Consumer

• Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP) 
• This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
• There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great. 

• Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading. 
• Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
• Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade. 

• Matahari Department Store (LPPF IJ) is the key player in the department store space in Indonesia with a significant transformation well underway to drive future growth and profitability.
• The company had a slightly disappointing Lebaran performance given some seasonal disparities but continues to make significant progress in revamping its merchandise mix, with a strong omnichannel yielding results. 
• Matahari Department Store (LPPF IJ) looks exceptionally cheap on 4.0x FY2024E PER, and with a dividend yield of 20.0% and with earnings expected to rebound in 2024E.

• Helped by the share in the incremental IPL media rights value, RPSG Venture’s (RPSGV) revenue from the sports business revenue jumped to INR 590cr+ in Q1FY24 vs INR 300cr+ YoY.
• Losses in the FMCG business narrowed to INR 63cr vs INR 90cr YoY and INR 70cr QoQ. FMCG revenues continue to be at around INR 400cr+ annualized run-rate.
• RPSGV’s BPO business, Firstsource Solutions (FSOL IN) saw stabilization in de-growth and margins. Margins expanded by 375bp during Q1FY24.

• Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
• The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
• For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.

• Keiyo Co Ltd (8168 JP) has recommended DCM Holdings (3050 JP)’s tender offer of JPY1,300 per share, a 58.3% premium to the undisturbed price (29 September).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 35.68% ownership ratio.
• Irrevocables represent a 0.88% ownership ratio. The minimum acceptance condition (lower limit) requires a 50.4% minority acceptance rate, which is achievable as the offer price represents a ten-year high.

• Shiyue Daotian (1892269D CH) is looking to raise up to US$108m in its Hong Kong IPO, after downsizing from an earlier reported float of US$200m.
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
• In our previous notes, we covered the company’s performance. In this note, we will cover the firm’s PHIP updates and share our thoughts on valuation.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Victoria’s ESG as “Weak”, in line with its Environmental, Social and Governance scores. Controversies are “Material” and Disclosure is “Weak”.
• Victoria PLC designs, manufactures and distributes flooring products across the UK, Continental Europe and Australia.

• Hengan International Group (1044 HK) and Vinda International (3331 HK) are both market leaders in China’s personal care industry.
• Hengan’s operations have greater exposure to sanitary napkins and diapers; whereas tissues account for 83% of Vinda’s revenue. Both companies have been impacted by an increase in wood pulp prices.
• Hengan is trading cheap; but Vinda’s bottom line is forecast to return to its glory days. Plus rumours of a possible takeover of Vinda continue to do the rounds. 

• Tyson Foods, Inc. delivered disappointing results as the company could not meet the revenue and earnings expectations of Wall Street.
• Lower profitability in their Beef and Chicken segments accounted for more than 90% of the reduction in adjusted operating profit.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• In KOSPI, all eyes are on Ottogi Corporation, a constituent of the KOSPI 200 index. 8.38% of SO’s shares are about to be unleashed.
• In KOSDAQ, the focus is on CanariaBio and Coocon Corp, both of which are constituents of the KOSDAQ 150. They are set to release shares on October 28th.
• For Fadu, a two-month IPO lock-up is being released, accounting for 2.5% of SO.

• We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in October 2023, among which 2 are in KOSPI and 43 are in KOSDAQ.
• These 45 stocks on average could be subject to further selling pressures in October and could underperform relative to the market.
• Among these 45 stocks, top five market cap stocks include Fadu, Ottogi Corporation, CanariaBio,  Top Material, and PhilEnergy.  

• Since my bearish insight on August 11 (Li Ning (2331 HK):  Low Quality Earnings Beat), Li Ning’s share price has declined by 27% in less than 2 months.
• Anta’s share price on the other hand has been flat during the same time frame (Anta Sports (2020 HK):  Most Resilient In Industry Down-Cycles).
• In this insight, we look at if there are now any positive catalysts on the name, given the steep share price decline.

• JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
• A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
• Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-September 2023.

