Consumer

• Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
• The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake. 
• Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

• 15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
• A holistic view of the three different documents here suggests, indeed, “It was a trap”. 
• This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

• The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
• Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – 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%.

• Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
• Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
• Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

• Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
• Toyota is the company’s largest shareholder and its largest customer.
• We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.

• L’Occitane (973 HK) reported FY1H24 (fiscal year ending March 31) results yesterday after market, with net profit down 45% yoy. 
• The sharp drop in earnings is mainly due to a 48% yoy increase in marketing costs, as well as increased finance costs.
• The company maintained the FY24 outlook of 17% topline growth and an operating profit margin of 12% (FY1H24:  7.2%). 

• Dekon Food and Agriculture Group (DFAG CH) is looking to raise up to US$128m in its Hong Kong IPO.
• Dekon Food and Agriculture Group (DFAG) is a vertically integrated livestock farming enterprise in China.
• In this note, we will look at past performance, and share our thoughts on valuation.

• Perfect Medical Health (1830 HK) results showed 7% revenue growth and 10% YoY profit (27% YoY adjusted profit for subsidies) growth in H1 FY24.
• The company declared a 14.2 cent/share interim dividend. H2 dividends usually are higher, so we expect a 32-35 cent dividend for FY24. 
• This is another dividend-yielding gem, trading at 12.0x PE FY24e, a 9% dividend yield, and 15% of the market cap in cash and investments with a >50% ROE. 

• 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-November 2023.

• Meituan (3690 HK) ‘s 3Q2023 revenues beat estimates while OP for the quarter was well below consensus estimates.
• There were clear signs of slowdown in earnings growth due to macroeconomic challenges and weaker demand. 4Q earnings are expected to decline further.
• Meituan’s share price went down by about 11% following its earnings announcement as slowdown in core local commerce and weakening earnings have concerned investors.

• As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
• Toyota is the company’s largest shareholder and its largest customer.
• In this note, we will talk about the deal dynamics.

• There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
• Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
• There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

• The final datapoints for the December Hang Seng Indices rebalances were recorded today, slightly altering the initially expected weights and flows. 
• The expected flows have slightly increased since the initial estimates on 15 then 17 November.
• Across all three indices, I see a net total of roughly HK$13.4bn a side to trade. 

• The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
• Li Auto (2015 HK) will have the largest inflows due to the HSI inclusion while Xiaomi (1810 HK) will have the largest outflow due to HSTECH capping.
• There will be passive selling in HSBC Holdings (5 HK) for yet another rebalance due to capping of the stock in the Hang Seng Index (HSI INDEX). 

• Two weeks ago, Asahi Group Holdings (2502 JP) revealed plans for a secondary offering, aiming to sell 33.48m common shares in international markets.
• In this insight, we delve into the fundamentals of the business, identifying an opportunity if the offering is priced at a decent discount compared to Asahi’s current price.
• We think recent price hikes and ongoing alcohol tax reforms position Asahi to outperform Kirin Holdings (2503 JP) in the next 3-4 years.

• Asics unveils MTP with focus on financial milestones: 7-10% Sales CAGR to 660 billion yen and Operating profit of 80 billion yen by 2026. 
• The biggest risk to the MTP looks to be market share goals in the US. However, we think overall sales and margin targets are achievable.
• The share price is up 80% YTD and stock is no longer cheap. However, plugging in the MTP assumptions into a DCF reveals further 17% upside

• We are back with our regular weekly updates after taking an earnings break and a Diwali vacation. 
• Ishares Msci India Small-Cap (SMIN US)  appears to be where the most market action is currently. We also maintain a long bias on the NIFTY Index (NIFTY INDEX). 
• Honasa Consumer (HONASA IN) is the star of the week that is playing an innovative narrative that which street seems to like, but warrants attention. 

• The F100 and F250 December 2023 index changes are likely to be announced after the close on Wednesday 29th December 2023.
• In this insight, we take a look at the potential index changes for F100 and F250 based on rankings as of 27th November 2023.
• There could be one change for the F100 index and six separate changes for the F250 index. Some names lurking close to the border can still make it.

