Consumer

• Automotive aftermarket parts provider Bapcor Ltd (BAP AU) has reportedly recently received two buyout proposals.
• This follows the sudden departure of former CEO Darryl Abotomey in December. 
• Confirmation of these approaches may be clarified when 1H22 results are released on the 9 February. 

• The growth rate of the Chinese e-cigarette market bounced up to 73% in 2021 from 7% in 2020. 
• The global e-cigarette market increased by 23% in 2021, but Smoore is only good at vaping components.
• We conclude that Smoore has an upside of 86% for year end 2022.

• Anta benefits from strong tailwinds of the two Olympic events and the Chinese government’s support for citizens’ sports engagement
• Anta’s inventory position has improved relative to H1 2020. However, it remains weaker than pre-pandemic levels in 2019
• We analyse Anta’s inventory and highlight key factors to watch in its upcoming FY2021 results

• With churn rates as high as 50% and wholesale customers declining by 27.7% in 9M21, we are not particularly interested in Huitongda (9878 HK) over long term.
• The valuation looks cheap compared to peers on the surface, but when compared after considering Huitongda’s 1P exposure its at a significant premium to peers.
• Given that the market takes time to pick up similar mispricing situations, we think its advisable to wait and see where Huitongda opens, before arranging a short position.

• Subaru’s 3QFY22 missed consensus with revenue of ¥666bn (-5.8% QoQ, -22.3% YoY) and OP of ¥42.0bn (6.3% OPM) both looking weak. 
• The reported revenue and OP were 11.2% and 2.8% lower than consensus estimates respectively. 
• The company revised OP guidance to ¥100bn from 2Q’s ¥150bn which itself was lowered from ¥200bn but this should be the last of the bad news.

• Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model. 
• Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns. 
• Today we are flagging Weight Watchers, Triumph Grp, Sprouts, Ormat Tech .

• Samyang Tongsang (002170 KS) is the 14th company in our Korea Small Cap Gems series.
• Samyang Tongsang’s net cash/market cap ratio is 124%, one of the highest among Korea companies with more than 100 billion won in market cap. 
• Chairman Huh (age 84) still has a 20% stake in the company. There could be material changes to corporate governance if the ownership structure changes in a few years.

• Delta Apparel (NYSE American: DLA) is a vertically integrated apparel company that designs, manufactures, sources, and markets activewear and lifestyle apparel products.
• Despite trading at a fraction of market multiples, I see over 100% upside in the stock given its competitive advantages in digital garment printing, unique vertical integration, and healthy growth prospects for two key business segments.
• While its stock trades at a fraction of market multiples, DLA is well-positioned to sustain double-digit earnings and FCF growth rates for the next 5 years

• Avadh Sugar has 31800 TCD sugarcane crushing capacity, 325 KLD distillery capacity and 74 MW saleable power capacity
• The company produces 6.0 lakh tonnes (lt) of sugar, 8 crore litre of ethanol & 15 crore units of saleable power.
• Target Price and Valuation: We value the stock at Rs 970, valuing the business at 2x FY23 BV.

• Varun Beverages is one of the largest franchisee of PepsiCo in the world.
• The company produces & distributes carbonated drinks, juices & packaged drinking water in six countries including India
• Target Price and Valuation: We value the stock at Rs 1050, valuing the business 23x CY23 EV / EBITDA

• The Combination Cuscaden – Keppel Scheme Offer Meetings for Singapore Press Holdings (SPH SP) shareholders should come imminently.
• Time has passed and that should be worth something. Astute shareholders have likely already made their feelings known. Everyone should. 
• In the meantime, there is a good spread, with a put option on a portion of it, and the possibility of a little upside. 

• There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.
• LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.
• This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.

• Numerous reports indicate that Seven & I is preparing its Sogo Seibu department store subsidiary for sale. 
• This follows years of calls from major investors to dispose of underperforming assets at Japan’s second largest retail conglomerate.
• Seven & I still has many problems to solve in its domestic business. Ito-Yokado remains the biggest problem but perhaps won’t be disposed of while the company’s 98-year old founder lives.

