Daily Brief Consumer: Sheng Siong, Haidilao International Holding, ASICS Corp, Water Oasis, General Motors, Hilton Worldwide Holdings, 4imprint, Chipotle Mexican Grill, Japfa Comfeed Indonesia, British American Tobacco and more

• Sheng Siong (SSG SP) reported another resilient quarter with revenue growth at 4.7% YoY and profit growth flat, with annualized ROCEs at 27%. 
• Net cash grew to 289 mn SGD (highest ever now at 12% of market capitalization). The company is expected to expand by 3-4 stores in FY23 for Singapore.
• While the stock is not cheap at 19x/18x FY23e/FY24e and 3.8% dividend yield, we see prospects for margin expansion in further quarters as execution remains high quality.

• Positive profit alerts from both Jiumaojiu and Haidilao reflect strong gain in operating efficiency but also point to looming growth deceleration as brands mature.
• We see valuation more reasonable due to a combination of sector de-rating in 1H23 and higher visibility into earnings recovery post these profit alerts.
• Yum China remains best long-term play in China catering sector in our view. While both Haidilao and Xiabuxiabu present trading opportunity, we are still cautious about Jiumaojiu.

• Asics is due to report on 8th August. We expect another strong quarter and guidance revision
• Recent results from Nike bode well for Asics – declining inventories and strong top line performance in China
• We believe that higher operating margins will be the key stock driver and see 10% upside to fair value

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety. 
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
• We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.

• General Motors exceeded Wall Street expectations in terms of revenue and earnings.
• With solid pricing and incentive discipline, they have now provided higher retail marketer results for four straight quarters in the United States.
• We give General Motors a ‘Hold’ rating with a revised target price.

• Hilton Worldwide delivered an all-around beat in the last quarter, exceeding expectations with strong results.
• The company’s solid fundamentals, industry-leading brands, and strategic partnerships continue to drive its growth.
• With a high number of signings and a robust development pipeline, Hilton is poised for continued expansion in the coming quarters.

Ahead of 4imprint’s interim results, scheduled for 9 August, the company has issued a half-year trading update indicating performance running well ahead of market expectations for the full year. This is in terms of volumes, gross margin, profitability and cash. The May AGM statement had also been very positive, but there was greater uncertainty at that time whether the buoyant conditions would persist and we held our forecasts. We have now lifted our revenue and earnings estimates for FY23 and FY24 and adjusted for the pension buy-in, announced in July. 4imprint is clearly outperforming its market and has plenty of scope to continue to build (profitable) share.

• Chipotle delivered a mixed set of results in its most recent result with revenues falling short of Wall Street expectations but above-par earnings.
• The rise in Chipotle’s overall revenue was driven by an upsurge in comparable restaurant sales and also new restaurant openings.
• Lately, Chipotle announced its foremost development pact with Alshaya Group for opening several restaurants in the region of Middle East.

Japfa Comfeed’s H1/23 results remained weak, with a large drop in profitability on account of an oversupply of poultry, higher raw-material costs and lower consumer demand. While there was sequential improvement in Q2, the overall H1 results remained significantly weaker y-o-y. The company’s financial risk profile continued to deteriorate, while liquidity worsened.

We revise our LARA on Japfa to “High Risk” from “Medium Risk”, given the company’s quickly deteriorating liquidity profile and increasing leverage. The inadequate liquidity position and fast-rising leverage are no longer in line with that of a “Medium Risk” credit. 

• During the last quarter, BAT showed a decent performance with growing revenue, profit, and earnings per share.
• The focus on New Categories has been successful, with revenue from non-combustibles increasing significantly.
• By prioritizing sharper execution and responsible New Category development, BAT aims to navigate regulatory challenges.