Consumer

• A Ground Rule change to the index universe will result in the deletion of PetroChina (601857 CH) and Gree Electric Appliances (000651 CH) from the FTSE China A50 Index (XIN9I).
• Potential inclusions at the June rebalance are Poly Real Estate Group Co., Ltd (600048 CH) and Anhui Conch Cement (600585 CH). China Citic Bank Corp (601998 CH) is close.
• Assuming three changes are implemented, one-way turnover at the rebalance is estimated at 3.05% and will result in a one-way trade of CNY 1,484m.

• CP Vietnam (CPV), an 82%-held unlisted subsidiary of CP FOODS (CPF TB) (CPF), has applied for a listing on the Ho Chi Minh Stock Exchange
• CPV, an integrated agro-industrial and food business play in Vietnam, generated Bt111.1bn of sales in FY21, accounting for 21.7% of CPF’s revenue.
• CPV forms part of Cp Pokphand (43 HK) which was privatised in January this year. 

• Although consensus looks a bit challenging, there could be a decent OP beat yet again in the third quarter.
• Meanwhile Pan Pacific International Holdings (7532 JP)’s valuation is still cheap and has decent potential for multiple expansion.
• Thus, there could be more upside to PPIH if the company dismisses whatever the remaining concerns over profitability through a reasonably strong third-quarter performance.

• We anticipate channel ONE average all day rating to climb back to top-5 tier channel by 2H22after fell down to no.7 in 1Q22.A recovery in rating will instantly benefit group 
• We expect the company to report 1Q22 net profit at Bt219m (+13%YoY +7%QoQ), the highest level in the past three quarter.
• NEE still hold strong position in the digital TV industry with high potential growth of contents distribution via online platforms, other businesses that started to contribute great portion of profit

• 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%), implying 35xPE’23E, close to Thai commerce sector.
• We expect CRC to report 1Q22 net profit at Bt1.2bn (+208%YoY, -48%QoQ).
• YoY growth will be supported by a recovery in sales from fashion business both Thailand and Italy, a solid demand recovery from tourism related parties, and government stimulus 

• Maintain BUY call with lower TP of MYR3.30 (-2%)
• Cut FY22E EPS but FY23E/FY24E EPS little changed
• RWG VIP market intact post borders reopening
• RWG mass market to get a boost from Singaporeans

• This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
• The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized. 
• This week we flag: Carvana, Life Time Group, Bed Bath & Beyond, Surgery Partners

• The share price of Yamaha Motors has sunk to a low of 1x book on concerns that the marine business has peaked 
• Recent results and commentary from Brunswick suggest that the market remains as buoyant as ever 
• We would be buying the stock ahead of earnings, expecting a similarly bullish outlook from Yamaha 

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• BRIT’s top line improved by 15.5% YoY in Q4FY22 but remained flattish QoQ. The company reported revenues of Rs 3,508 Cr, up 15.5% YoY, driven by mid-single digit volume growth of 4% on account of share gains from unorganized players
• Gross Margin (GPM) of 37.3% in Q4FY22 was lower than 136bps YoY owing to a sharp QoQ and YoY rise in prices of RMs like palm oil and crude that impacted prices of packing material and transport costs
• Retain HOLD with revised TP of Rs 3,650 (earlier Rs 3,700), valuing BRIT at 43x PE its FY24E EPS.

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• Alibaba Group (9988 HK)’s fourth-quarter results will be out soon and we predict another disappointing quarter with mid-single-digit revenue growth.
• The company’s FY23 revenue guidance could be significantly weaker than the current consensus estimate as rumoured layoffs and budget cuts are likely to affect Alibaba Group (BABA US)’s growth.
• With the share price near the upper end of the trend channel leading up to 4QFY22 earnings, we think it’s a good time to add to existing short positions.

