Smartkarma Daily Briefs

• On 22 August, Dongfeng Motor (489 HK) disclosed a pre-conditional privatisation by merger by absorption by Dongfeng Motor Corporation, along with a proposed distribution and listing of VOYAH shares.
• The VOYAH application proof, filed on 2 October, points to strong fundamentals and suggests that the appraised value of VOYAH and the offer are conservative. 
• Based on the data points from the application proof, I calculate that the implied offer is HK$12.11-12.25 per H Share, a 11.6%-12.9% premium to the appraised value of HK$10.85. 

• Tata Motors (TTMT IN) is demerging the company into two separate listed entities that will focus on the Passenger Vehicle business and the Commercial Vehicle businesses.
• Based on the estimated valuation for the two entities, both stocks will continue to remain in the MGlobal Index and the FGlobal Index.
• NIFTY and SENSEX trackers will need to sell their Commercial Vehicle business holdings soon after listing. There could be selling in the Passenger Vehicle business holdings at a later rebalance.

• After incorporating the company’s FY25 results, we have tweaked our income statement estimates and valuations of LG Electronics India IPO.
• Our base case valuation is target price of 1,514 INR which is 33% higher than the high end of the IPO price range. 
• It appears that the company wants the IPO to be successful and after much review the company has decided to price the IPO at more attractive levels to new investors. 

• LG Electronics (066570 KS) will divest a 15% stake in its 100% subsidiary LG Electronics India (123D IN) through an IPO, raising Rs116 billion (USD 1.3 billion).
• The IPO pricing implies a valuation well below that of listed Indian peers and appears to overlook the sector’s underlying near term macro demand tailwinds.
• LGEIL’s 1QFY26 financial performance came in weak, primarily due to a seasonal slowdown in cooling product sales, particularly air conditioners. This follows a strong FY2025.

• Severe Financial Distress: Vinfast is operating with deeply negative gross and net margins, leading to significant cash burn and a high degree of uncertainty regarding its path to profitability. The company is critically dependent on the financial support of its parent, Vingroup, and its founder for survival.
• Ambitious but Risky Global Expansion: The company is pursuing an aggressive and costly expansion strategy, pivoting from a challenging entry into the US and European markets to focus on high-growth potential markets in Asia, such as India and Indonesia. Execution in these highly competitive regions remains a key uncertainty.
• High-Stakes Bet on an Unproven Brand: While revenue is growing rapidly, this is off a low base and has been achieved through substantial losses. The company faces intense competition from established global automakers and new EV players, and its brand has limited recognition outside of Vietnam, posing a significant hurdle to capturing market share.

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• Chow Tai Fook Jewellery (1929 HK) is one of the best-performing Hang Seng Index (HSI INDEX) constituents YTD, but it is time to take some money off the table.
• At 5%, its 12-month forward dividend yield is about the lowest in the last five years, implying limited share price upside. Valuations have run ahead of earnings momentum.
• The recent recovery in Hong Kong jewellery retail sales is partly due to the low base effect. Additionally, a higher gold price will weigh on demand for gold products. 

• Shopback is a leading cashback and rewards platform in the Asia-Pacific region, poised to benefit from the rapidly growing e-commerce and digital loyalty market. The company is currently undergoing a strategic realignment, focusing on its core cashback services and sustainable growth after a period of aggressive expansion.
• Recent financial performance for the fiscal year ending March 2024 shows a 13% increase in revenue to S$133 million (US$102.4 million) and a 36.3% reduction in operating losses, indicating early positive results from its restructuring efforts. This follows a challenging prior year where revenue declined 20% and losses widened.
• Key challenges include intense competition from regional super apps and other loyalty platforms, the need to regain and maintain consumer trust after significant layoffs and the discontinuation of its Buy Now, Pay Later (BNPL) service, and navigating the complexities of a diverse and fragmented APAC market.

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• CP ALL is expected to benefit from the government’s copayment stimulus program, set to launch in October, directly through Makro, which supplies mom-and-pop stores and indirectly through 7-Eleven. 
• The company remains optimistic about a pick-up in growth in 2H2025, driven by promotions in 3Q2025 and government stimulus, along with improving margins driven by an improved product mix. 
• 7-Eleven remains on track to expand its store network by 700 new outlets in FY2025, is gravitating toward slightly larger stores, allowing an increased number of SKUs. Valuations remain attractive.

• Despite TONGSHIFU’s leading position through vertically integrated business model, the inherent limitations of the industry are obstacles for further expansion. Performance growth is clearly constrained by the overall market capacity.
• The “double attack” market pattern makes it more difficult for TONGSHIFU to achieve breakthrough growth within the existing market. Outside of copper-based products, TONGSHIFU hasn’t found a second growth curve.
• TONGSHIFU’s valuation should be lower than Pop Mart/Laopu Gold/Bloks due to the big gap in growth potential/profitability/cashability. However, valuation could be higher than industry average due to leading market position.