In today’s briefing:
- Sumitomo Forestry (1911 JP): Selloff Provides Entry for Potential Index Inclusion
- KT&G: A Strong Candidate for Outperformance Amid Increased Signs of Market Fears
- ECM Weekly (5th Aug 2024) – Ola Electric, Brainbees, WeRide, Sanil, CR Beverages, Carote, Fortescue
- Brainbees Solutions (FirstCry) IPO: Valuation Insights
- [Q2 Earnings Review] ADM Falls Short of Expectations on Weak Results in AS&O & Nutrition Businesses
- DFI Retail (DFI SP): 1H2024.Pivoting to Profitable Growth with RTE Foods
- Sustainability Has Many Companies Confused About Linking Financial and Non-Financial Information
- New Wave – Vaulting to Glory?
- Ferrari (RACE US) Q2 2024: Margin Uptrend Continues, No Demand Weakness
- [CB 30/2024] Corn & Soy Tumble on Improving Weather; Chinese Demand Likely to Support Soy
Sumitomo Forestry (1911 JP): Selloff Provides Entry for Potential Index Inclusion
- Sumitomo Forestry (1911 JP) is a potential inclusion to a global index at the August rebalance. If added, passive trackers will need to buy over 6x ADV.
- Sumitomo Forestry (1911 JP) has traded lower on risk-off sentiment and further downside provides an entry point that could pay off if the stock is added to the index.
- Sumitomo Forestry (1911 JP) has outperformed its peers but trades at similar valuations to some stocks. A long/short trade could protect the downside.
KT&G: A Strong Candidate for Outperformance Amid Increased Signs of Market Fears
- In this insight, we provide an update of KT&G Corporation (033780 KS) which is a strong candidate for outperformance amid increased signs of market fears.
- We continue to believe that there is an increasing probability of cigarette price hikes in Korea in 2H24. Last time that KT&G hiked its cigarette prices was in January 2015.
- The company’s shareholder return policy is to provide cash dividends of 1.8 trillion won and share buyback/cancellations worth 1 trillion won from 2024 to 2026.
ECM Weekly (5th Aug 2024) – Ola Electric, Brainbees, WeRide, Sanil, CR Beverages, Carote, Fortescue
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the coming week will see see the listing of Akums Drugs while books will be open for Ola Electric, BrainBees Solutions and Black Sesame Technologies.
- On the placement front, there were two large deals in Fortescue Metals (FMG AU) and Adani Transmission (ADANIT IN).
Brainbees Solutions (FirstCry) IPO: Valuation Insights
- BrainBees Solutions (0172540D IN), India’s largest multi-channel retailing platform for mothers’, babies’ and kids’ products, will launch an IPO to raise up to US$500 million.
- We previously discussed the IPO in Brainbees Solutions (FirstCry) IPO: The Bull Case, Brainbees Solutions (FirstCry) IPO: The Bear Case and Brainbees Solutions (FirstCry) IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs440-465 per share is attractive. Therefore, we would participate in the IPO.
[Q2 Earnings Review] ADM Falls Short of Expectations on Weak Results in AS&O & Nutrition Businesses
- ADM’s Q2 results underperformed analyst expectations with both EPS and revenue missing analyst estimates.
- Operating profit declined for Ag Services & Oilseeds (ASO) and Nutrition, while Carbohydrate Solutions saw an uptick, driven by margin and volume expansion in Starches and Sweeteners.
- ADM expects weak Q3 for AS&O and Carbohydrate Solutions, with improvements expected in H2 2024. Nutrition is expected to perform strongly due to cost efficiency and volume expansion.
DFI Retail (DFI SP): 1H2024.Pivoting to Profitable Growth with RTE Foods
- Strong recovery in 1H2024 profit growth YoY was driven by margin improvements in the food and convenience segments.
- Double-Digit sales growth in the Ready-to-Eat (RTE) foods segment boosted margins, offsetting reduced cigarette volumes from last year’s tax increases in Hong Kong.
- While weak consumer confidence in North Asia impacted sales, good growth in the expanding Southeast Asia business provided a positive offset.
Sustainability Has Many Companies Confused About Linking Financial and Non-Financial Information
- Sustainable management should be considered in the sustainable expansion of corporate value, including shareholders’ interest, and non-financial information should provide direction based on information that isn’t feasible, including financial information.
- Starting with appointing people who are diverse in nationality and gender to the board of directors will lead to discussing management issues with diverse opinions.
- Significant differences exist between those companies that have improved their efforts to improve board practices and capital profitability and achieved results, and those that have only formally put board practices.
New Wave – Vaulting to Glory?
- After a warm-up week of swimming, rowing and archery, the Olympics now kicks into top gear with the athletics.
- Among the hottest of track and field gold medal prospects is Armand ‘Mondo’ Duplantis of Sweden.
- On Monday evening, the 24-year-old will contest the men’s pole vault final as the defending champion from Tokyo.
Ferrari (RACE US) Q2 2024: Margin Uptrend Continues, No Demand Weakness
- Ferrari N.V. (RACE US) reported another strong Q2 2024, with revenues up 16% and profits up 25% YoY. EBITDA margins expanded to 39% due to pricing/personalization(20%).
- The company raised its guidance on revenue/EPS by 2.3%/5%, flagging Q3 would be weak as it transitions to its new ERP, but we believe the company is being conservative.
- Trading at 48.7x FY24e, the stock seems a tad expensive, but it’s up 28% YTD because of upgrades, which we believe will continue.
[CB 30/2024] Corn & Soy Tumble on Improving Weather; Chinese Demand Likely to Support Soy
- North Dakota accounts for 51% of total US spring wheat production. The region’s projected 2024 crop yield 15% higher YoY at an average of 54.5 bushels per acre.
- Large old-crop corn inventories record yield of 183-185 bpa collectively dragging corn prices down.
- Wheat vols rebounded last week after falling the prior week. Prices face uncertainty as strong exports, lower production in EU & China provides support against massive US harvest.
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