Consumer

• There will be 7 additions and 7 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 9 June.
• We got all 7 inclusions right and 5 of the 7 deletions right. The adds have 3-6 days ADV to buy, while the deletes have 4-12 days ADV to sell.
• Short interest on the deletions is a significant portion of the estimated passive selling and there could be short covering in the week leading up to implementation of the changes.

• The end of Rakuten free plans is unlikely to have a major industry read across although the end of loyalty point chasing should help save on promotional costs
• Mobile erosion has likely peaked but full-year losses for FY22 will be higher than last year. We expect the progression to profitability to be modest
• Listing the securities business is a positive as it surfaces fintech value but allocating proceeds from valuable asset sales to funding mobile is not

• SD Biosensor leads the addition group with an estimated inflow of 4.59x ADTV. SK Discovery and Yungjin Pharmaceutical have the most substantial outflow at 7.23x and 6.07x ADTVs, respectively.
• For short-covering, CJ CGV stands out the most at this point. Its short interest is 4.57% of SO, and the short interest has increased the most of late.
• For short resumption, two names stand out: Meritz Fire and Hana Tour.

• XPEV (US ADR) is forming a compelling positive wedge but faces a test of the critical 18 macro dual low support where a trading bounce is expected.
• Sell volumes rose on the 25 rejection, calling for a test on the key 18/19 support zone.
• RSI sub 30 target does suggest XPEV breaks 18 support after a tradable bounce with 24/25 the key hurdle. 31 represents MT resistance. 9868 HK linked levels.

• Korea Exchange announced the additions and deletions to KOSPI200 today.
• There were no major surprises with regards to the additions and deletions.
• SK Discovery is a potential buy candidate and Hana Tour Service is a potential sell candidate post the announcement of KOSPI200 additions and deletions.

• Our checks primary done over North of India suggest a stable to improving rural environment 
• There is a sense of aggression in ITC Ltd (ITC IN), Britannia Industries (BRIT IN) is well placed to grow volumes & Nestle India (NEST IN) is expected to be a steady performer. 
• Dabur India Ltd (DABUR IN)’ s image at the distributor level is quite shocking and Marico Ltd (MRCO IN)‘s products are more prone to volatility. 

• TVS Motor (TVSL IN)’s market share gains in the premium segment can further accelerate in case of easing supply issues and rural recovery. 
• While EV may not materially move the volumes in the near term, the ramp-up of the newly launched TVS iQube (EV) will determine the sentiment around the stock. 
• The sector view is positive, but current valuations are not lucrative enough to ignore capital allocation issues that have been a concern for TVSL. 

• EV start-up Faraday Future released their delayed Q1 2022 results & had some hair-raising disclosures on their first-ever earnings call. 
• Cash halved in the 3 months since Q4 2021 & dropped another 20% as of April 30th. Faraday didn’t deny that they have roughly a quarter’s worth of cash left. 
• We can’t see how Faraday raises cash in the current risk-adverse markets. And we don’t see any assets worth buying them out for. Faraday is in need of a miracle. 

The Europe HY Trade Book for May 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.

• As expected, NIO Inc (9866 HK) will be added to the Hang Seng Tech Index (HSTECH INDEX) at the close on 10 June replacing ASM Pacific Technology (522 HK).
• We estimate passive trackers will need to buy over 9 days of ADV on NIO Inc (9866 HK) while selling 11 days of ADV on ASM Pacific Technology (522 HK). 
• NIO Inc (9866 HK)‘s inclusion in the Hang Seng Tech Index (HSTECH INDEX) could create significant arb opportunities versus NIO Inc (NIO US) on 10 June.

• We should focus on the weight changes of the existing constituents. For this, two names really stand out: Kakao Pay (+0.44x ADTV) and LG Corp (+0.37x ADTV).
• It is because Kakao Pay and LG Corp will undergo an increase in their float rate in the KOSPI 200 rebalancing, and these up-weights will also affect this sector index.
• Their combined inflow size (KOSPI 200 & KOSPI 200 IT) will be 1.41x and 1.16x ADTVs. This will be the most substantial, except for Kakao Bank and the new additions.