• PT Nippon Indosari Corpindo (ROTI IJ) released an impressive set of 1Q2022 results with higher wheat prices being offset by price rises plus greater operational efficiencies.
• Modern trade saw an especially strong recovery in 1Q2022 but general trade also saw good growth and continues to hit record highs.
• PT Nippon Indosari Corpindo (ROTI IJ) management remains optimistic on the outlook for 2022, with guidance for +15% growth in sales together with improving margins. 

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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.

• Gajah Tunggal
• Times China

• The review period for the June rebalance of the KOSDAQ 150 Index ended on Friday. We see 14 potential changes to the index – most are high probability. 
• The impact of passive trading is higher on the deletions than on the additions. Short interest on the potential adds is zero/negligible and a lot larger on the potential deletions.
• Short interest on a couple of potential deletion exceeds the estimated passive selling, while there are others where short interest is three-quarters of the estimated passive selling.

• Carsome (CARSOME1 SP), Malaysia’s used-car eCommerce/technology unicorn, has reportedly submitted a confidential IPO filing for a dual listing on Nasdaq and Singapore Exchange.
• Carsome has a great ESG story to tell, but needs to be less humble about telling it because pre-IPO ESG messaging can impact IPO valuations, especially for transportation-related deals.
• The centerpiece of Carsome’s ESG story should be the important (but underappreciated) role of used car markets in decarbonising road transportation, a leading source of carbon emissions.

• China Education Group (839 HK) demonstrates resilience amid market concerns on policy uncertainties by posting a 40.5% growth in 1H22 reported net profit and 20.1% growth in adjusted net profit. 
• Higher education segment saw 44% profit growth and strengths will sustain into 2H22. Weaker secondary vocational and global education segments will witness a sharp recovery, based on latest application statistics.
• CEG has secured increase in tuition and quota in the coming school year, and this will boost FY23 outlook. It opts for an Rmb500m buyback, instead of paying interim dividend.

• PPI has begun roll out of new, specialty food stores designed to slot into a variety of shopping malls. 
• On the surface, these stores look like mini-Don Quijote stores, emphasising low prices and a dazzling density of product, but focused on sweets, liquor, cosmetics, or a combination.
• Expansion will help reach new customers, reduce the expense of opening new stores, and help with building scale for private brands. 

• Campus Activewear Ltd (1535013D IN) is about to go public soon. 
• The RHP has portrayed Campus’s return ratios such as ROCE to be one of the highest in its peer group, inching past the likes of Bata India Ltd (BATA IN).
• However, upon further investigation of the financials, the return ratios seem to be mysterious, simply because of capital reserve arising from acquisition of promoter-companies, back when Ind AS was adopted.

• Astra International 1Q2022 numbers reflect its prime positioning as a beneficiary of recovering domestic growth in Indonesia and its exposure to the commodities boom through United Tractors (UNTR IJ).
• It has increased market share in autos through Toyota and Daihatsu plus holds a strong position in providing auto, motorcycle, and heavy equipment financing providing further geared exposure. 
• Astra International has a war chest from the sale of Bank Permata which is yet to be deployed but could be in the digital space as a future potential catalyst.

For our next Corporate Webinar, we are glad to welcome Taste Gourmet Group (8371 HK) CFO and Company Secretary, Gerald Yu. In the upcoming webinar, Gerald will share a short company presentation with on-the-ground insights from Hong Kong, after which he will engage in a fireside chat with Smartkarma Analyst Sameer Taneja. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 17 May 2022, 17:00 SGT.

