Brief Consumer: Future Bright Base Buy Zone and Rally Hurdle and more

In this briefing:

  1. Future Bright Base Buy Zone and Rally Hurdle
  2. Lotte Holdings Controlling Stake Battle Dynamics: Short Holdings
  3. El Puerto De Liverpool: Mexican Retailer in the Value Spotlight

1. Future Bright Base Buy Zone and Rally Hurdle

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Future Bright Holdings (703 HK) did not hold our 0.33 bottoming target Future Bright Bottom Projection but is in a basing process with improved volumes on the back of accumulation. Spikes continue to face risk of fades back to base line support near 0.25 with fresh support just above this area.

A bottom cycle on the back of the mature descending wedge is the stand out chart feature along with MACD bull divergence.

Bull wedge formations display a 70% or higher probability of seeing a powerful bull breakout.

MACD held major low support which is a strategic positive (non confirming new price lows as sellers are squeezed out) after the initial upside break in late October, the MACD is now staging a fresh rise off of backswing support.

We have cleared buy level and macro hurdle resistance at 0.65 as our intermediate target after a fresh pullback cycle within the basing process. Above 0.65 opens up the macro cycle.

Future Bright still shows risk of a value trap but as the global equity bull cycle matures in late Q1, Future Bright will become a more attractive rotation play.

2. Lotte Holdings Controlling Stake Battle Dynamics: Short Holdings

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Suddenly, Lotte Holdings is getting a lot of attention. The share price got boosted by nearly 9% in the last three trading days. What’s this all about here? Of course, the price hasn’t indeed bottomed out yet. It is still sitting near the 5-year low. So, bargain hunters might have come in. But why now? Well, then there was this market speculation about SDJ (the older brother) purchasing back Lotte Holdings shares, which has spread lately in the local market. The growing expectation on another round of a brotherly fight seems to be pushing up the Holdings shares.

Here is the link to the local news report about the possibility of SDJ making a move on Lotte Holdings. (Source: MoneyToday Bell)

3. El Puerto De Liverpool: Mexican Retailer in the Value Spotlight

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  • We revisit El Puerto de Liverpool SAB de (LIVEPOLC MM) which we highlighted in our thematic research piece Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers as not only a leading Mexican department store chain but also the third largest credit card issuer in the country
  • El Puerto de Liverpool SAB de (LIVEPOLC MM) shares have underperformed other major LatAm retailers, in part due to concerns about the Mexican macro-economic outlook and also the increase delinquency in its credit card portfolio
  • We believe that El Puerto de Liverpool SAB de (LIVEPOLC MM) is not only attractive on its modest EV/EBITDA valuation, but that it offers EBITDA growth and that it has a relatively under-leveraged balanced sheet
  • The shares are beginning to re-rate, as we see that negative revisions to consensus estimates are subsiding and the value versus the retail sector is, we believe, increasingly compelling to investors
  • Risks include a worse-than-expected GDP growth outlook for Mexico, with lower consumer demand and worsening consumer credit quality as well as a tougher competitive climate in retail, especially in digital marketplace and other online sales venues

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