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ANP301191

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  1. Tried it last night, it was such a mess that I gave up an hour in. Maybe I messed up something somewhere :S
  2. @DooDiligence - appreciate the point. Maybe I havent been clear enough in my example. But the reason I prefer the product rather than the marketplace is because I see "luxury" as being more about product and product identity. What I was trying to convey in my example with Ben & Jerry's was the luxury product in market "x" should have the ability to raise prices if its product is truly luxurious and specifically sought after. Perhaps the regular food categories are not the right place for this example, maybe I should have focused more on the Wine/Champagne categories or other niche products. @LearningMachine - I agree, if the grocer has such a large % of your sale under his control, then you are by all means more dependent on him than he is on you and so he can take a huge chunk of any price increase. I just dont think that a brand or a product that is so sought after should ever find itself in such a weak position, but undoubtedly it has probably happened and will probably happen again.
  3. @LearningMachine agree with you on the foods bit, but not so much in terms of the stores. Just personally, I used to shop at Tescos when I lived in London, but that was partially due to it being the closest grocer to me. I think the food products itself may be more valuable. I mean just thinking about the ice cream category - Ben & Jerry's has a tremendous following, if they were to increase their prices by 20c, would it really change peoples buying habits? How often they could increase prices is a question because there will be some demand elasticity, but certainly upmarket brands in the food space should be able to do so. Has anyone considered NFLX in this category? I dont know if they can repeatedly increase prices year on year, but certainly looking at the prices all the other streaming services are now asking for, NFLX is value for money.
  4. Paraphrasing the question posed, I would argue that there are two distinct segments of businesses that can increase prices without worrying about customer attrition - i) businesses offering a rare/branded product; ii) businesses so intertwined into the lives/businesses of their customers that the cost of changing the supplier outweighs the increased costs. For the first part, I would argue LVMH (MC.PA), CTF (1929 - HK), Richemont, Kerring, maybe even Hermes, Titan in India, Swatch Group all would be these types of businesses. I honestly believe that in all these businesses, the consumer is more attracted by the brand than the product, so the pricing power is with the brand and the business can extract additional value. I would also add high end luxury yacht manufacturers, luxury homebuilders and any other luxury product. For the second part, AWS, MSFT have been mentioned. I would add SAP, Salesforce. There are probably other software names, but I am blanking. The anecdotal example I have is a friend running his entire business on SAP, he tied down because he has spent tons of money building up a team/reorganizing modules to fit his workflow/teaching non-IT employees about the system. I dont see a scenario where he can willingly leave SAP.
  5. @formthirteen you made my week, I have it on repeat
  6. MSCI ACWI ETF - I think the USD Version is ACWI. I hate that its mostly large cap techs, so would probably add a few more positions to even out the tech bias. Maybe add a little more of a Euro Stoxx 60 in, love some of the large European consumer brands (Nestle, Danone, Ambev, LVMH), especially if I am unable to trade in this scenario. My pension account holds the regulars (BRK.B, GOOGL, MC.PA, MSFT) along side a couple of different ETFs and a couple of moonshots (PLTR to the moon ) but I dont know if I am going to be involved enough over the course of the next 30-50 years to make "good" investing decisions, so ETFs for me.
  7. Just looking at it from the point of view of what the FT says will be sold - I think the resultant streaming player will be a significantly stronger than anyone other than Netflix and Disney. May lead to more consolidation with other streaming player, specifically waiting to see what Comcast does. From a consumer point of view, I understand that cable bills in the US may be higher than having multiple subscriptions, but its a pain to have to keep a track of which shows are on which platforms, so this should help. Or maybe its just that I am lazy.