• Despite MercadoLibre’s non-benchmark status, ownership among active EM managers has reached new highs.
• MercadoLibre has been the beneficiary of significant manager rotation over the last year, with 131 funds increasing weights and 29 opening new positions.
• MercadoLibre is now the 8th largest holding on an average weight basis and has recently overtaken AIA Group as the largest overweight stock position across all regions.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Metalsa’s ESG as “Adequate”, in line with its “Adequate” scores for the Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Strong”.
• Metalsa is a Tier 1 automotive parts supplier of structural components for light and commercial vehicles, headquartered in Monterrey (Mexico).

• Kanzhun or Boss Zhipin, is the largest online recruiting platform for white collar workers.
• Users exceeded servers’ capacity for the third time this year.
• The positive signal is that recruiters began to grow in 2Q23.

• It was reported in the local Korean media that the Dongwon Group is considering on listing three private companies including Starkist, Dongwon Loex, and Dongwon Home Food.
• Prior to their IPOs, Dongwon Group is reviewing the potential of selling partial stakes in these companies in pre-IPO investments.
• One of the major purposes of the IPOs would be to gain access to more capital which could be used by the Dongwon Group to acquire HMM. 

• Japanese inflation, which peaked at 4.3% in January 2023, gradually decreased to 3.5%, 3.2%, 3.3%, 3.3%, and 3.2% in the subsequent months of 2023.
• Inflation rates remained stable for most items, excluding Fuel, Electricity, Water, and fresh vegetables, indicating the persistence of cost-push inflation.
• In this insight, we analyze the recent quarterly performance of Yakult, Nissin, and Seven & I, Japanese Consumer Staples companies discussed in our prior Smartkarma Original.

• Gree Electric Appliances (000651 CH) trades at the lowest valuation multiple among the three major home appliance companies in China, at 7x forward PE and 7% forward yield.
• Investment case rests on stable earnings growth and high dividend payout and yield, which works well in a low interest rate environment in China.
• Resiliency of earnings for Gree is under-appreciated by the market, making rerating possible.

• Adidas has all the ingredients to win: “a great brand, credibility, authenticity, innovation, collaborations, talented people, and a global network”.
• Adidas operates in a highly attractive industry as it benefits from a structural growth from sports, which is playing an increasingly important role in more and more people’s lives
• Although 2023 is a transition year, the following years are very promising in terms of sales, margins, and earnings development.

• We’ve expected to see 4300-4325 act as major support on SPX, while also expecting consolidation between 4300-4325 support and 4600 resistance until the end of September, and possibly longer.
• Still possible this 4300-4325 support holds, but odds of a deeper pullback to SPX 4165-4200/the 200-day MA have increased following major breakouts in the U.S. dollar (DXY) and Treasury yields 
• Also adding to concerns: 1+ year uptrend violations on $IWO/$IWP, and breakdowns below 34,280 on the Dow, $180 on IWM, $472 on SOXX, $81 on ITB, and $104-$105 on XLI

• Star Entertainment Group (SGR AU) (SGR) plans to raise around US$480m (A$750m) via an entitlement offer cum institutional placement.
• SGR undertook a similar sized raising earlier this year in Feb 2023, at a price which was double the current deal price.
• In this note, we will talk about the deal dynamics.

• On 9 August, PE outfit TPG and InvoCare (IVC AU), Australia’s leading funeral services provider, entered into a Scheme Implementation Agreement at A$12.70/share, inclusive of a A$0.60/share fully franked dividend.
• TPG’s had previously tabled A$12.65/share on the 7 March, which  InvoCare summarily rejected.
• The Scheme Booklet is now out. InvoCare shareholders vote on the transaction on the 31 October, with implementation on the 24 November. The IE says terms are “fair and reasonable“.

