Consumer

• 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.

• On 31 January, Walmart (WMT US) announced a 3:1 stock split. For cognoscenti, that meant a Dow Jones Industrial Avg might be in the offing.
• The last change to the index was in Aug-2020, spurred by the 4:1 split for Apple (AAPL US). This time, the likely deletion candidate was Walgreens Boots Alliance (WBA US). 
• Indeed, last week, the Index Keepers announced Amazon.com Inc (AMZN US) would replace Walgreens Boots Alliance on 26 Feb (i.e. WBA would be booted on the close of 23 Feb).

• Trip.com reported a strong set of Q4 and FY23 earnings results last week
• Company has held the line on SG&A expenses; look for strong H124 growth
• We believe shares are cheap and recommend investors buy below US$43/ADS

Key points

• Aritzia has potential for significant share price upside, with potential returns between 170% to 344% over a 3-year period
• The author has previously exited the stock at $50 but is considering going long again due to the brand’s continued strength despite recent challenges
• The analysis questions whether Aritzia’s targets for fiscal year 2027 are reasonable and raises concerns about the company’s potential for future growth

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.

• A bombed-out sector down 80% from the peak is worth another look
• Weaker companies have exited the industry or have already gone under 
• The sector ETF has a good risk reward  with catalysts ahead

• Luckin Coffee (LKNCY US) concluded FY23 with a 203.3% surge in non-GAAP net profit to Rmb3.2bn, benefiting from higher store count and monthly transacting customers.
• Luckin plans to lift store count by at least 23%, with total to reach over 20,000 in FY24. Product innovation, promotional discount reduction, and better store efficiency are profit drivers. 
• Net cash reached Rmb3.8bn, or 7% of market cap. With a consensus EPS forecast of 28% CAGR in the next two years, its 15.1x and 11.7x PERs are not stretched.

• Fang Weihao’s departure means PAGD’s strategic transformation failed. The business model of being a “vassal” of Ping An Group seems hard to bring high valuation due to “discounted” growth potential.
• PAGD is at a crossroads. The question is which development path will the new CEO choose – Follow Fang Weihao’s strategy or return to the traditional Internet healthcare business model?
• Both directions have painful costs that investors will not be happy with. Therefore, we recommend that investors remain sober and rational in the face of the bullish view on PAGD.

• A great week for HK and Chinese shares, especially the larger caps. Mainland indices were up 8 days in a row to Friday, helping HK shares stay bid.
• Net SOUTHBOUND buying was HK$20.0bn in the first post-holiday week. LOTS of SOEs on the net buying side.
• Remarkable this past week, was a new tendency to net sell names which were up a lot and net buy names which haven’t performed as well. 

• 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 BUY RMB 10.7bn of A-shares on strong average activity after RMB +16.1bn, +9.9bn and +12.1bn the three weeks before. More National Team buying this week.
• Five of the top ten buys among liquid NORTHBOUND stocks were finance. Again. Info Tech saw net selling. Again. People trading long gamma now instead of short gamma.

• Youngone Holdings is an attractive deep value stock. Net cash (including short term investments) was 1.1 trillion won at the end of 3Q 2023 (79% of market cap).  
• Youngone Holdings is the holding company of Youngone Group. Youngone Corp is best known for its OEM apparel business for major branded companies such as The North Face and Patagonia.
• We found Youngone Holdings using Smartkarma’s Smart Score Screener system. 

• Hasbro Inc.
• concluded its fourth quarter and 2023 full-year earnings report with a focus on the positive effects of the company’s refocusing strategy and a cautious outlook for 2024.
• Chris Cocks, the CEO, outlined the recent strategies of Hasbro, which centered on their philosophy of fewer, bigger, better, leading to a reduction in SKUs and an emphasis on high-impact products.

• DoorDash reported its Q4 2023 earnings, with the company’s representatives including co-founder, chair, and CEO, Tony Xu, and CFO Ravi Inukonda, discussing its investment strategies, outlook and financial performance.
• Notably, in international markets and new verticals, DoorDash is seeking to find product-market fit and grow efficiently.
• The company sees significant potential due to lower penetration levels, with investments destined towards improving product market fit, expanding its restaurant and retailer base, and launching subscription programs.

