Daily Brief Equity Bottom-Up: Retail Ads: A New Revenue Stream for Seven & I and Rival Convenience Stores and more

• Retail media in its traditional sense is nothing new, simply referring to the use of advertising in stores, but in modern terms retail media is something far, far bigger. 
• It is not only a trend in the US, but one that is about to explode in Japan – although in a very different format.
• With purchase rates up two-fold in early experiments, the potential for brands advertising through retail stores will be significant with some estimates suggesting a ¥20 trillion market.

• After declaring a whopping 18% dividend yield in FY22, we expect Shougang Fushan Resources (639 HK)’s generous payments to continue as they could declare another 14% in FY23e.
• The margin of safety is high as there is a cash buffer (55% of the market cap in cash) and 10-year average annual free cash flows of 1.5 bn HKD.
• China’s FAI stimulus and stabilizing the steel margins could be catalysts to drive the share price forward in the short term.

• TCS reported weaker than expected growth and margins. YoY growth in constant currency (CC) terms came in at just 10.7%. Operating Margin (OPM) came in at 24.1% vs 25% expected.
• North America in particular has seen some demand slowdown, largely due to deferment of discretionary projects and delayed decision making. Europe is improving as energy crisis is receding.
• Looking forward, Europe, in particular UK, is likely to lead the growth. North America may also come back as the banking crisis there seems to have been contained.

• Adastria is on a roll, capturing more market share in both the core apparel market as well as through licensing (Forever 21) and home decoration and other lifestyle markets.
• Until now, it has focused on slightly premium mass markets but a new chain will face Uniqlo and Muji head on in apparel basics.
• It is also adding a new basics chain in home decoration and hoovering up contracts to supply apparel to chain stores. 

• Infosys reported a weak Q4FY23 with QoQ CC (Constant Currency) growth down by -3.2%. OPM (Operating Margin) contracted QoQ by -50bp to 21%, and was weaker than 21.5%+ expected. 
• Led by macro concerns, demand outlook remains cautious with FY24 growth guided to be 4-7% YoY in CC terms.
• The bottom end of the FY24 OPM guidance has been lowered to 20% vs 21% achieved in FY23. Overall OPM guidance for FY24 is 20-22%.

• Adi Sarana Armada (ASSA IJ) provides unique exposure across Indonesia’s mobility ecosystem from car leasing to auctions and omnichannel used car sales together with logistics and last-mile delivery.
• The company booked relatively strong sales growth last year, with very strong growth from used cars and logistics with slower auctions but profitability was impacted by bigger losses at Anteraja.
• The outlook for 2023 looks more positive for both sales and profitability, with the ongoing growth in used car sales, recovery in the auction business, and last mile under Anteraja. 

• The Keepers Holdings (KEEPR PM) declares its FY22 results on the 14th of April 2023, and Shakey’s Pizza (PIZZA PM) on the 20th of April 2023. 
• Despite its recent move upwards, The Keepers Holdings (KEEPR PM) trades at 9.6x/7.5x FY22e/23e PE and Shakey’s Pizza (PIZZA PM) at 17.7x/11.3x FY22e/23e, with both boasting high double-digit future growth.
• We discuss our expectations on the results for FY22 and prospects for Q1 2023. For mid/small-cap investors, these are great companies to invest in for exposure to the Philippines.

Vietnam Enterprise Investments (VEIL) is the UK’s largest and oldest listed Vietnamese equities closed-end fund. Despite Vietnam’s bright economic outlook, Vietnamese equities were hit hard in 2022 by a toxic mix of unwelcome domestic and global developments, creating a disconnect between Vietnam’s favourable economic fundamentals and equity valuations. VEIL underperformed over this period due to its quality growth bias, as investors fled to defensive sectors, but the fund has consistently achieved its objectives of capital growth and outperformance on a rolling three-year basis and over the longer term. VEIL’s managers are confident 2023 will be a better year, both for the market and for the trust. They expect government initiatives to be effective in addressing domestic market issues, while the State Bank of Vietnam’s recent rate cuts and easing guidance should sooth investors’ rate hike jitters. If the managers are correct, the gap between Vietnam’s growth prospects and low equity valuations should begin to close, and VEIL’s performance should recover accordingly.

• We expect Luckin to report 1Q23 revenue at 77.0% YoY to RMB4,257mn, non-GAAP operating margin and net margin are expected to increase 12.6ppt and 9.1ppt to 16.4% and 13.2%; 
• We think the current moderate competition can bring positive externality to coffee players, whereas it may hurt street tea shops; 
• We maintain the stock as BUY and raise TP by US$1 to US$41.

• We expect JD to report C1Q23 top-line and non-IFRS net income (1.7%) and (12%) vs. consensus, respectively. 
• We expect revenue to decline (1%) YoY in 1Q23 and grow just 3% YoY in FY23, due to (1) slow recovery in key product categories like electronics; (2) team restructuring;
• And (3) competitive landscape. We maintain SELL and US$27 TP. Our TP implies 10x 2024 P/E.