7 July 2023: Bumitama Agri Ltd (BAL SP), BYD Co. Ltd (1211 HK), Live Nation Entertainment Inc (LYV US)
Singapore Trading Ideas | Hong Kong Trading Ideas |United States Trading Ideas | Sector Performance | Trading Dashboard
United States
Hong Kong
Bumitama Agri Ltd (BAL SP): Expecting a short-term rebound
- BUY Entry 0.56 – Target – 0.60 Stop Loss – 0.54
- Bumitama Agri Ltd. produces CPO and PK, with its oil palm plantations located in Indonesia. The Company’s primary business activities are cultivating and harvesting our oil palm trees, processing FFB from its oil palm plantations, its plasma plantations and third parties into CPO and PK, and selling CPO and PK in Indonesia.
- Palm Oil Futures Prices. Malaysian palm oil futures slightly pulled back to MYR 3,900/tonne after it jumped to near MYR4,000/tonne as a US acreage report showed smaller-than-expected soybean plantings shocked crop markets.
- Palm oil price support. Lower soybean production in the US, ongoing El Nino weather conditions affecting oilseeds and oil palm crops, and a weaker ringgit are anticipated to uphold the elevated prices of crude palm oil (CPO) above RM3,400/tonne. Palm oil prices experienced an increase as a result of strong shipments from Malaysia in early July, which alleviated concerns regarding heightened production levels in the country. Exports more than doubled compared to the previous month, suggesting a positive outlook for export demand in July and August, potentially slowing the rise in stockpiles. Furthermore, palm oil prices are being supported by gains in rival soybean oil prices, following the unexpected reduction in the US soybean planting estimate for this summer. Additionally, petroleum prices have been bolstered by supply cuts from OPEC+, which may enhance the attractiveness of vegetable oils as alternative fuels.
- 1Q23 earnings review. Revenue declined by 8% YoY to 3.6tn IDR from the previous 3.9tn IDR. Net profit fell 51% YoY, to 429.1bn IDR (S$40mn) from 873bn IDR. The decline in net profit is attributable to lower ASP alongside rising fertiliser prices.
- Market consensus.
ThaiBev (THBEV SP): Recovering consumer confidence
- RE-ITERATE BUY Entry 0.57 – Target – 0.65 Stop Loss – 0.53
- Thai Beverage Public Company Limited is Thailand’s largest and leading beverage producer and distributor. Its operation is considered among the leading distillers and brewers and in Southeast Asia. ThaiBev’s leading products include a variety of well-established spirits brands, including its famous brew Chang Beer. In the non-alcoholic beverage category, key products include water, tonic soda, energy drink, ready-to-drink coffee and green tea.
- Improving consumer confidence. According to the latest consumer confidence survey, the index recovered to the highest level since the COVID outbreak, reaching 50.2 in May. The promising recovery was driven by the growth in tourism and the demand for industrial and agricultural goods.
Thailand Consumer Confidence Economic Index
(Source: Bloomberg)
- Potential liquor industry disruption. Winning the most seats in the Thailand general election in 2023, the Move Forward Party opposed the existing strict liquor law which is viewed as preserving a duopoly by suppressing microbreweries and distilleries. Boon Rawd Brewery and ThaiBev, makers of Singha and Chang respectively, hold a combined 93% of the local beer market. Though it is possible for the new government to ease the production curb, the dominance of the two giants will remain unchanged in the near term as their economy of scale can maintain stable profit margins amidst a high inflation environment.
- 2Q23 earnings review. Revenue grew mildly by 2% YoY to 67.4bn THB. Gross profit margin was 30.3%, up 0.06 ppts YoY. PATMI grew mildly by 3% YoY to 7.4bn THB. Net margin was 10.9%, up 0.01 ppts YoY.
- Market consensus.
(Source: Bloomberg)
BYD Co. Ltd (1211 HK): Record sales
- BUY Entry – 256 Target – 280 Stop Loss – 244
- BYD COMPANY LIMITED is a China-based company principally engaged in the manufacture and sales of transportation equipment. The Company is also engaged in the manufacture and sales of electronic parts and components and electronic devices for daily use. The Company’s products include rechargeable batteries and photovoltaic products, mobile phone parts and assembly, and automobiles and related products. The Company mainly conducts its businesses in China, the United States and Europe.
- Record Breaking Sales. In the second quarter, BYD achieved a milestone with record-breaking deliveries of their domestically produced vehicles in China. Their Dynasty and Ocean series, which include electric vehicles (EVs) and petrol-electric hybrid vehicles, experienced a remarkable surge in June sales, witnessing an 88.16% year-on-year increase to reach 251,685 vehicles. This noteworthy accomplishment marked the first time BYD’s monthly sales exceeded 250,000 units. Additionally, according to CPCA data, the period from April to June witnessed BYD delivering a total of 700,244 vehicles.
