In today’s briefing:
- HSCEI Index Rebalance: Xpeng (9868) Replaces China Feihe (6186); Li Auto (2015) Biggest Gainer
- Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications
- Concrete Measures to Raise ROA Are Needed to Achieve Medium-Term Stock Price Outperformance
- Chipotle Mexican Grill Inc.: Launch of Farmesa & Other Drivers
- The Kraft Heinz Company: Major Drivers
HSCEI Index Rebalance: Xpeng (9868) Replaces China Feihe (6186); Li Auto (2015) Biggest Gainer
- As expected, XPeng (9868 HK) replaces China Feihe (6186 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 10 March.
- Using prices from the close on 24 February, estimated one-way turnover is 3.28% and will result in a one-way trade of HK$2,162m at the close on 10 March.
- Short interest on XPeng (9868 HK), Li Auto (2015 HK), China Feihe (6186 HK) is quite high in terms of days of ADV to cover and in terms of float.
Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications
- Notable names that have proposed amendments to their articles of association for changing the dividend record date at this year’s AGM include Hyundai Motor Group, POSCO Holdings, and Kakao Corp.
- There were skeptical views on how much response local big-name companies would show to Korea FSC’s plan. However, the response from large companies has been unexpectedly positive and aggressive.
- We should consider the possibility that the preferred stock premium of companies whose dividend visibility has improved through this may continue to improve compared to those that have not.
Concrete Measures to Raise ROA Are Needed to Achieve Medium-Term Stock Price Outperformance
- If TSE were to require companies with low P/Bs to disclose improvement measures, more companies are likely to take immediate action to increase shareholder returns.
- Reducing equity capital is effective in raising ROE, but simply draining cash accumulated from the past through shareholder returns will not lead to long-term stock price outperformance.
- Among the components of ROE, ROA improvement is required rather than immediate increase in financial leverage. Companies should disclose their more detailed plans to increase ROA over the medium term.
Chipotle Mexican Grill Inc.: Launch of Farmesa & Other Drivers
- Chipotle Mexican Grill delivered a highly disappointing result for the last quarter.
- The company failed to meet the revenue expectations as well as the earnings expectations of Wall Street despite AUVs expansion and improved restaurant-level margin.
- The management faced several challenges this quarter, including one of the highest inflationary periods and an uncertain macro environment.
The Kraft Heinz Company: Major Drivers
- Kraft Heinz saw strong revenue momentum in the last quarter and managed to deliver an all-around beat with a good growth in base volumes.
- The management claims to be outperforming the competition in food service and emerging markets.
- In 2023, the management is looking towards expanding its marketing technology and personnel investments to propel the company’s growth.
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