• We maintain BUY rating for HMPRO with a target price to Bt16.10, derived from 35xPE’22E, or implying 40% premium to Thai Consumer Discretionary.
• We expect HMPRO to report 4Q21 net profit at Bt1.57bn (+2%YoY, +80%QoQ),thanks to stores sales recovery (SSSG at +10%YoY) supported by pent-up demand, demand from home renovation after a flood
• We foresee 2022E earnings to grow to Bt6bn close to pre-COVID levels (+16%YoY) supported by 1) a solid revenue growth at 4% close to Thailand GDP growth from re-opening stores

• We have increasing confidence in Oriental Watch (398 HK) paying out a > 74 cent dividend for FY22 ( implied dividend >40 cents for H2 2022, full-year yield 17%). 
• Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for >50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. 
• Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.

• Emperador Inc (EMP PM) and Monde Nissin Corp (MONDE PM) will replace Bloomberry Resorts (BLOOM PM) and Robinsons Retail Holdings (RRHI PM) in the Philippines Stock Exchange PSEi Index (PCOMP).
• There will be a lot to trade from passive funds. Implementation will take place at the close on 11 February – there are only 5 days to go.
• Emperador Inc (EMP PM) has rallied over the last month while the deletions have traded lower. As re-opening plays, the passive selling could provide an opportunity to buy the deletes.

• We have pointed out previously that the hype surrounding Tesla’s FSD system was delusional. 
• We have always regarded their differentiating factor as simply being a greater risk tolerance for endangering the lives of their customers. 
• However, some automakers are actually making efforts to improve safety… and they actually know what they are doing.

• The CEO and family leader Yamaguchi-san is launching an MBO to take out one of the largest Toyota dealers out there. 
• Optically, it looks fully-priced, with significant net debt and a 74% takeover premium. A closer look is, however, warranted.
• This is large enough (despite illiquidity) to be interesting, and it could get interestinger.

• Seven & I Holdings (3382 JP) is down 2.71% today following the company’s response to ValueAct’s public letter.
• We think this share price move is unwarranted and driven by a false interpretation that Seven & I’s response is a rebuttal.
• Therefore, we would be using this as an opportunity to add more Seven & I shares.

• Snapchat largely dispelled the Apple bear case, and should return to the mid $60s.
• Actual competitive differentiation vs. TikTok and Facebook means Snapchat’s user growth and engagement remain strong.
• Revenue growth will reaccelerate as it works through IDFA, but international monetization is the kicker.

• Daehan Flour Mills is the 13th company in our Korea Small Cap Gems series. 
• Daehan Flour Mills is one of the largest companies in Korea engaged in the flour milling industry. It provides various types of flour in Korea.
• Daehan Flour Mills, which is a deep value play, has just become very interesting since Lee Jong-Gak (honorary chairman and largest shareholder of the company), passed away on 3 February.

• Disney is in negative territory since I first covered the company, while the market returned nearly 50% over the period.
• Pandemic lockdowns are only part of the story, while consistently lower return on capital appears to be the chief culprit for this performance.
• Even as margins are likely to improve, more content spend and higher competition suggest that it would likely not be enough to support valuation.

• Suzuki reported its 3QFY22 results on Friday with revenue of ¥901bn (+8.8% QoQ, -0.5% YoY) and OP of ¥47.5bn implying an OPM of 5.3% compared to 5.3% in 2QFY22. 
• The reported revenue and OP were 3.8% and 5.9% higher than the consensus estimates respectively. 
• The company revised its full year revenue guidance to ¥3,400bn (¥200bn up from the previous guidance), while OP guidance remained unchanged on ¥170bn.

• TTK Prestige is India’s leading player in kitchen solutions and has been successful in transforming itself from a company manufacturing pressure cookers
• It continues to be market leader in the cooker segment and has material share in other appliance and cookware categories
• Target Price and Valuation: We value TTK at Rs 1270 i.e. 45x FY24E EPS

• Sony posted a strong quarter on the back of resilient margins in gaming and stellar performance in the pictures segment. 
• Guidance was raised to ¥1.2trn above the top of consensus at ¥1.185trn but results will likely be around ¥1.3trn, a little below the ¥1.37trn we called in early 2021. 
• Next year should see further growth and we expect firm performance going forward.