• Tuhu Car (2007986D HK) raised around US$151m in its Hong Kong IPO.
• Tuhu is an integrated online and offline platform for automotive services in China.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

• Leapmotor (9863 HK) (LM) raised around US$800m in its Hong Kong IPO. The stock was listed in Sep 2022, its lockup on pre-IPO investors will expire on 29th Sep 2023.
• LM is a smart EV company based in China, founded in 2015.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• August outbound travel activity surged against easy 2022 comps, but offered no surprises
• The pace of outbound capacity rebuild slowed in August — what do airlines see ahead?
• Is there really “pent-up” tourism demand among Chinese consumers? We don’t think so

• Tsuruha is the latest retailer to come under attack from an activist investment fund. 
• As with Seven & I, the company fended off demands to shake up its board, crucially with the support of Aeon, its largest stakeholder.
• The move will likely lead to some careful reconsideration of how Tsuruha and Aeon could work together and may even lead to a Welcia/Tsuruha merger.

Games Workshop Group (GAW) enjoyed another record year of revenue and profit growth in FY23 despite the more challenging macroeconomic backdrop and economy-wide cost pressures. Underlying volume growth is testimony to the appeal of the IP to its hobbyists. GAW entered FY24 with strong revenue momentum, implying that the June 2023 release of Leviathan, the 10th edition of its most significant property, Warhammer 40K, has boosted growth in Q124. Easing cost pressures should be supportive of underlying margin progress, albeit the recent strength of sterling provides a headwind to growth if it persists through the year.

• Airbnb delivered a solid result and managed an all-around beat in the recent quarterwith over 115 million Nights and Experiences Booked, resulting in revenue of $2.5 billion, marking an 18% year-over-year growth.
• Net income for the quarter stood at $650 million, reflecting a net income margin of 26%, the highest second-quarter margin ever achieved.
• Additionally, free cash flow reached $900 million, a 13% increase from the previous year, with a trailing 12-month free cash flow of $3.9 billion and a margin of 43%.

• Monster Beverage Corporation generated below par revenues in the last quarter and its earnings were on par with market expectations.
• The rise in gross profit as a percentage of net sales was primarily due to price actions, lower freighting expenses, and higher aluminum can costs.
• Besides that, the company introduced The Beast Unleashed in the quarter.

• The Kroger Co. delivered a mixed result in the recent quarter, with revenues below market expectations but surpassing the analyst consensus regarding earnings.
• The total effect on operating profit during the second quarter was somewhat positive, and they expect this to continue for the remainder of the year.
• Besides these results, their healthcare subsidiary, Kroger Health, entered into a collaborative partnership with Performance Kitchen to provide medically customized meals (MTMs).

• Thai Beverage (THBEV SP) has trended lower over the last couple of years and the stock is trading very close to its lows.
• There has been a contraction in multiples and Thai Beverage (THBEV SP) trades cheaper than a lot of its Asia listed peers.
• A potential index inclusion could bring in significant passive inflows and result in a rerating of the stock.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), JSR Corp (4185 JP), DDH1 (DDH AU), ENM Holdings (128 HK). 
• Lowest spreads – Toyo Construction (1890 JP), Healius (HLS AU), Yaizu Suisankagaku Industry (2812 JP), Allkem Ltd (AKE AU), Pact Group Holdings (PGH AU), Pacific Current (PAC AU). 

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
• We add UMP Healthcare (722 HK) to our list of small/mid-cap names we track. The company has just recently declared its full-year results. 

• This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables and charts and welcome feedback. This week saw small net buying for the first week in seven.

• Golden Agri Resources (GGR SP) has traded lower over the last year and trades cheaper than some of its peers.
• Revenue, income and net profit margins have been moving higher over the last few years and EPS/DPS have increased sharply over the last two years.
• Potential passive buying could result in Golden Agri Resources (GGR SP) outperforming peers in the near term.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Kokusai Electric (6525 JP) filed for it Japan listing, while Midea Group Co Ltd A (000333 CH) continued to work towards its H-share listing.
• In the placement space, there were no major deals this week apart from Blue Star and Sheela Foam Ltd (SFL IN). 

• Hyatt Hotels Corporation’s results were a major disappointment as the company failed to meet Wall Street’s revenue and earnings expectations.
• The ongoing transformation of Hyatt is gaining momentum, with second-quarter results reinforcing their confidence in executing the strategy outlined during the Investor Day in May.
• Hyatt has set ambitious targets, aiming to achieve $750 million in free cash flow and an 80% asset-light earnings mix by 2025.

