Consumer

• Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
• There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
• Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.

• China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
• Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Agri-Food play Japfa Ltd (JAP SP) recently distributed in-specie its 62.5% stake in AustAsia Group (2425 HK).
• Japfa continues to hold a 55.4% stake in Japfa Comfeed Indonesia (JPFA IJ), together with unlisted ops focused on animal proteins in Vietnam, India, Bangladesh, and Myanmar.
• Japfa is estimated to be trading at around a 41% discount to NAV and ~4x EV/EBITDA. 

• There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
• We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
• All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

• Minor International (MINT TB) represents a unique combination of exposure to a diverse set of hotel and restaurant brands both in Thailand and globally making it a true recovery proxy.
• The company’s hotel portfolio is well-diversified geographically and across different segments giving it exposure to both tourism in Thailand and globally and to the recovery in business travel. 
• Minor Food has also seen a strong recovery as revenge dining draws consumers to dine out. Overall valuations look attractive given expected growth rates over the next two years. 

• Shareholder returns, including dividend policy and treasury stock retirement/buyback and growth policies improved slightly. Still, cash allocations are weak in both shareholder returns and growth, so cash is piling up.
• The policy shareholdings is decreasing year by year, but the holdings is so large that they still account for a large % of total assets, so cash is piling up.
• Companies with ROEs above 12% achieved even higher returns, and Tobin’s Q1.2-1.4 companies (with higher valuations than average) increased slightly. Investors may have valued companies that exhibit higher returns.

• Hisense announced the long-awaited equity incentive scheme on Jan 2. 
• For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level. 
• We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company. 

• Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. 
• In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
• Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. 

• We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
• We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.
• Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.
• We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.

• We would be closing our 2021 high-conviction long trade on Seven & I Holdings (3382 JP) before they release 3QFY23 results next week.
• Although we are not expecting the company to miss consensus estimates this time around, we are expecting significant downside risks to Seven & I’s US business throughout the year.
• Given that shares went nowhere after 12% revenue and 1% OP beats in the previous quarter is a good indication that the upside is limited.

• On 30 December, Super Hi International Holding (9658 HK) completed its separate listing in HK from Haidilao by the way of introduction. The trading has been highly volatile so far.
• Our base case valuation of Super Hi International is target price of HKD13.6 per share, which represents a 40% upside from current levels.
• The same store sales at Super Hi improved significantly in nearly all major regions in 1H 2022. 

• Sales has been weak since October, mainly due to price hike.
• Technology leadership may not be sustainable with limited R&D investments.
• EREV version may not be the right solution for the company’s long-term growth. 

• In this insight, we discuss our initial thoughts on the Golfzon County IPO which is likely in 1H 2023.
• As of September 2022, Golfzon County owned and operated 18 golf courses and 387 holes, the largest in Korea. 
• Golfzon Newdin owns a 43.2% in Golfzon County. We estimate Golfzon Newdin’s market cap to be 273 billion won or 6,369 won per share, representing a 44% upside. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Anton Oilfield
• Japfa Comfeed Indonesia
• Sands China
• Times China

• IPAR has added Lacoste to its portfolio of fragrance licenses and should lead to incremental growth in 2024.
• Lacoste, like IPAR’s other major licenses, is a well-established brand that is likely to immediately contribute to sales and earnings growth when in 2024
• Heading into the holiday shopping season of 2022, fragrance was proving as a high demand category from consumers

• Despite re-openings in China, Nu Skin’s operations remain exposed to cyclical risks.
• The company’s net margins are poor, and earnings crash risk is a regular feature.
• The stock’s technical features imply that it could rebound in 2023, but it presents an isolated case with little substance in the broader context.

• We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
• The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
• If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.

• We expect 5 changes to the Nifty 100 Index (NSE100 INDEX) at the March rebalance. The review period ends on 31 January and the announcement should be late February.
• The largest impact of passive trading will be on Page Industries (PAG IN), Biocon Ltd (BIOS IN), Mphasis Ltd (MPHL IN) and ABB India Ltd (ABB IN). 
• There are quite a few overlaps with the AMFI reclassification of stocks and there could be buying and selling from active fund managers over the next few weeks.

• After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
• Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
• With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.

• We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
• Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK). 
• Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.

• There are four weeks left to go in the data period for calculating the next Nikkei 225 review for March, likely to be announced ~7 March 2023.
• The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723) , and Japan Airlines (9201).  The 3 DELETES Toho Zinc (5707) , Toyobo (3101), and Nippon Light Metal (5703) 
• Oriental Land is the one to watch in March. Slight underperformance would boost buying impact. The Sep23 rebalance and subsequent ones are smaller in size but more interesting in impact.

