In this briefing:
- Tesla (TSLA): SWOT Analysis Leads To…Rivian
- TRACKING TRAFFIC/Chinese Tourism: HK & Macau Gained ‘Share’ in December, Continuing H218 Trend
- The Fed’s Dovish Tilt: Unconvincing Articulation Invites Conspiracy Theories
- Biosimilar Battlefield: The Remsima/Inflectra Warning
- Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US
1. Tesla (TSLA): SWOT Analysis Leads To…Rivian
What happens when innovation becomes commoditized? We believe this is a core concern to every Tesla watcher, bulls and bears so we began our Lunar New Year week (or Pro Am 2019 week in Pebble Beach) with a quick and dirty SWOT analysis of Tesla to see where the next potential existential threat can come from…and we ended up looking at Rivian.
Tesla: A SWOT Analysis
Tesla’s key strengths that we see are Elon Musk’s charismatic personality that lends to fund raising capability and marketing prowess. The company’s weakness lies in its collective inexperience in the automotive industry, and the fact that the car business is a mere component in Musk’s vision of a vertically integrated, electrified future. This has created and continues to exert tremendous amount of pressure on management. We believe opportunities for new entrants are that EVs are not as difficult to design and produce, as well as to finance, as Tesla fanboys in the financial industry and media make it sound. A key Threat to Tesla could be companies like Rivian, a U.S. BEV light truck dedicated OEM based in Detroit, which is currently taking customer deposits on 2020 deliveries of its R1S SUV and the R1T pickup truck (https://preorders.rivian.com/2322956400/checkouts/29de1808b812748f8fe476718e460bea).
Rivian is a private company that has not issued public debt so financial information on the company is unavailable in the U.S. public domain, so we poured through strategic investor Sumitomo Corp’s Yuho reports to see if we can find any tidbits in Japan but found nothing there either. Hence, while we cannot make much financial observations about the company at this point, we do see a number of strategic signs from Rivian’s actions that may indicating that it is most likely improving upon the Tesla experience to avoid the hiccups and the bumps on the road to premium EV segment dominance.
From an APAC stock market perspective, we see LG Chem and Sumitomo Corp as two entities that could potentially see financial impact from Rivian in the next several years. Teslerati has made an educated guess on LG Chem as Rivian’s cell supplier which we believe to be reasonable, although Rivian and LG Chem have neither confirmed nor denied the relationship (https://insideevs.com/new-details-rivian-battery-pack-design/, https://www.teslarati.com/rivian-battery-lab-irvine-california-megapack-production/). Current investment in Rivian by Sumitomo Corp is most likely an insignificant amount from the latter’s perspective but could perhaps grow into something bigger at some point in the future.
The Rivian R1S
2. TRACKING TRAFFIC/Chinese Tourism: HK & Macau Gained ‘Share’ in December, Continuing H218 Trend
Tracking Traffic/Chinese Tourism is the hub for all of our research on China’s tourism sector. This monthly report features analysis of Chinese tourism data, notes from our conversations with industry participants, and links to recent company news and thematic pieces. Our aim is to highlight important trends in China’s tourism sector (and changes to those trends).
In this issue readers can find:
- As it has throughout the latter half of 2018, HK & Macau traffic boomed in December: Over the last several months, we believe Chinese tourists have been staying ‘closer to home’, for a variety of reasons. December’s Chinese outbound tourist figures support this idea, as visits to nearby Hong Kong and Macau surged, and trips to destinations farther afield moderated.
- An analysis of December domestic Chinese travel activity, which remained subdued: Overall domestic travel demand, measured in passenger-kms, grew by 3.4% in December, similar to H118 growth. But while rail and highway travel growth held up relatively well compared to earlier in 2018, air travel in December was again weak relative to H118’s strength, up 9.1% after climbing 13.8% in the first half of the year.
- China-to-USA travel activity continued to weaken in December: US tourist and student visa issuance and visits to Hawaii all declined again in December. We think the declines reflect some Chinese tourists turning cautious on the economy (and thus disposable income), but the declines may also reflect changing Chinese policy.
Although we remain positive on the long-term growth of Chinese tourism, it’s clear that near-term demand growth has slowed, and that Chinese tourists are generally staying closer to home and probably spending less than they were a year ago.
Happy New Year (of the Pig)!
3. The Fed’s Dovish Tilt: Unconvincing Articulation Invites Conspiracy Theories
Confirmation that the Federal Open Market Committee (FOMC) has adopted a patient approach to policy conduct provoked an unjustified rally in risky assets due to the earlier hints from Fed officials, but incoming economic data may not necessarily guarantee that the next move in the federal funds rate will be in a downward direction.
Furthermore, markets also rallied due to an intimation that the Fed will consider stopping balance sheet shrinkage at an early juncture, but Chair Powell indicated that the federal funds rate remains the prime policy tool to alter monetary conditions in a normal economic environment, not balance sheet size.
Due to potential downside risks in the economic outlook, the FOMC has seemingly raised the bar for increasing the federal funds rate, thereby indicating a dovish tilt in its prospective policy conduct.
Some commentators believe Fed Chair Powell has downgraded the role of the Phillips Curve in setting policy by announcing a patient policy approach at full employment, thus additionally raising the possibility that the FOMC is prepared to tolerate an overshooting of its 2% inflation target.
Meanwhile, other observers are hinting that the Fed’s dovish policy tilt simply reflects damage inflicted on Chair Powell and the FOMC in the aftermath of the recent spat with President Trump.
Some commentators are citing poor communication to financial markets by the FOMC since last September for creating excessive volatility during 2018 Q4, and this has consequently forced the adoption of the patient policy approach to rectify past mistakes.
4. Biosimilar Battlefield: The Remsima/Inflectra Warning
2019 marks an inflection point for Korean biosimilar companies Celltrion Healthcare (091990 KS), Celltrion Inc (068270 KS), and Samsung Biologics Co., (207940 KS). Several new product launches are on tap, but competition will be more intense from here. More to the point, our updated estimates of end market revenue in the EU for Celltrion’s Inflectra/Remsima show that revenue is declining: consistent with commentary regarding pricing pressure as new competitors enter the market. This development suggests that biosimilar launch curves won’t be as steep as in the past and that product maturity will come sooner.
Expectations for these companies remain high, so we remain wary of these stocks.
5. Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US
Qatar Petroleum and Exxon Mobil (XOM US) have taken a positive final investment decision (FID) on the Golden Pass LNG export facility on the US Gulf Coast, one of 25 projects up for FID this year globally. Golden Pass awarded the engineering, procurement and construction (EPC) contracts for the project to a joint venture of Chiyoda Corp (6366 JP), Mcdermott Intl (MDR US) and Zachry Group, with the project expected to cost US$10bn and come on line in 2024. We discuss the company impacts, the project detail and market impacts
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