Daily Brief Consumer: Great Wall Motor, Jardine Cycle & Carriage, Seven & I Holdings, BYD, Pou Chen, Midea Group Co Ltd A, Hero Motocorp, Sichuan Baicha Baidao Industrial, Vf Corp and more

• A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
• They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
• RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

• Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
• The simple ratio of JCNC/Astra International (ASII IJ) is at its highest level outside the 2008 GFC.
• A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.

• Value Act’s recent statement might suggest that they have prevailed and Seven & I Holdings (3382 JP) has yielded to their demands. However, the reality might be less straightforward.
• Value Act sought new market expansion, but Seven & I is focused on reinforcing its presence in existing, well-established markets.
• Given Value Act’s impatience, their acceptance of Seven & I’s plan for a 2026 Super Stores IPO, contingent on a business transformation, is unexpected.

• We believe the revenue growth will be slow in 1Q24, but it will still be rapid for the full year 2024.
• We also believe the operating margin will hit the historical high in 1Q24, but it will be just stable for the year 2024.
• We conclude the stock has an upside of 60% for the year end 2024. Buy.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
• Since my last insight, my index change expectations and flow expectations have changed significantly.
• My latest estimate for one-way flow in June 2024 is US$1.06bn (down from US$1.22bn a month ago).

• 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 been selling recently (this week and last buying semi tech, selling renewables)
• Hs fell sharply vs As. AH Premia very wide. Alpha on portfolio vs straight H vs A but a bad week as liquid Hs underperformed liquid As by 2.5+%.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 6.7bn of A-shares on decent volume. A-shares out-performed H-shares quite dramatically, taking back H-share gains from the week before, which reversed prior weeks.
• This week saw net buying of semiconductor/chip names, and net selling of the EV/Solar/Battery space and buying of the Ping Ans, but most notable was liquid A vs H performance.

• The story of Hero is the story of persistence, collaboration and achieving goals that many would have regarded as impossible.
• From its humble roots of selling bicycles in 1956 Ludhiana Punjab, to becoming the world’s largest two wheeler company is an extraordinary feat.

• Maintaining the momentum, protecting its market share and setting sights towards ‘Future of Mobility’ is something special.

• Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around 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 and valuations in our past note. In this note, we talk about the trading dynamics.

Key points

• VFC is a large apparel company with iconic brands such as The North Face and Vans
• Shares are currently undervalued following a disappointing FY23, with estimated fair value of $40/share
• Strong brands and opportunities for portfolio rationalization and margin improvement make VFC a potential growth opportunity with new management in place.

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.