• Genuine Parts Company’s (GPC) latest Q4 2023 earnings reveal the company had a strong performance throughout the year, achieving a strong and solid fiscal year.
• GPC’s total sales in 2023 exceeded $23 billion, a nearly $1 billion increase from the previous year, aligning with the company’s expectations.
• Total company segment profit margins also improved by 50 basis points to nearly double digits, marking the third consecutive year of double-digit earnings growth for GPC. On top of this, the company returned $788 million to shareholders and reported a 68th consecutive annual increase in dividends.

• Overseas investors have increased buying Japanese stocks in anticipation of acceleration in profit growth due to the shift to inflation. This is consistent with the trends of ROE and TOPIX.
• As far as ROE trends are concerned, neither share buybacks nor dividends are sufficient. It may be said that many managers are still dominated by a deflationary mindset.
• Companies with high foreign shareholdings are seeing changes that are starting to use cash more effectively. However, it’ll take time, as most companies will start to move after asking around.

• Since early November 2023 we have been expecting global equities (MSCI ACWI) to stage a year-end rally that would continue into the early part of 2024.
• As we progress through the “early part” of 2024, more global indexes and Sectors are breaking out and starting to participate in the upside. This is classic bull market behavior.
• Our outlook remains bullish; continue to ride this trend higher, and treat pullbacks as buying opportunities. Actionable Themes: Hong Kong/China, Consumer Discretionary, Industrials, Energy/Coal, and Polish Banks

• Based on the Q3 consolidated financial results announcement for Sony Group Corporation for FY 2023, the company showed considerable resilience against some difficult market conditions.
• One critical highlight was the significant increase of 22% in consolidated sales for the quarter compared to the same quarter the previous fiscal year, reaching a record high of JPY 3,747.5 billion.
• Notably, the operating income and net income also increased substantially year-on-year and reached the second-highest level on a quarterly basis.

• Instacart recorded a robust fourth quarter in 2023 and an encouraging outlook for 2024.
• The company attributes their success to the top-notch product experience they provide with a leading selection, quality, and speed.
• New and expanded partnerships, such as those with Kroger and Costco, boost Instacart’s selection advantage with some of the most significant grocers in North America.

• The KOSPI 200 INDEX has been rallying since January 2022, roughly up +22.5%, the rally can continue, but soon there could be a pullback, possibly this coming week.
• If the index falls from its current highs, where are the best support levels to go LONG again?
• The price area between 355 and 345 is where the index could find support and resume the uptrend.

• We are raising our price target for BWMX to $22.50 (from $17) increasing our 2024 top and bottom line projections and rolling out 2025 projections after Betterware de Mexico registered 4Q upside on virtually every level, with the Betterware division returning to YoY top line growth for the first time in eight quarters, and 9.6% YoY revenue growth for JAFRA Mexico with materially better than expected margins.
• The company continued to reduce overall debt levels and raised the dividend rate by 25%, with initial 2024 guidance materially above Street expectations.
• Management also confirmed the coming expansion of Betterware into the United States (in 2Q24) and first signs of a key turn at JAFRA USA. We believe Betterware is once again situated to drive material expansion, and we are increasing our 2023 revenue and EPS projections to Ps.

• Despite global challenges on the macroeconomic and industry fronts, the Molson Coors Beverage Company reported strong performance and growth during its Fourth Quarter and Fiscal Year 2023.
• The company announced significant increases in global net revenue and bottom line, with a growth of over 9% and nearly 37% respectively.
• This marks the company’s highest reported dollar results on record, surpassing the already impressive results of 2022.

• The main businesses, hotel and air ticket bookings increased by 131% YoY and 86% YoY in 4Q23.
• The Chinese traveling market continued its recovery after the lift of the lockdown at the end of 2022.
• The stock price is close to our last price target – Downgrade to Hold.

• Trip.com Group (9961 HK) has a remarkable 4Q23 with adjusted net profit surged 437.1% YoY. Higher volume and better market efficiency have resulted in massive margin expansion.
• Net cash has ballooned to about 15% of its share price, and this has allowed it to carry out a massive US$300m Capital Return Program in 2024.
• Business has outperformed the industry in CNY, with domestic hotel and air business volume increased by 60% and 50% YoY. Its overseas platform also saw double-digit growth.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Fast Retailing (9983 JP), Hang Lung (10 HK), Far East Consortium International (35 HK), and Pharmaron Beijing (3759 HK).

• Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$235 million at the IPO reference price of JPY1,550 per share. Pricing on 11 March.
• Trial aims to act as a one-stop shopping store where consumers can buy whatever they want at a great price. Trial’s basic pricing strategy is Every Day Low Price.
• The investment case rests on steady revenue growth, industry-leading same-store sales growth, solid margin profile and cash generation.

• ADEA reported fourth quarter results showcasing debt reduction through free cash flow generation. ADEA had eight license signings of which two were brand new licensees
• Reported fourth quarter results showcasing debt reduction through free cash flow generation. ADEA had eight license signings of which two were brand new licensees
• ADEA has started to invest more in R&D, which resulted in ADEA ending 2023 with nearly 11,000 patents compared to approximately 10,000 in the year prior

• Airbnb’s Fourth Quarter earnings for 2023 revealed significant financial growth, with 99 million Nights and Experiences booked in Q4, marking Airbnb’s highest ever fourth-quarter results.
• Revenue increased by 70% year on year to reach $2.2 billion.
• However, the net loss for the company stood at $249 million.

• Marriott International delivered strong results in 2023 due to robust demand for travel and an increasing portfolio of over 30 leading brands.
• The global room revenue per available room (RevPAR) grew nearly 15%, and net rooms increased 4.7%, driving profitable growth in earnings and cash flows.
• For the fourth quarter, global RevPAR rose over 7% year-on-year, propelled by roughly equal growth in average daily rate (ADR) and occupancy levels.

• Intra-Urban mobility in major cities and foot traffic in leading shopping malls in China have demonstrated decent growth during 2024 CNY holiday period.
• We estimate Miniso domestic store sales increased 35% yoy during CNY-holiday and 11% yoy during Jan to mid-Feb 2024. We expect Miniso total revenue to increase 26% yoy in 1Q24.
• We maintain the stock as BUY and maintain TP at US$33/ADS.

• Xiaocaiyuan International Holding (XCY HK) is looking to raise up to US$200m in its upcoming HK IPO.
• Xiaocaiyuan is a Chinese home-style cuisine restaurant operator. It prices its menus’ items to achieve average spending per consumer between RMB50 and RMB70 for its dine-in customers at its restaurants. 
• In this note, we talk about the company’s historical performance.

• Coca-Cola provided overall positive results despite the ongoing global challenges they faced.
• James Quincey, Chairman and CEO, specifically highlighted their “all-weather strategy,” which allowed them to attain 8% comparable earnings per share growth, despite notable headwinds from a 7% currency impact.
• He attributed the year’s success to the company’s strategy and improved capabilities, making Coca-Cola a more agile and efficient global organization.

• In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the March 2024 index rebal event.
• The official index changes for the March 2024 review could be announced after the close of 5th March 2024.
• I currently do not see any changes for the DAX index but there could be one change for the MDAX index.

• We visited FirstCry Franchisee stores in Ajmer (Rajasthan), and Hosur (Tamil Nadu).
• FirstCry has a high brand recall, limited competition, and healthy franchisee relations.
• The ability to leverage FirstCry and Baby Oye is a good margin lever.

• Low cost apparel retailers have enjoyed a significant uptick in the past few years as consumers look to polarise their spending further between cheaper basics and luxury treats. 
• But the real change is in improving profitability. One the biggest beneficiaries has been Honeys, a low cost womenswear retailer that has seen a revival in the past few years.
• Operating profit has tripled since 2018. Can it last? Work on creating its own low cost manufacturing base suggests it can.

• In 2023, % Woman Board Members increased progressively even in companies with lower corporate governance scores. Many companies are unanimous in their commitment to appointing women board members.
• Together with the fact that business challenges have not been solved by only having people who think alike, 90% of institutional investors said that information on women’s activities is important.
• Companies with over 25% women on their boards have superior values in profitability and stock valuation. Managers should implement the promotion of women in order to transition to value-creating management.

• Both Elliot (62p/share prospective offer) and JD.com (9618 HK) are interested in Currys PLC (CURY LN) a battered (but with long history) UK retailer of electronics and appliances.
• Currys has been reshaping since 2008, without the market giving credit by the looks of the share price. This time might be different with focus on higher-margin services and credit.
• On a comparables EV/EBITDA basis, my fair value estimate is 76p/share (£861 million implied equity value), 23% above Elliot’s offer. The Board may be willing to engage around that figure.

