Consumer

• Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, has launched an HKEx IPO to raise US$330 million. The shares will be listed on 23 April.
• We previously discussed the IPO in Baicha Baidao IPO: The Bull Case and Baicha Baidao IPO: The Bear Case. 
• There are no cornerstone investors. Our valuation analysis suggests that Baicha is fairly valued at the HK$17.50 IPO price. Therefore, we would pass on the IPO.

• We believe the criticism against Nongfu Spring will eventually help the company.
• Catching the trend of sugar free, tea revenue surged by 83% in 2023.
• The company achieved higher growth and higher margin, but its stock price is still flat.

• Sichuan Baicha Baidao Industrial is looking to raise up to US$330m in its HK IPO.
• SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
• We have looked at the company’s performance in our past note. In this note, we talk about valuations

• TSE officially announced that it will request prime market listed companies to simultaneously disclose two documents, financial statements and timely disclosure information, in Japanese and English from April 2025.”
• Given the characteristics of Japanese companies, which tend to implement only minimum requirements, few companies will engage in English language disclosure in their annual securities reports, which wasn’t explicitly stated.
• Rather than improving the quality of the market to make it easier for global investors to trade, TSE has set efforts targets to match the speed of the slowest ship.

• Vinfast (VFS US) is large on promise but low on delivery, with sales in FY2023 coming in well below expectations, and the vast majority being to related companies. 
• The company is building huge capacity in Vietnam, India, and Indonesia in the region, and in the US, where sales have been slow but where capex is required.
• Vingroup has set up ride-hailing company GSM, using Vinfast vehicles for its fleet, making up 50% of its sales in 2023, leaving question marks over the sustainability of its model.

• Johor Plantations Group (2368120D MK) is looking to raise around US$180m in its upcoming Malaysia IPO.
• Johor Plantations Group (JPG) is an upstream oil palm plantation firm operating predominantly in Johor, Malaysia.
• In this note, we look at the firm’s past performance.

• Corn prices are presently being pressured by ample supplies owing to the record US harvest.
• Corn prices face an upside risk owing to elevated demand for ethanol and supply uncertainty from the South American harvest.
• Premium for long-dated corn futures over near-term futures is on the rise. A calendar spread can be used to express this view. 

• Last week’s inflation data surprised market participants on the upside. CPI YoY: 3,2% vs. 3,1% estimate. Core CPI m/m: 0,4% vs 0,3% estimated
• Even larger was the upside surprise in the PPI data. Friends of the 70s double-dip inflation scenario will probably love this chart.
• Take a closer look at the 70s and how inflation recovered before it take of in the late 70s for another rip higher.

• We are reiterating our Buy rating, $41 price target and projections for Build-A-Bear Workshop after meeting with management in their St.
• Louis headquarters.
• We believe there remain multiple near and longer term growth opportunities for the company, as they expand the product, places and prices they offer “Furry friends” and further leverage the trusted Build-a-Bear brand name.

• Following the positive response to our article on Perfect Medical , we are keen to introduce our readers to another noteworthy company in the healthcare and beauty industry, Water Oasis.
• Despite initial appearances suggesting sluggish revenue growth over the past decade, a deeper examination reveals significant improvements in business quality and consistent shareholder returns through substantial dividends.
• This under-the-radar company, we believe, presents an attractive risk-reward profile.

• A week ahead of trial, a defendant in massive fraud case copped a plea
• Terms of deal include guilty plea, asset forfeiture, restitution of US$158 mn
• US investigation continues; are other Chinese companies involved in case?

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
• Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

• Baicha Baidao’s profit model doesn’t rely on tea drink sales, but on continuous expansion of store size.However, rapid expansion brought by the franchise model has led to significant management challenges.
• The profitability/market attractiveness of ChaPanda stores are declining, which not only reflects franchisees’ concerns about future profit prospects,but also reflects the market’s re-evaluation of the attractiveness of Baicha Baidao brand.
• Although current financial performance of Baicha Baidao seems acceptable, after IPO, its performance could decline year by year, leading to a collapse in stock price/valuation if this is the case.

• Masked by a high base, 4Q FY24 sales of Sa Sa International Hldgs (178 HK) edged down by 4.1% YoY. However, sales for mainland China have increased by 18.2%.
• Overall sales for FY24 are in line with market projections and there is potential for further margin expansion. Its 6.7x and 5.9x PERs for FY25F and FY26F are inexpensive.
• The addition of more mainland cities to the Hong Kong individual visit scheme, promotion of Hong Kong tourism, and weaker USD in the medium term are all positive factors.

