In today’s briefing:
- JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date
- Taste Gourmet: What to Expect From the 2023 Results
- Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand
- S&P 500 Testing 4165-4200, DJIA Testing 34,280, Nasdaq Composite Testing 12,300; Stay Defensive
- JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- Yerbaé Brands: 2022 Financials Beat Expectations
- Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers
- The Procter & Gamble Company: Pricing Power Continues To Be Its Biggest Weapon – Key Drivers
JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date
- Today, City index Eleventh, the corporate entity often used by noted activist Yoshiaki Murakami, announced (EDINET filing) they owned 1.756mm shares or 5.31% of Arcland Service (3085 JP)
- In mid-April, Arclands Corporation (9842 JP) announced it would merge with 55%-owned restaurant subsidiary Arclands SHD. Murakami-owned 5+% of Arclands at the time. Then it sold 9842 and bought 3085.
- This looks like a confusing set of moves. It is not as confusing when you think about it. He is setting up something for later.
Taste Gourmet: What to Expect From the 2023 Results
- Taste Gourmet (8371 HK) will report FY23 (March YE) results on June 23rd. Channel checks indicate strong momentum in Q4 Vs. Q3 FY23.
- Based on our estimates of 72/112 mn HKD for FY23/24e, the stock trades at 8x/5x FY23e/FY24e with a 7.6%/11.9% dividend yield assuming a 60% payout ratio.
- The company has 114 mn HKD of cash (20% of market cap), which is earmarked for restaurant expansion by 6-10 outlets and dividend payout (50-60% of earnings) in HK/China.
Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand
- The ramp-up in public housing supply in Singapore could be an opportunity for Kimly Ltd to fast-track expansion given its outlets, food-stalls are mostly located in public housing blocks.
- Bigger F&B retail players like Kimly are better positioned versus others to weather the multiple headwinds faced by Singapore F&B retail sector today.
- Upcoming 1H FY2023 results can trigger an up move in the stock if the company reports a meaningful margin recovery. Current undemanding valuations reflect heightened investor concerns.
S&P 500 Testing 4165-4200, DJIA Testing 34,280, Nasdaq Composite Testing 12,300; Stay Defensive
- We still recommend a tactical overweight to defensives (Staples, Utilities, Healthcare, and gold miners) as the SPX tests our 4165-4200 resistance range, and also resistance from the prior 1.5-month uptrend.
- As we await Wednesdays FOMC announcement, the DJIA and Nasdaq Composite are testing 1-year resistances at 34,280 and 12,300, the DXY appears to be inflecting higher, and breadth remains weak.
- While we still see a reach to 4300-4325 as possible, we believe playing for more upside is akin to picking up pennies in front of a steamroller.
JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- We believe JD’s growth rate will continue to slow down and its margin will continue to improve in 1Q23.
- However, we also believe revenue growth will recover from 2Q23.
- We set a price target of HK$256, implying an upside of 85%. Buy.
Yerbaé Brands: 2022 Financials Beat Expectations
- Yerbaé posted full-year 2022 financial results that beat our estimates.
- 2022 net revenue came in at $7.2M vs. our estimate of $6.8M, representing 19% YoY growth
- Gross margin came in at 59% in 2022 vs. our estimate of 58%
Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers
- Philip Morris International’s Q1 results exceeded analyst expectations on the earnings front but were below par in terms of revenues despite some decent underlying momentum from IQOS, ZYN, and its combustible business.
- The company’s Q1 organic net revenues had solid growth.
- This highlights the ongoing strength of IQOS as a step-up in pricing but was somewhat mitigated by anticipated HTU inventory movement.
The Procter & Gamble Company: Pricing Power Continues To Be Its Biggest Weapon – Key Drivers
- Procter & Gamble delivered strong results and managed an all-around beat in the recent result.
- Pricing increased sales growth by 10 points, while mix had a marginally favorable impact on the quarter.
- Growth remained widespread across business divisions, with organic sales increasing in the company’s ten product categories.
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