Daily Briefs

• DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
• Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP). 
• Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.

• Trial Holdings (5882 JP) (TH) is now looking to raise up to US$259m in its Japan IPO, after having canceled its prior listing attempt last year.
• TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
• We have looked at the company’s past performance in our previous notes. In this note, we talk about implied valuations in the IPO range.

• Vinda International (3331 HK) has announced the pre-condition for Sukanto Tanoto’s HK$23.50 voluntary offer is satisfied. The composite document will be despatched on or before 11 March. 
• The offeror has received irrevocables from Essity (ESSITYB SS) and Mr Li, representing 72.62% of outstanding shares, which satisfies the 50% minimum acceptance condition.
• Including irrevocables, the offeror currently represents 80.31% of outstanding shares. The offeror intends to exercise compulsory acquisition rights. The tight 0.4% gross spread reflects a done deal. 

• With the review period complete, Titan Co Ltd (TTAN IN) should replace Indian Oil Corp (IOCL IN) in the Nifty100 Low Volatility 30 Index at the close on 27 March.
• Constituent changes, volatility changes and capping changes will result in one-way turnover of 13.2% resulting in a one-way trade of INR 4.2bn.
• The flows on the stocks are not very large but there will be same side and offsetting flows from other index trackers at the same time.

• Adjusting for impact of LNY timing, January numbers still seem firm
• Headline February / LNY 2024 traffic growth also appears solid
• Our thesis remains that tourism recovery takes longer, strongest in H124

• Vipshop reported C4Q23 top-line, non-GAAP EBIT, and GAAP net profit in-line, 6.3% and 7.0% vs. our estimate, and 4.5%, 20.5%, and 23.9%, vs. consensus, respectively;
• We expect the two themes of “live for the moment” consumption and consumption downgrade to persist in 2024. The former drives apparel spending, while the latter drives consumers to Vipshop
• We maintain BUY and raise the TP to US$ 20.4, implying 7.7x CY24 non-GAAP P/E, and 4.9x CY24 EV/Earnings.

Melco Resorts’ (MLCO) results remained soft in Q4 and FY 2023. GGR from the company’s Macau properties improved sequentially in Q4, but continued to underperform peers relative to the 2019 levels. Moreover, EBITDA from City of Dreams (COD) Manila was flat, while earnings from COD Mediterranean fell due to conflict in the Middle East.

MLCO’s weaker earnings recovery meant that the pace of its net debt reduction in FY 2023 (-7% y-o-y) has lagged those of peers such as Sands China (-19%), MGM China (-23%) and Wynn Macau (-10%). That said, from a credit perspective, we are less concerned about the softer earnings performance of Wynn Macau and Melco Resorts (vs. for MGM China and Sands China), as we believe these companies will prioritise using FCF generation to gradually deleverage. In our opinion, the slower pace of deleveraging for Wynn Macau and Melco Resorts may delay the resumption of dividend payments, but is unlikely to affect the companies’ refinancing abilities.

• China Travel International Investment Hong Kong (308 HK) has an impressive 2024 CNY with the volume and revenue of its tourist attractions increased by 46% to 123% YoY.
• Relative to 2019 CNY, most businesses have fully recovered. 1H23 earnings is the highest since 1H20 and the market may have underestimated 2H23, providing upside surprise potential. 
• The share price is still some 30% below the peak in late-2021 when earnings have yet to recover. Also, its net cash now equals 19% of the share price. 

• On the 15 December 2023, the Tanoto family emerged with a HK$23.50 pre-conditional Offer for Vinda (3331 HK). PRC regulatory approval to one side, this Offer was a done deal.
• Those regulatory approvals have now been satisfied. The Composite Doc will be dispatched on or before the 11th March, at which time the Offer will be open for acceptances. 
• With a 50% minimum acceptance condition and irrevocables of 72.624% (plus Tanoto’s 7.69% direct stake), this should turn unconditional on or before the 20th March

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