• Trial Holdings (5882 JP) (TH) is now looking to raise around US$234m 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 provide our updated thoughts on valuation.

• The possibility/likelihood of a “¥50bn MBO” for Snow Peak Inc (7816 JP) was leaked in a Nikkei article last Friday. It went limit up two days in a row. 
• That TOB price is more than 70% off its three-year high. That will certainly disappoint some. Separately, the price seems a bit low given growth. 
• The family and friends own ~42% so if someone gets upset, or uppity, there could be a challenge. Just because an MBO exists doesn’t mean people have to tender in.

• Snow Peak Inc (7816 JP) has recommended a Bain Capital-sponsored MBO tender offer at JPY1,250 per share, a 58.0% premium to the undisturbed price (15 February). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 38.13% ownership ratio.
• Based on the irrevocables, the minimum acceptance condition requires a 52.8% minority acceptance rate. While not a knockout offer, the acceptance condition is achievable.  

• Pal Group’s founder retired last month after 50 years at the helm. 
• Since 2001, the fashion to variety store business has grown from ¥10 billion to a forecast ¥184 billion this year.
• There remains growth potential in the variety store chain, 3Coins, as well as a revival in the fashion side.

Key points

• ETSY’s end markets are expected to grow at a high single digit rate, allowing for 10% compound annual growth rate in Gross Merchandise Sales (GMS)
• ETSY’s international market, comprising 45% of revenue, is growing faster than its US market
• ETSY has room to increase its take rate slightly, with its current rate of 19.8% in line with industry standards, positioning the company for continued growth in e-commerce.

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.

• The NIFTY Index has been rising for 5 days in a row, this is the second week up (CC=+2), there is a good chance it will pullback soon.
• The index is going towards the Q3 resistance level at 22354, that would be a good area from where to start to prepare for a pullback.
• Going SHORT may not be worth it, the right trade is to wait for the pullback and go LONG again at better prices.

Dentsu’s FY23 net revenue was a touch above guidance at Q3, with a better-than-expected operating margin reflecting a good Q4 in Japan, further boosted by a short delay in an IT project pushed out to Q124. The results were accompanied by the news of a change in global CFO, with the role reverting to Yushin Soga, who held the role until January 2023. As anticipated, net revenue outside Japan declined, although there was some trading improvement in the US in Q4. A thorough business review is now in progress, with the next mid-term plan due early in H2. In the meantime, the balance sheet is strong, with leverage reduced to 0.6x EBITDA, and share buybacks will be resumed. We regard the rating as undemanding.

• GTX reported results affirming our investment thesis on how the business can generate substantial free cash flow with an outlook of little to no sales growth
• Ahead of the results, we had brought down our numbers on the expectation a flattish year could result in sales and adjusted EBITDA being more in line with 2023
• GTX issued a 2024 guidance suggesting we would be towards the lower end of their guidance range as new programs should hold sales closer to 2023 levels

• Ownership levels among Asia Ex-Japan funds hit record highs as funds continue to add exposure.
• 13% of the funds in our analysis opened new positions over the last 6-months, with average weights increasing by 0.57%
• New positions added by Invesco Asia Opportunities (4.3%), LO Funds High Conviction (3.6%) and Allianz Asian Equity (2.9%) over the period.

• We are initiating coverage of Bassett Furniture Industries, Inc., publicly traded under the ticker BSET.
• Bassett primarily operates in two segments: Retail and Wholesale.
• A third segment, Corporate & Other, accounts for corporate and unallocated expenses, as well as the operating results of Noa Home, a recent e-commerce acquisition.

• Hotel demand ahead of expectations – Q1-3 FY3/2024 results were driven by strong underlying demand for hotel operations.
• The domestic business was boosted by a robust market environment where visitor numbers for domestic and overseas customers exceeded pre-pandemic levels, helping drive Q3 FY3/2024 RevPAR by 43.5% YoY.
• Despite a high run rate versus company guidance for sales and exceeding recurring profit and net income, there has been no revision from the company, indicating a potential for an overshoot in our view. We believe inbound and domestic demand will be sustained.

• Heiwado Co Ltd (8276 JP) today announced a Secondary Offering sell-down by cross-holders, combined with a buyback post-offering to mitigate some of the effects of overhang.
• Banks and insurers are selling, and that will leave the stock with a lot of cross-holders left, but investors should look at the model given he zeitgeist. 
• Companies with lots of cross-holders have to be “fair” to them. Those without copious cash have to spread it around so this transaction model looks likely to be continued.