• TVS Motor (TVSL IN) primary setback is in the form of poor capital allocation
• In TVS Motors: Analysis Of Various Investments , we had briefed on the investment policy of the company and how the non-core investments/subsidiaries are dragging the profits.
• This insight is an extension of the previous one; we update on the various investments the company has undergone and how it impacts the capital allocation.

• Plenty of review announcements after the close on Friday – HSI, HSCEI, HSTECH, FTSE AW/AC, Sensex. Most changes were as expected.
• There are a lot of review cutoffs on Monday and announcements expected later in the week (KOSPI200, KOSDAQ150, CSI300, STAR50).
• There were inflows to Hong Kong, Taiwan, Korea and Australia focused ETFs during the week, while there were outflows from China, Japan and India focused ETFs.

• We anticipate the uptick in retail primarily aided by the wedding season to be short-lived for Hero Motocorp (HMCL IN). 
• HMCL has not been able to keep pace with changing consumer preferences, the limited success in premium segment and scooters is likely to remain an overhang even on new launches.  
• Inventory correction at the dealer’s end could aid wholesales supporting valuations, but the company remains structurally unattractive. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• With LIC not delivering and Delhivery needing insurance, combined with the Korean cancellations and HK silence, it looks like its going to be a quiet few weeks for IPOs.
• On placements, both the Korean deals were a disappointment, despite being well-flagged.

• Woolworths Ltd (WOW AU) proposes to acquire all shares in MyDeal.com.au Ltd (MYD AU) other than those held by Sean Senvirtne and other key management personnel.
• MyDeal shareholders will receive $1.05/share in cash, a punchy 62.8% premium to last close, but just 5% above its 2020 IPO price.
• This proposal is being done by way of a Scheme with expected completion in Q3/Q4 2022.

• Ultrajaya Milk Industry & Trading saw continued growth momentum in 1Q2022 both for its core UHT milk business (No.1) and its carton tea business as mobility restrictions were lifted.
• The company also sources more of its milk requirements locally, which means less exposure to imported milk power but prices there have started to come off. 
• Management remains optimistic that the company can achieve double-digit growth this year plus it has increased ASPs by +3% in April. Valuations at a discount to staple peers. 

• At 4% below the COVID sell-off low level, Shiseido Company (4911 JP) is looking genuinely attractive over the medium-long term.
• In addition, there could be a shift in the short term market sentiment towards Japanese cosmetics with China’s COVID lockdowns expected to ease from the beginning of next month.
• With the downside risk limited to less than 10%, we think it may be a good time to start owning Shiseido.

• MyDeal.com.au Ltd (MYD AU) entered a SID with Woolworths Ltd (WOW AU) to acquire an 80.2% interest. Shareholders will receive A$1.05 per share, a 62.8% premium to the unaffected price. 
• The three largest shareholders, representing 76.0% of outstanding shares, will vote in favour of the deal. The scheme meeting is set for 3Q. 
• This is a done deal. At the last close price, the gross and annualised spread for an October implementation date is 4.5% and 10.1% respectively.  

• Eicher Motors (EIM IN) is well-positioned to offset margin pressures due to its aspirational brand, the success of its new models and exports. 
• Easing supply issues along with newer export markets provide a compelling runway for revenue growth. 
• While our estimates are in line with consensus,  we believe the YTD outperformance is likely to continue and any opportunities presented amidst market volatility must be exploited. 