• The revised Corporate Governance Code and the inclusion of prime market listing criteria have resulted in significant improvements in % of independent directors and in the practices of Nominating/Compensation Committee.
• Meanwhile, the chairmanship of the board of directors and the ratio of female directors, for which the Code didn’t specify improvements or provide numerical target, are improving at modest pace.
• There is the issue of whether the board/committees require independent directors to function fully independently, and the % of female directors indicates the seriousness of improving management and governance.

• China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
• Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
• The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.  

• Shinwon Corp (009270 KS) is the 18th company in our Korea Small Cap Gems series.
• Established in 1973, Shinwon is a leading apparel company which has been in business for nearly 50 years. Its most popular apparel brands include Besti Belli, Si, Viki, and SIEG.
• The four key catalysts with Shinwon include significant share buybacks, strong growth in sales and profits driven by exports, potential change in the controlling shareholding structure, and discounted valuations.

• This is our first report on Hormel Foods Corporation, one of the leading protein food companies across the globe.
• Hormel achieved another quarter of growth in organic sales led by its solid performances from its food service businesses and its center store grocery portfolio.
• In the quarter, Hormel saw growth from its food and ethnic forward portfolios.

• Wayfair is a renowned e-commerce platform providing a wide variety of products such as furniture, decor, housewares, and home improvement offerings.
• Wayfair has seen strong momentum in CastleGate as it drives various advantages for suppliers, lower retail prices because of ship cost savings, reduced damage rates, better visibility on sites, and quicker conversion via quick delivery.
• The company has been driving operational cost savings, which could reduce the cost of goods.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
• These insights may flag those companies where shares have been pledged. Stocks mentioned include Apac Resources (1104 HK), Ausnutria (1717 HK), Pharmaron Beijing (3759 HK), and Joinn Laboratories (6127 HK).

• Luxury brands had a rather fashionable year in 2022, bouncing back from the pandemic slump with the help of pent-up demand and lockdown savings spent on travel-worthy threads.
• However, even the resilient luxury market isn’t immune to the macroeconomic forces at play, from inflation to the war in Ukraine and the impending recession in the US and Europe.
• It is a surprise then that Luxury Fashion house Lanvin Group decided to plunge into the public markets despite the choppy economic waters.

• YFO has played a relatively upfront game for Toyo Construction (1890 JP) – badly at first, then better. 
• With Takashimaya (8233 JP) and H2O (8242 JP) now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.
• Skyworth Group Limited (751 HK)‘s latest buyback offers a minimum proration of 7.8%, although applying the last buyback two years ago, it’s likely to be 13%+.

• The competitive position and demand environment for Eicher Motors (EIM IN)‘s “Classic 350” remains intact. 
• The recent launch “Hunter 350” is expanding markets by taking on the competition.
• Cannablisation fears from Hunter 350, remain unfounded, and unlikely to have any major impact on margin trajectory. 

• This year is less intense compared to previous years. However, given this year’s overall market returns and the lower visibility of yearend dividends, it is still a reasonably aggressive flow.
• Most of this PROP flow should have been dividend hunting aimed at the distortion of ex-date price correction caused by RETAIL’s tax avoidance-driven selling flow.
• The performance of the individual stock position strategy (entering on T-4~1 ex-date) might not have been as juicy as expected, but it still managed to deliver a positive return.

• Blibli (BELI IJ) is a very different animal from its listed peers given its omnichannel approach and its large 1P business plus a substantial private-public institutional B2B business. 
• The company’s IPO was a relative success, raising US$508m in fresh funds, and the share price is still above the IPO price after listing on 8th November.
• Blibli (BELI IJ) is still loss-making but has a strong backer in the Djarum Group. Its travel business could move to profitability quite rapidly and Ranch is there already.

• BigBasket, an India-based online grocery player owned by conglomerate Tata Sons, has raised US$200 million at a US$3.2 billion valuation, the platform’s co-founder and CEO Hari Menon told Tech in Asia.
• Founded from a small office in Bengaluru in 2011 by Menon and four other partners, V S Sudhakar, Vipul Parek, Abhinay Choudhari, and V S Ramesh, BigBasket was acquired by Tata Sons through its subsidiary Tata Digital in 2021.
• Largely focusing on online grocery, BigBasket has also expanded to quick commerce via BB Now and subscription-based service via BB Daily.

• Since many companies struggle to meet quorum requirements for AGMs, many companies mail accompanying documents along with the voting form in paper form, even though Companies Act has been amended.
• The use of DX, such as hybrid shareholder meetings and online voting, comes to mind to meet quorum requirements for shareholder meetings, and this will help reduce administrative costs.
• The fundamental issue, however, is that there are many conventional AGMs with little appeal and little substance, such as few managers whom we would really like to hear speak live.