• The review period for the KRX New Deal indices ended on 31 January. The changes will be announced toward the end of February and implemented on 10 March.
• We expect LG Energy Solution (373220 KS) to be included in the Battery and BBIG indices, while Kakao Pay (377300 KS) should be added to the Internet Index.
• The largest selling is expected to be on Douzone Bizon (012510 KS) due to a potential downweight in the Internet index and a deletion from the BBIG index.

• Askul Corp (2678 JP) today announced a 4.9% buyback, likely via ToSTNeT-3, designed to lower the holding of parent Z Holdings (4689 JP), to meet TSE Prime Tradable Share criteria.
• While 5.1% earnings accretive, it will not be enough, and the structure suggests despite significant excess cash, the next tranche won’t come immediately.
• There is short-term strategy, and there is longer-term positioning. Both may work in this case.

• With momentum behind defensive/semi defensive names in the Japanese market, Pan Pacific International Holdings (7532 JP)’ seems to have one of the best risk reward ratios among Japanese retail players.
• PPI’s undervaluation is visible in valuation multiples across the board with all multiples trading near the past 10-year low level.
• Thus, we would buy PPI with a target of 40% upside in the short term.

• Premier Investments (PMV AU) has added a further 3.9% in Myer Holdings (MYR AU) taking its stake to just short of 20%. 
• There is no love lost between the boards of Premier and Myer since Premier took a 10.8% stake in March 2017.
• Premier has attempted to spill the board in the past. That scene looks set to repeat itself. That or a takeover.

• Q3 21 in-line for revenue but well ahead for EBITDA on solid advertising growth leading to an upgrade in management’s full-year EBITDA target.
• Operational results were encouraging with double-digit gains in ad sales and 7% eCommerce growth despite strong year-ago comps.
• Impairment losses for equity associate Demae-Can sting but the overall story is positive.

• Aisin’s 3Q revenue of ¥1,004bn (+13.1% QoQ, -4.3% YoY) and OP of ¥54bn (5.4% OPM) reassured investors and the stock closed 4% higher. 
• Revenue was 1.7% higher than consensus estimates while OP was 4.9% lower but Aisin maintained guidance. 
• The real story is the production ramp from here however and risk-reward for Aisin remains phenomenally skewed.

• Denso announced 3QFY22 during market hours today posting revenue of ¥1,426bn and OP of ¥97bn. 
• Reported revenue was 4.2% higher than the consensus estimates while OP was 17.8% lower. 
• The market reacted negatively to the weak OP print but we think the focus should be all on the upcoming volume ramp.

• There is just one DLC in this report, Rio Tinto, following the unification of BHP and Shell.
• Discounts to NAV of holdcos have shown mixed performance: Alba, 41.3%; GBL, 26.9%; Heineken Holdings, 18.2%; Industrivärden, 12.1%; Investor AB, 11.6%; Kinnevik B, 8.8%(premium); Porsche Automobile Holding, 39.2%.
• Recommended trades: GBL vs. listed assets, Industrivärden vs. listed assets, Investor vs. listed assets, Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto.

• According to a local media outlet called ETNews, CJ ENM is considering on selling about half of its stake in Netmarble to potentially acquire the controlling stake in S.M. Entertainment.
• Although CJ ENM is the lead candidate to acquire SM Entertainment, other contenders including Kakao Corp and Naver are not totally out of the M&A race. 
• Overall, we would wait on buying CJ ENM at current levels. We think that the market is still concerned about CJ ENM overpaying for SM Entertainment.