• In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.
• Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.
• The stock price reached our last target, but we believe there is still an upside of 40% for 2024.

• In Aug 2022, Zomato (ZOMATO IN) completed the acquisition of 91% of Blinkit’s outstanding shares via issuing its own shares. These shares were released from their lockup in Aug 2023.
• Leading to a selldown by Softbank Group (9984 JP) in the same month, followed by another selldown in Oct 2023. Softbank will once again be released from its lockup soon.
• In this note, we will talk about the lock-up dynamics and recent updates.

• Since the US$1.3 billion secondary placement announcement, Asahi Group Holdings (2502 JP)’s shares are down -6.2% from the undisturbed price of JPY5,804 per share (16 November).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asahi’s shares have followed the pattern of previous large placements. 
• The offering will likely be priced on 28 November. Investors participating in previous large Japanese placements tend to secure positive returns.

• In this insight, we provide the income statement comparisons of the eight largest global luxury brand Korea operations including Louis Vuitton Korea, Prada Korea, Ralph Lauren Korea, and Moncler Korea.
• In 2022, Korea spent $16.8 billion in luxury goods, representing per capita consumption of $325 per person, surpassing the United States ($280 per person) and China ($55 per person). 
• Luxury brand spending in Korea is often a leading indicator of global luxury brand spending. Luxury brand spending in Korea has been weak this year and this continued in 3Q23.

• In October, the sluggish recovery in outbound tourism demand continued
• Outbound capacity growth also timid; but domestic recovery is mostly complete
• As growth stock, Trip.com’s disappointed; maybe it can attract value investors?

• Drive Lah ComfortDelGro seems to be increasing its involvement in the automotive startup space this year.
• The Singapore-based taxi firm backed mobility-focused impact fund Shift4Good in January and battery recycling startup Neu Battery Materials in July.
• Most recently, ComfortDelGro invested US$2 million in Drive Lah.

• China Education Group (839 HK) appears to be facing the headwinds from higher USD interest rate and reduction in capitalised interest. The intangible write-off is another drag on FY23.
• Newly registered students increased 17.8% for FY24. With better average fees, this will help the topline. Our concerns are high finance and operating costs will erode revenue growth.
• Consensus is overly aggressive and there are risks of downgrade. Earnings may re-accelerate in the future, but weaker 1H FY24F keeps us on the sideline in the short term. 

• On 27 November, Schaeffler (SHA GR) increased the cash consideration for Vitesco Technologies Group (VTSC GR) by 3.3% to €94.00/share, an implied equity value of €3,762 million, implied EV of €3,416 million.
• Although this may not include a takeover premium, and optically the multiple seems low at 3.4x EV/Fwd NTM EBITDA, I update my TP to €94. 
• A higher counteroffer or another sweetening seems unlikely. I believe it should not be difficult for Schaeffler to achieve 75% acceptances, thus the deal will likely go through.

• Amazon Netsuper is competing head to head with Rakuten’s online food platform in an online food sector that has grown 80% in four years. 
• Last month Amazon confirmed that Arcs, one of the largest supermarkets in Japan and the biggest in northern Japan, will join Life, Valor and Seijo Ishii in using its system.
• Arcs’ online supermarket was already growing strongly but the tie-up with Amazon will take it to the next level, helping to compete with Aeon and Rakuten.

Britvic reported robust FY23 results despite the weaker consumer environment, reflecting the resilience of its brand portfolio. Price/mix offset limited volume declines resulting in revenue growth of 6.6%, despite unfavourable summer weather and tougher comparators. Inflationary pressures were mitigated through pricing actions and cost discipline, as adjusted EBIT grew 6% at a margin of 12.5%. Investment in its existing brand portfolio and the recent addition of two bolt-on acquisitions in high growth categories underpins management’s confidence heading into FY24.