Taste Gourmet Group Limited is a Hong Kong-based restaurant group offering a variety of cuisines, under a portfolio of brands, to a diversified customer base. Since the opening of its first restaurant in 2007, the group has owned and operated a total of 34 restaurants offering Vietnamese, Japanese, Chinese, Western, and Drink under 14 brands, including 11 self-owned brands such as La’taste Vietnamese Cuisine, Dab-Pa Peking & Szechuan Cuisine, Dab-Pa Peking & Szechuan Bistro, Dab-pa Modern Chinese Cuisine, Urawa Japanese Restaurant, Nabe Urawa, Rakuraku Ramen, Wasyohuya Yamaichi, Moments Together, Yakiniku Guu, San-Kinn, three licensed brands known as Parkview, Takano Ramen, and Tirpse, and one joint venture brand known as Xianghui.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Channel checks with Merida Industry (9914 TT) and Giant Manufacturing (9921 TT) on the Asia order book provide color on Shimano’s results so far. 
• Channel checks with the Dutch Accell Group (ACCEL NA) also do not show any encouraging data either. 
• Share buyback will provide short term relief but it won’t make revenue growth rate to be as high as early 2021. 

• Oriental Land (4661 JP) fell more than 10% today after a strong earnings beat in 4QFY22, which saw revenue and OP beat consensus by ¥7.0bn and ¥8.6bn respectively.
• The medium-term outlook is very disappointing with the company expecting no pricing growth and low park attendance.
• After moving up nonsensically during COVID due to extremely inflated medium-term consensus, we think Oriental Land’s share price could start falling apart after this medium-term plan announcement.

• FY22 EBITDA guidance is disappointing as strategic investments accelerate yet again and leaving investors uncertain on whether previous guidance for FY23 can be met
• We think ZHD’s FY23 target of ¥ 390bn in EBITDA is reachable but a meaningful beat, which is factored into consensus, is less likely
• So FY22 is another transition year but without the excitement on the potential for LINE as an alternative theme. It is better to be on the sidelines. 

• Today is the last day of the review period for the June review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close on 17 June. 
• We see Tata Motors Ltd (TTMT IN) and Tata Motors DVR (TTMT/A IN) replacing Dr. Reddy’s Laboratories (DRRD IN). Hindalco Industries (HNDL IN) is a close add on sector balance.
• The impact on DRRD IN will be higher than on TTMT IN, in terms of days of ADV to trade and days of delivery volume that needs to change hands.

• Solid earnings call heightened our conviction in Facebook as a terrific long for the next year.
• Reels monetization headwind will become a tailwind… just a question of when. TikTok threat is real, but Facebook knows how to clone other’s innovations.
• Apple IDFA issues not worsening, Facebook will figure this out eventually.

• Chungdam Global is getting ready to complete its IPO in the next several weeks. The expected market cap after the IPO is from 179 billion won to 204 billion won.
• Chungdam Global sells Korean cosmetics and other global beauty brands to e-commerce companies in China and other countries. It generated more than 75% of its sales in 2021 from JD.com.
• The company experienced exceptional growth in sales and profits in the past several years. Its sales and operating profits jumped by 97.4% and 204% CAGR from 2019 to 2021, respectively

• Koito reported 4QFY22 results on the 27th of April and had a 16% revenue miss despite a 3% revenue beat for the quarter. 
• Top line momentum remains strong overseas but material costs continue to pressure gross margins. 
• Guidance for ¥67bn in OP was a significant miss vs. consensus at ¥92.3bn.

• A noteworthy flow trend in the Korean stock market is the National Pension Service’s local equity purchase. For this, they tend to overweight those previously underweighted blue-chip stocks. 
• All of the top 10 most net-bought stocks by local pensions on April 18-26 are KOSPI 200 constituents. And most of them all have a relatively small NPS-owned stake.
• Most of them have significantly outperformed the KOSPI 200 (-0.90%) during this period.

• Ownership in Tesla hits record levels among Global managers. Of the 371 Global equity funds in our analysis, a record 15.1% now have exposure to the stock.
• GARP managers are the most aggressively allocated, with a 0.42% holding on average, though the larger individual positions are held by Growth and Aggressive Growth strategies.
• Despite this record, Tesla remains under-owned by Global active managers compared to large cap peers, and is the second largest underweight in the World

• Results for Q4 and FY22 guidance were mixed with platform sales and revenue largely in-line but margins slightly weaker
• The loss of a major B2B customer wipes out almost all the growth in that segment but core consumer growth remains solid (10%+) as do operating KPIs 
• The read across to parent Z Holdings is limited as the difference in company guidance and consensus operating profit is less than 1% of ZHD consolidated

• Zozo reported yesterday missing slightly across the board with OP missing consensus by 6.7% on a 0.7% miss at the top line. 
• GMV was reasonable due to apparent generosity on reward points and strong promotional spending. 
• OP guidance of ¥51.5bn was noticeably below consensus and while Zozo is considered conservative we expect a miss and long-term stagnation.

