19 June 2023: Wilmar International Ltd. (WIL SP), Budweiser Brewing Company APAC Ltd. (1876 HK), Estee Lauder Companies Inc (EL US)

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Wilmar International Ltd. (WIL SP): Sugar and palm oil prices rebounding

BUY Entry 4.05 – Target – 4.30 Stop Loss – 3.92
Wilmar International Limited operates as a food processing company. The Company offers oil palm cultivation, edible oil refining, crushing, and gains processing services, as well as provides sugar, flour, and rice. Wilmar International serves customers worldwide.
Sugar futures prices rebounded. Raw sugar futures in the US rose above 25.4 US cents per pound, heading toward the 11-year high of 27 US cents touched on April 28th amid threats of lower supply. The Indian government stated that it will prohibit sugar exports until the second half of 2024 due to concerns that El Nino could reduce rainfall and lower yields. The world’s second-largest producer and exporter has already capped foreign sales in the current marketing year due to historic droughts in the Maharashtra region. In the meantime, gasoline taxes in Brazil continued to support the demand for biofuel alternatives, swaying cane producers to blend ethanol instead of crushing the sweetener, and effectively reducing sugar supply and availability for exports.
Palm oil futures prices rebounded. Malaysian palm oil futures soared on Friday for a fourth day. The benchmark palm oil contract FCPOc3 closed at MYR3,743, setting it on course for an 11.17% weekly jump, as dry weather conditions curbed the prospects of palm and US soybean production.

Raw sugar (red) and crude palm oil (brown) futures price trend

(Source: Bloomberg)

1Q23 results review. Revenue dropped by 3.8% YoY to US$16.9bn. Net profit fell by 26.2% YoY to US$391.4mn. Food product sales volumes rose by 4.1% YoY to 7.2mn MT. Feed and Industrial Products sales volume jump by 15.2% YoY to 13.7mn MT.
Market consensus.

(Source: Bloomberg)

Genting Singapore Ltd (GENS SP): Bracing peak visitor arrivals this summer

RE-ITERATE Entry – 0.95 Target – 1.05 Stop Loss – 0.90
Genting Singapore is best known for its award-winning flagship project Resorts World Sentosa, one of the largest fully integrated destination resorts in South East Asia. Genting Singapore is one of the constituent stocks of the FTSE Straits Times Index. The principal activities of Genting Singapore and its subsidiaries are in developing, managing and operating integrated resort destinations including gaming, hospitality, MICE, leisure and entertainment facilities.
Higher arrival levels. With Singapore’s international visitor arrivals continuing to surpass a million for the third consecutive month, May’s figures showed a slight decrease from the post-pandemic high recorded in April. According to the Singapore Tourism Board (STB), tourism arrivals in May reached 1.11mn, down from 1.13mn the previous month. However, these numbers were more than 2.5 times higher than the 418,458 visitors recorded in May 2022. Although arrivals remain below pre-pandemic levels, the steady increase indicates a growing demand for travel to Singapore, mainly due to increasing travel demand from South-East Asia. Generally, Singapore visitor arrivals peak during July and August. Genting Singapore’s 2023 revenue is likely to see exponential growth in the new year. This revenue boost will likely translate to higher profits, which can then be used to continue fueling their expansion effort.

Singapore Visitor Arrivals Trend

(Source: Singapore Tourism Analytics Network)

Improving its attractions. In order to attract a more upscale market and meet the demands of its target audience, renovations have begun at The Forum at RWS, in May, with the aim of doubling its gross floor area to approximately 20,000 sqm across three levels. This expansion is scheduled to be completed by the end of 2024 and will provide an array of upscale restaurants, specialty shops, and concept stores. Additionally, construction is underway at Universal Studios Singapore’s Minion Land and the Singapore Oceanarium, both of which are set to have soft openings in early 2025. These developments align with the ongoing RWS 2.0 project and signify the company’s dedication to improving its destination appeal and catering to the evolving preferences of its clientele.
Gross gaming revenue (GGR) recovery. RWS has been experiencing positive growth as regional travel and gaming demand continue to recover. In 1Q23, the company’s gaming business generated $339.9mn in revenue, reflecting a significant increase of 45% compared to the previous year’s figure of $234.5mn. This growth aligns with the overall forecasted trend of Singapore’s GGR recovering to more than 70% of pre-pandemic levels in 2023. Historically, GGR in Singapore has shown a correlation with tourist arrivals from China, with higher arrivals resulting in higher GGR. As tourist numbers from China approach pre-pandemic levels, it is expected that GGR will follow a similar trajectory of recovery. The ongoing recovery of regional travel and gaming demand, coupled with the resurgence of Chinese tourist arrivals, bodes well for RWS’s future prospects in the gaming sector.
Market consensus.

