Consumer

• East Buy’s stock price plunged after a conflict broke out between the top broadcaster and the management team.
• NIO will launch another brand for low price products, following BYD’s low price and Li Auto’s price reduction.
• Tencent will move its unimportant assets to China Literature again.

• 7 weeks up in a row and very overbought, the NIFTY Index could pullback from its highs this week and/or the next.
• A pullback to the 21008-20542 support area could be an occasion to enter LONG, profitable if the index rebounds from there and continues to rally into January.
• The potential pullback appears to be a short-lived retracement down, based on MRM pattern readings.

• The Indian Market (~$4 trillion) has now overtaken Hong Kong as the 4th most-valued stock market after the US, China, and Japan. 
• We recently concluded an exploratory trip to Patna, the capital, and also the largest city of the state of Bihar, Summarized thoughts on companies focused in this insight. 
• Multiple stocks covered in the Insight. The future of Easy Trip Planners (EASEMYTR IN), especially if it’s banking on franchisee expansion, could go the other way around.

• After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.
• This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.
• As is our custom, our working excel models are available to our readers on request. 

• Gaining sufficient scale to get out of the shadow of the Big 3 online malls in Japan is providing tough for Jade Group (3558 JP)’s Locondo.
• The number of active users on Locondo has fallen in recent quarters, causing concern for merchants and investors alike. 
• Jade Group, is hoping that sales of major brands like Reebok will attract more users while also bringing higher levels of growth.

• We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
• We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
• Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.

• MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
• While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate. 
• The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender. 

• SOUTHBOUND flows showing reversion tendencies continues for a fourth week. Hs rebound vs their As on the week – especially the liquid ones.
• SOUTHBOUND saw HK$9.9bn of OUTflows on the week to 15 Dec, ALL of which was net sales of Tracker Fund of Hong Kong (2800 HK) and Tencent (700 HK). 
• High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK) and China Telecom (728 HK) seeing net buying as a percentage of volume. 

• Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
• MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
• Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.

• Since SEC operates in US executive branch, Congress lacks power to stop IPOs
• But by passing new laws, Congress could potentially undermine SHEIN’s IPO
• Given current political climate in the US, SHEIN IPO faces real political risks

• Water Oasis (1161 HK) reported 16%/65% YoY revenue/PAT growth for FY23. For H2 FY23 revenue/PAT decelerated to 7% YoY/31% YoY. The company guided a positive outlook for FY24.
• Net cash increased to 271 mn HKD, representing 28% of market capitalization (990 mn HKD), as the company benefitted from positive working capital cycle changes. 
• Water Oasis (1161 HK) declared a 7-cent dividend for H2 FY23, bringing the overall dividend for FY23 to 14 cents (9.6% div yield). 

• Haier Smart Home (6690 HK)‘s acquisition of Carrier commercial refrigeration business is earnings accretive. It will also be strategically positive to its growth outlook. 
• With net cash of Rmb17.3bn, HSH has no problem funding the deal internally. Instead of earning a single-digit return on cash, the business’ 9% earnings yield is attractive. 
• The transaction will extend HSH’s application scenarios from household to commercial while elevating its competitiveness in Europe and allowing it to capture the B-end customers. 

• REPT BATTERO Energy (REPT) raised around US$270m in its Hong Kong IPO.
• REPT is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• Since mid-November, spreads have generally widened across our European liquid universe of ordinary and preferred shares (9 have tightened, 10 widened).
• Recommended trades long preferred / short ordinary shares: Media-for-Europe, Sixt, Volkswagen (still the most interesting situation).
• Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal.

• I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Four new deals discussed this week: Sigma Healthcare (SIG AU)‘s reverse takeover; Tanotos’ tilt for Vinda (3331 HK); and Tender offers for Shinko Electric (6967 JP) and Outsourcing (2427 JP).
• Key updates took place on: Pact Group Holdings (PGH AU), Allkem (AKE AU), Costa Group Holdings (CGC AU), T&K Toka Co Ltd (4636 JP) and Hollysys Automation Technologies (HOLI US).

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• A few large placements in India, along with Denso Corp (6902 JP) pricing, kept the market ticking this week.
• In the IPO space, India saw a flurry of launches, as companies and banker try to cash-in on the market frenzy.

