431m (+21.4% vs consensus).
- FY22 guidance was raised across Beenos’ core e-commerce businesses due to the favourable impact of the yen depreciation on overseas demand and changes to shipping methods and rates.
- What caught our eye the most was Beenos’ decision to gradually realise gains from its VC investments.
Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Toyota is famous for conservative guidance, but today’s FY3/23 estimates of a 22% decline in pretax profit raised some eyebrows. Raw materials & logistics are to blame.
- Adjusting for various conservative assumptions by Toyota for FY3/23, flat profits are possible, but margin deterioration appears unavoidable.
- On flat profits in FY3/23, the 12x PER & 5.5x EV/EBITDA are not particularly cheap. Toyota is in the “Guidance Dog House” until it can produce a significant beat.
Japan’s Governance: About an Article on Matsukiyo Cococala & Co.
- The Nikkei Shimbun published an article titled “Matsukyo Cococala & Co. 6 Months After Inauguration, Integration Effects Begin Here,” and I have considered the issues discussed in that article.
- The integration effect will raise the profit, but further improvement is less likely without recovery in same-store sales, as the profit margin for prescription will decline amid intensifying competition.
- Tsuruha and Matsukiyo Cococala, which belong to group (C) where family members are leading the company while the family’s shareholding has been reduced to less than 20%, are facing difficulties.
ThaiBev BeerCo 2022 Pre-IPO – Peer Comp and Thoughts on Valuation
- On 5th May 2022, Thai Beverage announced that BeerCo will resume its Proposed Spin-off Listing. This time the company is aiming to raise less than US$1bn, as per media reports.
- We have looked at various aspects of the deal earlier, as the company had tried to spin-off BeerCo in 2021 as well before finally calling it off in April 2021.
- In this note we undertake a peer comparison and talk about valuations
Suzuki – MSIL In The Driver’s Seat Again
- Suzuki’s 4Q revenue beat consensus by 7.2% but OP missed by 8.9% as a result of raw material costs and a sudden surge in depreciation and R&D.
- Guidance was typically conservative at revenue of ¥3,900bn (-4.1% vs. consensus) and OP of ¥195bn (-28.9% vs. consensus).
- We believe margin assumptions are too conservative, as are assumptions for volumes and JPY/INR.
Silver Ring Value Partners Q1 2022 Partner Letter
- Silver Ring Value Partners serves investors in the State of Massachusetts.
- The portfolio’s market value is roughly unchanged thus far in 2022 despite an environment in which both stocks and bonds have begun to experience substantial declines.
- The Company offers portfolio management, financial planning, and trading services.
SBUX: “We’re Playing the Long Game”
- Starbucks continues to demonstrate a robust recovery in its domestic territory, with International (Ex-China) playing catch up.
- The focal point of Q2 earnings, however, was the temporal deterioration of the China business.
- Plagued so badly by zero-covid policy closures, the contagion from the China arm of the business resulted in Starbucks withdrawing guidance for the remainder of the year.
Mittleman Global Value Equity Fund Class P Quarterly Report Q1 2022
- The Mittleman Global Value Equity Fund (MGVEF) declined 13.1% in Q1 2022.
- MIM believes that the businesses in which it has invested retain the features necessary to endure and surmount transitory setbacks.
- The company is an SEC-registered investment adviser that provides discretionary portfolio management to institutional investors.
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