  8. Hi @Ilyich Regarding the new products - honestly no objective way to track it. I know a few people in the Indonesian grocery business so I take their word for certain things. But seeing as a ton of their 2017-2018 Chairman's and CEO's letters focused on these new items, I would suppose that at some point they would have to show some sort of results or something. As for the price of Cocao - I used the free Nasdaq portal - https://www.nasdaq.com/market-activity/commodities/cj%3Anmx . I honestly started my analysis from 2015 and did not go back further simply because that was the time that they divested their cocao processing businesses to Barry Callebaut, so I may have missed a trick there. Either way, I really dont believe that management has materially reduced the cost of goods its fluctuated at the 70% mark since 2015. Even though the price of some of their raw materials have come down (at least according to the chart I referenced). There were a couple of issues that they had to restate about in the last 3 years. First in 2018 they uncovered fraud in their Philippines distribution unit - by my calculations that cost the company around $3.5m (restated new revenues/new profit + legal fees/admin expenses). The second thing is a little bit more technical and I would urge you to recheck this because I am no accountant - but its a technical change in accounting in Singapore. From what I can understand, new guidelines implemented in 2019-2020 pushed accountants to reclassify incentives and how they are dealt with. As a result Delfi's incentive program - they provide counterparties discounts based on how much of their product they sell, they give incentives to sales people, managers if allowed, they provide "marketing and branding" items - had to be removed from both the revenue and the sales and marketing numbers. From what I understand, Delfi was booking the revenue higher as it was adding in this cost while selling the items, and then was increasing their Selling and Distribution Costs when those incentives were hit. Under the new guidelines certain amounts of that incentive program needs to go into COGS and certain amount is reduced equally from the Revenue and the Selling and Distribution Costs. I asked a friend who is an actual accountant and he tells me that the new guidelines ask if the costs are specifically needed to sell the product then it needs to go into COGS and not another operating expense line. But again, no accountant so if you figure it out - please do let me know. As for the DCF - I just relooked at it yesterday (built in December) and I think a) my assumptions of growth were kinder than yours at that time, optimism of the vaccines and all; b) I utilized the excess cash on the balance sheet as working capital - for some reason my original post missed a small paragraph where I argued that due to the healthy cashflow, over the course of the next few months the business should increase leverage to generate better returns for shareholders, I tried to implement this by using the cash as working capital. I think if you were to plug in the cash as NWC in your DCF you should come to approx the same value as I did. In terms of management - I would love to see some changes - a more responsive management or board - but its 65% owned by the family (I think) so I wouldn't hold out hope for that. I think larger risk is transition to next generation which will happen at some point. Also just in reading their 2020 Annual report again, I think a ton of their officers are also getting up their in age, so the transition may be a tad more painful than I previously believed. Also I completely agree with Cicero, that Delfi's products are for lower income consumers, and that they are in an extremely competitive landscape in terms of pricing. His anecdotal experience is probably played out over 100,000s of consumers, and it is a big risk that as income grows in these countries, Delfi's products will no longer be as big a player. Another anecdote - I tasted the Delfi chocolate bar and wasnt the biggest fan of it - and if you were to offer me a Cote D'Or or a Lindt at the same price there is no way I would opt for Delfi - and I am probably willing to pay a lot more for these brands against Delfi myself. That being said, still a fan of the business because of its relative undervaluation and the belief that it has a long runway. Also check out DBS's write up on Delfi - its a tad old (Feb 2021) but I think they are one of the only major banks that follow Delfi. https://www.dbs.com.sg/private-banking/aics/stock-coverage/templatedata/article/equity/data/en/DBSV/012014/DELFI_SP.xml
  9. Hi @Ilyich, Answering your cons: 1) I think currency risk (especially Indonesian Rupiah) is a huge risk, but honestly looking at it from a macro level, I want to be invested in ASEAN so I have take a slightly optimistic (my friends tell me over-optimistic) view on it. 2) I agree that their growth strategy has not really had much time to show results - however, from my research into the market, they have piqued peoples interest and for me that is a start. What I am waiting for is real news about the actual successes/failures of their new lines of product - green tea chocolates and the likes. The reason I am interested in specifically these lines (healthy chocolates) is that I dont see them being too successful in other "developing" markets and even in developed markets like Benelux. If this doesnt produce the types of results that they want, their SKU counts will have grown tremendously, they will have probably killed their gross margins/efficiencies etc. and they will have to invest new money into new products again. 3) I havent heard of any partnerships outside of Indonesia or Philippines either, though we could both be missing out on something. I don't think management is actually very interested in going into other markets - which for me is a positive, I dont want them to go and burn cash to become the world leaders in chocolates, I would prefer them to spend that money in protecting their moat in Indonesia/Philippines, grow in Malaysia maybe, or pay me back the cash in dividends :). 4) Completely agree with you with regards to the vaccinations - the more I read about Indonesia or Philippines the more I think "normalized" earnings will have to be pushed back another quarter or maybe even 2. 5) While they dont specifically split out advertising quarterly, their Selling and Distribution costs have been steady at around 18-22% for the last 3 years (pre-covid), I would imagine that this will not change going forward, at least in the near term. Another con that maybe you should consider as well is the price of cocao which has been rising alongside all commodity prices, along with the price of all of their other ingredients. I dont really know enough to model out their exact production costs but I would expect to see costs of goods sold as a % of revenue to increase rather significantly in the near term. I dont want to take too much of a macro view on the business, but I am guessing that inflation would probably be a big negative for this business due to the elasticity of demand in such a competitive category. Pros: 1) Capex should be lower - I also think that their factories have a much larger capacity than is currently being used and I dont see them growing their items sold by 10-15% annually after reaching normalization, so I think we should have 4-5 years of nice low capex. 2) I think its SKUs and also I think part of it is commodity prices - if I am not mistaken from 2015-2019 Cocao prices trended downwards. Total decline was around 20% in the time I measured it. I also would point you towards them restating their 2018/2019 financials due to incorrect calculations of COGS and Sales and Distribution Costs. Their net margins from FY 2016 to FY 2019 were around 4-7% so I would argue that the actual savings are not so great. Just my two cents - I take the partnership brands as a benefit. I think if the company is truly able to understand the manufacturing and sales of these new items (specifically in the non-chocolate categories) then the opportunity to produce and launch its own products are present. Additionally, as I argued in my initial thesis, for me this is a company that could be an interesting buy-out for a large confectionary player who wants a foot-print in ASEAN. If the company is able to execute the production and distribution of agency brands, it provides some sort of operational risk mitigation for those potential suitors. Please do let me know your thoughts.