• Maintain BUY rating with TP of B23.00 derived from 16xPE’22E, which is close to +1SD of 5-years trading average. Our rating reflects strong pet food growth outlook, attractive 3.8% yield
• We foresee earnings momentum to improve QoQ in 2Q22, supported by better pet food business unit from new capacity, and further strengthen by Baht downtrend.
• In our view, the new pet food capacity should gather pace in 2H22, upon better demand in light of favorable macro dynamics. Moreover

• Yesterday analyst meeting came out with a positive tone.We reiterate our BUY rating for SAPPE with a target price of Bt35.25 (+10% from previous TP)based on 24xPE’22E, close to +1SD
• Management targeted revenue at Bt10bn by 2026 or +22%CAGR(2022-26). •In our view, SAPPE target is quite challenging amid concern over rising inflation situation. 
• We expect 2Q22 earnings to continue to grow YoY and QoQ supported by (1) higher oversea market penetration, (2) distribution channel expansion,  (3) more effective marketing activities

• Analyst meeting came out with a positive tone regarding 2022 outlook.We maintain BUY rating with a target price of Bt38.0,based DCF method (WACC of 8% and terminal growth of 2%)
• Positive 2022outlook as we expect the hotel industry to make a strong come back in 2022due to vaccine roll outs and easing of international travel restrictions,making the earnings positive for2022
• Since 1Q is typically the lowest travel seasonality,we expect the revenue from hotels to grow for next 3 quarters (around 50% by 4Q22), contributing around 75% of the total revenue.

• VIP Industries (VIP) Q4 FY22 results reported a weak set of numbers given the seasonally weak quarter.
• Revenue stood at Rs 356 Cr up 46% YoY on account of the low base & down 13% QoQ due to the 3rd wave of Covid-19 Omnicron variant
• Revising our FY23/24 estimates adjusting for the new cost environment we revise our recommendation from Buy to HOLD with a revised TP of Rs 596/share (earlier: Rs 600/share) valuing the stock at 47x FY24E EPS.

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• We downgrade to HOLD rating from  BUY rating with TP unchanged at Bt43, derived from  DCF (WACC of 10% and TG of 2%), implying 28.6xPE’23. 
• The company reported a net loss of Bt44m in 1Q22 compared to net loss of Bt476m in 1Q21 and net profit of Bt152m in 4Q21 in line with our expectation.
• 1Q22 EBITDA doubled YoY but remained flat QoQ at Bt951m supported by strong YoY recovery of hotel performance benefitting from 1) Rebound of Thailand tourism 2) Continued strong operations.

• Yesterday analyst meeting came out in a positive tone. We maintain the HOLD rating with a target price of Bt27.0, derived from an SOTP methodology. Our TP implies 25xPE’22E
• Expect the 2Q22 earnings to improve both YoY and QoQ, on the back of continued oil sales growth  and healthy marketing margin.
• The 2H22 earnings should improve YoY from better sales growth, however oil marketing margin may prone to downside risk as the crude oil price continue to remain at high levels.

• Ancient proverbs dictate the pace of policy change in Japan. But, the first step has been taken 
• Investors should be watching for further relaxation of inbound tourist restrictions, particularly on the Chinese market 
• Out top pick on this thematic is MatsukiyoCocokara (3088 JP) . Tourists used to account for over 10% of sales, but there is more…

• ITC reported a healthy set of numbers in Q4FY22with Revenue of Rs 15,331Cr (our estimate – Rs16,205Cr), down 2.2%QoQ but up ~16.5% YoY, led by a strong 8% volume growth in Cigarettes (in line with our estimates).
• Gross Margins at 52.5% was 132bps lower YoY on account of unprecedented RM inflation
• Benign taxation, inexpensive valuations (20x FY24E EPS), 5% dividend yield makes us BUYers of the stock. Our TP is revised to Rs 295 (earlier Rs 280).

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• Maintain BUY call and MYR2.43 DCF-based TP
• Earnings and dividends below our expectations…
• … but worst likely over, in our view
• Maintaining earnings and dividends estimates

• Undemanding valuation and good dividend, BUY
• 1Q22 earnings recovery
• New orders to boost sales growth
• Profit growth seen despite high costs

1Q22 earnings recovered QoQ to THB259m (+44% QoQ, -19% YoY). We expect new orders to help fuel 2022E sales growth of 6.5% YoY. While higher steel costs will initially squeeze gross profit margins, as it takes 3-6 months to hike prices, we expect only a dip in GPM. We forecast FY22 earnings to hit a new high of THB1.032b (+8% YoY). We think SAT’s valuations are undemanding at 7.6x 2022E P/E and 1x P/BV, with a healthy THB3.5b cash on hand. It offers a good dividend yield of 8.6%. Our THB25.50 TP is based on 10-yr average forward P/E of 10.3x. Maintain BUY.