• Las Vegas Sands (LVS US) announced it will buy  ~1% of Sands China (1928 HK). Melco International Development (200 HK) mean reverts after a roller coaster out/under-performance. 
• Preceding my comments on Las Vegas Sands and Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Vinda International (3331 HK) has announced a pre-conditional voluntary offer from Sukanto Tanoto at HK$23.50 per scheme share, a 7.8% premium to the undisturbed price (26 April). 
• The pre-condition relates to China SAMR and Japan Fair Trade Commission approval. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
• Irrevocables ensure the satisfaction of the minimum acceptance condition but also rule out a competing proposal. The timing of China SAMR approval is the key risk. 

• Olympic Industries (OLYMPI BD) sustained and improved profitability despite the revenue drop. 
• Square Textiles (SQTT BD) faced challenges in FY23 but now seems to be turning around. 
• Bashundhara Paper Mills (BPML BD) saw a weak performance driven by lower profitability due higher interest rates on borrowings.

• Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
• That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
• And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal. 

• A meeting with Ace Hardware Indonesia revealed a newfound enthusiasm and confidence in the outlook for growth with new store formats and an omnichannel approach as key future drivers. 
• The company will accelerate its store buildout in 2024 with plans for 20 new stores versus 13 in 2023 with new format stores taking the lead, with an emphasis ex-Java.
• Ace Hardware Indonesia (ACES IJ) will also accelerate the buildout of smaller-sized Ace Express stores with a pilot started this year.  Recent share price weakness looks unjustified.

• The hosts discuss the abundance of bowl lunch options in midtown Manhattan and how it has changed over time.
• They raise the question of how businesses in this crowded market can stand out and win customers.
• The co-founder of Sweetgreen, Nick Jamaic, is introduced as the guest to discuss their success in the salad bowl game and their recent announcement of not cooking anything in seed oils.

This podcast is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only.

• There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
• Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
• Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

• China Tourism Group Duty Free Corp Ltd (601888 CH)  (CTG) share price has plunged by 63% despite solid 9M23 profits growth and cash flushed balance sheet 
• Underlying fundamentals is solid, Chinese people still buying duty free goods, albeit tilting towards value than decadence purchases 
• CTG is cheap relative to its own history on all valuation metrics (PE, P/Book, P/FCF) and many technical indicators suggest it is in OVERSOLD territory 

• GoTo Gojek Tokopedia Tbk PT (GOTO IJ) announced on Monday a partnership with TikTok  which would combine former’s e-commerce biz Tokopedia with TikTok Shop Indonesia.
• TikTok was forced to close its e-commerce services in Indonesia following regulations banning online shopping on social media platforms in September citing protection of smaller merchants and data privacy.
• It seems TikTok will certainly be a winner if the deal is approved but surprised at GoTo’s move to retain a minority stake given e-commerce business is nearing profits.

• With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
• Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
• In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

• Li Auto’s deliveries and revenues surged by three digits since 3Q23.
• The company is building new factories in Changzhou and Beijing. 
• However, we believe the stock is overvalued apart from comparing with Tesla.

• Research shows that El Niño results in milder weather leading to higher precipitation and consequently ~3.5% higher yield leading to depressed bean prices.
• Bean prices have outperformed seasonal trends in November and December. It is surprising given surplus inventory outlook and El Niño effect on production.
• Notifications of large export sales have driven much of the bullishness in prices over the past week. Prices are up 1.7% from last Friday’s settlement prices.

• Adelson family interests have sold 10% of their LVS equity to acquire a pro basketball franchise. This triggered am 8.5% decline in the stock when it was actually  bullish.
• The market has not yet grasped the magnitude of  the Asian  gaming  recovery arc which points to 2024 reaching baseline 2019 arrivals and GRR pace by mid-2024.
• LVS has the scale and amenities to outperform peers but this  is  not  yet reflected in its trading  range dead pooled in  the $40s.

• Since 11/21/23 Compass we have discussed weekly that even a minor 2-5% pullback is far from a guarantee, considering “breakaway gaps” and what appeared to be an ongoing “lockout rally”
• All we got was a 1% peak to trough decline in the S&P 500, while the Nasdaq 100 (QQQ) pulled back 2.9% (though left the 11/14/23 gap unfilled).
• Now, SPX and QQQ are breaking out yet again after a multi-week consolidation period, including SPX breaking above 2-year resistance at 4600-4607. This is what a strong market looks like.

