In today’s briefing:
- Seven & I: Founder’s Death Fuels Value Act’s Activism, Angers The Board, Reduces Short Thesis Risk
- Nidec (6594) | FY3/24 Guidance Risk
- China Catering Sector: Long Xiabuxiabu / Short Jiumaojiu
- Bank Mandiri (BMRI IJ) – Riding a Digital Wave
- Bank of Nova Scotia: Initiation of Coverage – Business Strategy & Key Drivers
- L’Oréal: +13% Since Initial Note. Strong Q1 Despite a Flattish China.
- [iQIYI, Lnc. (IQ US) Target Price Change]: Reiterate SELL for Increasing Competition
- Keepers Holdings: Q4 2022 Concall, Reiterate Positive Outlook for 2023
- YERB.U: Challenger Brand in Secular Growth Industry
- CBD – When The Catalyst Is Slapping You in the Face
Seven & I: Founder’s Death Fuels Value Act’s Activism, Angers The Board, Reduces Short Thesis Risk
- Value Act’s investor activism campaign picked up steam following the death of Seven & I Holdings (3382 JP) founder.
- The board of Seven & I may have been aggravated by Value Act’s unreasonable demands and timing, leading to their first angry response in over two years.
- The damaged relationship between Seven & I and Value Act reduces the upside risk to our short thesis from disposal of underperforming businesses.
Nidec (6594) | FY3/24 Guidance Risk
- We do not expect any major surprises when Nidec reports FY3/23 earnings on 24 April
- However, we believe that there is a significant risk that the company will guide below analyst consensus for FY3/24
- We are bearish going into results. After that, there could be an opportunity to turn bullish again on FY3/25 PE of 14x
China Catering Sector: Long Xiabuxiabu / Short Jiumaojiu
- We believe the recovery of China consumption is “not yet solid”, but not faltering.
- China catering sector’s recovery stays on track, although Q2 has historically been a low season.
- Long Xiabuxiabu and short Jiumaojiu to play the sector’s recovery while hedging against potential macro weakness.
Bank Mandiri (BMRI IJ) – Riding a Digital Wave
- Bank Mandiri (BMRI IJ) released a well-balanced set of results with some pressure on NIMs more than offset by higher loan yields, lower credit risk, and great cost efficiency.
- The rapid and widespread adoption of the Livin’ app for new customers and onboarding customers has positively impacted efficiencies and helped gather more CASA.
- Bank Mandiri Persero (BMRI IJ) is optimistic about the outlook for 2023 with loans expected to grow +10%-12% with table NIMs and lower credit costs.
Bank of Nova Scotia: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on the Bank of Nova Scotia, one of Canada’s Big Five multinational banking and financial service companies.
- Although banking revenues increased by a solid 11%, overall revenues were down 1% year over year due to reduced noninterest income.
- Mortgage lending increased by 7% while commercial loans increased by 22%, bringing loan growth to 9% year over year.
L’Oréal: +13% Since Initial Note. Strong Q1 Despite a Flattish China.
- Q1 20223 sales exceed expectations with LFL sales growth of 13.0% versus consensus of 7.3%.
- L’Oréal is ideally positioned in all regions, across all pricing points.
- China impact post-reopening still to be seen in figures. We expect upside from China in H2
[iQIYI, Lnc. (IQ US) Target Price Change]: Reiterate SELL for Increasing Competition
- We forecast iQIYI 1Q23 top line/bottom line to miss cons. by (3.6%)/(6.3%), largely due to the rebound of content costs to cope with competition pressure.
- We raise our full year ads revenue estimate slightly to reflect the better-than-expected macro recovery. Our top and bottom lines in 2023 are (3.3%)/(7.0%) vs cons, due to long-term competition.
- Maintain SELL but slightly raise TP to US$ 5.60, implying 18.4X PE in 2023.
Keepers Holdings: Q4 2022 Concall, Reiterate Positive Outlook for 2023
- The Keepers Holdings (KEEPR PM) reported 26% YoY revenue growth and 41% YoY profit growth for FY22. Based on our estimates, the stock trades at 7.7x/6.6x FY23e/24e PE.
- Net cash represents a healthy 21% of market capitalization, and given its strong profitability, the management seemed reasonably confident in maintaining its 50% payout ratio (5%/6% dividend yield FY24e/25e).
- The management guided a structural industry uptrend with teens growth across all its spirits for FY23e/24e. We believe a multiple of 15x is a fair multiple for this company.
YERB.U: Challenger Brand in Secular Growth Industry
- Yerbaé has been posting accelerating sales growth (+124% YoY in Q1E), using its diversified and growing distribution network which covers over 10,000 retail doors across the U.S.
- CEO Todd Gibson is a beverage industry veteran, having experience at Hansen’s Energy (Monster), SoBe, FUZE Beverage, and Coca Cola
- YERB.U is trading at 3.0x 2024E sales compared to high-growth peers at 5.9x, despite having the highest sales growth and gross margins Yerbaé Brands Corp. (YERB.U:TSXV) produces energy drinks using plant-based ingredients, tailored to health-conscious active lifestyle consumers.
CBD – When The Catalyst Is Slapping You in the Face
- I recently made my first purchase for the year, buying a core position in Brazilian holdco Companhia Brasileira de Distribuição (CBD:NYSE).
- I believe it has merely been caught up in the general market/SIVB sell-off and the price being offered is too good to pass up.
- CBD is engaged in supermarket/retailing operations and is controlled by the French giant Casino, with 41% ownership.
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