In today’s briefing:
- Astra International (ASII IJ) – A Solid Start with Data in Mind
- Miniso: Investors Turning a Blind Eye to Red Flags in Miniso
- Leapmotor: In Desperate Straits..
- Modest ROE Growth Expected to Increase Shareholder Proposals for Higher Shareholder Returns
- Sales Accelerate in March Resulting in a Revenue Beat; Multiple Growth Catalysts in Place
- Lear Corporation: Benefits From Kongsberg Acquisition – Key Drivers
- Fit Hub Banks $6.5m to Make Exercise More Affordable
- Monster Beverages Corp: Continued Supply Chain Challenges – Key Drivers
- Darden Restaurants Inc.: Digital Growth
Astra International (ASII IJ) – A Solid Start with Data in Mind
- Astra International (ASII IJ) registered a strong start to the year with strong growth across most of its major divisions in 1Q2023, including 4W, 2W, Financial Services, and Heavy Equipment.
- The company’s market share in the auto business remained stable and increased for motorcycles, whilst heavy equipment and mining benefited from higher coal prices and infrastructure improving revenues on toll-roads.
- Astra has launched a new JV with Equinix to build data centres in Indonesia, which makes an interesting addition to its digital economy exposure. Valuations are attractive relative to history.
Miniso: Investors Turning a Blind Eye to Red Flags in Miniso
- Despite a 15% drop in March 2023, Miniso (MNSO US) remains relatively expensive compared to peers, having rallied 330% between October 2022 and March 2023.
- We think this is a good opportunity to short MINISO Group Holding (9896 HK) as we see around 35% downside purely from a valuation angle.
- Meanwhile, red flags like insider selling, Blue Orca’s accusations, senior management departures, and a mature domestic market could send the share price back below $5.0.
Leapmotor: In Desperate Straits..
- Several news media outlets reported that Leapmotor (9863 HK) had inflated its sales data for December 2022 based on distributor claims.
- With China ending its new energy vehicle subsidy policy in 2022, EV makers were rushing to sell as many units as possible before embracing price hikes and face competition.
- The company announced a price hike in January and sales volumes have declined in 1Q2023. We think the company will struggle to increase its sales volume going forward.
Modest ROE Growth Expected to Increase Shareholder Proposals for Higher Shareholder Returns
- The fact that there is a certain correlation between ROE+DOE and TOPIX reconfirms that it’s effective to ask management to improve performance in terms of both profitability and shareholder return.
- While % change in shareholders’ equity moves in line with % of change in net profit, dividend payout moves moves differently. Many companies still adopt a “stable dividend” policy.
- If shareholders propose share repurchases, dividend increases, etc., it can be said that management has determined that the shareholder return (ROE+DOE) it has secured is not sufficient.
Sales Accelerate in March Resulting in a Revenue Beat; Multiple Growth Catalysts in Place
- Following the company’s fiscal 2Q sales release, our thesis remains intact.
- We are encouraged by the improving sales trends RCI experienced in March and early April.
- Further, we see several catalysts on the horizon to provide for accelerating growth over the next 12-18 months.
Lear Corporation: Benefits From Kongsberg Acquisition – Key Drivers
- Lear had a strong quarterly performance and managed an all-around beat.
- Its sales increased by 10% to $5.4 billion, and core operating profitability rose by 67% to $265 million.
- The Lear Forward initiative also improved the company’s cash flow performance.
Fit Hub Banks $6.5m to Make Exercise More Affordable
- Living a healthy lifestyle can be burdensome and expensive. Indonesian startup Fit Hub is on a mission to democratize health for middle- and low-income households in Indonesia by offering affordable gym memberships.
- In Indonesia, the average membership costs US$50 per month, while the startup charges US$17.
- Since being founded in 2020, Fit Hub has opened up 60 offline clubs across 14 cities in Indonesia. It plans to open 100 clubs by the end of the year.
Monster Beverages Corp: Continued Supply Chain Challenges – Key Drivers
- Monster Beverages’ last result was a colossal disappointment as the company faced challenges meeting the increased demand for its products due to the rampant supply chain issues.
- Despite these issues, the company reported a 3.1% increase in operating income, driven by increased input costs and selling expenses.
- The company saw positive results from its Java Monster line, with increased sales and increased share in its coffee plus energy category.
Darden Restaurants Inc.: Digital Growth
- Darden Restaurants had a strong quarter and exceeded the market expectations with respect to the top and bottom lines.
- Despite an 8% increase in hourly wages, restaurant labor was 120 basis points better than the previous year due to sales leverage.
- Since Darden used higher revenues to leverage higher inflation on utilities and higher repairs and maintenance costs, restaurant expenses were 40 basis points better than the previous year.
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