• Golden Throat Holdings is a gem. It has excellent fundamentals including an eye-catching dividend yield (17.9% in 2023) and a blistering DPS growth (10x from 2020 to 2023). 
• It also benefits from a compelling long-term theme (relieving sore throats caused by worsening air quality/smog/fine dust problems along with recurrent regular cold/flu symptoms among millions of people in China). 
• Golden Throat Holdings is one of the leading throat lozenges manufacturers in China. Its net margin averaged 24% from 2019 to 2023.

• I tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals discussed on Smartkarma this week: Madison Dearborn’s low-balled Offer for APM Human Services (APM AU); and NTT Data Corp (9613 JP)‘s Offer for Jastec (9717 JP).
• Key updates took place on: Boral Ltd (BLD AU), Azure Minerals (AZS AU), Genex Power (GNX AU), JSR Corp (4185 JP), Chilled & Frozen Logistics Holdings (9099 JP), & Lawson (2651 JP).

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) lock-ups. HD Hyundai Marine Solution (443060 KS), ZEEKR (ZK US)and Sichuan Baicha Baidao Industrial (SCBCBDID CH) IPOs.
• Event-Driven developments L’Occitane (973 HK), CGN New Energy Holdings (1811 HK), Azure Minerals (AZS AU), Genex Power Ltd (GNX AU), Riso Kyoiku (4714 JP), Chilled & Frozen Logistics Holdings (9099 JP). 

• Since 2020, there has been a divergence between P/B and TOPIX movements, complicating matters for listed companies that have been asked to raise their P/Bs.
• Expectations are high for a rise in ROE, which has a certain correlation with nominal GDP, which is also increasingly correlated with TOPIX, as deflation exits.
• If price pass-through fails, escaping deflation may not lead directly to higher profit margins. If profit margin increase is insufficient, reducing cash on hand is essential to increase ROE.

• The Keepers Holdings (KEEPR PM) demonstrated a 5-year CAGR of 16%/25% revenue/profit growth with an ROE averaging 20%.
• FY23 surpassed our expectations with 17%/30% revenue and net profit growth. 4Q 2023 high season revenue and profit growth was an astounding 21%/75% YoY.
• The stocks trades at 6.9x/6.2x PE FY23/FY24e with a 7.5% dividend yield (assuming ten centavos/dividend based on FY23 earnings for FY24 and a 50% payout ratio). 

• Mitra Adiperkasa (MAPI IJ) has revealed more detail on the impact of boycotts stemming from the Gaza conflict on some of its brands, most notably Starbucks but also including Zara. 
• Management remains upbeat about the outlook for the expansion of new retail outlets across its brand portfolio in Indonesia and Southeast Asia but has reduced guidance for Starbucks. 
• Mitra Adiperkasa remains the best proxy for Indonesian retail with any weakness in the share price an opportunity, with valuations remaining attractive. 

• Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, will launch an HKEx IPO to raise US$300 million next week, according to press reports.
• In Baicha Baidao IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on pedestrian store KPIs, unsustainable historical growth rates, declining contract liabilities, and margin pressure reflecting a fiercely competitive market.

• We expect Alibaba to report CY1Q24 top-line, non-GAAP EBITA and non-GAAP net income in-line, (14.2%) and (7.4%) vs. consensus. We cut non-GAAP EBITA by 10% and kept topline unchanged;
• BABA is prioritizing growth of both AliCloud and cross-border ecommerce (AliExpress), which will weaken profitability in the near-term but is the right thing to do. 
• BABA is transforming itself into Chinese Microsoft with hopes of e-commerce mainly pinned on overseas. We maintain BUY and US$ 85 TP, implying 9.5x CY24 P/E.

• Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
• Full year operating profit guidance maintained at Y450 billion, just slightly below the street 
• The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers

• Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
• Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, will launch an HKEx IPO to raise US$300 million next week, according to press reports. 
• Biacha is China’s third largest freshly-made tea shop company in terms of retail sales value in 2023, according to Frost & Sullivan.
• The bull case rests on a rising market share, high revenue growth, sector-leading margins, cash generation and a strong balance sheet. 

• Net profit per listed company increased 4.4 times over the 33 years from 1989 to 2023, which means only a modest 4.5% annual growth.
• The reason why ROE has been sluggish since FY 2005 is due to the slow growth of Net Profit Margin, the decline of Asset Turnover, and the flat financial leverage.
• When the escape from deflation becomes a reality, the key is to have products ready to pass on prices, and defense by cash alone is not sufficient for this purpose.