• Consumption of used products is rising fast as exemplified by the rise of 2nd Street. 
• Operated by Geo Holdings (2681 JP), once just a DVD rental business, it is now Japan’s largest used goods retailer.
• Sales are booming in a market increasingly focused on thrift and re-use, allowing 2nd Street to even take on the might of Mercari.

• So there we were today, scanning the latest corporate filings to the Securities and Exchange Commission , when we noticed that Johnson Controls ($JCI) had filed its latest earnings report .
• We started reading, and were immediately stopped short by this earnings adjustment, right there in the second bullet point: Fiscal Q4 GAAP EPS of $0.80; Q4 Adjusted EPS of $1.
• Hold up — what cybersecurity incident? When did that happen, and what has Johnson Controls said about it so far? 

• Since the US$4.0 billion secondary placement announcement, Denso Corp (6902 JP)’s shares are down 4.3% from the undisturbed price of JPY2,298 per share (28 November).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Denso’s shares have followed the pattern of previous large placements.
• The offering will likely be priced on 13 December. Investors participating in previous large Japanese placements tend to secure positive returns.

• Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
• Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
• Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK). 

• CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
• Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
• The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN). 

• JSE indices get rebalanced in the closing auction on Thursday.
• No constituent changes will be made to the ALSI, Top 40, Top 40 SWIX, FINI, FINDI or INDI. HAR will enter the RESI and AMS will fall out.
• Largest buys: BTI, MNP, BHG, APN.

• KT&G is a high conviction pick in 2024.We believe KT&G Corporation (033780 KS) is likely to announce cigarette price hikes in 2H 2024.
• Three major reasons include a) no cigarette price hikes in nearly 9 years, b) Korean legislative election will be in April 2024, and c) reduce government tax revenue shortfall.
• We believe that the Korean government could raise cigarette prices to about 7,000 won to 8,000 won per pack from current price of 4,500 won. 

• The contents of quarterly reports are the same as those of financial summaries. Therefore, it’s in order that the quarterly reports for 1Q /3Q be unified with the financial summaries.
• The major difference between quarterly securities reports and financial summaries is the significance of legal responsibility. By requiring partial review by auditors, TSE will ensure the reliability of financial summaries.
• Meanwhile, TSE must continue to enhance the ethics of company managers and require companies to eliminate malicious misreporting. Unification of quarterly reports would further increase the role of the TSE.

• RPSGV’s BPO business, Firstsource Solutions, is stabilizing and reported flattish QoQ revenue growth. EBIT margin has also bottomed out and is now at around 11%, an expansion of 300bp YoY.
• FMCG Business continues to maintain an annualized revenue run-rate of INR 400cr+. The Sports business generated revenues of INR 50cr+ vs INR 15cr YoY. 
• The FMCG and the Sports businesses hold tremendous scalability potential going forward. The IPL Lucknow franchise also owns a team named Durban in the South Africa T20 league.

• I wrote a brief write-up on why I liked Anexo (ANX) almost a year ago when the stock was trading at 84p.
• I had hoped that the VW payout would be 10-20 million GBP and turned out to be only about 7.2 million for 12,000 of their 16,000 VW clients.
• As of their H1 2023 report they had another 12,000 Mercedes emissions clients, and they believe the VW settlement has created a precedent and have several other car manufacturers lined up, so this could turn out to become a nice profit stream after all.

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.

• Wynn Macau Ltd

• Li Ning (2331 HK) announced yesterday that the company has acquired a HK office project, the Harbour East, from Henderson Land, for a total consideration of HKD2.2bn. 
• The acquisition is quite unexpected given that Li Ning has had a clean corporate governance track record.
• The company now trades at 11x foward PE, assuming no growth in 2023 and 2024 earnings.  It is now a value stock, though the visibility is very low. 

• On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
• The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
• We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.

• We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
• Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A. 
• There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

• The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
• The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
• Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.