- Launch of new premium SUV. BYD has taken a significant step forward in its pursuit of the premium market by introducing the Denza N7, a cutting-edge electric sport utility vehicle. The company has already received an overwhelming response, with pre-orders surpassing 24,000 units since its debut at the Shanghai Auto Show in April, which showcased five N7 SUVs in an expansive exhibition hall. Initially, the Denza N7 electric vehicle (EV) will be exclusively available for purchase in mainland China.
- New EV production base in Brazil. BYD will invest US$620 million in a Brazilian industrial complex in Bahia state. This move will support the production of affordable vehicles and batteries for the local market. The project consists of three plants that will begin operations in the second half of 2024. These plants will manufacture chassis for buses and electric trucks, assemble EVs, and produce lithium iron phosphate, a crucial material for EV batteries. This investment highlights BYD’s commitment to global expansion and accelerating its presence in Brazil.
- 1Q23 results. Net sales improved to RMB120.17bn in 1Q23(+79.83% YoY). Net profit rose to RMB$4.13bn in 1Q23 (+410.89% YoY). Diluted EPS rose to RMB1.42 in 1Q23 (+407.14% YoY).
- Market Consensus.
(Source: Bloomberg)
Samsonite International S.A. (1910 HK): Escaping the Holiday Heat
- RE-ITERATE BUY Entry – 22.0 Target – 24.0 Stop Loss – 21.0
- Samsonite International S.A. is a Hong Kong-based company principally engaged in the design, manufacture, sourcing and distribution of luggages, business and computer bags, outdoor and casual bags, travel accessories and slim protective cases for personal electronic devices. The Company operates its business through three segments. The Travel Bag segment is engaged in travel products with suitcases and carry-ons of three main categories, including hard-side, soft-side and hybrid luggages. The Casual Bags segment is engaged in daily use, including different types of backpacks, female and male shoulder bags and wheeled duffel bags. The Business Bags segment is engaged in business use, including rolling mobile office bags, briefcases and computer bags.
- Incoming summer holidays. According to the National Immigration Administration, China’s recent Dragon Boat Festival holiday, which ended last Saturday, demonstrated a noticeable resurgence in outbound travel. This was evidenced by the increasing number of border crossings, reaching 65% of the level seen in 2019. As the summer holidays approach, visa applications have been piling up due to the peak in Chinese travellers heading overseas. Airbnb’s summer travel report reveals a significant surge in interest among Chinese users for outbound travel during the early summer period (July 1-15). The search interest for outbound travel from Chinese users has also experienced a nearly six-fold increase, surpassing the growth observed this spring.
- Escaping the hot weather. China’s National Meteorological Center issued a renewed yellow alert for high temperatures last Friday, as heatwaves are anticipated to impact large areas of the country. The forecast predicts that temperatures in certain regions of Beijing, Tianjin, Hebei, and Henan will surpass 40 degrees Celsius. This heightened heatwave condition has led to an increased demand for tourism, as consumers seek a brief respite from the scorching weather during the upcoming holiday period.
- Campaign with New Balance. Samsonite introduced an all-new “Live United” campaign with New Balance in April 2023. This campaign seeks to address the travel and lifestyle needs of today’s consumers. This collection features four bags that come in different sizes, in 2 colours, catering to the needs of different travel purposes.
- 1Q23 results. Net sales improved to US$852.1mn (+48.5% YoY), compared to US$57.3mn in 1Q22. Net profit rose to US$73.8mn in 1Q23 (+348.4% YoY), compared t US$16.4mn for 1Q22. Basic and diluted EPS is at US 5.1 cents.
- Market Consensus.
(Source: Bloomberg)
Live Nation Entertainment Inc (LYV US): Wildest Dreams
- BUY Entry – 92 Target – 100 Stop Loss – 88
- Live Nation Entertainment, Inc. produces live concerts and sells tickets to those events over the Internet. The Company offers ticketing services for leading arenas, stadiums, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. Live Nation Entertainment serves customers worldwide.
- Strong demand for live events. The demand for live events remains strong, even in the face of economic challenges. In 1Q23, Ticketmaster reported record-breaking activity, with revenue of $3.1 billion, a significant increase of 73% compared to 1Q22. Ticket sales for shows exceeded 90 million, up over 20% from the previous year. This surge in ticket sales, along with high attendance rates, reflects the unwavering passion and dedication of fans to indulge in live events. The company’s concert division experienced the highest attendance ever for 1Q, with 19.5 million fans attending shows, up 79% compared to the previous year. The international markets drove much of this growth, and the company expects continued strength across all global markets in 2023. In the ticketing business, Ticketmaster sold 73 million fee-bearing tickets, up 40% from the previous year, with revenue of $678 million and AOI of $271 million. The sponsorship business also saw significant growth, with top-line revenue improving by 47% and adjusted operation income increasing by 37%. The company’s strong performance in 1Q23 sets them up for continued growth throughout the year. Despite potential financial constraints, fans continue to invest in the live experience, reaffirming the enduring appeal and value they place on witnessing their favorite artists perform live on stage.