• The coming week has the rebalance implementation for the NIFTY family of indices on Thursday and the Nikkei 225 (NKY INDEX) on Friday.
• The review period for the December rebalance of the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index and the HSCI Index ends on Friday.
• Inflows to mainland China ETFs resumed following a pause as markets continue to trade weak.

• Soybean ranks as the most traded crop globally. It comprises 10% of the total value of global agriculture trade.
• The Americas comprise >80% of total global production. China mops up ~60% of global imports and is primarily used to feed massive livestock.
• Soybean is more prone to shocks from geopolitical disruptions. Weather also impacts Beans. El Niño favours Soybean yields.

• Costa Group Holdings (CGC AU) has entered a scheme implementation deed with Paine Schwartz Partners (PSP) led consortium at A$3.20 per share. 
• The key conditions are regulatory and shareholder approval. China SAMR regulatory approval poses a risk, primarily related to timing. Costa anticipates completion in 1Q24.
• The headcount test related to the retail vote remains a risk. The risk/reward is unfavourable as the deal break downside (10%+) outweighs the offer’s upside (3.6% at last close).  

• My comparables derived valuation of Pendragon PLC (PDG LN) is 32p/share, above the value of Lithia’s “package” and spot-on Hedin’s unsolicited & preliminary revised offer (well above its initial lowball offer).
• The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.
• The revised Hedin’s offer is 17% above Lithia’s, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board’s recommendation. Gross spread, 5.6%. Long.

• Vinfast (VFS US) reported 2Q2023 results yesterday. Revenues saw significant increase driven by strong YoY growth in EV sales volume which reached 9,535 units during the quarter.
• More than 50% of EV volume during 1H2023 were to a related company while US volume was less than 200 units raising serious concerns over demand for Vinfast’s EVs.
• It seems unlikely for Vinfast to meet its 50K EV target for 2023 and our revised forecast suggests there is further downside despite shares dropping more than 50% vs IPO.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Cencosud’s ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

Our H1/23 Assessment and Outlook report is a review of the performance of companies under our coverage in the stated period. Following a brief discussion of macro trends as well as monetary policy and input cost developments, we assess how these companies performed compared to our analysts’ expectations, and examine credit stats trends. We provide overviews of sector developments, as well as summaries of all the companies’ earnings. This includes classifying all the names into either picks or pans, to provide an overview of which companies we are comfortable of investing in a portfolio context. We highlight that both our picks and pans can be names for which we have “Hold” recommendations.

• Nippon Active Value Fund PLC (NAVF LN)’s jointly-held shareholding in Intage Holdings (4326 JP) has declined from 11.28% to 9.52% of outstanding shares (disclosed on 20 September).
• NAVF wants to take as much money off the table as possible as NTT (Nippon Telegraph & Telephone) (9432 JP)’s partial offer price represents an all-time high.
• Our revised minimum proration is 53.31%. NAVF’s action suggests that the minimum acceptance condition, which requires a 20% minority acceptance rate, should be satisfied.

• Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Melco Resorts’ ESG as “Adequate”, in line with its Social and Governance scores. The Environmental pillar is “Strong”. Controversies are “Immaterial” and Disclosure is “Strong”.

• On the 18 September, Costa Group Holdings (CGC AU) announced A$3.20/share best and final Offer from Paine Schwartz Partners (PSP) down from the A$3.50/share NBIO in July.
• Costa’s shares wobbled – would they, won’t they be supportive? A break price beyond the undisturbed price loomed. Vanguard kicked out a chunk of shares below A$3.
• This morning Costa and PSP entered into a Scheme Implementation Deed. The transaction is expected to close in 1Q24. Key conditions are Costa’s shareholder vote and FIRB/SAMR/EU approval. 