Genting Seasonality trend

(Source: Bloomberg)

(Source: Bloomberg)

Budweiser Brewing Company APAC Ltd. (1876 HK): A beer a day keeps the summer heat away

BUY Entry – 22.0 Target – 24.6 Stop Loss – 20.7
Budweiser Brewing Company APAC Ltd is an investment holding company principally engaged in the brewing and distribution of beer. The Company produces, imports, markets, distributes and sells a portfolio of beer brands owned or licensed by the Company, including Budweiser, Stella Artois, Corona, Hoegaarden, Cass and Harbin. The Company also produces, markets, distributes and sells other non-beer beverages. The Company distributes its products primarily in China, South Korea, India, Vietnam and other Asia Pacific regions.
Peak Travel Season. Anticipating the upcoming peak travel season during summer, the company foresees a surge in beer demand across Southeast Asia. As international travel restrictions are gradually lifted, more people will be able to travel, leading to increased demand for beer. Particularly, China is expected to experience significant growth in beer demand as pandemic-related restrictions are eased and travel demand returns to pre-pandemic levels. To capitalize on this trend, the company has already begun expanding its presence in various Chinese cities with its premium beer products. Following the country’s lifting of COVID-19 restrictions a few months ago, a rebound in demand has been observed. China has also witnessed a notable influx of tourists since reopening, and the resumption of shopping festivities further contributes to this trend. The recently held 6.18 shopping festival is expected to attract even more tourists to China, thus complementing the demand for beer. Taking these factors into account, Budweiser APAC, which encompasses over 50 brands and currently holds a 16%-17% share of China’s beer market, is well-positioned to benefit from the increased tourism levels.
World Cup Sponsor Deal. Budweiser has recently made an announcement stating that it will continue to be the official beer of the FIFA World Cup, maintaining this prestigious partnership through the 2026 tournament set to take place in North America. This extension of Budweiser’s association with FIFA solidifies their ongoing relationship. As the FIFA World Cup stands as one of the most globally renowned sporting events, Budweiser is poised to reap the rewards of renewing its sponsorship with FIFA. The reported value of the sponsorship is estimated to be around US$75 million based on the previous World Cup Sponsorship deal, building on the success and visibility of Budweiser.
1Q23 earnings. The company revenue rose to US$1.7bn, +4.29% YoY compared to US$1.63bn 1Q22. The company’s net income fell slightly to US$297mn, -1.66% YoY, from US$302mn in 1Q22. Basic earning per share is US 2.27 cents.
Market Consensus

(Source: Bloomberg)

Tencent Holdings Ltd. (700 HK): Release of Tencent Cloud Industry Model

RE-ITERATE BUY Entry – 353 Target – 385 Stop Loss – 337
Tencent Holdings Ltd is an investment holding company primarily engaged in the provision of value-added (VAS) services, online advertising services, as well as FinTech and business services. The Company primarily operates through four segments. The VAS segment is mainly engaged in the provision of online games, video account live broadcast services, paid video membership services and other social network services. The Online Advertising segment is mainly engaged in media advertising, social and other advertising businesses. The FinTech and Business Services segment mainly provides commercial payment, FinTech and cloud services. The Others segment is principally engaged in the investment, production and distribution of films and television program for third parties, copyrights licensing, merchandise sales and various other activities.
Expected easing of US-China Tensions to drive economies. US Secretary of State Antony Blinken is set to travel to Beijing this weekend, as announced by the US Department of Sate. This visit holds significance as the Biden administration aims to navigate the complex relationship with China. The trip’s agenda includes establishing open communication channels, discussing concerns on various issues, and exploring potential cooperation on transnational challenges such as climate change and global stability. The talk for a better relationship between the world’s 2 large superpowers would drive economic recovery up for both side.
Tencent Cloud Industry Large Model and Intelligent Application Technology Summit. Tencent has announced that it will host the Tencent Cloud Industry Large Model and Intelligent Application Technology Summit on June 19th. During the event, Tencent will unveil its technical solutions for industry large models and share updates on the progress of intelligent application upgrades and the implementation of these solutions in various industrial customer scenarios. Tencent is also likely to release their artificial intelligence tool, which is expected to be called HunyuanAide and built on large language model Hunyuan.
1Q23 earnings. The company revenue rose to RMB150 billion, +11.0% YoY compared to 1Q22. The company’s profit for the period was RMB33.4 billion, +27% YoY. Net margin also increased to 22% in 1Q23 compared to 19% in 1Q22. Basic earnings per share were RMB3.431, while diluted earnings per share were RMB3.353.
Market Consensus

(Source: Bloomberg)

The United States market is closed today in observance of a public holiday, Juneteenth. The market will reopen on 20 June, Tuesday.

