Consumer

• Wilmar International (WIL SP)‘s current implied stub and simple ratio (Wilmar/Yihai Kerry Arawana Holdings C (300999 CH)) are both at all-time highs. 
• Preceding my comments on Wilmar 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%.

• Amer Sports (AS US) is a global iconic sports and outdoor brand group. According to press reports, it has filed for a NYSE IPO to raise US$2 billion.
• In 2019, a consortium of Anta Sports Products (2020 HK), FountainVest, Anamered Investments and Tencent (700 HK) acquired Amer at an EV of €5.5 billion.  
• The bull case rests on the rapid growth and gross margin improvement under the consortium’s ownership, along with technical apparel and outdoor performance’s improving revenue and margin profile. 

• The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. Tongcheng Travel Holdings (780 HK) is a key beneficiary.
• In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. 
• Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against Trip.com (TCOM US) can be reversed.

• The business model of MIXUE is S2B2C. The expansive and highly efficient supply chain is the bedrock of MIXUE’s industry leading performance and scale, setting it apart from its peers.
• MIXUE has more flexibility to diversify its business to explore new growth points and is also more resilient to risks/industry changes, which determines sustainability and growth ceiling of future development.
• As competition for freshly-made tea drinks industry intensifies, capital has become “impatient”. As an industry leader, now is the best time for an IPO. MIXUE’s valuation could reach US$10 billion.

• It is an expected option for a parent company to make a profitable subsidiary wholly owned by the parent company, an environment that demands improved ROE.
• It is natural that the market would receive a stock offering by a large shareholder with more information than others as the stock price is higher than its fair value.
• It’s not unrelated to the fact that few shareholder proposals are approved and company proposals are rejected at AGMs, and that most domestic investment managers affiliates of major financial institutions.

• Guming Holdings (GUM HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are Goldman Sachs, and UBS.
• Guming Holdings (Guming) is a maker of freshly-made beverages in China.
• As per CIC, its “Good me” brand is China’s largest mid-priced freshly-made tea store brand in terms of both GMV in 2023 and store count as of Dec 2023.

• FirstCry (0172540D IN) seeks to raise up to US$700m in its upcoming India IPO. The deal will be run by Kotak, Morgan Stanley, Bank of America, JM Financial and Avendus.
• FirstCry is India’s largest multi-channel retailing platform for Mothers’, Babies’ and Kids’ products in terms of GMV, for the year ending Dec 2022 (9M23), according to RedSeer. 
• In India, FirstCry sells Mothers’, Babies’ and Kids’ products through its online platform, company-owned modern stores, franchisee-owned modern stores and general trade retail distribution.

• At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
• We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
• The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.

• Ola Electric (1700674D IN) is looking to raise about US$1bn in its upcoming India IPO. The bookrunners are Kotak, Citigroup, BofA, Goldman Sachs, Axis, ICICI Sec, SBI Caps, BoB Caps.
• Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
• The firm manufactures EVs and certain core EV components like battery packs, motors and vehicle frames.

• Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation.
• In Ola Electric 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 high R&D capitalization, ongoing losses, high attrition, declining contract liabilities, cash burn and deteriorating balance sheet. 

• We anticipate a sluggish beginning to the fiscal year with 1Q8/24 earnings reflecting slower growth in Japan, China, and Southeast Asia.
• Our forecast for 1Q24 operating profit stands at ¥130 billion, slightly below the consensus estimate of ¥138 billion. Assuming our estimates are accurate, we anticipate a slightly negative share-price reaction.
• Our bearish stance on the stock persists, driven by the fact that it trades at a premium to our DCF and at a premium compared to global peers

• Oriental Watch (398 HK)  went ex-dividend on the 4th of January and has settled at an appetizing valuation of 6.8x PE with 60% of the market cap in cash.
• The market post-golden week and into the new year has been tepid.
• We expect the company to continue paying out 100% of its profits as dividends, based on which the dividend yield is close to 14% at the current share price.

• In this note, we will take a look at broker performance for HK IPOs and placements in 2023. 
• The following dataset includes all HK IPOs and placements above US$100m, which amounted to a total of 27 deals.
• The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.