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• Maintain BUY with a tad lower TP of MYR5.43 (-1%)
• 1Q22 unlikely to be better QoQ for RWLV, we opine
• 2Q22 likely to be a lot better for RWLV, in our view
• Vegas Loop likely to be a boon for RWLV, we gather

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• On 23rd Dec 2021, Tencent declared a special dividend in the form of distribution in specie of shares of JD.com, making Prosus the third largest shareholder with a 4.2% stake.
• The actual settlement only happened on 25th Mar. On that day, the bulk of the stock that Tencent distributed moved into CCASS with the exception of shares held by Prosus.
• In this note, we talk about the shareholding pattern and increase in shares held in CCASS.

• Yamaha’s 1QFY22 was weak with revenue of ¥482bn (-1.5% vs. consensus), and OP of ¥40.1bn (-17.3% vs. consensus). 
• The company’s FY22 guidance remained unchanged projecting ¥2,000bn in revenue (-2.0% vs. consensus) and OP guidance of ¥190bn (-4.5% vs. consensus). 
• Beating guidance significantly will now be difficult without price hikes but valuations are too cheap to ignore.

• Q1 22 operating figures are better than the smaller peers although not exactly beating Anta. 
• Launching the cafe to boost SSSG post-COVID-19 is a positive strategy. 
• Its valuation is currently trading below its historical highs . Turn positive on Li Ning (2331 HK) .

• Convenience stores in Japan aren’t known for their fashion prowess although most sell the odd sock and underwear.
• FamilyMart Co Ltd (8028 JP) sees an opportunity to both expand sales categories and increase margins with higher value fashion basics supplied by its new parent Itochu Corp (8001 JP).
• Itochu is a leading fashion supplier and has created a hit product range for Familymart as well as another in cosmetics.

• Taste Gourmet Group (8371 HK) held a webinar with Smartkarma on the 17th of May, highlighting the sharp and swift recovery of F&B in Hong Kong. 
• Post 19th May, eight people can dine in till midnight (vs. four). With mid-May revenue tracking 109% of June 2020 (restrictions were fully relaxed), recovery should be better than expectations.
• Despite the 13% move yesterday, the stock is still cheap at 5.9x PE FY23 earnings and an 8-10% dividend yield (with a potential for further upgrades). 

• In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with Dongwon Enterprise.
• This is likely to have a positive impact on Dongwon Industries since it boosts the value of Dongwon Industries’ minority shareholders at the expense of controlling shareholders of Dongwon Enterprise.
• The merger price of Dongwon Industries will be raised from 248,961 won to 384,140 won (reflecting net asset value). The merger ratio will be adjusted from 1:3.8385530 to 1:2.7023475.

• We speak to channels across West, North and South to understand the 2W demand environment 
• Mid segment is still not seeing recovery, premium and lower end segment is stabilising / doing relatively better. 
• Restoration of supplies and aggressive marketing strategies can aid volume recovery for TVS Motor (TVSL IN) and Eicher Motors (EIM IN) 

• DCF valuation now at $44.51 indicating stock could be 24% undervalued here.
• Sentiment on Las Vegas asset sale has turned negative as to timing as some investors believe it was hasty given the recovery of the Vegas market.
• Strong balance sheet provides long term solvency with current ratio of 2.1 as rumors of China lockdown easing persist since last week.

• Analyst meeting came out with positive tone regarding 22E outlook.We maintain BUY rating with TP Bt4.20 derived from DCF valuation (WACC=7% & Terminal growth= 2%) implying 10% discount to 23.1xPE’23.
• The company reported net loss of Bt313m in 1Q22 compared to net loss of Bt492m in 1Q21 and net loss of Bt246 in 4Q21 in line with our expectation.
• Excluding extra ordinary items, the operational losses declined YoY and QoQ to Bt313m since revenue almost doubled YoY  and increased 4% QoQ to Bt646m after bottoming out in 3Q21.