• A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
• We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
• In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

• The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
• Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
• There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

• After market close on Friday 24th November 2023, the December 2023 index review results for CSI 300/500 and SSE 50/180 were announced.
• CSI 300 and CSI will have 14 and 50 changes while SSE 50 and SSE 180 will have 5 and 18 changes respectively. There are many overlapping flows.
• In this insight, I have presented the details of the index changes and aggregated the expected flows attributable to the four indices mentioned above.

• Vinfast (VFS US), a Vietnamese EV manufacturer and a majority-owned affiliate of Vingroup Jsc (VIC VN), completed its merger with Black Spade on 14 August. 
• Due to the low float, the shares have been on a wild ride, with the last close of US$6.56 materially below the high of US$82.35 per share.
• VinFast remains an avoid due to related party-driven EV sales, declining customer traction, operating losses, cash burn, equity raise overhang and frothy valuation.  

• Zensho Holdings (7550 JP) aims to raise around US$300m via a public offering.
• As per the company it will use the proceeds from the deal for potential M&A transactions.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Tesla Motors (TSLA US) market share in China has decreased and its 3Q23 operational data suggested it offered discounts to defend its market share. 
• Albeit losing some market share, BYD (1211 HK) operational data is much more solid, even expanded its profit margin during a difficult environment in China. 
• Tesla share price has outpaced BYD’s this year by 70%, it should reverse in the next year.

• My updated SOTP shows that Porsche Automobil Holding (PAH3 GR) is trading at a still massive 41.2% discount/NAV, implying that Porsche SE is liable for c. €6.5 billion legal claims, maybe too harsh.
• Recent rulings have been favourable. The discount is partly due to capital allocation leaning towards debt servicing. Porsche SE is trading at 2024e 2.6x Fwd P/E and 7.3% dividend yield.
• Porsche SE presents an attractive opportunity to gain exposure to Volkswagen and Porsche AG through a discounted and levered investment. Discount to NAV should systematically decrease.

• Tongcheng Travel Holdings (780 HK) is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.
• The cooperation with Tencent (700 HK) continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.
• 3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.

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 South City
• China Vanke
• Hopson Development
• Studio City International Holdings Limited
• Tata Motors ADR

• ZEEKR is expected to IPO in December. The company plans to raise up to $1B and Geely Auto may purchase additional shares of ZEEKR in a concurrent private placement.
• I have a favorable view of the upcoming ZEEKR U.S. IPO and value ZEEKR shares using a 50/50 blend of EV/Sales analysis and long-term discounted cash flows analysis.
• ZEEKR’s last round was a $750M Series A in February 2023 at a $13B post-money valuation. My ~$21B target valuation suggests 61% potential upside vs. last round valuation of $13B.

• The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• Hs with H/A pairs under-perform their As on average. H/A Pair intracorrelation is up and A premia continue to trend better.
• SOUTHBOUND and NORTHBOUND were net sells overall. Everybody sold tech.

• This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The same few names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Zhongji Innolight, etc, but the nets are changing (and Chongqing Changan)
• Last week, NORTHBOUND were again net sellers (RMB -3.16bn), but Shanghai saw net buys. The top two flows were Chongqing Changan Automobile Company (200625 CH) to buy, BYD to sell.

• Zensho Holdings (7550 JP) has had a great couple of years in share price movement. And this year is seeing earnings explode to new highs. M&A and FX.
• Now they want to build a “war chest” equivalent to 4% of market cap to go do more M&A. 
• This seems opportunistic. And the shareholder register is extraordinarily lopsided. There is really only one buyer for this deal.

• We are positive on Orion Corp. Regardless of the overall market movement next year (up or down), we believe Orion Corp could outperform KOSPI in the next 6-12 months.
• The company has millions of loyal customers in major overseas countries including China, Russia, and Vietnam. Despite difficult operating conditions, Orion continues to generate stable growth in sales and profits.
• Orion Corp’s valuations are attractive. Orion Corp is currently trading at 2024E EV/EBITDA of 4.4x (42% lower than average valuation multiple from 2019 to 2023).

