In today’s briefing:
- Ace Hardware (ACES IJ) – New Aspirations in Place
- Yum China (9987 HK): The Best Long-Term China Catering Play
- Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings
- Struggles in China Hurt Uniqlo’s Bottom Line
- Astra International (ASII IJ) – Strength in Diversity
- A New Type Of “Deemed Shareholding” Has Emerged!
- Will Delayed La Niña Onset Fuel Weather Risks Firing up Corn Prices?
- Euglena Co Ltd (2931 JP): 1H FY12/24 flash update
- Sprouts Farmers Market Inc.: Why Are They Expanding Store Footprint in Emerging Markets? – Major Drivers
- BorgWarner Inc.: Electric Vehicle and Hybrid Technology Expansion Catalyzing Growth! – Major Drivers
Ace Hardware (ACES IJ) – New Aspirations in Place
- Ace Hardware Indonesia (ACES IJ) reported an impressive set of 1H2024 results with continuing momentum behind SSSG driven by promotional campaigns but margins remained stable at the same time.
- The company continues to open new format stores and renovate existing ones. It has also introduced new private label brands to drive growth and will introduce 15% new SKUs.
- The company will be renamed PT Aspirasi Hidup Indonesia to reflect the separation from ACE US but we see the impact as minimal. Valuations remain attractive on 12.6x FY2025E PER.
Yum China (9987 HK): The Best Long-Term China Catering Play
- We believe Yum China remains the best long-term China catering play. 2Q24 results highlight the resiliency and agility of its business model and management to navigate tough environment.
- While cost optimization drove bottom-line beat, we share management’s view that it is not one-off exercise but will strengthen the company’s operation efficiency moat and market leadership.
- Macro concerns are well known and fully priced in in our view. Otherwise investors won’t have the opportunity to own the name for low double-digit P/E.
Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings
- Fila Holdings announced that its subsidiary Magnus Holdings plans to sell a 1.8% stake in Acushnet Holdings in a block deal sale worth about 98 billion won.
- Our NAV valuation of Fila Holdings suggests an implied value per share of 49,192 won, representing 18.2% upside from current levels. Fila Holdings’ 51.9% stake in Acushnet Holdings.
- The block deal sale of Acushnet Holdings by Magnus Holdings is likely to have a positive impact on Fila Holdings as it could result in higher capital returns to shareholders.
Struggles in China Hurt Uniqlo’s Bottom Line
- Uniqlo Co. Ltd.’s strategy of raising prices in the face of rising costs has taken a toll on the Japanese clothing retailer’s bottom line in China due to growing competition and thriftier consumers.
- The fast-fashion chain’s Greater China profit and revenue both fell in local currency terms during the March-May period, dragged down by poor performance on the Chinese mainland and in Hong Kong, according to earnings results released last month by its parent company, Fast Retailing Co. Ltd. The results did not provide specific earnings figures for the period.
- Fast Retailing attributed the poor performance to lackluster consumer appetite, unseasonal weather and an insufficient product lineup to satisfy local customer needs.
Astra International (ASII IJ) – Strength in Diversity
- Astra International (ASII IJ) saw a slight decline in its core earnings in 1H2024, which was an admirable performance given the weakness in the auto market and commodities divisions.
- Offsetting the weakness in autos, Astra saw strong performances from its financing businesses for 4W, 2W, heavy equipment, and consumer finance, which booked +8% YoY growth in 1H2024.
- Astra remains a key proxy for the overall Indonesian economy, with the diversity of its earnings exposure underpinning its resilience. Valuations are attractive, supported by a 9% FY2024E dividend yield.
A New Type Of “Deemed Shareholding” Has Emerged!
- For first time in 30 years, the fund is back, matching the demand of companies that want to reduce cross-holdings immediately and companies that want more time to sell cross-holdings.
- If the voting rights of cross-shareholdings contributed to the fund are retained, corporate governance will remain an issue until the fund’s investment is terminated.
- In reviewing recently filed annual securities reports, we often see cases where cross-held shares in more closely related companies are contributed to retirement benefit trusts instead of being sold.
Will Delayed La Niña Onset Fuel Weather Risks Firing up Corn Prices?
- Last El Niño was one of the strongest on record, and typically are followed by La Niña, but this transition has yet to occur.
- Latest ONI Reading and trend shows possibility of La Niña developing in August-October, could coincide with winter.
- Historically, adverse weather changes and high hurricane incidence are likely to spoil bearish bets against corn and lead to sustained price recovery.
Euglena Co Ltd (2931 JP): 1H FY12/24 flash update
- Sales increased to JPY23.6bn (+3.7% YoY), operating profit reached JPY348mn, recurring profit JPY309mn, and net loss JPY267mn.
- Biofuels segment sales dropped to JPY306mn (-66.0% YoY), with a segment loss of JPY251mn, reflecting the pilot plant’s closure.
- Revised FY12/24 forecast: sales JPY48.0bn (+3.3% YoY), adjusted EBITDA JPY3.8bn (-71.0% YoY), sales forecast lowered by JPY2.0bn.
Sprouts Farmers Market Inc.: Why Are They Expanding Store Footprint in Emerging Markets? – Major Drivers
- Sprouts Farmers Market’s second quarter 2024 results demonstrate both growth and resilience amidst varying market conditions.
- The company reported a significant increase in sales—up 12% year-over-year to $1.9 billion, propelled by a robust 6.7% growth in comparable store sales.
- Key drivers of this growth include increased e-commerce sales, which surged by 30%, and now constitute 14% of total sales, and the company’s strategic expansion through new stores.
BorgWarner Inc.: Electric Vehicle and Hybrid Technology Expansion Catalyzing Growth! – Major Drivers
- BorgWarner, a leading automotive supplier, presented its 2024 second-quarter earnings results and shared updates on operational strategies and future plans.
- During the earnings call, they discussed financial performance, business outlook, significant product awards, and strategic restructuring.
- For the second quarter of 2024, BorgWarner reported sales of approximately $3.6 billion, which was flat compared to the previous year but outperformed the industry’s modest production decline.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