• PDD diversified into ‘local life’ businesses in December 2023, but stopped these businesses within two weeks.
• We believe PDD’s low price advantage does not work in Meituan-like ‘local life’ and the top performer Meituan is hard to fight.
• We believe the stock price has an upside of 88% for year end 2024.

• MIXUE Group (1860056D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are Bank of America, Goldman Sachs, and UBS.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• The firm is the largest domestically freshly-made drinks company in terms of number of stores as of Sept 23, and number of cups sold during 9M23, according to CIC.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
• Event-Driven developments – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), Weiqiao Textile Co (2698 HK), Vinda International (3331 HK).

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Adbri (ABC AU).
• Lowest spreads – Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), A2B Australia (A2B AU), Tietto Minerals Ltd (TIE AU), IJTT Co., Ltd. (7315 JP). 

• Anta Sports Products (2020 HK) announced a set of in-line 4Q23 operating data. 
• In addition, the company has filed a registration statement with the U.S. SEC on January 4 for a proposed listing of Amer Sports on the New York Stock Exchange. 
• Anta currently trades at a forward PE of 17x based on estimated 2024 earnings, compared to a historical forward PE of 24x since 2017.

• Amer Sports, 52.7% owned by Anta Sports Products (2020 HK), has finally filed a US IPO registration. This is positive for Anta Sports as it can realise Amer’s value.
• Reported losses at Amer have increased YoY for 9M23 due to higher finance cost. But, its gross, operating, and adjusted EBITDA margins have all recorded solid improvements. 
• Assuming Amer is listed at the sector’s average FY23 P/S of 1.6x, Anta Sports may book deemed disposal gain of HK$13.5bn, or about 6.8% of its market capitalisation.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 5.5bn of A-shares on lighter average activity. BIG net selling flows on the first day of the year for HK going north.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

• A recent report shows apparent gains by Temu against US “dollar” store chains
• In this insight we introduce the “dollar” store concept and share our experiences
• We conclude that Temu & SHEIN don’t likely view some categories as priorities

• Chinese NEV (new energy vehicle) producers’ deliveries grew rapidly in 2023.
• PDD closed most “local life” businesses, including hotel booking, movie ticketing, etc.
• Jack Ma is no longer the controller of AliPay, the largest online payment app.

• In Japan, many companies have large gap between their stock price and their intrinsic value due to issues related to the use of assets and other resources or cash flow.
• Companies want to use the example of “improvement measures” to be released by TSE in January as a template, so we can’t expect “management is serious about  tackling this issue.”
• The fact that ROE has improved modestly over the past decade indicates that management hasn’t made fundamental changes to traditional management strategies to address the challenges faced by individual companies.

• I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals discussed this week: AOKI Holdings (8214 JP)‘s MBO and in-specied-triggered MTO got Kerry Express Thailand (KEX TB).
• Key updates took place on: JOYY (YY US), Tietto Minerals Ltd (TIE AU)and Pact Group Holdings (PGH AU).

• TSE’s request to raise P/B was issued March end, and the number of companies that have disclosed their improvement measures is still low, at only about 30% of all companies.
• Companies are likely to use good examples, but because the factors that increase share price vary from company to company, companies must offer their own solutions to their own situations.
• Investors don’t want to see “P/B improvement plan” that follows the template, but want to see compelling measures that demonstrate cash flow growth, which is based on share price appreciation.

• Mixue Group (MIX HK), a world-leading freshly made drinks company, filed for an HKEx IPO to raise US$0.5-1.0 billion. 
• Mixue is China’s largest and the world’s second-largest freshly made drinks company, in terms of both the number of stores and cups sold in 9M23, according to CIC.
• The investment case rests on a strong brand, leading market share, high revenue growth, robust cost control, stable profitability and cash generation. 

• The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO. 
• This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO. 
• This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.

• Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January). 
• 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 13.35% ownership ratio. 
• Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high. 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Agile Property Holdings
2. China Vanke
3. Indika Energy
4. SK Hynix
5. Vedanta Resources

and more…

• PT Metrodata Electronics is Indonesia’s leading ICT distributor and one of the largest IT solutions & consulting companies, making it a play on growing digitalisation in the country.
• The company has seen strong demand from several sectors for its solutions & consulting business, most notably from banks for digital transformations, oil & gas, and telecoms 
• PT Metrodata Electronics is also seeing a strong rebound in its ICT distribution business, with its higher-margin solutions outperforming boosted by public sector growth. Valuations compelling on 8.7x FY2024E PER.