Estee Lauder Companies Inc (EL US): Rich and beautiful

BUY Entry – 203 Target – 228 Stop Loss – 190.5
The Estee Lauder Companies Inc. manufactures and markets a wide range of skincare, makeup, fragrance, and hair care products. The Company’s products are sold in countries and territories around the world.
Release of anti-ageing research. Estee Lauder announced its plan to unveil innovative clinical and preclinical results in the field of skin health and anti-ageing. The company will present these findings at the 25th World Congress of Dermatology in Singapore, in July, showcasing research from three brands in five separate presentations. The data will cover topics such as the effects of facial creams, the mechanobiology of the skin, the benefits of a targeted cosmetic serum, and the use of moisturisers. Estee Lauder will also host a symposium on sirtuins and longevity, exploring the relationship between sirtuins and their impact on skin. The company’s research reflects its commitment to scientific advancement and its focus on understanding the molecular pathways underlying inflammation and ageing.
Rising beauty sales in China. China’s annual 6.18 shopping festival has provided a boost for beauty brands, with sales surging for both global giants and local Chinese brands. Major brands such as L’Oréal, Estée Lauder, Proya, Lancôme, and Dior experienced significant sales growth during the event, indicating a recovery for the country’s beauty industry after a pandemic-induced slump. Chinese consumers showed a willingness to spend again, with e-commerce playing a key role in the industry’s rebound. Domestic brands also performed well, leveraging their proximity to consumers and comprehensive marketing channels. Beauty device sales, high-tech skincare products, and new product launches were among the notable trends during the festival, highlighting the evolving preferences and shopping habits of Chinese consumers. Livestreams and interactive formats were utilised by beauty brands to engage customers and drive sales.
Resilience in US retail sales. US retail sales in May surpassed expectations, rising by 0.3% and reflecting the strength of consumer spending, which accounts for more than two-thirds of the country’s economic activity. The strong growth in the first quarter offset the impact of inventory slowdowns. Factors contributing to the rise in retail sales include strong wage gains, easing inflation, and increased online sales. This positive trend supports the overall economic outlook and acts as a buffer against a recession. Despite concerns about higher interest rates, consumer demand remains robust, potentially leading to another rate hike. While there are signs of slower momentum in certain areas, the overall resilience of US retail sales indicates a positive outlook for the economy.

(Source: Reuters, Refinitiv)

3Q23 earnings review. Revenue fell 11.5% YoY to $3.76bn, beating estimates by $60mn. Non-GAAP earning per share was $0.47, $0.04 below expectations.
Market consensus.

(Source: Bloomberg)

Unity Software Inc (U US): Our future reality

RE-ITEREATE BUY Entry – 40 Target – 48 Stop Loss – 36
Unity software provides a software platform for creating and manipulating interactive real-time 3D content. The platform can be used to create, run and monetize interactive real-time 2D and 3D content for mobile phones, tablets, PCs, game consoles, and augmented and virtual reality devices.
Apple Vision Pro is expected to drive related development. The Apple Vision Pro headset has sparked a renewed interest in spatial computing and the metaverse. As part of Apple’s strategy to build a strong third-party ecosystem, they have partnered with Unity, a leading platform for developing 3D games and spatial computing software. Through this collaboration, Unity will bring its popular Unity-based games and apps to Vision Pro, harnessing the headset’s advanced features like Passthrough, high-resolution rendering, and native gestures. This presents Unity with an opportunity to leverage its real-time 3D tools and empower its vast community of developers in creating innovative apps and games for the Apple Vision Pro. Despite previous challenges stemming from Apple’s iOS privacy changes, this collaboration signifies a positive step forward for Unity. It not only underscores the growing significance of spatial computing but also solidifies Unity’s role as a key player in this dynamic field. The partnership grants Unity a substantial advantage in the rapidly expanding spatial computing market and serves as a valuable platform to showcase its powerful 3D engine and capabilities to a broader audience.
1Q23 earnings review. Revenue rose 56.3% YoY to $500mn, beating estimates by $25.3mn. GAAP loss per share was $0.67, $0.03 below expectations. Sales are expected to rise 72% to 75% YoY to between $510mn and $520mn, as the company continues to look to gain share in the advertising market.
Market consensus.