  10. Speaking to family in Mumbai (who thankfully are safe), the situation in Dehli is replicated in Mumbai. Even in April/May 2020 at the peak of it in Mumbai, there was some availability of oxygen or beds, today even doctors are unable to get family members admitted. While respecting the need to keep politics out of it, the gross incompetence shown by officials in opening up India and declaring victory so early while not replenishing oxygen or other necessary healthcare supplies has really shown a weakness in governance in India from public health officials/politicians. What frightens me even more than the actual case counts in India is the food inflation, which has begun to skyrocket, which will lead to a vicious cycle of people who are hand to mouth needing to work to feed their families and then getting sick and spreading the disease even further. Another question I have been asking: where else has this strain migrated to? I have read of cases in Belgium, HK, France, UK all linked to India via people who have travelled in the past few days. I would guess its only a matter of time till it starts showing up in local populations or other countries.
  11. Trimmed RBC, CAT and bought ATM puts on HON, DE, FITB.
  12. @LC - I agree with you, i think the question isnt so much AI or even what the world looks like in 2100, but what it looks like in the nearer term. I think automation will kill so many millions of jobs that the developing world will struggle to maintain social order. I remember taking a history of empires class in college, and one of the key ideas (or so the professor argued) behind the fall of empires was social unrest and the inability of the "elites" to continue to maintain social order. I would argue that the same could take place today if there were millions of people who could not find jobs because a robot could build the same item at a fraction of the price with a fraction of the mistakes. I guess this is when people will start screaming for a universal basic income to ensure that everyone can "survive", though I think there is a solid argument to be made that it already exists in parts of Europe. So then my question becomes, at what point do we stop existing as a capitalist society and turn into something else? And if we become something else, following on from @tede02 question, do we even need growth?
  13. I dont think this is as big a fine as I first thought from reading the headlines. As Pistachio_lawyer indicated, I think its miniscule as compared to their cash on hand or the amount of cash they are generating on a quarterly/yearly basis. Its also less than the 10% cap that the government has for monopolistic competition fines, so obviously there is some discussions/negotiations on this fine that have gone on behind close doors. If this is the "price" that Baba needs to pay for the cloud to be lifted and for regulators to back off, I think its a no-brainer and long-term investors should welcome it. Also, I dont know how much of the discussions on baba have surrounded its ancillary businesses as compare to the e-com business, I think much like Amazon, part of the reason you own baba is for all the moonshots that are inside the company that could potentially be the next big thing. I appreciate the VIE structure probably doesnt offer as much protection as I would like, but thats the hope atleast.
  14. https://investor.costco.com/news-releases/news-release-details/costco-wholesale-corporation-reports-second-quarter-and-year-21 E-Commerce sales y-on-y growth is pretty amazing in spite of Covid-19 forcing people to purchase online. Anyone use Costco's online store? How does it compare to a Walmart or someone elses?
  15. Great question. Noticed a lot of BRK as part of the allocation - is there no management risk in the future? Not wishing ill on anyone but Warren Buffet and Charlie Munger may not be around for the full 15 years, Berkshire has not gone through a transition in its current form. For me its MSFT, DIS and TCS (Tata Consultancy in India). No idea of what the returns would be, but I am pretty confident they wont be anything like the last 15 years so will be happy with high-single digits.
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