• Asahi Group Holdings (2502 JP) announced yesterday that it will raise the prices of a majority of its domestic beverage brands to pass the rising cost of raw materials to customers.
• Although beers as a whole has a relatively inelastic demand, the price elasticity in different categories of beer varies quite a bit with high malt beers having highly elastic demand.
• We think the price hike could be more detrimental to Asahi than its competitors as the company generates most of its domestic revenue from the price-sensitive high malt beer segment.

• Like Netflix, Spotify is increasing spend on proprietary content… at the same time rivals are, which makes the ROI on this spend worth less.
• Promised margin inflection no where in sight. Have to wait for Analyst Day for more clarity. 
• While we could justify a share price in the $70s, we no longer think Spotify is as compelling a risk reward short as it has for the past two years.

• We update our earnings forecast and valuation model for IBJ (6071, the company) and adjust our target price to 1,300 yen
• The number of marriages has continued to decline over the past two years due to the pandemic, and we believe that latent demand for marriage among singles has been increasing
• Directly-owned stores and party business: As consumer activity recovers, the number of party participants, as well as the number of members and successful marriages at directly- owned stores, is expected to recover

• The Okada Manila gaming property will finally become investible by 3Q22 with the Spac IPO now planned for debut by June.
• US based 26 Capital Acquisition company aims for US trading on the NASDAQ and UE’S alternate subsidiary, Asiabest will trade on Manila exchange.
• The Okada property leads the entertainment zone properties in market share.

• We expect the company’s earnings to expand YoY in every quarter of 2022 which will be supported by strong recovery in a media revenue together with solid operating margin
• Bt250m per year after the asset acquisition in 2021. •Expect the company to report net profit in 1Q22 at Bt90m (+142%YoY -41%QoQ) YoY expansion will be due to a 20% 
• Media revenue is expected to grow 31%CAGR in 2022-23E, driven by revenue recognition of new media capacity in digital, static segments (mainly from Aqua), and, retail media in 7-eleven stores

• The review period for the KOSPI 200 June rebalancing ends this Friday. This June rebalancing will have seven additions and seven deletions.
• Additions: F&F (383220 KS), Meritz Fire (000060 KS), SD Biosensor (137310 KS), Iljin Hysolus (271940 KS), Hanil Cement (300720 KS), K Car (381970 KS), and Hana Tour (039130 KS).
• Deletions: CJ CGV (079160 KS), Yungjin Pharmaceutical (003520 KS), Bukwang Pharmaceutical (003000 KS), Sk Discovery (006120 KS), S&T Motiv (064960 KS), Cuckoo Holdings (192400 KS), and Nexen Tire (002350 KS). 

• We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
• There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
• We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place

• Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
• LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
• These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.

• Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
• The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
• It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
• We are posting updated company forecasts/estimates including a separate table for PayPay

• Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
• It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
• The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.

• Maintain BUY rating with a new TP of Bt9.60 (revise up by 16%) as we roll forward valuation base to 30xPE’23E which is -1SD of 5-years trading mean. 
• We expect 1Q22E operation to be the bottom quarter at a net loss of Bt55m,ahead of earnings modestly gearing up in 2Q22 and onwards, on the back of tourism recovery.
• In our view, recovery trend to continue into 2H22, based on full reopening country for foreign tourists post COVID crisis, with upside risk from new branches and products. 

• Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
• The best companies tend to weather crises better than average ones, Poppe says.

• Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
• Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
• Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.

• This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
• The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
• Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom