Smartkarma Daily Briefs

• AFR reports that TPG Capital, through UBS, is seeking to acquire 14.4m or 10.00% of Invocare Ltd (IVC AU)‘s outstanding shares at A$12.65, a 41.3% premium to the undisturbed price.
• If the aftermarket raid is successful, TPG will follow the tried-and-test private equity playbook of securing a pre-bid stake before lobbing a non-binding offer at A$12.65 per share
• TPG has timed its move to take advantage of the post-results price slump. While not a knockout offer, it is a starting point for the Board to secure better terms.

• On 7 March, Kakao Corp (035720 KS) announced a tender offer of up to 35% of outstanding shares of SM Entertainment at 150,000 won per share.
• We believe that this will be a successful tender offer and the share price of SM Entertainment is likely to surge to near 150,000 won per share. 
• The minority shareholders of SM Entertainment are cheering on as its share price appreciation will be nearly 96% from end of 2022 to the tender offer price of 150,000 won. 

• Kakao and Kakao Entertainment each plan to purchase 4.167 million shares at ₩150,000 per share, totaling 8.33 million. This is a 14.5% premium to the last close.
• The tendering ending date is March 26th, Sunday, so the actual ending date is March 24th. Since Korea adopts the T+2 settlement system, stocks must be purchased by the 22nd.
• The price of SM may decline towards below the tender price relatively quickly as a large number of retail investors will likely bet on the prolonged proxy battle.

• Luckin Coffee reported its 4Q22 revenue, non-GAAP operating income, and non-GAAP net income (9.1%), (11.4%), (57.9%) lower than our estimate. 
• The store temporary close due to Covid impact is the main reason for revenue miss, and the higher income tax payment is the reason for the miss on NI.  
• We expect Luckin to catch up the store expansion schedule in 1Q23 at 730 new stores, and reach to 10,500 total stores by the end of 2023. 

• South Korea’s largest e-commerce company, Coupang (CPNG US) sank around 20% leading up to 4Q22 earnings. It dropped another 9% soon after the earnings report to around $14.0 per ADS.
• Meanwhile, the valuation remains expensive compared to regional peers as Coupang is trading at an 80% premium to the second most expensive e-commerce name in the region.
• If the share price breaks the trend line here, we think shares could go on to fall below the last year’s bottom of $8.98 per ADS.

Melco Resorts’ (MLCO) FY 2022 results were better than peers’, supported by strong earnings growth at its overseas assets (in the Philippines and Cyprus) amid a weak showing in Macau. In addition, management reported rosy earnings guidance for YTD 2023 (in line with those reported by peers).

Going forward, we forecast that the company’s revenue will reach 70-80% of the FY 2019 level, supported by a recovery in industry GGR to 50-60% of the 2019 level, as well as contributions from Studio City Phase 2 and City of Dreams Mediterranean from H2/23. This should allow MLCO to generate positive FCF and deleverage in FY 2023.

We move our recommendation to “Buy” on the MPEL curve from “Hold”.

• Diageo’s share price has been underperforming for far too long due to outside factors that have little to do with the business itself.
• The premium brand portfolio in combination with the well-executed acquisition strategy creates a unique opportunity.
• The company is well-positioned to retain and even improve its industry-leading margins.