Consumer

• Now that the March 2024 Nikkei 225 Rebalance is decided, we have a model for the Sep 2024 Review. As previously discussed on Smartkarma, actual name changes get tough now. 
• As of now, there should be two ADDs and two DELETEs. They might not occur. But there are two other situations which create interesting dynamics around big names. 
• The dynamics of Fast Retailing and Tokyo Electron promise more fun than the actual name changes in September 2024. It impacts how you trade Nikkei vs TOPIX and tech internals.

• Auntea Jenny is positioned in the same league as Guming. Both have similar business model/strategy. However, in terms of the number of stores/revenue scale/profitability, Auntea Jenny lags behind its peers.
• China’s freshly-made beverage industry has developed to the stage of capitalization. Auntea Jenny has to obtain more funds to strengthen barriers, improve supply chain, accelerate expansion.The real competition just begins.
• Pre-IPO valuation of Auntea Jenny was already RMB5.1 billion, but the market seems not optimistic about the franchising model. Valuation of Auntea Jenny should be lower than that of Guming/MIXUE.  

• First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China.
• They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$.
• This somewhat obscures their true earnings power.

• Richemont is a Swiss company known for owning luxury brands like Cartier and Van Cleef & Arpels
• The Jewellery segment has seen impressive growth with sales increasing from $5.2bn to $14bn
• The segment boasts significant operating margins of around 35% and has room for further growth in the luxury Jewellery market

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.

• We are reiterating our Buy rating, $10 price target and projections for Vera Bradley with the company reporting 4QFY24 (January) results before the open next Wednesday.
• We look to the 4Q call for management to provide even more detail on the material changes to the company, as CEO Jackie Ardrey and her team begin to take full control of the shopping and product experience.
• We believe Vera Bradley has become increasingly more relevant and appealing to a wider customer base, and the company is positioned, with a cash rich and materially leaner balance sheet, to fund potential higher-margin growth drivers going forward.

• Global wheat prices have been defying expectations and have continued on a downward trend since the start of 2024
• Russia is expected to have a high wheat production of over 90 million tons in 2024 due to favorable growing conditions
• Ukrainian wheat exports are expected to improve with better logistics and an estimated production of nearly 20.5 million tons in the 2024-25 season

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Tata Motors restructures, separating passenger and commercial vehicle businesses into distinct entities to unlock value in electric vehicles and Jaguar Land Rover unit.
• Streamlines operations, enhances shareholder value, and capitalizes on growth opportunities in passenger and commercial vehicle sectors.
• Offers investors specialized entities, unlocking hidden value, showcasing proactive adaptation to market changes, and positioning for sustainable growth in the automotive industry.

• Ola Electric is looking to raise about US$1bn in its upcoming India IPO.
• Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
• In our previous note we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

• With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the March rebalance.
• Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a one-way trade of A$97m.
• There are 9 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.

• AntFin is looking to raise around US$350m by selling around 2% of Zomato (ZOMATO IN).
• Ant Group had earlier sold some of its stake in Nov 2023 and Ant just came out of lockup from the previous selldown a few days ago.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Yesterday, Haidilao International Holding (6862 HK), the largest hotpot chain in China, announced that the company will introduce franchise model as a new way to support growth. 
• Haidilao’s move into franchising should directly benefit Yihai Int’L Holding (1579 HK), the affiliate company that supplies hotpot condiments to Haidilao. 
• Yihai is trading at an inexpensive 12x 2024 PE compared to a historical average of 32x since listing.

• Despite margin pressure, Sheng Siong (SSG SP) delivered resilient earnings for FY23. Revenue was up 2.3% YoY, and profits were up 0.3% YoY. 
• The company guided it had opened two additional stores at the start of 2024 (2023 end: 69), and six more locations were up for tender in 2024. 
• The stock trades at 17x FY23, with a 4% dividend yield and 15% of the market cap in cash. Margin pressure due to inflation will be a headwind in FY24. 

• TSE wants to make disclosure of financial statements in English mandatory, which many prime market companies do, and to require disclosure in both Japanese and English on the same day.
• The focus will be on expanding to English-language disclosure of documents such as annual securities reports and corporate governance reports, which are in high demand by overseas investors.
• Inadequate English-language disclosure has directly affected listed companies by preventing IR meetings from deepening dialogue and negatively impacting investment decisions.