• The review period for the NIFTY 100 Index ended on 31 Jan. The rebalance will be effective after the close on 30 March and the announcement will come end February.
• Potential inclusions are Zomato (ZOMATO IN), Mindtree Ltd (MTCL IN), SRF Ltd (SRF IN), Indian Railway Catering and Tourism (IRCTC IN) and Tata Power (TPWR IN). 
• Potential deletions are Yes Bank (YES IN), Indraprastha Gas (IGL IN), Jindal Steel & Power (JSP IN), Aurobindo Pharma (ARBP IN) and Hindustan Petroleum (HPCL IN). 

• Nikkei reported yesterday that Seven & I Holdings (3382 JP) is in final negotiations to sell its underperforming department store business Sogo Seibu, amidst pressure from several of its investors.
• The company has indirectly confirmed the news by saying that they are considering changes to Seven & I’s business portfolio including the sale of the Sogo & Seibu business.
• The disposal of underperforming department stores could increase the efficiency of capital usage and generate upside to shareholders returns and enable the company to focus on growth through geographic expansion.

• Huitongda (9878 HK) is looking to raise up to US$318m in its Hong Kong IPO.
• Huitongda (HTD) is a leading commerce and service platform serving businesses in the lower-tier retail markets of China.
• In this note, we will look at deal dynamics, assumptions, and share our thoughts on valuation.

• Sony is due for a tactical rise, stall and minor new low after completing a full count rise at 15,700. Trendline support break and gap resistance will attract sellers. 
• RSI bear divergence stands out. 12k tactical buy zone with 14k sell area. Ideal C wave buy zone lies at 10,500 support or within this range.
• Sony remains an attractive macro bull play but has some backfill risk to iron out toward higher conviction long support.

• Jcontentree has hit a home-run with “All of Us Are Dead” zombie drama reaching number one in Netflix Inc’s global charts.
• According to Flixpatrol on the 31 January, All of Us Are Dead took the top spot in Netflix’s global popularity rankings for two consecutive days from its release.
• Jcontentree’s valuation multiples are likely to rise 20-30% or more in the coming days, driven by the global success of the All of Us Are Dead zombie drama.

• Vedant Fashions is looking to raise up to US$420m in its India IPO.
• It is a fashionwear company targeting the Indian wedding and celebration wear segment. According to CRISIL, it was the largest company in India in the men’s Indian wedding wear segment.
• In this note, we will run the deal through our ECM framework and talk about the deal background.

• MMC reported its 3QFY22 results on 31st January which saw revenues of ¥526bn (+14.6% QoQ, +39.1% YoY) and OP of ¥30.8bn. 
• Revenue was in-line, only 0.3% higher than consensus estimates while OP beat consensus estimates by ¥15bn thanks to the 5.9% OPM. 
• The result bodes well for the auto sector overall but weak top line and a dependence on forex have us going… meh.

• Siyaram Silk Mills (SSML), a fabric and apparel manufacturer, has created a strong brand portfolio largely catering to the Tier II & III towns.
• Siyaram’s brand portfolio consists of reputed brands like Siyaram (flagship brand), Oxemberg, MSD and J Hampstead
• Over the last decade, the company has gradually expanded its fabric and garment capacities and simultaneously managed to reduce the debt/equity from 1.0x in FY12 to 0.2x in FY21

AU Small Finance Bank: AUBANK’s Q3FY22 earnings were 14% ahead of our estimates due to lower-than-expected provisioning. Asset quality continued to improve with negative net slippages in the quarter, driving GNPA down to 2.6% (Q2FY22: 3.2%). The bank sustained its business momentum, with strong disbursement growth (+33% YoY, +59% QoQ). AUBANK has further stepped up its investments on franchise-building blocks (employees, branches, tech) and new asset classes (credit cards, merchant acquiring), which are likely to stretch expense ratios and drag near-term profitability metrics (opex to assets at ~5%).

• Dixon Technologies is India’s leading electronic manufacturing (EMS) provider and one of the largest beneficiaries of the government’s PLI scheme.
• Dixon operates in both original equipment manufacturing (OEM) and original design manufacturing (ODM)
• Strong RoE, RoCE at ~20%, ~24%, respectively (three year’s average)