Author: Tristan d'Aboville

Tristan d’Aboville is an Executive Director, Research Analyst, managing the European Research Product. Mr. d’Aboville has more than 16 years of experience in equity research and sales. Since joining the firm in 2012, he has applied his client-centric style with analysts and portfolio managers, anticipating and exceeding their needs. He writes the well-received weekly European commentary, and follows it with a client conference call to discuss findings. Prior to William O’Neil + Co., Mr. d’Aboville was a top-producing salesperson at Kepler Capital Markets, formerly known as Julius Baer, and at Natixis Bleichroeder, covering European equities for large U.S. institutional clients. He started his career as an equity analyst at Aurel-BGC, later moving to Natixis Bleichroeder, where he became the lead analyst for the European Hotels, Leisure and Catering Sector. He was recognized as a Top Analyst for Predictability & Recommendations by AQ Publications in 2003. Extel named him one of the top three European analysts covering the business services and hotel & leisure industries. Prior to the securities industry, Mr. D’Aboville was an auditor with Arthur Anderson. Mr. d’Aboville earned a Master of Science in Managerial and Financial Economics from ISC Paris School of Management. Later, he studied Global Affairs at New York University. He is a Certified International Investment Analyst (CIIA). A sportif, Mr. d’Aboville enjoys kite surfing, sailing, skiing, tennis, chess, and spending as much of his free time as possible with his wife, young daughter, and son.

Synlait Milk

Posted on by Tristan d'Aboville

Highlights from the report:

 

Shares bounced from 10-WMA support, steadily progressing toward 52-week highs. While shares are extended from a conventional entry point, we recommend adding to existing positions.

New Zealand (

) is one of the best performing APAC markets, trading 1% off 52-week highs.

The stock displays significant technical strength with RS and A/D Ratings of 97 and A-, respectively. Its RS line is near all-time highs. The stock has been in an uptrend, finding support at its 50-DMA.

Growth is fueled by its infant formula (IF) products that are offered through its exclusive A2 Milk agreement in China and Australasia. Further growth opportunities lie in China’s New Hope and Bright Dairy IF, which are both expected to receive Chinese Food and Drug Administration approval this year. Coupled with capacity expansion, which reflects management’s medium-term confidence, consensus expects revenue and EPS to have a CAGR of 18% and 40%, respectively, from 2017 to 2020.

Britannia Industries

Posted on by Tristan d'Aboville

Key Points:

Despite global market weakness, particularly in APAC, with most APAC markets shifted bearish (eight of 13), we continue to believe that India is constructive. India’s Sensex is trading 3% from 52-week highs and holding above its 50-DMA.

Britannia has excellent Composite and SMR Ratings of 99 and A, respectively, indicating the stock’s technical and fundamental superiority.

The stock is extended from a proper entry point but continues to hold well, trading along its 10-WMA. Its RS line is near all-time highs. We recommend holding it at this level and building positions on any pullbacks to the 10-WMA (INR 5,640).

Britannia’s focus on the premium segment bodes well with the trend of premiumization in the F&B industry in the region. Product launches, new segments, and expanding capacities will drive a 15% revenue CAGR in the next two years. Coupled with margin expansion, mainly from premiumization and lower costs, consensus expects an EPS CAGR of 20% by 2020, making Britannia one of the best growth stories among Indian Staples.

European Weekly Summary

Posted on by Tristan d'Aboville

Since our last review two days ago, the Stoxx 600 has not been able to hold its May 31 low of 382.14. Yesterday, the index lost  0.9%, breaching its 100‐SMA. Although volume was lower, we are downgrading the index’s market status to a Downtrend.
This move was accompanied by several downgrades among  European countries: France and the Czech
Republic were moved to a Downtrend while the U.K. and Finland were downgraded to Uptrend Under
Pressure.
We reiterate our extremely cautious approach to European equities. Since the Stoxx 600 topped on May
22 after the follow‐through day on April 5, it has been accumulating a high number of distribution days,
translating into a rotation of leadership. Momentum among defensive sectors, namely Staples and
Healthcare, has been rising.

European Weekly Summary

Posted on by Tristan d'Aboville

Market Summary

Despite increasing selling pressure, we have kept the Stoxx 600 in an Uptrend Under Pressure after the close today. Although the index recorded another distribution day and the count is very high at eight, we see the May 31 low of 382.14 as the key support level. The fact that the index closed in the upper side of its daily trading range was also a somewhat positive trading action.

 

That said, we continue to adopt a cautious approach toward European equities. Since the Stoxx 600 topped on May 22 after the follow-through day on April 5, it has been accumulating a high number of distribution days. The pressure that the market has been experiencing is reflected by the downgrades of several markets in the region in the past two weeks, including France and the Netherlands today (see Exhibit 1 on page 5).

Weakness in European markets has translated into the rotation of leadership. Momentum among defensive sectors, namely Staples and Healthcare, has been rising(see Exhibit 2 on page 5).

Macau Gaming Update

Posted on by Tristan d'Aboville

Concerns over Macau’s rising regulatory environment have re-emerged after the Monetary Authority of Macau (AMCM) issued a press release ti-tled“Financial sector should ensure appropriate risk management mea-sures.” Coupled with lower-than-expected GGR growth in May, Macau casino stocks have been under pressure, reflected by deteriorating technical indicators among key players.

We can’t exclude the risk of a more stringent regulatory environment in the near future and do not recommend buying on weakness as momentum is deteriorating.

Galaxy Entertainment ( PIPE.HK ): Shares have been unable to rally further after breaking below the 50-DMA on heavy volume on April 26. We are monitoring the name closely and look for shares to hold support at current levels.