• VinFast is a fast-growing electric vehicle manufacturer based in Vietnam, founded in 2017 by Vingroup and billionaire Pham Nhat Vuong
• The company has plans for global expansion and aims to have vehicles in 50 markets by the end of 2024
• VinFast has a $16 billion market cap and recently completed a SPAC merger that raised $239 million, but its financial ties to Vingroup raise concerns about its independence

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.

Borussia Dortmund’s Q224 results reflect the positive effects of a more normal football season versus the disruption from the FIFA World Cup in the comparative Q223 period. The reiterated financial guidance for FY24 looks well underpinned given the phasing of games and with the excitement of the final stages of the Champions League to come. The share price continues to look very attractive versus our slightly adjusted sum-of-the-parts valuation of €10.40/share and its own historical multiples.

• Culp reports 3QFY24 results after the close on Wednesday, March 6. An investor conference call is scheduled for 11:00 am ET on Thursday, March 7.
• Culp revised its guidance for the second half of 2023 in January in conjunction with the WTR Furniture/Furnishings Virtual Conference.
• Recovery in the mattress segment had been slower than previously expected.

• 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”.

• There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
• The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
• There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.

• 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 and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
• Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”

• The SPDR Straits Times Index ETF (STTF SP) will need to sell Emperador (EMI SP) at the close of trading on 15 March.
• Other global index trackers will need to sell Emperador (EMP PM) at the close on 15 March.
• There will be around US$55m to sell across both lines and varying liquidity has opened up a huge spread between the listings.

• Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$236 million at the IPO reference price of JPY1,550 per share.
• We previously discussed the IPO in Trial Holdings IPO: The Investment Case. 
• In this note, we discuss valuation. Our analysis suggests that Trial is attractively valued at the IPO reference price of JPY1,550. We would participate in the IPO.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, we took an early look at the possible summer 2024 listing of Tokyo Metro.
• For placements, there was another large selldown in Renesas Electronics (6723 JP), while ITC Ltd (ITC IN) could see one as well soon from British American Tobacco (BATS LN). 

• About half of the prime market companies were able to communicate to investors that they are aware of their cost of capital and are committed to share price conscious management.
• Half of the companies are reluctant to engage in constructive dialogue with investors, sustainable growth and medium-to-long-term improvement of corporate value, which is the concept of prime market listing criteria.
• A quarter of prime market listed companies disclosed in English. Since TSE requires disclosure of this information in Corporate Governance Report, disclosure in English of this document becomes more important.

• This is our first report on e-commerce player, Carvana.
• The company’s Fourth Quarter 2023 Earnings included an optimistic forecast regarding the company’s economic performance.
• The company’s fiscal year GPU (Gross Profit per Unit) augmented by nearly $1,000, setting a fresh record and exceeding their previous best in 2021.

• Altria Group’s recent earnings call has raised important topics worth considering for investors.
• The company, known for its strong position in the tobacco industry, showed a clear intent to diversify into smoke-free product categories, such as heated tobacco, oral tobacco, and e-vapor.
• These steps are seen as a strategic move to cushion the company from declining cigarette volumes and broaden its consumer base, thereby improving its long-term growth prospects.

• Wayfair Inc., an American e-commerce company that sells furniture and home goods, reported their Fourth Quarter 2023 earnings.
• Wayfair recorded a 3% adjusted EBITDA margin, reflecting their third consecutive quarter of positive adjusted EBITDA and free cash flow.
• The company’s revenue base largely mirrored that of 2022, improving their free cash flow by over $1 billion in 2023.

• Cash Converters International (ASX:CCV) is a consumer finance company operating as a service provider, owner and franchisor of second-hand goods and financial services stores in Australia and internationally.
• CCV has delivered a solid H1 FY24 with revenue growth of 34% to $191.5m (in line with RaaS $192.5) and EBITDA growth of 13% to $32.6m (15% ahead of RaaS $28.4) and NPAT of $9.8m (7% ahead of RaaS $9.2m).
• The gross loan book has grown 15% to $294m, which is all the more impressive as the business transitions away from SACC products due to regulatory change, more than offset by growth in all other products, domestically and internationally.

• I tally 54 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals discussed this week on Smartkarma (possible four): Offers for Alumina (AWC AU), Superloop (SLC AU) & Qantm Intellectual (QIP AU); Samsonite (1910 HK)‘s ESR (1821 HK)‘s rumoured approaches. 
• Key updates took place on APM Human Services Internation (APM AU), Adbri (ABC AU), CSR Ltd (CSR AU), Weiqiao Textile Co (2698 HK), and Outsourcing Inc (2427 JP).

