Developing countries have seen tens of millions of their people emerge from poverty into the middle class, and everyone wants a piece of the action. Every entrepreneur or multinational has an angle on how to tap into the emerging consumer’s new spending power, and investors have been pouring into consumer stocks. The trouble is, all this exuberance has already been priced into many valuations. The challenge now is how to find less obvious ways to gain exposure to the emerging consumer at a better price.
At the high end, enthusiasm about China’s allegedly endless appetite for luxury brands is pushing up stocks like LVMH, which now trades at about 3.5x book value on the hope of rapid growth.
In the mass market, a company like Tingyi, China’s dominant instant noodle and beverage firm, trades at 9x book value – compared with about 2x for the MSCI Emerging index. Brazilian-listed tobacco company Souza Cruz trades at an eye-watering 18 times book value. These valuations don’t take into account the fact that growth in demand ultimately faces a natural limit: we can only eat so many bowls of noodles and smoke so many cigarettes, however much we may love them.
While there are few obvious bargains left in emerging consumer stocks, we believe that there are still pockets of opportunity in related sectors. One example is Chinese property developer Evergrande Real Estate.
Some of the steam has come out of Chinese property stock prices recently amid concerns about the potential for excess and fears that the government might act to contain the exuberance or try to limit speculation on housing because it creates income disparities. Evergrande, rather than tapping into high-end consumption, is doing something boring that the government likes. It has prioritised developments in so-called third-tier cities. In these cities (the sort that house mere millions of people, rather than tens of millions, and don’t even show up on maps made three years ago) there’s a tremendous need for housing for workers as the country urbanises. The government has made a clear commitment for an extended period of time to support an increase in this housing stock.
We think that an alternative way to tap into emerging consumption is to try and sidestep the hype and buy the companies that sell inputs to consumer-goods manufacturers. An example is Japanese-listed tyre maker Sumitomo Rubber.
China has recently outstripped the US as the world’s biggest consumer of cars, yet there are few publicly-listed pure-play Chinese automobile manufacturers. The market leader, SAIC, is only listed in the A-share market, which is off-limits to many foreigners. The number two player, FAW Group, is state-owned and not listed. On the other hand, Sumitomo has a rapidly growing business in China and is solidly profitable. Concerns about the outlook for Japan weigh on its valuation, leaving it priced well below its competitors.
Another indirect source of exposure to the emerging consumer is financials. Companies that provide consumer financing aren’t seeing the same magnificent valuations as those that sell final goods. Consumers in many of these markets are relatively “underleveraged”. For example, Brazil’s consumer borrowing currently amounts to about 30 per cent of GDP and Turkey’s is 16 per cent, compared with an emerging-market average of 63 per cent of GDP. (In the US it’s about 130 per cent.)
One name we still consider attractive is Banco do Brasil, which has been expanding rapidly in secured consumer lending such as auto loans and payroll loans (where the servicing costs are deducted directly before consumer receive their pay cheques). This is highly profitable business: Banco do Brasil’s net interest margin on consumer lending is about 16 per cent, compared with about 6 per cent on business and agribusiness lending.
There are comparable examples in India, where banks such as Punjab National Bank, Bank of India and Allahabad bank are catering to a growing middle class.
In summary, while the obvious bargains have already been snapped up, with a bit of lateral thinking investors should still be able to glean attractive returns from emerging consumption growth for the foreseeable future.
Morgan Harting is a senior portfolio manager at AllianceBernstein
大众市场上，康师傅(Tingyi)这样一个公司的股价与账面价值之比为9倍，而摩根士丹利资本国际新兴市场指数(MSCI Emerging Market index)的这一比率为2倍。康师傅是中国占主导地位的方便面与饮料公司。巴西上市烟草公司Souza Cruz的股价与账面价值之比已经达到了令人难以接受的18倍。这些估值并没有考虑到需求增长最终面临自然极限：我们能吃的碗面，能抽的香烟都是有限的，不管我们有多么热爱它们！
尽管新兴消费类股票中剩下的显而易见的“便宜货”已寥寥无几，但我们相信，相关行业仍存在大把的机会。其中一个例子便是中国房地产开发商恒大地产(Evergrande Real Estate)。
我们仍觉得巴西银行(Banco do Brasil)极具吸引力。它在消费担保贷款业务领域扩张迅速，比如汽车贷款与工资日贷款(payroll loans)——这种贷款的利息成本会在消费者收到他们的工资支票前被直接扣减。该业务的利润率非常高：巴西银行消费信贷的净息差约为16%，而工商企业与农业企业贷款的息差则约为6%。
印度也有类似的例子：旁遮普国家银行(Punjab National Bank)、印度银行(Bank of India)与阿拉哈巴德(Allahabad bank)等银行，正在迎合不断壮大的中产阶级的需求。