• Leapmotor (LM) aims to raise around US$1bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• It focuses on the mid- to high-end segment in China’s NEV market with a price range of RMB150,000-300,000. As of end FY21, it had delivered a total of 52,832 cars.
• In this note, we talk about the not so positive aspects of the deal.

• There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there is large short buildup on quite a few of the stocks.
• Over the last month, the largest increase in shorts as a percentage of passive selling was on Mercari Inc, Ryohin Keikaku, Tokyo Century Corp, Sohgo Security Services, Pola Orbis Holdings.
• The deletions have underperformed the TOPIX by 22% over the last 6 months and by 10% over the last two months. Position for a bounce post implementation.

• Tabcorp Ltd (TAH AU) will soon spin out its Lottery and Keno business, to be called The Lottery Corp (TLC AU). TAH shares go ex-TLC on 24 May.  
• The question is where do they trade. What is in the price? What is not? What are the potential index implications?
• This insight provides a grid of index implications and pro-forma valuations (EV/EBITDA, PER, Dividend Yield) for each and both and the combined entity.

• Besides as nationalistic consumption play, Haier Smart Home (6690 HK) also offers attractive investment theses with bright growth prospects. Despite share price rebound, valuations are still not yet reflecting fundamentals.
• The surge in demand for refrigerators and freezers during the pandemic-led lockdowns has boosted HSH’s business in 4M22 while it will also reap benefits from Rmb depreciation.
• The government’s support of healthy development of residential real estate market will be positive towards smart home appliance demand which HSH is set to gain from its leadership position. 

• JD will continue to close its unprofitable minor businesses in following quarters.
• The growth rate of total revenue slowed down in 1Q21 due to weak demand of home appliance.
• We believe JD has a significant upside despite that the revenue growth will continue to slow down.

• Asahi Group Holdings (2502 JP)’s 1Q22 OP of ¥9.0bn from ¥496.9bn revenue was significantly below the consensus OP of ¥34.0bn from ¥489.4bn revenue.
• Yet the company maintained its aggressive 2022 guidance, which expects domestic beer volume growth while prices are scheduled to increase by 6-10%.
• We don’t find this estimate credible, especially given that Asahi generates most of the domestic revenue from the price-sensitive high malt beer segment.

• Last week analyst meeting came out with neutral tone.We reiterate our BUY rating for CRC with a target price of Bt43.0,based on DCF (WACC of 8.2% and TG of 2%)
• Management maintained its key 2022 financial guidance. CRC targeted 2022 sales growth of 15%-20%YoY, mainly from fashion business and targeted GPM retail sales to expend by 100-120bps YoY.
• •CRC showed three measures to mitigate the effect from uncertainties under global issue such as(1)cost optimization by controlling OPEX growth to not be higher than 50% of total sales growth

• Following panic selling that we have outlined over the past month, we finally saw panic buying last Friday in the form of 92% upside volume on the NYSE.
• There is hope that this panic buying could signal a major bottom, but we still need to see more confirmation before declaring that the low is in.
• We are watching the Nasdaq 100 (QQQ) and the steep RS uptrends on Utilities (XLU) and Staples (XLP) for more confirmation that a major low is in place. Details below.