• We expect Q3 FY24 revenues/profits to be >40%/>70% YoY for Taste Gourmet (8371 HK) for their results in early February. 
• Another catalyst we look forward to in CY24 is the main board listing on HKex. The timeline, we believe, should be in the second half of the year.
• Trading at 6x PE with an 8.5% dividend yield and cash of 130 mn HKD, or about 21% of the market cap, is one of our top dividend gems.

• Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation. 
• Ola is the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of the Ministry of Road Transport and Highways.
• The bull case rests on rising market share in a growing market, a rapid growth phase, increasing gross margin and a favourable cash conversion cycle.   

• While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by gross margin growth and a gradual reduction in SG&A costs.
• Meanwhile, we expect Uniqlo’s International business OP to surpass ¥75bn, driven by a rebound in China demand  and strong momentum in South Korea, SE Asia & Ocenia.
• Thus, we see the upcoming earnings as a compelling opportunity for trading Fast Retailing (9983 JP).

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.

• China Vanke
• SJM Holdings

• BYD’s sales volume grew by 45% YoY in December, higher than 31% YoY in November.
• For the whole year 2023, BYD’s total sales volume rose by 62%.
• We conclude the stock has an upside of 74% for 2024.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
• We highlight 38 pair trades that involve Korean holdcos and opcos.
• Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.

• Kweichow Moutai (600519 CH) announced the preliminary result for FY23, with sales and net profit both up 17% yoy. 
• The overall weak consumer sentiment in China has not spared the Chinese liquor sector, as overall Chinese liquor demand has been lukewarm. 
• The current valuation for Moutai has become very attractive, and even if no rerating, the return is likely to be around 15% through earnings growth plus 2% from dividend yield.

• Companies with large shareholders’ interests of 20% or more account for 779 of 1,784 companies in Metrical Universe. A number of companies are investment targets as TOB  and MBO candidates.
• Companies with large shareholder influence may feel distanced from general corporate governance practices, but their interests are aligned with those of minority shareholders in terms of shareholder-oriented management.
• For quality markets, it’s necessary to reduce the number of companies by increasing TOBs and MBOs, and to do so, managers need to be aware of the cost of listing.

• Our base case valuation of APR is implied price of 370,809 won per share, representing an 85% upside from the high end of the bankers’ valuation range. 
• We estimate APR to generate sales of 683.9 billion won (up 25.7% YoY) and operating profit of 114.6 billion won (up 39.5% YoY) in 2024. 
• APR is one of the best IPOs in the Korean cosmetics sector in the past several years.

• China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) announced last week a new supplementary contract for its duty-free airport businesses in Beijing and Shanghai airports
• The new deal aims to promote collaborations between the airports and CTG, acting like true partners. However, we think it is more positive for airports and slight detriment to CTG
• Maintain our Bullish call with an unchanged target price of CNY106 (+27% UPSIDE), based on the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24

• Dada Nexus Limited (DADA.OQ) (“Dada”), with a market cap of USD 869.9 million, is one of China’s leading on-demand retail platforms holding around 20% market share behind Meituan (42%, 3690.HK) and Ele.me (24%, Alibaba-owned).
• Dada, a 54% subsidiary of JD.com (JD.OQ; 9618.HK) and 9% owned by Walmart Inc. (WMT.N) operates two core businesses, namely:

• JD Daojia (JDDJ), which is a local non-restaurant online to offline (“O2O”) retail marketplace

• JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
• A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
• Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-December 2023.

• APR is getting ready to complete an IPO in KOSPI in February 2024. The IPO price range is from 147,000 won to 200,000 won. 
• According to the bankers’ valuation, the company’s valuation is expected to range from 1.1 trillion won to 1.6 trillion won post IPO. 
• The company’s best selling product is its skin care beauty device product called Medicube Age-R. 

• Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
• With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
• Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

• China’s outbound tourism recovery started much later than others in the region
• In particular, Taiwan & Korea began ramping outbound travel earlier (in Q222)
• As destinations, Thailand & Vietnam recovered early, but now lag HK’s growth

• For this edition, we focus on our 2023 Bloopers, to improvise rather than get embarrassed.  We also share some thoughts on potential enhancements that can be anticipated going forward.
• On the NIFTY Index (NIFTY INDEX), we are still not bearish but do not find the markets to be very attractive either.
• Bloopers in focus include Zomato (ZOMATO IN); CarTrade (CARTRADE IN) ; Hero Motocorp (HMCL IN) and Aavas Financiers Ltd (AAVAS IN). 

• Toyota’s sale of Denso shares is believed to be aimed at securing cash for full-scale EV production, and it’s premature to expect “governance improvement through the sale of cross-held shares.”
• Since Toyota intends to maintain a 20% equity stake in Denso, which is an equity method affiliate, there will be no change in the influence on Denso for a while.
• While intercompany shareholdings and board reciprocity based on business relationships were one of Toyota’s strengths, the interests of minority shareholders were at risk of being left behind.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU). 
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU). 

• Rather than “management with awareness of stock price,” the question is whether management is carrying out its duties toward “the goal of increasing shareholder interests,” to put it more accurately.
• In determining TOB price, the question is whether independent committee was established, whether that committee actually functioned, and whether the directors performed their duties in the best interests of shareholders.
• The real objective of an MBO is to restart the company for a sustainable expansion of corporate value, not to rip off the equity stake of a bothersome activist investor.

• For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
• The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• Burlington Stores and its management reported a 6% increase in comparable store sales, aligning with the midpoint of their projected range of 5% to 7%.
• Despite a slight outperformance through September, unseasonably warm weather in October impacted the growth trajectory, particularly affecting outerwear sales, an area of strength for Burlington.
• Despite anticipating some variability, the company aims for mid-single-digit annual comparable store sales growth over the next five years, building on strategies implemented since 2019 to enhance its off-price model.

• The company had a 5.1% global retail sales increase, excluding foreign currency impact, propelled by positive international sales comps and net store expansion.
• The US experienced a 0.9% growth in retail sales, while international retail sales, excluding foreign currency impact, saw an impressive 9.4% surge.
• Positive retail sales growth, excluding foreign currency impact, contributed to improved operating income across both US and international domains.

• Estee Lauder Companies Inc. delivered a mixed result in the recent quarter, with revenues below market expectations, but it managed to surpass the analyst consensus in terms of earnings.
• Despite an 11% decline in organic sales, adjusted diluted EPS exceeded expectations at $0.11, attributed to a better-than-expected adjusted operating margin.
• Estee Lauder remains optimistic about sequential improvements, anticipating double-digit organic sales growth.

• Dollar Tree, Inc. delivered a disappointing set of results as the company was unable to meet the revenue expectations as well as earnings expectations of Wall Street.
• In a demanding retail landscape, Dollar Tree has demonstrated resilience amid challenges faced by lower-income consumers, including inflation and reduced government benefits.
• The company’s strategic initiatives include a multi-price journey at Dollar Tree, with a growing assortment, and planogram resets at Family Dollar, enhancing product offerings.

• We are reiterating our Buy rating, price target and projections for Express after visiting stores in Connecticut and Long Island.
• As such, we believe Express is on track to achieve our 4Q projections.
• We reiterate our Buy rating and price target.

• The Gap, Inc. has been seeing an amazing upward momentum after it managed to surpass the revenue and earnings expectations of Wall Street.
• Despite a 7% dip in revenue and a 2% decrease in comp sales, the third quarter showcased improved margins, expenses, and cash flow.
• Old Navy saw a positive 1% comp, driven by women’s and back-to-school strength, while Gap brand found success in women’s and baby segments.

• Etsy Inc managed to surpass Wall Street’s revenue and earnings expectations, marked by moderate top-line growth and sustained robust profitability.
• The management’s dedication to enhancing buyer confidence was evident in the strides made to improve reliability and convenience metrics, such as estimated delivery dates, package tracking, on-time delivery, and transparent return policies.
• These additional layers of analysis serve to provide a comprehensive and robust valuation, giving investors a nuanced understanding of the inherent risks and opportunities.