In today’s briefing:
- Jubilant Foodworks (JUBI IN) | Discount Is Attractive
- Softbank Group – An Acceleration in Investment Does Not Require a Third Vision Fund
- Premier Anti-Aging: DUO’s Time Is Done, But CANADEL & Clayence Is Taking the Company Forward
- Malaysian Banks June 2022 Screener; CIMB Is Our New Value Pick
- Loeb Backed Down Quickly…But Is Disney Really in Good Shape?
- Starbucks to Make China Its Biggest Market by 2025, Surpassing U.S.
- Askul Q1 23 Results Reaction: Solid Revenue but OP Down on Front-Loaded Investments
- Earnings Quality Short Candidates: ZoomInfo, Gogo, Elanco Animal Hlth, Sonos, Energizer
Jubilant Foodworks (JUBI IN) | Discount Is Attractive
- Jubilant Foodworks (JUBI IN) is India’s largest food service company. In hindsight, CEO’s exit in March 2022 under a high inflationary environment was just “NOISE”.
- Industry drivers are favourable, JUBI’s renewed focus on growth, additional brands and a new CEO, all put JUBI back on track to deliver robust growth.
- Currently trading at 68.5x NTM, JUBI is available at a 22% discount compared to it’s 3Y mean, considering the growth prospects discussed below, this discount is attractive.
Softbank Group – An Acceleration in Investment Does Not Require a Third Vision Fund
- Press reports indicate Softbank Group (9984 JP) is considering a third Vision Fund which seems to conflict with its more defensive posture at Q1 results last month
- Softbank can re-accelerate investment at any time without VF3 so talk of a new fund is not a signal change. Perceptions of private equity value are more important
- And a key message over the last six months is founders are too optimistic and that seems unlikely to shift suddenly. We have updated our SB performance tables below
Premier Anti-Aging: DUO’s Time Is Done, But CANADEL & Clayence Is Taking the Company Forward
- Japan’s number one skin cleansing balm, DUO seems to be in big trouble with monthly sales volume falling by almost 40% over the last 12 months.
- However, Premier Anti-Aging (4934 JP) is making progress with the development of other brands to reduce its dependence on DUO.
- Despite the depressed margins in the near-term, we are quite positive about Premier Anti-Aging’s medium-long term outlook with new brands like CANADEL and clayance showing promising signs for the future.
Malaysian Banks June 2022 Screener; CIMB Is Our New Value Pick
- The six Malaysian banks screen favourably on balance sheet and returns metrics to June 2022; we add CIMB to the buy list, keep RHB and we remove Maybank
- We add CIMB with its positive post-provision return trends and further potential which combine constructively with CIMB’s undemanding valuations versus the peer group; its high NPL ratio is fully provisioned
- We stick with RHB, with its attractive post-provision profitability and positive cost of risk trends, whilst also trading on attractive multiples versus peers and on a relatively low PEG
Loeb Backed Down Quickly…But Is Disney Really in Good Shape?
- Activist Dan Loeb recently backed down from his request that Disney spin out ESPN…something we thought was foolish, and glad is off the table.
- Disney is still trapped by the “rock and the hard place” choice of trading higher margin cable subscribers for lower margin (higher churning) streaming subs.
- Bob Chapek is a poor choice for Disney CEO…not alot of good options. This company is strategically boxed in. Parks’s overearning will dissipate, will be a good short next year.
Starbucks to Make China Its Biggest Market by 2025, Surpassing U.S.
- Starbucks Corp. plans to open 3,000 stores in China in the next three years, bringing the total to 9,000 locations and pushing China past the U.S. as the coffee giant’s biggest market by 2025.
- China is currently Starbucks’ second-largest market, with 16% of global stores and accounting for 7% of total revenue in the 2022 second quarter.
- The company aims to double its China revenue by 2025.
Askul Q1 23 Results Reaction: Solid Revenue but OP Down on Front-Loaded Investments
- Askul Corp (2678 JP) posted the best revenue growth in six quarters as both B2B and consumer product sales accelerated
- The corresponding operating income decline of 10% is less welcome but that includes a front-loading of planned growth investments and full year guidance of 1% growth is unchanged
- We are tagging this insight as bearish as headlines of a 10% OP decline might not be as well received as the top-line story
Earnings Quality Short Candidates: ZoomInfo, Gogo, Elanco Animal Hlth, Sonos, Energizer
- This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.
- They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts. When the company’s issues become well-known, there is often multiple compression as well as a rerating.
- These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.
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