• We expect Meituan to report C3Q23 top line, non-GAAP operating profit and GAAP net income 2%, 4% and 20% vs. consensus. Our C4Q23 estimates are 6%, 19%, and 30% …
• Douyin’s in-store GMV growth decelerated in September/October, per local media. We believe there are two main causes, (1) local life’s share of Douyin video views is around 10%~, which…
• Douyin’s next threat to Meituan is food delivery, but GMV is less than 1% of Meituan food delivery in 3Q, we estimate. At the current trajectory, we expect Douyin…

• A company visit with Sumber Alfaria Trijaya revealed confidence in the outlook with its more aggressive store expansion on track, as it nearly draws level with Indomaret.
• The company remains focused on expanding its Lawson convenience store outlets plus larger size Midi outlets. Its membership scheme is growing fast with 10m shopping once a week. 
• Sumber Alfaria Trijaya (AMRT IJ) remains a core retail holding, with its premium valuation justified by its strong growth prospects, with estimated 2-year Forward EPS growth of +25% and +17%. 

• EM Fund ownership in JD.com continues to fall. Average weights slip to 4-year low as managers close out in large numbers.
• Between February 2023 and October 2023, there were 56 closures versus 6 openings in JD.com, led by managers at the growth end of the spectrum.
• Despite this, JD.com is still the 16th most widely held stock globally, with combined AUM among the funds in this analysis of $1.27bn.

OPAP’s Q323 results were negatively affected by industry-wide influences in sports betting, a tough comparative for Lotteries, and one-off natural events, which have led to a minor, c 3%, tweaking to management’s prior FY23 EBITDA guidance. From an operational perspective, the new iLottery platform is building awareness and growing revenue, and player activity increased on the OPAP Store app, while the retail offer continues to evolve.

4imprint’s Q323 trading update indicated further good growth, albeit moderating against comparatives getting tougher as the year progresses. Full year revenue guidance is maintained at ‘slightly above’ $1.3bn, with continuing high returns on marketing spend prompting a $5m uplift in PBT guidance to ‘not less than $130m’. 4imprint’s underlying markets reflect US corporate economic health, with any downside mitigated by the prospect of carrying on building market share as less well-funded firms struggle. Already the largest North American distributor of promotional products, 4imprint’s market share in H123 was just 5.9%, giving plenty to go for. The long-term growth record, strong cash generation and robust balance sheet underpin the rating.

• Oriental Watch (398 HK) reported an 8% YoY profit decline for H1 FY24 (Vs. our expectation of 10-15% growth) due to a higher taxation rate and lower margins in HK. 
• Despite that, the company distributed 100% of its profits for a 28.5 cent HKD/share dividend (15% annualized) and built net cash/investments to 1.25 bn HKD (62% of market cap). 
• Trading at 7x FY24e PE with abundant cash and real estate with a 15% yield, the stock is worth exploring with the perspective of building a high-yield portfolio.

• Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
• GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
• In this note, we will talk about the company’s past performance and future prospects.

• Aeon and Seven & I both have large financial services arms, generating a substantial share of consolidated profits.
• With cashless payments now the norm, the old business models that relied on fees for cash dispensing are fast becoming outdated.
• Both retailers plan major changes to create ecosystems that should deliver a lot more data to improve targeted marketing for e-commerce and retail stores.

• The ¥100 Shop chains are facing higher COGS on one side and rising wages on the other, a problem when you run a fixed price chain at just ¥100. 
• Most (except Seria Co Ltd (2782 JP)) have reacted by introducing new, higher priced lines led by Daiso.
• Watts, the smallest chain, is now catching up and higher priced lines will make up a third of stock by 2027.

• In Apr 2023, ZJLD Group (6979 HK) raised around US$676m in its HK IPO. While it initially had a turbulent listing, the shares are now trading above its IPO price.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu. 
• In this note, we will talk about the company’s past performance and future prospects.