• Constellation Brands, Inc. managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company’s beer business generated significant growth for the quarter while steadily moving forward with all 4 of its strategic projects.
• Their larger premium and luxury brands in the higher-end wine area of their portfolio experienced weaker segment demand in April.

• Restaurant Brands International Inc. delivered an all-around beat in the previous quarter, marked by impressive growth, with year-over-year consolidated system-wide sales increasing significantly.
• Strong comparable sales and net restaurant growth drove this substantial growth.
• Popeyes US achieved substantial growth in similar sales, driven by menu extensions, operational enhancements, and digital sales growth.

• Metro Pacific Investments Co (MPI PM) has announced that the public float of the stock will drop to 2.78% following the Tender Offer.
• Metro Pacific Investments Co (MPI PM) shares are expected to be suspended from 26 September. That could see Bloomberry Resorts (BLOOM PM) added to the PCOMP INDEX on 25 September.
• There will be large passive inflows to Bloomberry Resorts (BLOOM PM) as well as flows from active managers that track the PCOMP INDEX.

• Through all the upheavals in discretionary product distribution in the last decade, Itochu Corp (8001 JP)’s Itochu Textile subsidiary has managed to maintain huge power in the channel.
• While the trading firm has traditionally focused on premium fashion brands, in the last few years it has invested heavily in the sports market, including its growing investment in Descente.
• The move is part of wider plans to take lead share in sports, footwear and department store brands.

• Midea Group Co Ltd A (000333 CH) announced on September 18 the approval for H-share listing for a total of not more than 10% of its outstanding shares (before overallotment).
• Reasons for the listing include the possible share incentive program for overseas employees and more exposure to foreign investors. 
• The H-share listing could be a safe bet given the current valuation profile, especially if the discount to A-share is larger than 10%. 

• From 200 properties, the Cambodian government now only allows 87 shrinking capacity but increasing footfall for existing properties like Nagaworld in Phnom Penh.
• Nagaworld enjoys a moat in metro Phnom Penh–this supply reduction expands its base.
• H1 performance strong, reduced national capacity will contribute to revenue gains from a wider geography for the largest single integrated luxury resort in Cambodia.

• Global Digital Niaga (BliBli) continues to stand out from peers given a differentiated omnichannel model plus a greater portion of 1P but 3P sales are growing driven by Tiket.com.
• TPV growth surpassed revenue growth in 1H2023 driven by Tiket.com but take rates and gross margins improved, as the company cut back on promotional spending and improved cost efficiencies. 
• BliBli booked organic growth with more users and a significant pick-up in the average order value, partially driven by Tiket.com. 

• While Yamazaki Baking (2212 JP)‘s recent surge has been impressive, consensus expectations are high for the upcoming quarter, despite yet another price hike in July 2023.
• From a valuation perspective, we expect limited upside potential even if Yamazaki Baking surpasses consensus expectations.
• Therefore, we believe that the risk-reward profile for maintaining a long position in Yamazaki Baking is currently not particularly attractive.

• The percentage of female managers is low, around 10%, so it will take time for internal executive directors to be nominated, and meanwhile companies will be dependent on outside directors.
• Finally, TSE has clearly stated specific numerical targets, so the path to achieving the targets is clear. Now the focus will shift to the content of female board  directors.
• Hiring talented people should be the biggest management challenge, but the appointment of foreign talent has been too slow compared to the globalization of the business.

• Indonesia-based Koltiva works with producers in 52 countries and boasts over 1 million producers and 6,800 businesses

• Indonesia-based sustainable farming and supply chain traceability startup Koltiva has raised an undisclosed “seven-figure” USD in a Series A financing round led by AC Ventures.

• Silverstrand Capital, Planet Rise, Development Finance Asia, Blue 7, The Meloy Fund, and an unnamed impact investor in Southeast Asia also joined.

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.

• First Pacific Co

• Maize plays a pivotal role in Indonesian agriculture, including as a prime source of animal feed. In 2022, the country’s maize production was estimated to reach 44 million tons.

• Agritech startup Kora is one of those few startups operating in this space.

• Kora aims to improve the quality and quantity of post-harvest maize.