• In India, demand for pets is on the rise – so much so that the country’s pet care market is estimated to reach US$1.9 billion by 2030. However, that also means an influx of first-time pet owners who don’t always know how to take care of their charges.
• That’s where companies like Supertails come in.
• An India-based pet care startup, Supertails addresses the needs of inexperienced owners by offering a holistic platform for pet care in India.

• Prefer, a bean-free coffee startup in Singapore, has raised US$2 million in seed funding led by Forge Ventures.
• 500 Global, A*ccelerate, Better Bite Ventures, Sopoong Ventures, SEEDS Capital, Entrepreneur First, and Pickup Coffee also participated in the round.
• The capital allows Prefer to make significant investments in growing the capacity of its production facility, expanding its ground coffee and ready-to-drink bottled beverages across Asia Pacific, starting with Singapore and the Philippines.

• Currys has rejected a second proposal from Elliot, at 67p/share, 8% higher. The Board rejected this second proposal, stating it undervalued the company and its potential for future growth.
• My fair value estimate is 76p/share (FY24e PE of 10.2x vs 9.1x currently, and FY25e PE of 8.9x vs 7.9x currently). JD.com’s surely negotiating a friendly offer ahead of 18 March.
• A major shareholder advises not to engage with Elliot unless a 75p/share proposal is tabled. JD.com, a trade buyer, should be capable of meeting the Board’s expectations. Reiterate long.

• During the last 3 weeks, Naspers and Prosus have come under pressure relative to their underlying portfolios.
• Since reaching a new all-time low on the 12th of February, Naspers’ discount has widened by 6 percentage points to 40.7%.
• Prosus’ discount has widened 5.7 percentage points to 35.4%. Naspers and Prosus are down 9% and 8% respectively, relative to a decline of 1.9% for Tencent in ZAR.

• Xinyi Glass Holdings (868 HK) reported FY23 results, with net profit up 5% yoy and sales up 4% yoy. 
• The company announced a final dividend of HKD0.37 per share, resulting in a full year dividend of HKD0.63 per share, which is a yield of 8%. 
• Overall the results look resilient, with auto glass segment a bit weaker than expected and float glass segment stronger than expected. 

• With IPOs becoming a place for founders to recoup their capital, and the desire for post-IPO growth declining, IPOs are a place for retail investors to speculate using scarce liquidity.
• If a market is provided that recovers funds without relying on IPOs, IPOs will become larger and more selective, which brings them closer to the investment focus of institutional investors.
• The expansion of the private equity market will play a significant role in the “industry restructuring,” as more M＆As between private companies and public companies are expected to take place.

• We continue to see more and more global indexes and Sectors breaking out to new highs. This is classic bull market behavior. The latest breakouts: Israel, Germany, and Sweden
• Our bullish outlook (since early November 2023) on global equities (MSCI ACWI) remains intact; continue to ride this trend higher, and treat pullbacks as buying opportunities.
• We continue to get more evidence suggesting the US Dollar (DXY) is rolling over, and quite likely that global sovereign 10-year yields are rolling over as well. Risk-on.

• The Wingstop Fiscal Fourth Quarter and Full Year 2023 Earnings highlighted the company’s substantial progress with its strategies involving same-store sales growth, brand partner returns, and growth acceleration.
• An eye-catching declaration from Wingstop was that 2023 was its strongest financial year on record, demonstrated simultaneously through its industry-leading results and marking its 20th consecutive year of same-store sales growth.
• Furthermore, Wingstop managed to grow to over $3.5 billion in system-wide sales- a growth spurt of 27%- coupled with the opening of a record-breaking 255 net new restaurants..

• Booking Holdings recently reported solid Q4 and full-year 2023 results due to global leisure travel demand resilience.
• Room nights grew by 9% YoY, and revenue of $4.8 billion alongside adjusted EBITDA of $1.5 billion exceeded expectations.
• Non-GAAP earnings per share also grew by 29% YoY, attributed to a reduced share count from the previous year.

• This is our first report on automobile major, Rivian Automotive.
• The company has made significant progress, doubling its production and deliveries and surpassing its initial production guidance by over 7,000 vehicles.
• The production ramp-up and introduction of new technologies came with challenges, but the company believes that the gained experience will be helpful in executing its 2024 plan.