• Charter Communications is one of the leading cable operators and broadband connectivity companies in the U.S.
• The company’s recent financial performance has been tepid despite consistent additions of new Internet customers throughout the year.
• They further offer the nation’s fastest Internet, WiFi, and mobile speeds when combined with WiFi, all while saving consumers thousands of dollars a year or serving them.

• Honeys is proving a resilient provider of low-cost women’s basic fashions in Japan. 
• While it struggled after losing the fickle younger fan base five years ago, Honeys has bounced back through careful control of costs that has kept prices down.
• Along with Workman and Shimamura, Honeys looks to be one of the longer-term beneficiaries of the shift to discount apparel, particularly in rising operating margins.

• Freetech Intelligent Systems, a China-based autonomous driving firm, has raised nearly US$100 million in its series B round, Nikkei Asia reported.
• Chaos Investment led the round, with TCL Industries Holdings, BAIC Capital, and Hengxu Capital participating, among other investors.
• Founded in 2016, Freetech creates a full-stack solution for autonomous vehicles, creating both software and hardware components to power cars.

• This is our first report on Charter Communications, one of the largest cable operators and broadband connectivity companies in the U.S.
• The company delivered a disappointing set of results in the quarter failing to meet Wall Street expectations in terms of revenues as well as earnings.
• The company also had around 4.7 million mobile lines at the end of the quarter.

• This is our first report on Sysco Corporation, one of the largest foodservice distribution companies in the U.S.
• Sysco delivered a mixed set of results for this quarter, surpassing revenue expectations of Wall Street with continued positive momentum in its business.
• The market share gains continued in the quarter, with the company posting 1.4 times sales growth in the industry.

• Sysco Corporation is one of the largest foodservice distribution companies in the U.S.
• The company’s financial performance has shown a simultaneous recovery along with the foodservice sector after the pandemic.
• Restaurant partners of the company continue to be resilient, and its travel hospitality and industry and business segment has regularly posted improvements in financial performance.

• The Composite Document for Shandong Fengxiang (9977 HK)‘s unconditional mandatory Offer from PAG Capital is now out.
• Shareholders who tender will be paid within 7 business days. 
• An H-class meeting will be held on the 18 January to vote on whether to delist Fengxiang. There is no guarantee this will occur.

• Our flash checks for Go Fashion India (GOCOLORS IN) and LUX Industries Ltd (LUX IN) suggest weak consumer sentiment continues to prevail.
• Competitive intensity is an area of concern for category creator and leader Go Fashion India (GOCOLORS IN) 
• Rupa & Company (RUPA IN) is giving a tough fight to LUX Industries Ltd (LUX IN) in the rural markets.

• Since late November we have been discussing our expectations for a pullback, while recommending shifting exposure to defensives (Staples, Utilities, Health Care) and/or taking profits.
• The pullback is finally happening following breaks below 3910 support on the S&P 500, $177.50 support on the Russell 2000 (IWM), and $279 support on the Nasdaq 100 (QQQ). 
• These levels are now resistance, while major resistance remains at 200-dayMAs/YTD downtrends. Stick with defensives/cash as we believe a test of the YTD lows on the aforementioned indexes is likely.

• In this insight, we discuss an update of pair trade between Emart (long) and Coupang (short). 
• Back on 1 August 2022, we recommended a pair trade between E Mart Inc (139480 KS) (long) and Coupang (CPNG US) (short).
• This pair trade has worked well in the past five months and we continue to like this pair trade (long Emart and short Coupang).

• Skyworth Group Limited (751 HK) has announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  
• On 17 June 2020, Skyworth announced a partial buyback – 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close. 
• Upon successfully completing this partial offer, Stephen Wong & concert parties would hold >50%, prior to the excise of any outstanding options. 

• FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
• With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months. 
• With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the market cap in cash.

• MR D.I.Y. Group (MRDIY MK) has continued to perform as coming out of the pandemic, offsetting inflationary pressures with selected price increases helping to stabilise margins.
• 4Q2022 should be strong with an upward normalisation of inventories, with a target for 180 new stores in 2022 and a further 180 stores in FY2023, fuelling future sales growth.
• MR D.I.Y. has a unique market position and strong brand in Malaysia, and Brunei and generates much higher ROEs than its regional peers hence justifying a premium valuation. 

• Hotel Shilla is a key beneficiary of the end of the zero COVID policy in China and the end of the mask mandate in Korea. 
• In the past several weeks, there has been a major shift on the highly stringent zero COVID policies in China which should have a positive impact on Hotel Shilla. 
• In the next several quarters, we believe that there is a good chance that the company’s results exceed the consensus expectations, driven by millions of tourists from China to Korea. 

