Daily BriefsEquity Bottom-Up

Daily Brief Equity Bottom-Up: Bic Camera (3048) | Cash-Strapped Consumers and more

In today’s briefing:

  • Bic Camera (3048) | Cash-Strapped Consumers
  • Oriental Land: Consensus Is Tangled in a Fantasy
  • BYD (1211): Respectable Result
  • Yahoo Mart’s Q-Conbini Stores: A Potential Competitor to the Big 3 CVS?
  • Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery
  • TCS: Resilient Outlook but Fairly Valued
  • CDW Corporation: Initiation of Coverage – Acquisition Of Sirius Computer Solutions & Other Drivers
  • MEX: “A Recession is an Ideal Time for Expansion”
  • OMI update
  • Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

Bic Camera (3048) | Cash-Strapped Consumers

By Mark Chadwick

  • Bic Camera is trading close to its 52-week high after rallying on expectations for the reopening of Japanese borders and increased sales from inbound tourists.
  • We think the market has gotten way ahead itself due to (a) falling real household spending and (b) less than expected impact from inbound
  • Bic’s high valuation is likely to derate due to rising interest rates.  We see around 30% downside for the stock based on peer multiples

Oriental Land: Consensus Is Tangled in a Fantasy

By Oshadhi Kumarasiri

  • It seems like Oriental Land (4661 JP) has yet again failed to land the number of visitors that consensus expected it to attract during the second quarter of FY23.
  • Even though we don’t see much downside risk to the 2QFY23 consensus OP due to price hikes, we believe that there is plenty of downside to its medium-term estimates.
  • There is also room for valuation multiple contraction with Oriental Land currently trading at an inflated 28.2x consensus FY27 OP multiple.

BYD (1211): Respectable Result

By Henry Soediarko

  • BYD (1211 HK) has recorded a more respectable result this year compared to the peers such as Tesla, Nio, and Xpeng. 
  • Overseas sales could be the next growth engine if the domestic market sales may stall. 
  • The price increase early this year to the customers did not deter the company’s growth rate which indicates its pricing power. 

Yahoo Mart’s Q-Conbini Stores: A Potential Competitor to the Big 3 CVS?

By Michael Causton

  • Quick (Q)-commerce continues to grow, with rapid home delivery providing a new level of convenience to meet demand from busy, urban consumers.  
  • Z Holdings’ team of Yahoo, Askul and Demae-can have run what is now called Yahoo Mart since 2020 which has opened its first three retail stores, a new omnichannel model.
  • Given the data analysis and supply chain power of its backers, these stores could quickly become a thorn in the side of the big convenience store chains.

Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery

By Tina Banerjee

  • Rainbow Children’s Hospital (RAINBOW IN) is India’s largest pediatric multi-specialty healthcare chain, operating 15 hospitals and 3 clinics in 6 cities, with a total bed capacity of 1,550+.
  • Due to its presence in the affluent cities of India, the company has superior ARPOB. With the normalization of business occupancy and outpatient volume improved significantly.   
  • The company plans to add 100 beds by the end of FY23. Higher occupancy and greater scale of operation are the biggest margin driver for the company.

TCS: Resilient Outlook but Fairly Valued

By Ankit Agrawal, CFA

  • Demand environment remains robust despite recessionary fears in US and Europe. Demand is being driven by structural factors like shift in the business model towards enterprise-wide digital transformation.
  • One of the biggest headwinds – attrition – has now peaked and is trending downwards. Job market has cooled off and salaries of new hires have become reasonable.
  • While the demand outlook and margin guidance is resilient, we estimate that the current valuations are fairly pricing the optimism. Projected IRRs are likely to be subdued from here on.

CDW Corporation: Initiation of Coverage – Acquisition Of Sirius Computer Solutions & Other Drivers

By Baptista Research

  • This is our first report on CDW Corporation, a leading IT solutions provider to companies across the U.S., Canada, and U.K.
  • The second quarterly result was strictly mediocre for CDW as the company failed to meet Wall Street expectations on the revenue front but managed an earnings beat.
  • With a continued emphasis on hybrid work and the return to the office driving collaboration, networking, and endpoint solutions, digital transformation, agility, and security remain major considerations.

MEX: “A Recession is an Ideal Time for Expansion”

By Investment Talk

  • Tortilla is a clear market leader, boasting 5x more units than the nearest competitor, operating a superior supply chain, and is highly cash-generative with a track record of savvy capital allocation.

  • The founder and CEO have reasonable equity stakes in the business.

  • As peers went into administration during the pandemic, they expanded aggressively and acquired a competitor for a reasonable price.


OMI update

By Newmoon Capital

  • It looks to me that the company is now run-rating to $500M of EBITDA, but it is possible that it is much lower depending on how Q3 turn out.

  • It was very possible that things were fine for the first 2 months of Q3 and then got really bad thereafter and so the run-rate EBITDA is actually much lower…but let’s just use $500M as our base case

  • Capex in this business is really closer to Opex. Apria is really a leasing/distribution business and so Capex is needed to keep the business running.


Guidewire Software Inc.: Initiation of Coverage – Strong Market Position & Other Drivers

By Baptista Research

  • This is our first report on Guidewire, a leading provider of software solutions for property and casualty (P&C) insurers worldwide.
  • The company reported an excellent finish to its fiscal year and beat Wall Street expectations on all counts.
  • Guidewire also introduced 13 new solution partners to the Guidewire Marketplace, bringing the total number of solution partners on its platform to over 160.

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