Newly confirmed strong finances (just 0.6x net debt/adjusted EBITDA including convertible loan) and continued Nordic market resilience, allied with multiple growth initiatives, are justifiably reinforcing Scandic’s confidence. Moves into economy (Scandic Go) and Germany mark a widening and accelerating hotel pipeline with clear scope to grow (4% of the estate vs pre-pandemic 11%), while a step-change in digitalisation via the new Oracle OPERA Cloud and enhanced loyalty programme are expected to drive material efficiencies and guest engagement. Financial flexibility should allow the company to address concerns about the maturity of the convertible loan (SEK1.2bn) in October. Consensus FY24 pre-IFRS 16 EBITDA forecast of SEK2.5bn give an EV/EBITDA of c 4.7x.

• We expect PDD to report CY4Q23 top-line and non-GAAP net income 14.3% and 21.2% vs. consensus. Main model changes are increased Temu revenue per order and PDD take-rate;
• Temu continued increasing prices despite the holiday shopping season, and merchants reported that Temu began charging service fees. PDD upgraded its ads tools, which we expect boosted China take rate.
• We maintain our BUY rating and raise our TP to US$ 178.

• Vietnam now accounts for more than 50% of production replacing China
• China production is less than 25% of overall capacity in 2023
• Reshoring and production of higher end “Athleisure” shoes is increasing margins for Stella International (1836 HK)
  

• GoTo held a public expose at the IDX to update investors on latest developments including the Tokopedia sale but also to outline its key strategies for 2024. 
• GoTo will start to receive the service fee from Tokopedia from 1st February despite that monitoring is ongoing by the Ministry of Trade although that is now 75% complete.
• GoTo’s focus will be on affordable products, some new premium offerings, and increasing higher take rate lending products through GoPay, with incoming fees from Tokopedia providing additional funding going forward.  

• For the month of February 2024, 15 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$20bn.
• The average premium for the new transactions announced (or first discussed) in February was ~33%.
• This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

• Asahi India Glass (AISG IN) is an integrated glass and window solutions company and engages both in the automotive and the building & construction segments.
• While capital allocation is not a major concern for the company, the only element that could warrant attention is CWIP as the company has several projects overdue.
• Margins have been strong yet slightly fluctuating in the last two years. Overall, the balance sheet health looks okay.

• The Home Depot’s Q4 2023 earnings highlighted both opportunities realized during the fiscal year and challenges faced, which contributed to a year of moderate performance.
• Overall, the company witnessed a sales decline by 3% reaching $152.7 billion for the fiscal year 2023 while comp sales dropped by 3.2% and EPS stood at $15.11, revealing a reduction from the previous year’s $16.69.
• 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.

• 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. 

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”.

• This is our first report on Garmin Ltd., leading producer of navigation and communication equipment.
• The company delivered strong growth in both consolidated revenue and profit for Q4 2023.
• Consolidated revenue rose by 13% to nearly $1.5 billion, breaking a new quarterly record with three of its business segments reporting double-digit growth.

• In its recent earnings, Walmart demonstrated a strong performance with sales growth of 4.9% and adjusted operating profit growth of 10.9% in constant currency.
• Major highlights include higher transaction counts and unit volumes, gains in market shares in both the U.S and internationally, improved in-stock levels, and strong performance in customer experience scores.
• It’s also significant that the company surpassed $100 billion in global eCommerce sales for the first time.

• The first piece had a question mark in the title. This one has an exclamation point. The exclamation point has value for one investor. Other people? Not so much.
• Today post-close we got the deal. I was a little surprised it came this fast, but it’s now mostly done it appears – largely as predicted in the last piece.
• There are things one can probably read into the details. It is probably worth thinking about those, and how those details affect the industry. 

• Earlier this month, British American Tobacco (BATS LN)’s management stated that they were reviewing their stake in ITC Ltd (ITC IN) to enhance its balance sheet flexibility.
• BAT has owned its stake in ITC for over a century and remains its largest shareholder.
• In this note, we talk about the possible deal structure and dynamics.

• Aeon Co Ltd (8267 JP), Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) have announced an alliance to establish the largest drugstore alliance in Japan by December 2027.
• Aeon will carry out several Tsuruha transactions – buy Oasis 13.58% stake at JPY15,500 per share and, on receiving regulatory approval, reach 27.17% of the voting rights.  
• The agreements involve merging Tsuruha and Welcia through a share exchange offer and Aeon subsequently increasing its Tsuruha voting rights from 27.17% to less than 51%. 