 

Sands China ( SNDC.HK ): Look for support to hold at HKD 40.13 in case of further weakness. A breakout above HKD 47.27 on strong volume would be a good area to add shares.

 

Puma

Posted on by Tristan d'Aboville

Some highlights from the report:

 

  • We are revisiting our investment case for Puma as its recent consolidation offers new opportunities to build a position in one of the most attractive growth stories among apparel/shoe manufacturers.
  • Since the stock was added to our Focus List on March 20, shares have run 26% to an all-time high on June 5. Since then, the stock has been consolidating and is now trading 7% from its 10-WMA, a key support level.
  • The stock’s RS line remains in an uptrend and close to all-time-highs. Other technical indicators remain strong, including an RS Rating of 90, A/D Rating of B, and Up/Down Volume ratio of 2.8.
  • The stock’s EPS Rank of 99 (best possible) reflects recent quarterly earnings acceleration from a turnaround that began in 2015. This turnaround is entering a new phase, driven by the brand’s expansion into key regions (China, U.S.), new segments (basketball, womenswear), new products (EvoPower, Autodisc), and the development of the DTC channel, including e-commerce.
  • Management targets 2022 like-for-like revenue growth of 10% and EBIT margin of at least 10%, translating into 20-25% EPS growth, making Puma one of the fastest growing athletic footwear companies.

 

Page Industries

Posted on by Tristan d'Aboville

Some highlights from the report:

  • Shares broke out of a 118-day consolidation base with a pivot of INR 25,789.95 and are actionable after the Company announced that it is extending its license agreement with Jockey International through 2040 on unchanged terms.
  • The stock has strong technical characteristics, with an RS Rating of 89, A/D Rating of B+, and Up Down volume ratio of 1.2. Its RS line is at all-time highs.
  • The stock has an excellent fundamental profile, with both five-year sales and EPS growth of 23%, an EPS Rank of 87, an SMR Rating of A, ROE of 46%, and a stability factor of 2 (1 being the highest consistency in earnings growth profile).
  • Page’s growth trajectory will continue be supported by its strong position in men’s innerwear, where core brand Jockey enjoys strong brand equity and operates in the niche mid-to-premium segment; its ability to strengthen its foothold in segments such as kidswear, leisurewear, swimwear, and women’s innerwear; and strong macro trends, particular­ly growing discretionary spending, rising urbanization, and the transition of the innerwear market from functional to fashionable.

Global Cyclical Sector – Apparel & Footwear

Posted on by Tristan d'Aboville

Some highlights from the report:

 

Globally, the Apparel Mfg group continues to be a source of long-term outperformance and its short-term momentum remains well positioned. Outperformance has been equally spread among geographies despite currency volatility. With the sector benefiting from increasing demand in China and ecommerce penetration, Q1 earnings brought another quarter of estimate beats.

 

Global Apparel-Clothing

China’s wealthy population is taking a central role in the global luxury market’s growth. With online sales being the major driver, the luxury goods industry is expected to grow 6–8% y/y globally this year, an acceleration from 6% y/y growth in 2017.

Actionable Picks

  • PVH (PVH, $12.96B market cap) – Global apparel company with a portfolio of iconic lifestyle brands, including Calvin Klein and Tommy Hilfiger. Growth opportunities in Asia (23% the group’s EBIT) and DTC channel expansion.
  • Page Industries (PI1.IN, $4B market cap) – Manufacturer of innerwear, leisurewear, activewear, and swimwear for men, women, and children. The Company will benefit from the underpenetrated and fast-growing Indian innerwear market, expanding its foothold in segments such as kidswear, leisurewear, swimwear (Speedo brand), and womenswear.

 

Global Apparel-Shoes

Apparel-Shoe manufacturers posted better-than-expected Q1 figures with several common themes, including the strength of DTC channels/ecommerce, rapid international expansion of U.S. and European manufacturers, and the multibrand strategy adopted by Asian manufacturers, driving the momentum.

 

Actionable Picks

  • Li-Ning (LNIN.HK, $2.7B market cap) – One of the most popular domestic sportswear brands in China. The increased proportion of new products versus old, higher sales from higher margin-generating DTC and ecommerce channels, and control over procurement costs are leading margin expansion.

European Weekly Summary

Posted on by Tristan d'Aboville

MARKET SUMMARY

The Stoxx 600’s uptrend has been under pressure since the end of May, reflected by the increasing number of distribution days. This week through Thursday, the Stoxx 600 gained two additional distribution days, bringing its total to six. The index is down 0.46% on a weekly basis, adding to last week’s 1.07% decline. This was its third consecutive weekly decline.

The index is trading near its 50-DMA, which remains a key support level; as long as it holds, the uptrend should remain intact. However, with the recent rise in and concentration of distribution days across different markets, we recommend being very selective in adding new names and sticking to leadership.

China Mengniu Dairy

Posted on by Tristan d'Aboville

China Mengniu Dairy was up 8% this week after breaking out of a double bottom base. We still like it here and would recommend adding to positions. Strong EPS Rank of 86 is expected to strengthen with EPS growth estimates at 66% and 26%, y/y, for 2018 and 2019, respectively. RS and A/D Ratings are accelerating at 90 and B-, respectively. We continue to see 2018 as a record year for Mengniu with strong revenue growth of 20% and 11%, y/y, in 2018 and 2019, respectively, supported by new liquid milk products, the FIFA agreement expanding its international reach, a significant ecommerce presence, and corporate restructuring.