• GoTo Gojek Tokopedia (GOTO IJ) has announced that it will sell a controlling 75.01% stake in Tokopedia to TikTok in order to create Indonesia’s leading e-commerce platform.
• There had been earlier indications that a deal was in the offing but the size of TikTok’s stake was surprising plus it has committed to invest US$1.5bn in Tokopedia. 
• GoTo will retain a 24.99% non-dilutive stake and will receive an ongoing revenue stream from Tokopedia in line with its scale and growth contributing directly to its EBITDA. 

• The Costa Group Holdings (CGC AU) IE considers Paine Schwartz Partners’ A$3.20 offer fair and reasonable as it is towards the upper end of its A$2.62-3.28 valuation range. 
• The scheme requires China SAMR and European Commission approvals. SAMR approval poses a timing risk but the scheduling of the scheme meeting reflects PSP’s confidence in securing the approvals.
• While not a knockout bid, the profit warning should help sway the retail vote in favour of the scheme. At the last close, the gross spread was 8.1%.

• REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, has launched an HKEx IPO to raise up to US$306 million. Pricing is on 14 December.
• We previously discussed the IPO in Rept Battero IPO: The Bull Case and Rept Battero IPO: The Bear Case. 
• There are no cornerstone investors. Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would pass on the IPO.

• On the 22 September, Costa Group Holdings (CGC AU) backed Paine Schwartz Partners’ (PSP) revised (and reduced) A$3.20/share best and final Offer. 
• Costa’s Scheme Meeting has now been tabled for the 30 December, with implementation expected on the 26 February. The IE is supportive and Costa’s board unanimously recommends the transaction.
• This appears  done. Key conditions are Costa’s shareholder vote and SAMR approval. I can’t see SAMR getting into a bind over berries. 

• Doms (DOMS IN) IPO opens for subscription soon. The INR 12 bn IPO includes INR 3.5 bn fresh issue and the remaining as offer for sale. 
• The company is a prominent player in the Indian stationary market and has one of the most diverse product portfolio with a market share of 12% in F23. 
• DOMS ticks right in majority of the boxes when it comes to operations and B/S health. One must still be cautious regarding dependence on FILA group, and faster depreciating rates.  

• The investment case revolves around the Company’s strong long-term fundamentals
• An attractive and complementary skincare-focused brand portfolio centred on flagship Nivea brand in the mass segment, Eucerin in the growing dermocosmetics category and La Prairie in the higher-margin luxury segment.
• Less expensive option than L’Oréal to gain exposure to an attractive skincare portfolio. The Company’s business model should prove resilient in a more challenging marker environment

• A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
• Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
• There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

• REPT BATTERO Energy (1998104D CH) is looking to raise up to HK$2.39bn (US$306m) in its IPO by selling 116.07m shares at HK$20.6/share, valuing the company at HK$46.9bn (US$6bn).
• The H-share market cap is a lot lower at HK$6.33bn (US$811m) since most of the pre-IPO shares will remain as Domestic Unlisted Shares.
• The stock will be eligible for HSCI inclusion in March but will need to trade higher than the upper end of the IPO range to be added to the index.

• Travelers increased by 75% YoY and traveling spending increased by 144% YoY in China in 9M2023.
• TCOM’s total revenue rose by 31% in 3Q23 over 3Q19 before COVID.
• We conclude an upside of 33% and a price target of US$43.70.

• We set out to compare prices & the “retail experience” at AMZN, SHEIN
• Selecting comparable items, we looked at landed costs, transit times, returns
• SHEIN’s value proposition is obvious; will consumers accept its drawbacks, too?

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts to play with.
• Last week saw NORTHBOUND net sell RMB 5.8bn of A-sharesin higher-than-normal activity.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start).

• BYD offers a reward up to RMB5 million for reporting defamation.
• NIO denied further layoff after releasing the 3Q23 results with both revenue and loss increasing significantly.
• Meituan’s GMV of live broadcasting food delivery reached RMB2 billion.

• REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, has launched an HKEx IPO to raise up to US$306 million. Pricing is on 14 December.   
• In Rept Battero IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on market share losses, high related party revenue, weak outlook, EV battery weak performance, FCF burn, high impairments and receivable financing. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Sino-Synergy Hydrogen Energy Technology (9663 HK) and Dekon Food didn’t do much even as other are lining up to try their luck.
• On the placements front, Japan and India flows continue like there is no tomorrow.