Consumer

• In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
• Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
• There is still a large reverse funding trade, with some large sells. 

• Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
• For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN). 
• The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.

• In Quiddity HSTECH Sep 23 Flow Expectations: Two ADDs/DELs Possible, I discussed my initial flow expectations and potential index changes for the September 2023 Rebalance.
• The suggested (previous insight) SHORT Ping An Healthcare and Technol (1833 HK) is down 10.6% vs the hedge JD Health International (6618 HK) in ~1.5 months. 
• In this insight, I have presented my updated flow expectations and some new trade ideas for the next few weeks.

• Lalatech Holdings filed for an IPO in March. I have tried to come at an IPO valuation for the company using a mix of methodologies: EV/Revenue, EV/GTV and EV/Gross Profit.
• Taking a weighted average of peer group multiples-based valuation methodologies, I arrived at a ~$7B IPO valuation for Lalatech Holdings, including ~$1.65B of cash and cash equivalents.
• From a peer group perspective, I arrived at a fair IPO valuation close to ~$7B, using a ~5x EV/CY22 Revenue, ~0.7x EV/CY22 GTV, and a 10x EV/CY22 Gross Profit multiple. 

• CyberAgent Inc (4751 JP) reported 3QFY09/2023 results today. Revenue decreased 0.2% YoY to ¥171.7n (vs consensus ¥177.8bn) while operating income decreased 86.2% YoY to ¥1.4bn (vs consensus ¥11.0bn).
• The game business has further deteriorated during 3Q with the absence of hit title launches and drop in UMA MUSUME Rankings. Segment reported losses during the quarter.
• CA has opened pre-registrations for two new games, we are not convinced that these could become top performers as the company has not given a hit title since UMA MUSUME.

• We are negative on Feng Tay Enterprise’s share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike combined with unattractive valuations.
• In the next several months, we think there is a higher probability of Feng Tay’s share price underperforming versus Nike.
• Feng Tay Enterprise is one of the largest global OEM/ODM companies that specializes the design and manufacturing of footwear. Nike is one of the largest customers of Feng Tay Enterprise. 

• Netflix delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
• Key second quarter results indicated revenue of $8.19 billion, adjusted earnings per share (EPS) at $3.29, and a surge in subscribers with 5.89 million net additions, all of which are above expectations.
• The shortfall in revenue was counteracted by strong performance in profitability metrics, such as the operating margin and free cash flow, which surpassed expectations.

• PepsiCo delivered an all-around beat in the previous quarter.
• The labor market is generally improving, which has improved how PepsiCo conducts its business.
• Another good news for the company was that PBNA’s margins decreased in the second quarter.

• Las Vegas Sands managed to exceed analyst expectations in terms of revenue as well as earnings.
• With its scale and substantial investment, Las Vegas Sands is well-positioned to benefit from this trend.
• We give Las Vegas Sands Corp. a ‘Hold’ rating with a revised target price.

• IPAR continued to experience momentum in demand in the second quarter with preliminary sales ending up at $309 million compared to our Street high estimate of $283.7 million
• IPAR’s management is taking a conservative approach with sales forecast given the supply chain and sales volatility in certain regions. 
• The strength in second quarter sales was across multiple brands and in both segments

• L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
• The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
• L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples. 

• Shimano reported a 40% drop in operating profit for 2Q and revised down full year guidance
• Bike sales continue to be weak (-19% YoY) in Q2 and 2H outlook is even worse
• We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve

• The Keepers Holdings (KEEPR PM) declares its Q2 2023 in the second week of August. We expect a 15-20% revenue growth and a similar profit growth. 
• The stock trades at 9.3x/7.9x FY23e/24e, with structural growth drivers arising from rising imported spirit consumption and a monopolistic position with a >70% marketshare by volume.
• With healthy profit growth and a sound balance sheet ( 15% of the market cap in cash), Keepers can pay 50% of profits resulting in a 4.2% FY23e yield. 

• Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
• There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ). 
• There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.

• From 2022 loss in period, MLCO earnings could come in anywhere between a profit of $0.06 to $0.70 indicative of recovery in Macau, Manila and opening of Cyprus.
• Revenue could come in above $1.2b. This is a forerunner of a solid recovery year.
• MLCO has a global vision beyond Asia that makes it attractive at its current price.

• We expect CPNG to report C2Q23 revenue and profit in-line and (31.6%) vs. cons., respectively. CPNG’s profit miss is largely due to rapid expansion in Taiwan…
• …which we estimate it will impact net profit by up to 40% this year.  AliExpress continues its development in South Korea, Temu, is expected to put pressure on Coupang. 
• We maintain SELL on Coupang and revise down this year’s EPS estimate by 16% and cut our TP to US$ 13.7 to reflect the changes on the profit side.