Britvic reported robust FY23 results despite the weaker consumer environment, reflecting the resilience of its brand portfolio. Price/mix offset limited volume declines resulting in revenue growth of 6.6%, despite unfavourable summer weather and tougher comparators. Inflationary pressures were mitigated through pricing actions and cost discipline, as adjusted EBIT grew 6% at a margin of 12.5%. Investment in its existing brand portfolio and the recent addition of two bolt-on acquisitions in high growth categories underpins management’s confidence heading into FY24.

• Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
• ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
• Geely is trading around a six and half year low, and below its five average trailing/forward metrics. 

• The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
• The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
• The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

• ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
• Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
• We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.

• Anta Sports Products (2020 HK) is the second largest China sportswear company at 20% market share in 2022.
• The thesis for Anta lies in Anta’s above-industry earnings growth for the next 3 years, low market expectations on China sportswear sector, and flexible multi-brand strategy.
• Anta trades at a forward PE of 17x based on estimated 2024 earnings, with around 15-20% expected net profit growth in 2024-2026.

• Bangladesh’s garment industry grapples with a 14% export dip, prompting worker unrest over wage discrepancies.
• Efforts by a wage board fall short as workers advocate for a Tk25,000 minimum, seeking fair compensation.
• Economic turbulence looms as 3,500 factories, constituting 85% of exports, confront closure amid widespread unrest.

• It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
• Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.   
• Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability. 

• The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
• Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation. 
• CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.  

• We once called Uniqlo the Toyota of clothing. And this remains apposite. Its consistent, reliable quality, focus on supply chain efficiency, and increasingly global renown make it a solid bet.
• The majority of the growth last year came from overseas markets, including even the US and Europe and the appointment of Daisuke Tsukagoshi as president will boost overseas performance further.
• Fast Retailing is talking up the potential of GU, which should make up for lower domestic growth from Uniqlo but also now thinks it can make it a global brand.

• IPAR issued its initial 2024 sales and EPS guidance proving clarity as investors value the stock for the year ahead.
• IPAR is forecasting sales and EPS in line with our current estimates suggesting there could be ample upside to the numbers if the current demand for fragrances were to continue.
• IPAR expects 2024 sales of $1.45 billion and EPS of $5.15. Both of which are in line with our estimates of $1.42 billion and $5.16, respectively.

• Trip.com reported strong Q3 earnings, reflecting 2023’s ongoing tourism revival
• Net Income beat expectations, and company made progress on expense control
• But we don’t see “game-changing” numbers in Trip.com’s latest earnings release

• Panasonic Holdings Corporation (PHD) is entering a strategic partnership with Apollo Global Management, involving the partial sale of its ownership in Panasonic Automotive Systems Corporation (PAS).
• PAS, historically known for car stereos and navigation systems, has expanded into automotive electronics, holding approximately 15% of the global Automotive Digital Cockpit market with $3.6 billion in sales.
• Despite a bearish view on Panasonic, this deal is seen as a positive step toward streamlining the group structure and concentrating on core, sustainable growth areas.

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.

• The broad equity market has been on an absolute tear since we discussed in our 10/31/23 Compass how risk/reward favored buyers as key supports were being tested on SPX/QQQ/IWM
• Furthermore, we discussed in our 11/7/23 Compass our belief that this was more than just another counter-trend rally, and that it is likely the start of a significant year-end rally.
• Bullish developments have only continued; among them includes 3.5-month downtrend reversals on the S&P 500 and QQQ. We expect more upside into year-end and beyond.

• Puma has outperformed its peers over recent quarters through a successful relaunch strategy leveraging on running, performance, and lifestyle wear
• Post Q3, sales and EBIT are in line with expectations, inventories are back to normal, and Puma is well on track to achieve the full-year outlook.
• On an EV/Sales basis, the valuation gap to European peer adidas has widened, which we believe is unjustified.