There has been a lot going on under M&C Saatchi’s operational bonnet, so delivering FY23 results a shade above market forecasts is a good result, especially given the difficult market backdrop. Earlier issues regarding outstanding put option liabilities are in retreat, with minority interests in FY23 down to 13% from 25% in FY22, and most remaining liabilities are expected to be settled in FY24. The focus is now firmly on optimising the operational structure. There has already been good progress, simplifying and achieving greater coherence on a regional-first approach, with better alignment to how clients (and potential clients) want to utilise the group’s global capabilities. The incoming CEO, Zaid Al-Qassab, who starts in May, should be taking on the group’s navigation in less stormy waters.

• Trial, the discount FMCG and retail technology company, completed its IPO last month, achieving an initial market capitalisation higher than most of its rivals in the supermarket sector. 
• If forecasts for FY2023 are achieved, it will become the 5th largest chain in the country and its proprietary technology should give it an important advantage in the medium term.
• But its position at the centre of the fast-growing discount sector will drive the real growth, and the Kyushu-based firm will emerge as challenger to leading retailers.

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.

• Tata Motors ADR
• Xiaomi Corp

• Unilever announced plans to separate its ice cream business into a separate publicly listed company (SpinCo), potentially via a spin-off transaction.
• Post separation, Unilever will focus on four core businesses: beauty and wellbeing, personal care, home care, and nutrition. The separation is expected to be completed by the end of 2025.
• The separation will allow Unilever to allocate capital and resources more efficiently towards higher growth categories with significant potential to scale.

• Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.
• Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.
• With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.

• Jade Group has acquired Magaseek and will merge the online mall with its own fashion e-commerce platform, Locondo and hopes to create a growing rival to Zozo.
• Magaseek was founded by Itochu 20 years ago, and the deal underlines Itochu’s growing influence over Jade as a proxy for its ambitions in fashion e-commerce and distribution.
• However, Jade Group has seen little organic growth for its Locondo platform in recent years, and while its acquisitions have added scale, integration has been haphazard.

Melco Resorts and Entertainment (MLCO) announced yesterday that it is planning to issue USD 500 mn in 8NC3 notes. In addition, subsidiary Studio City has initiated a tender offer to repurchase up to USD 100 mn of the STCITY 6.0 ’25s. We view positively MLCO’s proposed bond issuance and the maturity extension of its credit facilities, as well as Studio City’s tender offer, as they demonstrate management’s proactive approach in managing the company’s debt maturities. The transactions will significantly reduce MLCO’s refinancing risk in FY 2025, as the company would have c. USD 1.5 bn of availability under its credit facilities that can be used to help repay the USD 1.0 bn MPEL 4.875 ’25s due in June 2025. Moreover, management has committed to prioritise debt reduction over dividend payments in FY 2024.

We view the price talk of 7.75-7.875% as fair.

• On the surface, FY23/12 consolidated OP -68% YoY, profit ATOP -53%, and FY24/12 initial guidance for a profit ATOP net loss may appear to indicate a challenging earnings environment.
• However, closer examination reveals steady earnings improvement, and the new MTP through FY26/12 targets recouping major overseas growth investments.
• The table below shows sequential improvement in the amount change YoY for Group EBITDA, OP and profit ATOP every quarter, with profits at all 9 levels posting YoY gains in the 4Q.

• Given that it has already been 6 months since I first bought Card Factory and the stock is currently trading only slightly above my average purchase price, I decided to send you guys a short and sweet thesis on why I believe $CARD.L is an attractive opportunity.
• Card Factory is a greeting card and other “celebration essentials” retailer operating primarily in the UK.
• What is unique about the Northern Europeans, particularly the British, is their habit of buying greeting cards. It is ingrained in their culture

• Decision to invest in Sleep Number Corporation (SNBR) due to cyclical downturn in mattress sector
• SNBR seen as potential opportunity for cyclical turnaround despite drop in stock value since COVID-19 peak
• SNBR targets older, affluent customers with high-end mattresses sold through physical stores; has maintained constant market share for past decade

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Kayou is looking to raise up to US$500m in its upcoming HK IPO.
• Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product.
• In this note, we talk about the not-so-positive aspects of the deal.

• Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement. 
• Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
• The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

• Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.  
• The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
• Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition. 

• The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP). 
• The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP). 
• The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns. 

• P N Gadgil Jewellers (1742652D IN) is looking to raise up to US$132m in its upcoming India IPO. The deal will be run by Motilal Oswal, Nuvama and BOB Capital. 
• P N Gadgil Jewellers (PNGJ from hereon) is an Indian organized jewellery player. According to Technopak, it is the second largest among prominent organized jewellery players in Maharashtra. 
• Its product offerings include traditional jewellery for special occasions such as weddings, engagements and festivities and modern and jewellery designs for everyday wear purpose, in gold, diamond, silver and platinum.