• Omnicom Group delivered a mixed set of results for the previous quarter, with revenues below analyst expectations but managed earnings beat.
• Organic growth for the quarter was impressive and the company’s liquidity is strong while its cash flow supports its principal cash uses, including dividends, purchases, and share repurchases.
• Omnicom made considerable headway on its AI strategy by incorporating generative AI into Omni, their market-leading technology platform, and forming important first-of-their-kind technological partnerships.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Nemak’s ESG as “Adequate”, in line with the Environmental and Social scores. The company has “Strong” Governance. Controversies are “Immaterial” and Disclosure is “Strong”.
• Based in Mexico, Nemak is a global Tier 1 supplier to automotive OEMs. It specialises in aluminium components for powertrain, body and structure applications, as well as electric vehicle components.

• Conagra Brands delivered a mixed set of results in its most recent quarter, with revenues falling short of Wall Street expectations.
• As Conagra made significant headway on its cost-saving initiatives and consequently saw a significant rise in service standards, its supply chain kept becoming better.
• Conagra Brands further expanded its product line by introducing more than 50 new items across its frozen, grocery, and snacking divisions.

• Oisix Ra Daichi is by far Japan’s largest online food retailer, driven by the popularity of its fresh food and meal kit subscription services.
• Despite some backend problems last year, the company expects its system of continual improvement and expansion of new lines of meal kits to bring strong growth in the medium term.
• The development of the online food market should help boost the company’s prospects. Operating margins have worsened considerably but the company hopes to match the previous peak this year.

• There is a possibility that Oriental Land (4661 JP)‘s revenue and OP in 1QFY24 could surpass the consensus estimates by 8% and 21%, respectively.
• However, the outlook for the next three quarters may be different, as consensus appears inflated with annual OP expectations of ¥154.5bn compared to the company’s guidance of ¥122bn.
• We find medium term consensus expectations unrealistic, leading to potential downside for Oriental Land. We expect FY+2 EV/OP to decline from 46x to 20-30x.

• Since my last order filled today, here is my write-up on a special situation in Hong Kong.
• Stock is NVC International holdings (NVC ticker HKG:2222) .
• A Hong Kong nano cap stock. And it is quite illiquid, so beware.  I first learned of it through a Tweet from Writser .

• Selling from the ESOP program in the first quarter could result in an increase in LG Energy Solution (373220 KS)‘s float in local and global indices.
• The largest buying from passive trackers could take place next month with over 3% of the real float needing to be bought.
• Short interest has increased in the last month and short covering could take the stock higher ahead of the passive buying.

• 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 – Tryt Inc (9164 JP), Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK), Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group IPOs.
• Event-Driven developments – 111 Inc (YI US), Healius (HLS AU), Invocare Ltd (IVC AU), Newcrest Mining (NCM AU), Origin Energy (ORG AU). 

• 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, the coming week will see Tryt Inc (9164 JP) and Genda Inc (9166 JP) listing, along with Fadu (440110 KS) bookbuild.
• For placements, Japan and India placements continue to flow, while there are no signs of any major Hong Kong activity.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Nameson Holdings
2. Sunny Optical Technology Group
3. Genting Bhd
4. Shui On Land
5. Health And Happiness (H&H)

and more…

• Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto’s offer.
• The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.
• Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I’d be long, as I consider the risk reward is balanced. 

• We think the tailwinds of China’s consumption downgrade for PDD are overblown, while TEMU will be more of a drag than a support for bottom-line in quarters ahead.
• 2Q results to be announced next month will finally validate our thesis on the company’s earnings risk which we flagged back in last December.  
• The markets have been pricing in a sharp slowdown after a short-lived euphoria around its seemingly strong 1Q results, yet downside surprises could still catch investors off guard. Stay neutral.

• Market expectations for Yakult’s 1QFY24 earnings seem weak, with consensus looking light, and the share price currently lingering near the lower boundary of the minus 2x trend channel.
• Therefore, we believe that even a minor earnings beat next week could potentially drive Yakult Honsha (2267 JP)‘s share price back up to the ¥10,000 level.
• We anticipate that Yakult 1000 has the potential to drive that earnings beat, as it is projected to grow by as much as 65% YoY this quarter.

