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Hoarding will resemble a giant trunk during renovation work for an undisclosed "new project." A fashion show is planned for Oct. 2 at the site.

PARIS — Will Louis Vuitton chief executive Pietro Beccari, mastermind of the Dior 30 Montaigne super mega flagship in his previous job, break the luxury mold again with another mind-bending attraction?

Monogram hoarding is expected to start going up this week on a mammoth building on the Avenue des Champs-Élysées that had earlier been earmarked for Dior Couture’s new headquarters.

Vuitton confirmed exclusively to WWD that it has taken possession and will begin renovation and interior design work on the Art Nouveau-style building, formerly occupied by HSBC, for an undisclosed “new project for the maison.”

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The building will also serve as the venue for Louis Vuitton’s spring 2024 women’s fashion show on Oct. 2 during Paris Fashion Week, the house confirmed.

Nicolas Ghesquière, Vuitton’s artistic director of women’s collections, has selected many architectural marvels for most of his destination shows for Vuitton, and some of the ones in Paris — the Louvre and Musée D’Orsay museums among recent favorites.

But he also has a penchant for the rawness of buildings under renovation, having staged Vuitton shows at the Samaritaine Paris department store and Vuitton’s Place Vendôme flagship store while they were still construction sites.

“Work in Progress” is printed on tall white walls surrounding 103 Champs-Élysées, and the Dior hoarding of white couture prototype that wrapped the building since 2021 has been removed, leaving mostly bare scaffolding.

The Vuitton hoarding will take the form of a monogram trunk in wood and aluminum, inspired by ones used by explorers that are now stashed in the firm’s archives. Vuitton noted that all the materials employed to create the facade will later be reused or recycled.

Vuitton is keeping its precise plans for the building under wraps. A construction permit registered with the city of Paris mentions retail, hotel accommodation and the construction of a basement level and interior courtyard.

Specialized real estate news site CFNews Immo first reported in January 2020 that Vuitton parent company LVMH Moët Hennessy Louis Vuitton had signed a lease for the Art Nouveau style building, which is under Qatari ownership.

Located at numbers 103 to 111 on the famed thoroughfare, the building sits next door to Vuitton’s historic flagship on the Champs-Élysées, which opened in 2005. That location was roughly double the size of the previous unit. Vuitton has been present on the famous shopping thoroughfare since 1998.

Beccari, who moved over to Vuitton from Dior last February, has a reputation for bold gestures and audacious events, frequently telling his teams, “Don’t think big — think huge!”

During his tenure at Dior his mantra seemed to be “Go big or go home” as he rolled out dreamy destination fashion shows, impactful pop-up shops and department-store takeovers, mega exhibitions and a Paris flagship store that set a new standard: It incorporates a museum, a restaurant, pastry café, leafy courtyards, a 26-foot-tall rose sculpture by Isa Genzken and a hotel suite that offers a special few the run of the tore all night long.

In an interview with WWD last December, he said: “If you don’t take risks, you have no reward,” and also, “I believe in boldness and presence.”

Since arriving at Vuitton, he conscripted Ghesquière to add a pre-fall destination show to his workload, and a monumental one at that, staged on the lower deck of the Jamsugyo Bridge. Beccari also recruited music superstar Pharrell Williams as Vuitton’s creative director of menswear, privatizing emblematic Paris bridge Pont Neuf for a bombastic fashion and entertainment spectacle.

The luxury behemoth’s previous CEO, Michael Burke, let slip last November that he was mulling transforming Vuitton’s corporate offices on Rue du Pont Neuf, with its views of the Seine and the Eiffel Tower, for a large store and the first Vuitton hotel.

To be sure, the brand has been rapidly adding hospitality components to its boutiques — from full-fledged restaurants to chocolate shops — as it cements its status as a cultural brand.

Vuitton did not specify how long the construction works at the Champs-Élysées site might take.

It is understood Dior plans to establish corporate offices elsewhere in the neighborhood.

Contrarians might have passed over China, but the point of being a contrarian is to venture to places others shun

Given the endless bad news about China’s economy, the contrarian in me wants to be bullish.

It’s true that debt, housing, local government and consumer demand are all a mess, and dire demographics raise the prospect of a Japanese-style economic disaster. But there are three things working in China’s favor as an investment destination: Stocks rarely have been this cheap compared with the U.S.; its entire weight in a global benchmark is smaller than Apple’s; and a weaker dollar might help.