• The Keepers Holdings (KEEPR PM) set a new precedent of paying out 50% of its earnings. If sustained, the yield for FY22e/FY23e will be 6.6%/8.4%. 
• The move has made The Keepers Holdings (KEEPR PM) a growth/dividend yield stock with mid-teens profit growth and a forward yield >6% (~10% cash as % of mkt cap). 
• The catalyst for the company will arise from its strong Q4 2022 earnings. The management has already indicated the growth trajectory is similar to the prior quarters.

• Although there are some points to iron out, Fortress Investment is in the final stages of negotiation to purchase Sogo Seibu from Seven & I, with Yodobashi Camera as partner. 
• This is an exciting move for Yodobashi as it should be an excellent choice to leverage Sogo Seibu’s better locations and create more competition for rivals like Bic Camera.
• Even so, some stores will no longer have a future under their existing banners and the acquisition will mark the final demise of a 170 year old brand and company.

• Pan Pacific International Holdings (7532 JP)’ Don Quijote stores rebounded strongly from Covid, despite the lack of inbound tourists, reflecting the hard work done to update stores and merchandise.
• This innovation continues and Don Quijote stores recently even began offering several new private brand cosmetics ranges and new electronics, including a new small footprint freezer. 
• The company expects 15% of domestic sales from private brands alone but rising to 25% in the near term, with significant upside for operating profits.

• Takashimaya and H2O Retailing entered what felt like a forced engagement of convenience in 2008 when all their other competitors were busy merging.
• Although discussions for a full merger were held, in truth, thea agreement was more about practical collaboration to create more efficiencies. 
• With both firms now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.

• Sumber Alfaria Trijaya through its Alfamart and Alfamidi formats is one of the largest mini-market operators in Indonesia but is now expanding aggressively into the convenience store space through Lawson.
• The company should have a strong finish to the year with an additional 1,200-1,300 new stores being added over the period plus margins improving as Alfamart adds new services.
• Sumber Alfaria Trijaya is a core proxy to the winning mini-market format in Indonesia plus it is looking to replicate its success in the Philippines in Collaboration with SM Investments.

• Lawson introduced a new store format in Tokyo last month called Green Lawson, touting new ways to save energy and reduce waste. 
• The new store also features an early version of a retail advertising system that emulates Familymart Vision.
• The latest updates emphasise the continued investment by the big three convenience stores to remain relevant and improve sales efficiency while also countering the labour shortage.

• In this insight, we provide an update to our long-short pair trade of Hyundai Motor (long) and Tesla Motors (short), which we presented back in June 2022.
• Since 9 June 2022, Hyundai Motor’s share price is down 13.4% and Tesla’s share price is down 48.6% in the same period, resulting in net gains of 35.2%.
• We discuss five major factors impacting Tesla’s share price this year including market share losses, Musk’s acquisition of Twitter, valuation multiples decline, China operations, and global recessionary fears in 2023.

• This is our first report on Royal Caribbean Cruises, a well-known player operating three cruise vacation brands, including Royal Caribbean International, Celebrity Cruises and Silversea Cruises.
• Royal Caribbean Cruises has seen strong demand, fighting off inflation, and continues to focus on its value proposition of providing the best-quality vacations in the world.
• We initiate coverage on the stock of Royal Caribbean Cruises with a ‘Hold’ rating.

• Royal Caribbean Cruises is a renowned cruise player operating three cruise vacation brands, namely Royal Caribbean International, Celebrity Cruises and Silversea Cruises.
• The company has seen a strong recovery post the pandemic and its recent results have been strong.
• The good news is that Royal Caribbean Cruises has seen strong demand, fighting off inflation, and continues to focus on its value proposition of providing the best-quality vacations in the world.

• XXXLutz consortium secures 80.94% of home24 shares. The Additional Acceptance Period runs until 28 December. More shares will be tendered and delisting will eventually take place in 2023, in my view.
• My updated fair value estimate is €7.44/share (average of DCF and comparables, as per the tables below), just 0.8% below the offer price, hence my TP remains unchanged at €7.50.
• Gross spread is 0.93%. The risk of being stranded with a delisted stock encourages tendering at €7.50.

• The Mosaic Company is one of the major producers and marketers of concentrated phosphate and potash crop nutrients.
• The company’s business has been impacted by the ongoing inflation and supply chain issues and has been reducing its production off-late.
• Besides, the weather in the U.S. prevented spring planting, and the short planting window limited nutrient treatments.

• Global Industry Classification Standard (GICS) structure updates will lead to changes to the S&P/ASX All Technology Index at the March rebalance.
• To better reflect the GICS changes and reduce constituent turnover, S&P DJI has proposed changes to the index universe for constituent selection.
• We expect there will be 4 deletions from the index in March, but that could increase to 10 if the changes are not adopted.