- Fans still spending despite exorbitant prices. Despite the costs of concert tickets, with Taylor Swift’s tickets amounting to $134 more per ticket, fans are still willing to spend on live shows. Taylor Swift’s “Eras” tour is generating ticket sales of over $13 million per night, positioning her to have the highest-grossing tour in music history. With an average ticket price of $254, Swift is setting a high-water mark for prices in a year marked by concert inflation. However, this hasn’t deterred fans, as the tour has already grossed $300 million through 22 dates. In fact, Swift is on track to surpass the $1 billion mark, a feat no artist has achieved before. Despite the increasing ticket prices in the industry, more than 1.1 million people have purchased tickets to see Taylor Swift perform. Furthermore, the sustained demand from fans, who anticipate increasing their spending on live experiences in the future, will help support these high prices. This bodes well for both Live Nation and artists, as they can capitalise on the ongoing enthusiasm and willingness of fans to invest in live events.
- Goodbye to hidden fees. Concert promoter Live Nation has pledged to improve transparency in ticket pricing following pressure from the Biden administration. In an effort to crack down on “junk” fees, Live Nation plans to introduce “all-in” pricing for its owned venues, allowing ticket buyers to see the full fees upfront. This system will be implemented in September. Ticketmaster, owned by Live Nation, will also offer an optional feature for users to view upfront pricing for all tickets sold on the platform. However, individual venues will have the choice of how to display their prices. The move aims to provide consumers with a clearer understanding of the total costs and align ticket purchasing with other retail experiences. The elimination of surprise fees is seen as a positive development for consumers, particularly as Ticketmaster controls about 80% of ticket sales in the U.S. Consumer advocacy groups hope for greater transparency across various industries, including airlines, retailers, and banking. The introduction of all-in pricing is welcomed as a step toward better purchasing decisions, although it may not directly impact the actual ticket prices charged by venues.
- 1Q23 earnings review. Revenue rose 73.9% YoY to US$3.13bn, beating estimates by US$860mn. GAAP earning per share was -US$0.25, $0.21 above expectations.
- Market consensus.
(Source: Bloomberg)
Whirlpool Corp (WHR US): Home appliance sales recover
- RE-ITERATE BUY Entry – 146.0 Target – 160.0 Stop Loss – 139
- Whirlpool Corporation manufactures and markets major home appliances. The Company provides principal products include laundry appliances, refrigeration, room air conditioning equipment, cooking appliances, dishwashers, and mixers and other small household appliances. Whirlpool serves customers worldwide.
- US home sales jump as prices fall. Sales of new single-family homes in the US reached their highest level in almost 1-1/2 years in May due to a shortage of previously owned homes. The Commerce Department reported a 12.2% surge to a rate of 763,000 units, the highest since February 2022. Real construction spending on new manufacturing facilities has also doubled this year, driven by infrastructure and clean energy subsidies. Although mortgage rates rose, new home sales increased in the Northeast, South, and West. The median new house price dropped 7.6% from last year, and the supply of homes on the market slightly decreased. It is likely that signs of revival in the housing market will contribute to an increase in the purchase of household appliances. As the housing market improves and new homes are being sold at a higher rate, new homeowners typically need to furnish their homes with essential appliances such as refrigerators, stoves, washers, dryers, and more.
- Rise in consumer confidence. Consumer confidence in the United States soared to its highest level in nearly 1-1/2 years in June, surpassing expectations and marking the strongest reading since January 2022. The increase was especially prominent among consumers under 35 and those with incomes over $35,000. Strong economic indicators, such as increased consumer confidence, unexpected growth in new home sales, and robust demand for big-ticket manufactured items, reassured investors about the overall economic outlook. The positive trend in the housing market, coupled with increased consumer confidence, may encourage existing homeowners to invest in new appliances, bolstering sales of the appliance industry.
US Conference Board’s Consumer Confidence Index 
(Source: Bloomberg)
- 1Q23 earnings review. Revenue fell 6.8% YoY to US$4.65bn, beating estimates by US$150mn. Non-GAAP earning per share was US$2.66, $0.49 above expectations. The company’s strong performance was bolstered by robust demand for its refrigerators and washing machines in North America, which is its largest market. It is anticipating FY23 sales to reach approximately US$19.4B.
- Market consensus.
(Source: Bloomberg)
Trading Dashboard Update: Add Samsonite International (1910 HK) at HK$22 and Ross Stores (ROST US) at US$110. Cut loss on Agricultural Bank of China (1288 HK) at HK$2.98.