• After the market close, it was announced that HYBE (352820 KS) acquired a 3.7% stake (868,948 shares) in SM Entertainment Co (041510 KS) for 104.3 billion won.
• HYBE’s acquisition of shares was accomplished through the exercise of a put option by SM Entertainment’s founder Lee Soo-Man. After this purchase, HYBE will own 12.6% stake in SM Entertainment. 
• We like SM Entertainment at current levels. Valuations are attractive and there is a strong pipeline of new music/songs to be launched by its artists in 2Q 2024. 

• Astra International booked record earnings for 2023 despite some softening of commodities, driven by strong performance from the auto division and financing plus the strong performance from motorcycles. 
• Astra has continued to invest in growth areas of the Indonesian economy with investments last year in the EV battery ecosystem, increased exposure to healthcare, and investment in data centres.
• Management flagged a potential 2H cyclical downturn but it is well-diversified enough to weather this. Valuations look attractive on 6.8x FY2024E PER and with a 6.6% dividend yield.

• Tesla Q1 must be tracking even worse than I expected based on the uptick in Elon Musk’s erratic behavior—his tell when bad news spirals out of control.
• Wacko conspiracies, Putin propaganda, National security threat! At least he has his self-flattering alter ego Adrian Dittmann to boost his spirits. 
• Musk’s companies continue to rack up safety violations, government investigations, and lawsuits, while he loses his massive pay package and tries to dodge the SEC investigation into his Twitter acquisition.

• Aeon will almost definitely increase its stake in Tsuruha Holdings, which on its own will catalyse drugstore competitors to consider their mergeable options.
• Tsuruha MAY merge with Welcia under Aeon and just talk of this will catalyse drugstore competitors even more.
• But the ongoing fusion of drugstore retailing and FMCG formats like supermarkets and convenience stores, will also spur the entire FMCG sector to respond to Aeon’s massive potential dominance.

• LI Auto reported C4Q23 top line, non-GAAP operating profit and GAAP net income (6.2%), 13% and 81% vs. our estimates and 4.9%, 52% and 102% vs. consensus.
• We believe LI can beat our delivery estimate on exports, but can also miss the consensus on gross margins if its 2024 volume target is met by sedans;
• We raise our TP by US$5 to US$52 and reiterate BUY.

• Despite average weights falling from over 6% in 2020 to under 2% today, 73% of EM funds remain invested in Alibaba.
• The make up of the investor base has changed, with a rotation between high growth investors (out) and Value investors (in).
• Of the 73% of current holders, the core portfolio weight range sits between 1.5% and 3%, with the most bullish topping out at 5%+

• Sido Muncul‘s recent results reflect a sharp recovery in its core herbal and F&B business as increased sales volumes have brought scale benefits to its iconic products. 
• The company saw recovery in both sales and profits, with margins improving considerably  in 4Q2023 due to increased volumes and lower raw material prices. 
• Tolak Angin remains an iconic brand catering to all demographics with 70% leadership of its category, with Kuku Bima being the leader in powdered energy drinks. Valuations appealing versus history. 

• On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP). 
• Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
• To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.

• The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
• …deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK). 
• No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.

• Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.”   First reaction: You wot, mate?
• The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
• Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.

• The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
• Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK),  HSBC (5 HK) are the biggest sells.
• The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).

• Bloomberg reports that Samsonite (1910 HK) is drawing takeover interest from several PE firms which aim to relist Samsonite in the US to draw a higher valuation. 
• A standard takeover premium (around 30%) should be sufficient due to the shareholder register. There is no single large shareholder(s) to pose an issue to an offer. 
• The probability of an offer is medium, with an offer price likely around HK$30.00. Irrespective of a binding offer, the upside remains as Samsonite trades at an undemanding valuation. 

• Luggage maker Samsonite (1910 HK) is up 11.8% today, as I type, after Bloomberg reported it is working with advisers as it studies possibilities, including going private.
• With the reopening of China and the ongoing recovery in travel globally, Samsonite’s net sales improved markedly across all regions. 1H23 profit gained 185.3% versus 1H22.
• FY23 figures should be out in the middle of next month.