The basic case is that China is cheap. MSCI China, which includes Hong Kong stocks, trades at just 10.8 times the next 12 months’ earnings, about half the 20 times earnings of both the S&P 500 and MSCI USA. Even that hides the cheapness of much of the market, as Tencent Holdings makes up more than 12% of the index, and trades at 17.5 times forward earnings.

Of course, China is cheap for a reason. The property-market implosion has exposed the underlying weakness of the economy, while frigid relations with the U.S. have scared off Western investors. The risk of being in a Communist dictatorship has become all too clear, with the arbitrary decision to shut the private education industry, the crackdown on China’s big tech companies and the capricious response to Covid-19.

The question is: How cheap should China be? Past evidence suggests it can get much cheaper in a crisis. In the 2008-09 financial crisis, China traded at 6.6 times forward earnings, and was below 10 for most of the time from 2011 to 2015. It is also one of the few countries whose history includes a thriving stock market that went to zero, after the Communist revolution in 1949.

Yet, China is remarkably cheap compared with the U.S. The gap between the U.S. and China valuations has only been this wide briefly in 2020 and 2021, according to MSCI data starting in 2003.

It isn’t only that China is cheap. As an emerging market, it ought to benefit if the dollar begins to weaken. Aside from anything else, a weaker dollar would help China defend the yuan, as it has been trying to do.

“There’s a strong case to be made that the dollar has peaked and already started to decline,” argues Gustavo Medeiros, head of research at Ashmore Group. “When the dollar weakens, it typically becomes a virtuous circle of inflows and lending” to emerging markets.

Certainly, the dollar became historically strong. It peaked in trade-weighted terms, adjusted for inflation, last October at its strongest level since the 1980s. It has since weakened about 6% as the Federal Reserve moved from aggressive rate increases to a more balanced approach, and inflation in much of the developed world became a bigger problem than in the U.S.

I prefer investments to be cheap in absolute terms, not merely relative to alternatives. And the bull case applies to other investments, too. The U.S. market is very expensive, and makes everywhere else look cheap by comparison—with the U.K. at about 10 times forward earnings.

But the prospect of a weaker dollar wouldn’t particularly help other developed markets, except in pure currency gain terms. Emerging markets, however, usually benefit much more when the dollar falls. Compared with the rest of the emerging-market universe, China is about as cheap as it has ever been.

Some investors might still balk at the political and geopolitical risks of China, particularly regarding Taiwan. That’s perfectly reasonable. But there’s a contradiction here. Apple gets a fifth of its sales from China, has a large manufacturing base in the country and is bigger in the MSCI All Country World Index global benchmark than China.

Investors choosing to steer clear of China because of the political risks at least ought to worry about Apple, the world’s most-valuable company and a very expensive one, at 29 times forward earnings.

Contrarians looking for ways to avoid the richly priced U.S. market might have passed over China because of the constant flow of bad news. But the point of being a contrarian is to venture to places that others shun; it has plenty of risks, but they are at least starting to be priced in. I would prefer it to be cheaper still before buying, but who wouldn’t?

The property giant paid $22.5 million in coupons to international bondholders just before the end of a 30-day grace period

Embattled Chinese property giant Country Garden Holdings 2007 -0.98%decrease; red down pointing triangle made two overdue bond-coupon payments shortly before the end of a 30-day grace period, averting an international debt default that many investors saw as inevitable.

The 31-year-old developer on Tuesday made interest payments totaling $22.5 million on U.S. dollar bonds with a combined face value of $1 billion, according to a person familiar with the matter. The coupon payments were originally due in early August.

The financial struggles of Country Garden, which has been China’s top surviving developer after dozens of its peers defaulted on their debt, have rattled the country’s beleaguered housing sector and financial markets. The company’s cash crunch is a direct result of declining new home sales, which stem from weak consumer confidence and potential home buyers’ worries about the direction of home prices while China’s economy sputters.

In August, new home sales at China’s largest developers fell a third from the same month a year ago. Country Garden experienced a steeper drop in its monthly contracted sales, which declined by more than 70% to the equivalent of $1.1 billion in August.

Investors are still highly pessimistic about the Foshan-based company’s ability to withstand the downward spiral in China’s housing market and continue paying off its debt. As of June 30, Country Garden had the equivalent of $15 billion in bonds, bank loans and other debt coming due within a year.

The two Country Garden bonds that received their coupon payments have been trading at deeply distressed levels that indicate a very high probability of default. They were bid at around 10 cents on the dollar on Tuesday, according to Tradeweb.

The developer had signaled in recent days that it was likely to make the overdue dollar-bond payments. Late last week, Country Garden won approval from creditors in mainland China to extend the maturity date of $537 million in yuan-denominated bonds by three years. It also made an interest payment of around $600,000 on a bond denominated in Malaysian ringgit on Monday.