• China Resources Beer Holdings (291 HK) is a USD21bn red-chip company, and the largest beer company in China in terms of sales volume.
• The company is a perfect fit for the GARP (growth at a reasonable price) strategy, and visibility in earnings is also high for the next 3-5 years.
• Weak sentiment in H-share stocks and in overall China macro/consumption numbers provide a good entry opportunity for the stock.  

• Ace Hardware‘s June SSSG confirmed very strong growth momentum and the positive impact of its BOOM sale, with headline SSSG at +10.7% YoY, after a flat post-Lebaran performance in May.
• The company’s strategy of using influencers to promote the company has been a great success for its #Bisakejadian campaign, and BOOM sale with foot traffic continuing to improve at stores.
• Ace Hardware plans to step up its store expansion and ramp up new store formats to drive growth, with up to 15 new stores this year. Valuations are attractive.

• United Arrows (7606 JP) is a bellwether retailer for the premium fashion sector.
• Its slow initial recovery after the pandemic worried many but the last year saw a solid improvement, even if sales are still well below the peak.
• Following rationalisation, the fashion firm has now put in place plans to double sales to ¥250 billion in the next decade and we expect a return to 10% OPM.

• Foot Locker delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• The company remained optimistic about the back half of the year, with several key launches and brand collaborations planned.
• Despite challenges, Foot Locker continues to focus on its omni-connected retail experience, with plans to open new prototype stores next year.

• Capri Holdings delivered an all-around beat in the previous quarter as earnings per share and revenue both climbed by high single digits.
• All its houses saw an increase in revenue, with Versace, Jimmy Choo, and Michael Kors all experiencing double-digit growth.
• They kept growing footwear sales across all brands, with Versace, Michael Kors, and Jimmy Choo all seeing increases in the low double digits and Jimmy Choo in the high single digits for women’s footwear retail sales.

• Lennar managed to exceed analyst expectations in terms of revenue as well as earnings.
• The last quarter proved to be successful as the company maintained its focus on production, cash flow, and inventory management.
• Additionally, Lennar diligently managed its operating costs, keeping SG&A at significant lows while maintaining a sharp focus on cash flow and bottom-line results.

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.

• NagaCorp Ltd
• Sands China

• Vietnam-based financial education startup Stag announced that it had been selected to participate in the inaugural Entrepreneur-in-Residence (EIR) programme managed by Viet Capital Ventures (VCV) which also includes an investment in the startup.
• Alongside VCV, NH Securities Vietnam Co. Ltd. (NHSV) and Singapore-based Resolution Ventures also invest in a seed funding round for the company.
• This year, with the funding, Stag plans to continue enhancing financial education features while also launching new value-added products for retail and corporate users. It also plans to enhance KYC and security features and complete technology integrations with key strategic partners.

• Lalatech Holdings Co Ltd (LALA HK), a leading logistics transaction platform, has filed for an HKEx IPO to raise US$1 billion, according to press reports.  
• In Lalatech IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on market share pressure, KPIs declining growth, declining revenue visibility, maiden profitability built on a shaky foundation and barely positive underlying FCF. 

• Even if attendance increases somewhat since 92.1% of AGMs in 2022 had less than 100 attendees, the reluctance to hold an online voting AGM due to technical issues isn’t reasonable.
• With 84.8% of companies having Q&A sessions lasting less than 30 minutes, many companies want to end their Q&A sessions in as short a time as possible.
• Companies that want to keep Q&A sessions short tend to hold hybrid on-site and online sessions that can prioritize questions from on-site attendees and limit questions from online participants.

• Rookie International (1962144D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Citic Securities and CMBI. 
• Rookie International is a fully-integrated operator of childrenswear brands in Greater China. It operates a portfolio of childrenswear brands, by designing, manufacturing and distributing branded products in Greater China. 
• It generates revenue primarily by selling licensed products which it has self-designed or curated under the brands (for which it has access to licenses) in Greater China. 

• NEU Battery Materials, a Singapore-based lithium-ion battery recycling startup, has secured US$3.7 million in an oversubscribed seed funding round led by SGInnovate.
• ComfortDelGro Ventures, Shift4Good, Paragon Ventures I, and other angel investors also joined.
• These funds will accelerate the deployment of NEU Battery Materials’s automated recycling line, which will lower operational manpower requirements.

• Lalatech Holdings Co Ltd (LALA HK), a leading logistics transaction platform, has filed for an HKEx IPO to raise US$1 billion, according to press reports.   
• Lalatech is the largest logistics transaction platform in the world by closed-loop freight gross transaction value in the first half of 2022, according to Frost & Sullivan. 
• The key elements of the bull case rest on solid growth, rising monetization rates, achieving maiden profitability, a shift to cash generation and a debt-free balance sheet.