• Ace Hardware Indonesia (ACES IJ) results revealed a positive finish to 2023 and an optimistic outlook for 2024, with new store rollout and shorter promotion periods set to boost sales.
• ACES continues to roll out its new format stores and renovate existing stores with a positive result, with 20 stores expected to be renovated in 2024 and 15-20 new stores,
• The company has seen strong momentum in 2M2024 with +10% SSSG and remains confident about the outlook, with positive guidance for growth. Valuations remain attractive versus history. 

• Our NAV valuation suggests implied market cap of 1 trillion won or NAV per share of 15,983 won which is 11% higher than current price.
• Orion Holdings has attractive dividend yields and payouts. The company’s dividend yield increased from 4.1% in 2021 to 4.6% in 2022 and 5.1% in 2023. 
• The recent phenomenal performance of the movie Exhuma has resulted in a long-awaited revived positive sentiment on Showbox (which is 57.5% owned by Orion Holdings). 

• Kayou is looking to raise up to US$500m in its upcoming HK IPO.
• Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product.
• In this note, we talk about the positive aspects of the deal.

• Flowers Foods continued to show resilience in a challenging consumer environment in the fourth quarter and full year of 2023.
• The company’s brands gained unit and dollar share for the first time since Q1 2022.
• Dave’s Killer Bread was particularly noteworthy, reaching $1 billion in retail sales and growing unit volume by 10%.

• Freshpet Inc. delivered robust performance for the fiscal year 2023 and the fourth quarter, notching a significant growth in net sales and improving profitability.
• The management believes the pet food company reached an inflection point in its journey towards becoming a profitable business in the fresh/frozen segment of the pet food market.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Top Commodity Trader is Long Cocoa Pierre Andurand’s hedge fund bet on higher cocoa prices ahead of a massive surge last month, according to a Bloomberg article.
• Andurand said his firm expects cocoa-beans production globally to be down at least 18% on an annual basis, compared to most analysts’ expectations of 10-11%.
• “This means that we will finish the year with the lowest stocks-to-grinding ratio ever, and potentially run out of inventories late in the year,” he added.

• 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 Ginebra San Miguel (GSMI PM).
• We recently added Dream International (1126 HK). Read: Dream International (1126 HK): Dream Valuation of 3.7x PE and 12% Div Yield, >40% of Mkt Cap In Cash 

• Fu Shou Yuan’s 2023 performance was indeed not good, with negative growth in 23H2.Shanghai alone has limited market capacity.No matter how strong it is, it cannot drive the national market.
• Fu Shou Yuan has encountered difficulties in external expansion and M&A, so it chooses to increase dividends. However, this means the Company may have to say goodbye to high growth.
• The founder’s “past bad record” and uncertain business outlook hinder the upward potential of valuation, which requires a high margin of safety.It’s better bought at low price to collect dividends.

• ETF sale is pie in the sky if the dividend income from ETFs held by BOJ is used to cover the interest payments associated with lifting of negative interest rates.
• ETFs held by the Bank of Japan, which account for 7% of prime market capitalization, are actually reducing the number of actual tradable shares and hindering trading liquidity.
• Furthermore, ETFs held by BOJ, which don’t indicate their intention to be shareholders, may be voting in favor of the company’s proposal as new silent shareholders in place of cross-shareholdings.

• In March 2024, BYD’s Sales volume increased by 46% YoY and Li Auto’s sales volume increased by 39% YoY.
• AliPay announced that foreigners’ consumption amount in China in March was ten times of last year.
• Facing stagnancy and competition, Alibaba’s Taobao removed service charges from its retailers.

• Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
• Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns.  Hanwha reckons these should not be an issue.
• If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.

• The Boston Beer Company’s Fourth Quarter 2023 Earnings revealed an operational performance meeting the midpoint of their forecast, with depletions down by 6% for the year and gross margins achieving an improvement of 120 basis points.
• However, net loss for the quarter indicated challenges, standing at $18.1 million, or $1.49 per diluted share.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• The Simply Good Foods Company achieved financial results that were in line with their estimates for the fiscal first quarter that ended on November 25, 2023.
• The company reported an increase in its net sales by 2.6% to $308.7 million, propelled by the continuous momentum from its Quest range.
• The 40-basis point increase in the gross margin, which improved to 37.3%, was attributed mainly to lower ingredient and packaging costs.