The company also plans to extend the maturities of seven more domestic bonds, according to the person familiar with the matter.

Country Garden and its subsidiaries have roughly $10 billion of U.S. dollar bonds outstanding, according to data compiled by YY Rating, an independent Chinese credit-research firm. The company also has international bonds in other currencies, including the Thai baht and Hong Kong dollar.

Country Garden has two more dollar-bond coupon payments totaling $55 million in September. It has a $1 billion note due in January next year. It also has a 400 million Thai baht, the equivalent of about $11 million, note maturing late next month.

Around two years ago, property giant China Evergrande Group also missed some dollar-bond interest payments and made them before their grace periods expired. By late 2021, Evergrande, the world’s most indebted developer, was unable to keep up with its payments and finally defaulted on its dollar bonds. The company reached a debt-restructuring deal with its international bondholders earlier this year after protracted negotiations with creditors.

Chinese authorities are trying to do more to revive housing demand after largely standing by for much of the past two years while dozens of property developers slid into distress. In recent weeks, regulators have made it easier for Chinese citizens to buy properties by loosening the definition of first-time home buyers and lowering minimum down-payment ratios on people’s first and second home purchases.

LONDON, Sept 5 (Reuters Breakingviews) - The semiconductor industry has changed immeasurably since Japanese conglomerate SoftBank Group (9984.T) bought Arm for $32 billion in 2016. Yet the British chip designer’s fair value may be in that same ballpark, according to a Breakingviews valuation.

SoftBank is seeking an equity value of $50 billion to $54 billion as part of the roadshow for Arm’s initial public offering, Reuters reported at the weekend. When the Japanese conglomerate’s boss Masayoshi Son scooped up the Cambridge-based company seven years ago, he was placing a bet on the so-called Internet of Things, the view that tiny semiconductors would proliferate across everyday household items and provide the next leg of growth for chip designers. Now he’s pitching it instead as a central player in artificial intelligence, the new industry vogue.

Stock-market AI darling Nvidia (NVDA.O) at first glance seems to validate Son’s valuation hopes. The Californian chip designer’s enterprise value has recently soared to $1.2 trillion, or 23 times analysts’ average forecasts for its revenue this year, LSEG data shows. On that basis, Arm’s top line could stagnate at $2.7 billion and still justify a greater than $60 billion equity value, after including its $2 billion of net cash.

But that misunderstands Nvidia’s ascent, which is underpinned by massive increases in forecasts for operating profit. The mean analyst prediction for earnings before interest and taxation in the financial year to January 2026 has more than doubled since the start of May. The lesson for SoftBank and Arm is clear: chip investors are laser-focused on medium-term operating profit, not just revenue.

There are three key moving parts to Arm’s valuation. First is its top-line growth, which has been lumpy, dropping 1% in the last fiscal year but leaping 33% in the preceding 12 months. SoftBank in a recent earnings presentation highlighted a longer-term trend: Arm’s 14% compound annual growth rate over the past three years, using fiscal first-quarter figures. Apply that pace of expansion to the most recent calendar year, which makes it easier to compare Arm to listed peers, and the company’s revenue would reach $4 billion in 2025.

Second is the operating margin, or the percentage of sales that’s left over after deducting all costs other than interest and taxes. Under SoftBank, Arm’s operating margin has dropped to around 25%, from roughly 40% in 2015 – a consequence of Son’s preference for heavy investments in research. Bernstein analysts reckon a publicly listed Arm might nudge the margin back up to 33% within three years, if it lets costs grow slightly slower than revenue. On that basis, the company would pump out $1.3 billion of operating profit in 2025.

Third is the valuation multiple, which is best judged by looking at what investors are prepared to pay for similar listed companies. Nvidia, Cadence Design Systems (CDNS.O) and Synopsys (SNPS.O) are good choices. The first is exposed to Son’s beloved AI trend, while the latter two U.S. firms make software for chip designers, much like Arm, which licenses intellectual property for processors. On average, the trio have a current enterprise value of 25 times the operating profit analysts reckon they’ll earn in 2025, using LSEG data.

If Arm nabbed the same multiple, its enterprise value would be $33 billion, using the above growth and operating margin. Add the SoftBank-owned company’s net cash as of June 30, and the market capitalisation would be $35 billion.

Son last month agreed to pay a significantly higher valuation of $64 billion when SoftBank bought 25% of Arm from the Saudi Arabia-backed Vision Fund. In that context, the new $50 billion to $54 billion target would already represent an embarrassing step down. But even to justify the lower valuation, investors would have to torture the assumptions.