• The Netflix Inc (NFLX US) fall out has created a significant buying opportunity in Warner Bros. Discovery (WBD US)
• Warren Buffet’s purchases of WBD peer Paramount Global (PARA US) only serves to validate the buying opportunity in the much cheaper WBD
• Attributing a PARA-like value multiple to WBD’s Consensus 2023 EBITDA which is a little lower than management’s reaffirmed guidance, indicates a value up lift of 80% plus

• On May 16, Ohsho Food Service (9936, the company) announced FY3/22 full-year sales of 84.775bn yen (+5.1% YoY), OP of 6.959bn yen (+14.6% YoY), and RP of 13.024bn yen (+89.7% YoY)
• 4Q (Jan-Mar) OP was 1.938bn yen (+33.7% YoY; +6.0% QoQ), and OPM was 8.8% (7.2% in 4Q FY3/21; 8.2% in 3Q)
• The company’s guidance for FY3/23 is sales of 90.029bn yen (+6.2% YoY), OP of 7.516bn yen (+8.0% YoY), OPM 8.3% (+0.1ppt YoY) and RP of 8.627bn yen (-33.8% YoY)

• Aeon has finally published numbers on its e-commerce growth and performance.
• It has a ¥1 trillion target for FY2025 and while this is still a far off target, Aeon is making progress. 
• Digital sales have doubled in the past two years and Aeon is now well ahead of Seven & I which continues to fail to present a coherent e-commerce plan.

• Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue. 
• Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless. 
• We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.

• Leading dairy and premium foods player Cisarua Mountain Dairy continued to demonstrate its resilience during 1Q2022 despite some omicron disruption, and rising pressure from raw materials.
• Growth will be driven this year through capacity expansion and a focus on expanding distribution channels, especially through general trade and Miss Cimory MCM. 
• Management remains confident in the growth outlook and will potentially raise prices in 3Q2022 to offset inflationary pressures although powdered milk prices have already stabilized. Top consumer staples pick.

• Honda 4QFY22 was mixed with revenue of ¥3,876bn (-0.7% vs. consensus) and OP of ¥200bn (+33.1% vs. consensus). 
• The company’s FY23 guidance was weak projecting just ¥16,250bn (-2.2% vs. consensus) in revenue and OP of ¥810bn (-15.1% vs. consensus). 
• Those numbers are laden with Honda conservatism, but we nevertheless foresee smaller potential beats by Honda than for peers.

• Yamaha Motors’ stock crashed 9% after a poor quarterly report
• However, there were a number of temporary issues impacting costs in the quarter. Management reiterated its guidance for the full year
• Given that demand for its marine engines and motorbikes remains on track, we think the stock is too cheap, trading below book value 

• Leapmotor (LM) aims to raise around US$1bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• It focuses on the mid- to high-end segment in China’s NEV market with a price range of RMB150,000-300,000. As of end FY21, it had delivered a total of 52,832 cars.
• In this note, we talk about the positive aspects of the deal.

• IPAR reported strong demand for its fragrances in the first period even though the US Dollar strengthened against the Euro
• The first quarter performance was at the onset of the weakening of the Euro, but IPAR’s management asserted there has been no sign of demand abating
• IPAR’s stock has continued to underperform our expectations even though consensus estimates call for sales and earnings growth

• TUEM reported fiscal third quarter (March) results depicting how its business model looks when sales slowdown.
• The softness in sales was combined with TUEM getting full order placement from vendors when completion rates were running less than 70 percent in prior quarters
• TUEM announced a credit facility of $110 million, providing ample liquidity and flexibility heading into the holiday shopping season. It also removes one of the biggest overhangs on the stock

• On May 13, Fast Fitness Japan (7092, the company) announced FY3/22 results. Sales were 13.097bn yen (+17.3% YoY), and OP was 2.946bn yen (+28.4% YoY)
• The company’s FY3/23 guidance is for sales of 14.0bn yen (+6.9% YoY) and OP of 3.0bn yen (+1.8% YoY)
• The company announced its mid-term plan targets for FY3/25. The company aims for 18 bn yen in sales, 4bn yen in OP, and 1,400 stores

• Same-store sales for company-owned stores were 123.9% vs. April 2021 (108.1% for March), 743.9% vs. April 2020 (93.9% for March), and 102.7% vs. April 2019 (91.3% for March)
• Sales have been strong, as operating restrictions were lifted in late March. In particular, the Yakiniku division (Japanese BBQ) performed much better than in the pre-pandemic period
• The number of domestic company-owned stores at end of April was 365 (+5 MoM, +25 vs. end FY6/21).

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