In today’s briefing:
- Techtronic Industries (669 HK): Forensic Analysis Viewpoint
- Alibaba: Post Earnings Price Reaction Confirms Investors Are Worried Of a Fading Core-Business
- Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment
- Branded Camping from Goldwin and Snow Peak
- MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities
- The Coca-Cola Company: Major Drivers
- Marriott International Inc.: Major Drivers
- Restaurant Brands International Inc.: Major Drivers
Techtronic Industries (669 HK): Forensic Analysis Viewpoint
- Jehoshaphat’s short report has alleged that Techtronic Industries (669 HK)/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.
- Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.
- TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.
Alibaba: Post Earnings Price Reaction Confirms Investors Are Worried Of a Fading Core-Business
- Alibaba’s 3QFY23 results marginally topped consensus. With the share price dropping 0.65% cf. +0.35% for the index, both results and the price reaction were in line with our expectations.
- Yesterday’s results confirm that Alibaba (ADR) (BABA US)’s core businesses, Taobao and Tmall are in trouble and cost-cutting elsewhere is insufficient to offset the short-term weakness.
- Therefore, we do think that this is a good opportunity to profit on the short side with Alibaba shares having the potential to fall another 40-45% in the short term.
Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment
- Techtronic Industries (669 HK) was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.
- As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.
- We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.
Branded Camping from Goldwin and Snow Peak
- After decades of industrial, urban focus, city-dwelling Japanese first began a tentative reengagement with nature through hiking two decades ago.
- This has evolved into more extended trips that began to include camping and visits to wilder areas.
- These excursions are still a bit forbidding for many, so camping and outdoor activities in a park managed by a trusted brand have strong appeal, providing new revenue for brands.
MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities
- In our latest int’l reports we have preached caution, and since January we have discussed our expectations for $93 to cap upside on the ACWI-US
- Thus far, $93 has proven to be rock-solid resistance, and ACWI-US now displays a 4.5-month uptrend violation signaling the pullback has officially begun.
- We would expect this pullback to continue down to $86-87 at minimum, and potentially $84 (December 2022 low). Even $75-77 (the 2022 lows) is not out of the question.
The Coca-Cola Company: Major Drivers
- Coca-Cola had a successful year in 2022.
- In spite of the difficult macro environment, the company performed well and expanded by concentrating on broadening the scope of its offerings.
- Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
Marriott International Inc.: Major Drivers
- Marriott International had a decent business recovery in 2022 and the company delivered an all-around beat in the last quarter.
- The number of leisure transient room nights in the fourth quarter increased compared to 2019.
- Their mobile app users, digital room nights, and digital income all increased in 2022, each by 32% year over year.
Restaurant Brands International Inc.: Major Drivers
- Restaurant Brands International has delivered a mixed set of results in the quarter with revenues well above analyst expectations.
- However, the company missed out on meeting earnings expectations as the profitability was lower for Tim Hortons, Burger King, and Popeyes in the domestic market.
- We give Restaurant Brands International a ‘Hold’ rating with a revised target price.
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