Daily Brief Consumer: Anycolor, Trial Holdings, Greentree Hospitality, Rakuten, Tokyo Stock Exchange Tokyo Price Index Topix, 4imprint, China Resources Beer Holdings, Advance Auto Parts, Pointerra Ltd, Colgate Palmolive Co and more

• Anycolor (5032 JP) reported Q3 results today. 9mo Revenue is now above the lower end of original forecasts for the full-year. 9mo OP is 25% higher than the original mid-range.
• The net profit forecast is now up 51% from the original mid-range, and up 128% on the year. The stock has cratered. Badly. 
• It is now 19x April 2023 earnings for 90% revenue growth and 150% Net Profit growth and 40% OPM in the last quarter. Go figure.

• Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$380 million at the IPO reference price of JPY2,000. Pricing on 26 March.
• In Trial Holdings IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on bottom quartile gross and operating margin, mid-tier FCF generation and unusual cash collection cycle.

• Greentree Hospitality (GHG) is a Chinese hotel franchiser and operator that trades at a large discount to other US traded peers and had some rumours floating around in 2022 that it would be taken private by its controlling shareholder who owns 88.7% economic interest in the shares.
• The controlling shareholder also indicated that the reason for its late Q1 2021 report was that they had hired capital market consultants to explore a take-private offer.
• It does have some hair on it, but let’s first focus on the positives

• The big online malls continue to grow at higher rates than many branded e-commerce stores, meaning consecutive annual gains in market share. 
• Amazon’s lead now seems to be widening while Rakuten is also pulling ahead of Z Holdings, which continues to struggle with poor integration of assets, and we see little upside.
• Amazon is now Japan’s 2nd biggest retailer but, despite its problems in Mobile, Rakuten is proving a relentless competitor in e-commerce and we remain bullish on its e-commerce prospects.

• TSE will require companies with P/Bs below 1x to disclose improvement plans, urging them to shift to management that reflects an awareness of their cost of capital and stock price.
• The good thing about this TSE request is that “cost of capital” will be widely recognized by companies. Companies can no longer easily reject shareholder proposals regarding cost of capital.
• It should also be an opportunity for management to evaluate its own corporate value and compare it to market value and consider whether it should remain listed or go private.

4imprint’s FY22 results are impressive, with 45% organic revenue growth and an uplift in operating margin to 9.0% (FY21: 3.9%) despite some gross margin pressure from inflation. Much of this is due to the step-change in marketing efficiency via investment in the 4imprint brand, which has delivered large numbers of new customers and higher order counts. The group is inherently highly cash generative, and we already assumed that a special dividend was likely. This is now confirmed, at twice the level we anticipated, at $2/share. The pace of growth will likely moderate this year and there will need to be some investment to cater for the larger volumes, but momentum remains good, and our forecasts are edged ahead.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• On 9 February 2023 we published a bullish recommendation in China Resources Beer Holdings (291 HK), targeting an 8.75% multi-week rally in Q1 2023.
• 291 HK rallied from 58.75 on 9 February to 63.90 on 7 March (15 trading days), a rise of  8.75%. Target achieved on 7 March 2023.  

• This is our first report on Advance Auto Parts, a leading provider of automotive aftermarket parts in the U.S.
• Advance Auto Parts had a difficult year in 2022 though it did manage to improve its top-line results in the fourth quarter and managed an all-around beat.
• Mid-single-digit comp sales growth in DIY multichannel dominated the fourth quarter.

• Pointerra Ltd (ASX:3DP) provides a powerful cloud-based solution (Pointerra3D) for managing, visualising, analysing, using, and sharing massive 3D point clouds and datasets.
• The company has taken a highly manual, slow, and cost-prohibitive process and turned it into a fast, efficient workflow solution for 3D data, enabling digital asset management from any device in any location.
• The Pointerra3D suite of solutions spans target sectors including survey and mapping; architecture, engineering, and construction (AEC); utilities; transport; resources; and defence and intelligence.

• Colgate’s management seems to be making the right moves in pet food, but performance would need to improve in other segments as well.
• Upside appears limited in the short-run and I will be looking for more evidence that management could deliver higher gross margins, I am cautiously optimistic that Colgate will deliver better results in 2023.
• Performance of Colgate-Palmolive (NYSE:CL) in recent years could hardly be described as success.