Start with revenue. AI star Nvidia’s top line will grow at a compound annual rate of 51% from 2022 to 2025, according to average analyst forecasts gathered by LSEG. Assume that Arm captures some of the same gold dust and grows at a 20% annual clip up to 2025. Holding other assumptions constant, Arm’s fair value would rise to $41 billion. It’s hard to see a case for raising the valuation multiple beyond 25 times, which is already much higher than the average 22 times multiple that Arm managed in its final three years as a public company before SoftBank swooped. So profitability has to do the final lift. To clear a $50 billion equity value the 2025 operating margin would have to surpass pre-SoftBank levels of around 40%, while revenue grows at 20% a year.

That’s an implausible scenario. To mimic and sustain Nvidia-esque growth, Arm CEO Rene Haas would have to keep ramping up investments in engineers and sales teams, which would weigh on margins. On the other hand, boosting profitability by reining back spending would probably make a turbocharged top line impossible. Arm can either have a rapidly rising top line or rapidly rising margins, but probably not both.

The company itself acknowledged this tradeoff in a 2021 filing making the case for its sale to Nvidia, which was blocked by antitrust authorities. “The capital markets would expect Arm to make significant strategic changes, including cutting costs…” the parties said, referring to the possibility of an IPO, concluding that the UK group faced “significant challenges to growth” as a standalone company. SoftBank’s hoped-for price range only works if investors are willing to believe two mutually contradictory things at once. That may be possible for a short while, especially if the stock market’s AI hype persists, but it’s hardly the basis for a stable valuation over time.

Ministers urged to ‘regain momentum’ after Britain sinks from fourth place to eighth

The UK has fallen behind other leading economies in supporting the development of a low-carbon hydrogen industry, two trade bodies have warned.

The Energy Networks Association and Hydrogen UK urged the government to “regain the momentum” after falling from second place two years ago, behind only South Korea, to eighth.

“Though some progress has been made, the USA, Germany, Japan, Canada, the Netherlands and France have all leapfrogged the UK, at a time when competition to attract international investment in energy infrastructure has dramatically increased,” they said. South Korea had retained its top spot, the report found.

A joint report by the two trade bodies compared policies to develop clean hydrogen in the UK to those in 16 countries including India and Saudi Arabia.

No significant low-carbon hydrogen production projects in the UK have yet reached a final investment decision, the study said, despite the government setting a target of 10 gigawatts of production capacity by 2030.

The findings follow another study by Energy UK, the energy industry trade group, last month that highlighted the “low levels of expected investment in the UK” as other countries, such as the US, boost incentives for clean energy investors.

In June, the Climate Change Committee, the government’s independent adviser, said the UK was making “worryingly slow” progress and had “lost its global leadership” on the road to reach its stated goal of net zero by 2050.

The warnings come amid a growing debate in the ruling Conservative party about its commitment to green policies in the run-up to the next general election, which is expected next year.

Opinion polls show Tory voters are particularly resistant to the idea that carbon-cutting policies should be pursued if they result in extra costs to households. Last week, Sunak promoted Claire Countinho, one his closest allies, to the role of energy secretary.

Hydrogen does not produce carbon dioxide emissions when burnt, so it is hoped it can replace fossil fuels in several areas, such as heavy industry, although how widely it will be used is debated.

Most hydrogen globally is currently produced from natural gas, releasing carbon dioxide in the process. Producing low-carbon hydrogen involves either capturing these emissions, or using water as the source and extracting the hydrogen via electrolysis powered by clean electricity.

Both of those processes are expensive and complex, requiring government support and planning to get up and running at scale.

The joint report looked at metrics such as financial support for producers, and the development of infrastructure to transport and store hydrogen. It highlighted tax credits of up to $3 per kilogramme available for clean hydrogen producers in the US, one of the measures introduced by president Joe Biden’s Inflation Reduction Act.

“The certainty and simplicity of this funding mechanism is in stark contrast to the UK’s heavily negotiated contracts, competitions and allocation rounds,” it said.

However, the findings contrast with a report by Cornwall Insight, the energy consultancy, in April. It ranked 14 countries on their potential to “develop low-carbon advanced hydrogen economies” and put the UK third. It highlighted “substantial advancement” in the UK’s plans over the year.

The government said in statement it was “committed to boosting hydrogen as an important step towards reaching our net zero goals”. New measures in the energy bill, which is going through parliament, would “provide investors with the confidence to invest in the hydrogen sector, with the potential to create over 12,000 new jobs by 2030,” it added.