• JD Health’s 23Q3 results were below expectations. Due to the high base of 22H2 (especially 22Q4), revenue growth could become negative in 23Q4, thus dragging down 2023 full year growth.
• Considering the high base in 23H1, performance pressure could continue until 24H1. JD Health’s past high growth will be gone. Investors may need to get used to the lower-than-expected growth.
• Share price of JD Health is now in the bottom range. Current valuation is attractive. Despite the performance headwind, P/S is expected to return to about 3 to 4.

Since its formation in 1909, Borussia Dortmund has become one of Germany’s most successful football clubs and one of the most valuable global football clubs and brands. The corporate strategy has been to establish itself as the leading German football club after Bayern Munich, and to make its financial success less dependent on short-term sporting success by increasing the domestic and international marketing of the brand name to grow revenue. Over the long term, Borussia Dortmund has a proven and enviable track record of prudent investment in talent. Its investible free float is c 67%

• During H1-24, Richemont faced growing headwinds, including an uncertain macroeconomic and geopolitical environment, unfavorable FX movements and demanding comparatives. The Company nonetheless achieved double-digit sales growth
• H1-24 results presentation shows some cautious optimism, but the recovery will be slow
• The shares de-rated to a P/E of 16.3x, below its past 10-year average of 21.7x, which implies a 25% discount.

bet-at-home (BAH) is an online sports betting and gaming company, licensed in Malta and headquartered in Düsseldorf, Germany. Founded in 1999, the company has expanded across both regions and product verticals to serve over 5.6m registered users, making it one of the largest online gambling providers in Europe. BAH holds online sports betting and online gaming licences in a number of European countries, with its markets being Germany (44% of H123 betting and gaming volume), Austria and the rest of Western Europe (45%) and Eastern Europe (10%).

• Optimism for improved shareholder returns through IPOs diminishes further as Alibaba (ADR) (BABA US) puts the Cloud spinoff on hold.
• Jack Ma’s sale of 10m ADS, representing 5% of his Alibaba holdings, sparks concern. Investors should worry about his lack of optimism.
• With the Cloud IPO on hold, Alibaba Group Holding (9988 HK) is vulnerable to numerous downside catalysts, as outlined below.

• The accretion trade is going to plan as Prosus NV (PRX NA) sells Tencent (700 HK); and Prosus and Tencent both back their own shares.
• Preceding my comments on Prosus/Tencent One 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%.

• Alibaba’s cloud servers experienced downtime for more than three hours.
• Kuaishou achieved success in the Singles Day sales and we expect a high growth rate for “other revenue” in 3Q23.
• Tims China’s revenue grew strongly with aggressive expansion of new stores.

• We expect total revenue will grow by 24% in 3Q23, as catering has been recovering in China.
• We expect Meituan can still earn positive operating profit 3Q23, as the company cut salespeople’s bonuses.
• We also believe that the stock has an upside of 87% for year end 2024.

• Flair Writing Industries (1656496D IN) ‘s INR 5.9 bn upcoming IPO consists of fresh issue worth INR 2.9 bn and OFS worth INR 3 bn (at the upper end).
• The company is the largest pen manufacturer in India and one of the top three players in the Indian Writing Instruments Industry.
• While the company has shown a handsome growth since the pandemic, some operating metrics pertaining to employees don’t seem to add up.

Following a significant refocusing in recent years, paragon has returned to its core strengths as a supplier of electronic and kinematic content to major automotive producers globally. It seeks to address the global megatrends that are important to the automotive industry, namely climate change (CO2 reduction), digitisation, increasing comfort and urbanisation.

The FY23 results highlight continued growth in adjusted operating profit, management’s tight control of the business and the ongoing annual efficiencies being delivered. Smiths may also renew several long-term publisher contracts this year, which could imply visibility over at least 80% of annual revenues to 2029. Furthermore, development of new profit streams is beginning to create momentum, which may have the potential to more than offset the slow decline in core profits and support the dividend. Our valuation remains unchanged at 89p, representing c 90% upside.