• Bloomberg reported that Samsonite (1910 HK) is considering several options, including going private, and there are several suitors including from buyout firms  
• Share price has surged by 14% in the morning session. Stock is still very cheap, at 10.5x PE, 7.5x EV/EBITDA with an impressive ROE of 30%
• Our quick take values Samsonite at HKD34/share, based on its forecasted +1 year earnings multiplied to its average long-term PE of 15.5x 

• Matahari Department Store (LPPF IJ) reported another slow set of results in 4Q2023, as it saw slower demand and continues to clear aged inventory. 
• The company is well-prepared for the upcoming Lebaran season with more conservative inventory levels. It will also see the benefits of new brands coming on stream this year. 
• Matahari Department Store will open 4-6 new stores in 2024 but close 10 underperforming stores, with a continued focus on new DP brands like SUKO. Valuations remain attractive. 

• Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
• We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
• We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.

• Large-Cap indexes (S&P 500, Nasdaq 100, and DJI) remain bullish, all hitting new all-time highs last week while continuing to find short-term support at their respective 20-day MAs.
• Mid-Caps (S&P 400, Russell Mid-Cap) starting another leg higher following breakouts from 2-month consolidations. Small-caps (S&P 600, Russell 2000) are likely to follow in the footsteps of large- and mid-caps.
• Small-Cap indexes have been consolidating for 2.5 months following the historic rally from late-October to late-December 2023, a healthy sign. We expect they are gearing-up for another similar move higher.

• Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
• This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
• This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration. 

• Since the US$550 million secondary placement announcement, Toei Animation (4816 JP)’s shares are down 7.0% from the undisturbed price of JPY18,560 per share (14 February).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Toei Animation’s shares have followed the pattern of previous large placements.
• The offering will likely be priced on 27 February. Investors participating in previous large Japanese placements tend to secure positive returns.

• The possible merger between Welcia and Tsuruha under Aeon has been talked about for years despite concerns from both drugstores, but may now happen.
• But calling these retailers drugstores is increasingly a misnomer: FMCG-drugstores is better because they and many others in the sector, increasingly compete with FMCG retailers like supermarkets and even CVS.
• This evolution is rapid so the merits of a deal make more sense when we view it from a sector five years in the future than how it is today.

• In 4Q23, revenue grew by 136% and operating profit was significantly higher than the market consensus.
• Li Auto grew the most rapidly among the top-ten Chinese NEV sellers.
• We believe Li Auto will be one of the winners after the market gets more concentrated. Upgrade to Hold.

• In this insight, we discuss a trading strategy for APR (278470 KS) which starts trading on 27 February. APR is the most anticipated IPO in Korea so far in 2024.
• Our base case (6 months – 1 year) target price of APR is 370,809 won, which is 48% higher than the IPO price. 
• We recommend investors to take some profits off the table (30%-50%) if the share price shoots higher by 100% to 200%+ from the IPO price on the first day. 

• 4Q23 results beat expectations with record revenues and profits and announced a maiden cash dividend of USD8.75/share (0.35% yield)
• But, share price plunged by 10% on soft guidance of 4-6% YoY growth in room-night booked in 1Q24, due to the impact of high-interest rates and the ongoing wars 
• Good opportunity to buy on dips, stock trading at ~20x FY24 PE, ~18% discount to LT mean. Plus, there is a balance USD7.5b (6.1% shares in issue) of share buybacks  

• Some global investors are urging Chinese private education giant XJ International Holdings Co. Ltd. to redeem half of its $350 million in bonds before maturity, as the creditors fear the Hong Kong-listed firm may intentionally default on repayments.
• The bonds are due in 2026, but the creditors asked for the early redemption to be completed by March 2 in a letter sent to the Chinese company last month by their legal adviser, Chicago-headquartered global law firm Kirkland & Ellis LLP.
• The creditors are a group of large international investors who collectively hold no less than $154 million, or about 50%, of the bonds’ outstanding principal amount, according to the letter seen by Caixin.

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.

• Rakuten Group

• Gym Group is a low-cost gym chain based in the UK, with 230 gyms and trading at six times EBITDA.
• The company hit a rough patch during COVID but is expected to improve with new management and the ramp up of new gyms.
• Public markets may be mispricing the sector due to potential earnings, energy cost normalization, and growth opportunities in the European market.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• This is our first report on food product manufacturer, US Foods.
• The company reported solid performance in the fourth quarter and full year 2023, demonstrating strong execution of its strategy and operational discipline.
• For the entire fiscal year of 2023, the company achieved record adjusted EBITDA of $1.56 billion driven by strong case growth, independent case growth of almost 7% and increased market share with targeted customer types.