• Auntea Jenny (Shanghai) Industrial (AJI HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are CITIC Securities, Haitong, and DFZQ.
• Auntea Jenny (Shanghai) Industrial (Auntea) is a freshly-made beverage producer.
• As per CIC, the firm operates the fourth largest network of freshly-made tea shops in China as of Sept 23, with an extensive reach into the lower-tier markets

• Ralph Lauren has yielded strong financial performance for Q3, reportedly exceeding the company’s top and bottom-line expectations, while driving significant EPS growth.
• Such advancement comes despite a reportedly dynamic global environment, thanks to considerable focus on areas such as the brand.
• Immersing people in Ralph Lauren’s world of elegance and sophistication, the brand is resonating globally, allowing overall pricing power in the market.

• There was modest improvements in corporate governance in 2023, without any Code revisions. About two thirds of companies showed little improvement in their corporate governance practices over the past year.
• However, the increase in % Woman Board Members, a touchstone for measuring the improvement attitude of some companies that have shown improvement, gives us hope for the future.
• Companies with Metrical CG scores rising below 2.5 points and those with declines have challenges with their use of cash, along with their stock repurchase and dividend policies.

• Hilton Worldwide Holdings Inc.
• reported its Q4 and full-year 2023 earnings, during which the company made several significant achievements.
• For 2023, Hilton’s system-wide RevPAR grew by 12.6% compared to 2022 due to strong growth across every major region and chain scale.

• Trial Holdings (5882 JP) (TH) is now looking to raise around US$234m 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 past performance in our previous notes. In this note, we talk about the updates from its recent filings.

• In his presentation Thursday morning at the Agricultural Outlook Forum USDA Chief Economist Seth Meyer said input prices are not falling with commodity prices, squeezing margins.

• “When commodity prices normalize and readjust, those input prices tend to be sticky, which shrinks producer margins,” Meyer says. “…It was maybe easier to make a little bit of money in ’22, ’23.

• It’s going to be a little bit tougher in the next crop year.”

• Performance Food Group (PFG) hosted its Q2 2024 earnings call where they discussed results and future outlook, with performance metrics showing strong results for the quarter.
• The company generated total net sales of $14.3 billion, a 2.9% increase from last year, with the result at the top end of the guidance range.
• PFG’s sales performance was led by a 2.1% rise in total case volume growth, helped by an 8.7% surge in independent restaurant case growth.

• Tapestry Inc.’s Q2 FY2022 earnings were particularly solid and it achieved a 3% sales gain driven by a 12% growth at constant currency internationally, reflecting the benefits of its diversified business model.
• The firm saw a notable 19% sales increase in Greater China, as well as increases in Japan, Europe, and other parts of Asia.
• Impressively, the company maintained its revenue standing in North America, which was better than it had previously expected.

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

• As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
• Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK). 
• Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.

• The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
• Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
• The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high. 

• There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
• Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
• There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

• Shiseido Company (4911 JP) reported 4Q23 results last week.  Overall, operating profit of Y40bn in FY23 was Y5bn higher than previous company guidance of Y35bn.
• However, Shiseido’s China business weakened materially in 4Q23, and 2024/25 guidance seems a bit light. 
• I believe FY24 should not be used as a base for valuation because the nuclear wastewater impact is likely to linger a while longer during FY24. 

• Emperador (EMI SP) fails the liquidity test and could be sold by the SPDR Straits Times Index ETF (STTF SP) in March.
• Emperador (EMP PM) will also be sold by global index trackers in March and the stock should remain under pressure for the next few weeks.
• Frasers Centrepoint Trust (FCT SP) is ranked ahead of CapitaLand Ascott Trust (CLAS SP) by 9% on full market cap and should be added to the ETF in March.

• 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, Trial Holdings (5882 JP) was back in the market, a year after ditching its previous attempt, while Juniper Hotels is trying to ride the India wave.
• For placements, more signs of REIT coming back to life, this time in Japan. A relatively large deal in Toei Animation (4816 JP) as well was launched.

• Overseas traveling revenue recovered strongly in China during the Chinese New Year.
• Great Wall Motor’s vehicle deliveries increased by 69% in January 2024.
• JD.com plans to raise the salaries for customer service employees by 30% in 2024.