• The ES50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
• As ES50 index changes generally involve large cap names, these Rebalance events have historically had significant volume and ADV impact.
• In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.

• EbixCash (EBIXC IN), a subsidiary of Ebix Inc (EBIX US) and India’s largest end-to-end financial exchange, is seeking to launch an Rs60 billion (US$730 million) in July. 
• In EbixCash IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on margin pressure due to rising operating costs, a related party being the largest customer, declining revenue visibility and deteriorating cash generation.

Genting Berhad’s subsidiary, Resorts World Las Vegas LLC (RWLV), is holding roadshows to market an issuance of USD 300 mn Reg-S/144A 7-year senior unsecured notes. The notes are rated BB+/BBB- by S&P and Fitch, respectively. The new notes will rank pari passu with the existing USD 1.35 bn of RWLVCA notes.

Proceeds from the notes issuance will be used to refinance a USD 300 mn subordinated shareholder loan from Genting Assets Inc. Hence, the transaction will be leverage neutral.

We see fair value for the proposed RWLVCA 2030 notes at c. 8.5%, as we expect the bonds to price in line with the existing curve. That said, there could be strong demand for the notes, given the small issuance size and dearth of issuance in the Asia crossover space so far this year.

• India-based fashion brand Freakins has bagged US$4 million in its seed round led by Matrix Partners India and Blume Ventures.
• Founded in 2021 by Shaan Shah and Puneet Sehgal, Freakins is a direct-to-consumer clothing brand that specializes in denim.
• The Gen Z-focused firm has built up a catalog of over 1,500 styles, which it says caters to different body types.

• Organto announced the launch of ORO, a brand focused on premium non-GMO fruits and vegetables.
• This morning, Organto Foods (OGO:TSXV) announced the introduction of its latest innovative brand offering, ORO.
• ORO focuses on premium non-GMO fruits and vegetables, complimenting the I AM Organic brand (organic fruits and vegetables) and =Awesome Fruits (mid-tier non-GMO fruits).

• We expect JD to report C2Q23 revenue in-line vs. cons., and non-IFRS net income 6% vs. consensus.
• Although we raised our GMV estimate, our 5% YoY revenue growth estimate is unchanged as we expect 3P take rate decline to partially offset GMV growth.
• We maintain SELL and TP but cut FY23 non-GAAP net margin to 3% due to the greater share of lower margin 1P revenue vs. our prior estimate.

• EbixCash (EBIXC IN), a subsidiary of Ebix Inc (EBIX US) and India’s largest end-to-end financial exchange, is seeking to launch an Rs60 billion (US$730 million) in July.   
• EbixCash’s Forex operations have emerged as a leader in India’s airport Forex business. Also, EbixCash’s inward remittance business in India is the clear market leader.
• The key elements of the bull case rest on fast-paced growth, growth runaway from the post-COVID recovery, declining contract assets, improving balance sheet, and declining leverage.

• We expect Shakey’s Pizza (PIZZA PM) to release its results for H1 2023 in the second week of August. The stock just went ex-dividend today (17th July 2023).
• We estimate Q1/H1 FY23 revenue to grow 36%/59% and profits to increase by 31%/71%, led by slight margin expansion for Q2 over Q1 as guided by the company. 
• Trading at 14.5x/11.1x PE with a growth profile of >20% CAGR over the next 4-5 years, given the Potato Corner expansion, Shakey’s Pizza could be an attractive investment opportunity. 

• The policy of extending retirement age to 65 is a measure to solve the immediate labor shortage, but it may lack the perspective of a mid-to-long-term human resource utilization strategy.
• Since most employees in their 60s are male employees, this may slow down the fading of the traditionally male-centric corporate culture. A more diverse workforce is required.
• Although seniors are still a promising market based on demographic composition, from the perspective of creating new value, it’s necessary to have more discussions about creating society that ensures diversity.

The Europe HY Trade Book for July 2023 includes current trade recommendations drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.

• Kaso, which bills itself as the largest B2B ordering platform for restaurants and suppliers in the Middle East, has raised US$10.5 million in a seed round to fuel its mission of disrupting the food supply chain.
• Founded in 2021, the Dubai-based firm currently has 5,000 partners in Saudi Arabia and the United Arab Emirates. Its platform streamlines the fulfillment process for restaurants and suppliers, enhancing efficiency and transparency as well as combating food waste.
• The company estimates that food waste in the Middle East and North Africa (MENA) region amounts to around 250 kilograms per capita per year.