Consumer

• Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
• The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
• One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month’s expiration.

• On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
• Li Auto (2015 HK) and WuXi AppTec (2359 HK) are added. There are no deletions.
• I see 3.4% a side to trade and across the three major indices there are larger net flows, but few compelling ones given possible pre-positioning.

• For a second review running, Zhongsheng Group (881 HK) has avoided being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX).
• That means China Unicom Hong Kong (762 HK) misses out on index inclusion, but there is still hope for the next one.
• There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.

• The HSCEI Review for December 2023 was announced on Friday 17 November. 
• There were no ADDs and no DELETEs, which was a bit of a surprise.
• There is about 2.8% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

• The New and Better (16 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 outperform their As on average with higher-liquidity Hs outperforming more. High Premium As not seeing shrinking premia on average.
• SOUTHBOUND and NORTHBOUND were net sells overall. It looked like the combination of NORTHBOUND and SOUTHBOUND put on a long H short A in the non-bank financial sector.

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• SOUTHBOUND flows the last several weeks clearly indicated a momentum move. The top net sells were all down. The top buys were all up. This week that trend moderated significantly.
• SOUTHBOUND breaks a 17-week inflow streak with HK$2.1bn of net outflows entirely driven, it appears, by relatively few accounts punting large size in local (HK-listed) ETFs

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.

• Country Garden Holdings Co
• Melco Resorts & Entertainment
• Road King Infrastructure

• Besides turnaround in the bottom line, Sa Sa International (178 HK) achieved good store efficiency improvement and enviable cost control. It will enjoy further operating leverage.
• The 5.3pp sequential increase in sales contribution from tourists highlights its position to benefit from revival of tourist arrivals. Three to-be-opened stores will boost sales momentum. 
• Initial sales figures for 3QFY24 point to 27% overall sales growth, which is encouraging. Sa Sa stays in a very solid financial position with HK$196m of net cash.

• The Keepers Holdings (KEEPR PM) reported a soft Q3 2023 with revenue up 6.7% YoY and profits 4.5% YoY (ex-one offs of 38 mn pesos profits up 11% YoY). 
• The company guided a good build-up into Q4 2023 as the festive season showed signs of a good pick-up. 
• Trading at 8.2x/7x FY23e/24e with a 5.4%/6.3% dividend yield, we like the name, although there are a few short-term risks on working capital that the company needs to address.

• XPeng C3Q23 top line, non-GAAP operating loss and GAAP net loss in line, 28% and 68% worse than our estimates, main reason is G3’s End-Of-Production charge to the gross margin
• We expect XPEV to experience tough transition in 2024 since product line which spans across sedan and SUV, shall experience severe competition at a time when its differentiation is eroding.
• We prefer to wait out this period; we cut TP of XPEV from US$18 to US$9 and downgrade to SELL.

• JDH reported C3Q23 top line and non-IFRS operating profit that are 39% and 34% of our C2H23 estimates. We cut C2H23 top line, non-IFRS operating profit and IFRS net income.
• We keep 2024 top line unchanged but cut non-IFRS operating profit by 31% as we believe JDH might need to invest to explore new growth opportunities;
• We cut TP from US$65 to US$52 but maintain BUY.

• TME reported C3Q23 revenue, non-IFRS operating profit and IFRS net income inline, 12.9%, 2.3% vs. consensus. The bottom-line beat mainly due to the cost-effective operation and music subscription services.
• We notice TME has become less reliable on live streaming and more on monetizing its user base through ARPU enhancement
• We upgraded TME to BUY and raised the target price to US$ 9.7, implying a 21.1x PE ratio compared to its current trading at 17.8x in 2024.

• While Alibaba (ADR) (BABA US)‘s 2Q24 revenue and OP closely matched consensus expectations, the company experienced a significant sell-off, resulting in shares plummeting by over 9% yesterday.
• Yesterday’s weak performance may be linked to a 10% pre-earnings price surge, anticipating robust results. The postponement of the Cloud Spin-off could also have contributed to the decline.
• We maintain a bearish stance on Alibaba Group Holding (9988 HK) as we identify other fundamental and structural downside catalysts might become increasingly important and price-sensitive as time progresses.

• Shakey’s Pizza (PIZZA PM) reported a 28% YoY/26% YoY sales/net profit increase for Q3 FY23 due to a sales softening in September. 
• Sales are expected to strengthen into Q4 as there is a seasonal uplift, although the QoQ increase is not expected to be in line with previous years.
• The stock trades at 12.9x/9.9x PE FY23e/24e and will continue to see double-digit CAGR sales momentum.  The management retained its >30% YoY growth target for FY23e. 

• Based in Hong Kong, Dream International is one of the largest toy manufacturers in the world. It specializes on plush stuffed toys and plastic figures. 
• Despite the global toys markets going into destocking cycle, the company has generated significant growth in operating profit in the past year driven by strong demand for plush stuffed toys.
• If we assume a moderate 20% YoY increase in dividends in 2023, this would imply DPS of HKD 0.48 and this would suggest a dividend yield of 12.7% current prices. 

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. SJM Holdings
2. Melco Resorts & Entertainment
3. Lenovo
4. Longfor Properties
5. Tata Motors Ltd

and more…

• Asahi Group Holdings (2502 JP) today announced a collection of 10 shareholders (mostly financial institutions) would sell a total of 33.48mm shares (6.6% of shares out) in Asahi Group. 
• This will become more of a thing going forward. Cross-holders “want” to unwind. And in many cases, the cross-held want to buy back stock (reduce E, raise ROE).
• This deal is “good” in that it clears out a lot of the bank cross-holders in one fell swoop. But there are more crossholders behind.

• A group of shareholders are looking to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
• The deal would represent 23 days of Asahi’s three month ADV. Its latest extended large primary deal has done very well.
• While the deal isn’t particularly well flagged, it is an extended one allowing the market to price in the impact of the share sale. 

• Alibaba’s operating margin rose to 15% in 2Q24 versus 12% in 2Q23.
• Every expense as percentage of total revenue decreased and EBITDA of every business line increased.
• We believe the reorganization is going smoothly and the stock has an upside of 82%. Buy.

• Nine shareholders are looking to sell 33.48m shares of Asahi Group Holdings (2502 JP). That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.
• Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.
• There will be buying from global trackers but nothing from TOPIX trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.

• Asahi Group Holdings (2502 JP) announced a pure secondary offering of 33.5 million or 6.61% of outstanding shares. At the last close, the placement was worth JPY194 billion (US$1.3 billion).
• Notwithstanding Asahi’s explanation, the selling shareholders’ motivation for exiting their shareholding is likely to capitalise on the strong share price performance – Asahi shares are up 45% YTD.
• Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 28 November and 1 December (likely 28 November).

• DXN Holdings (DXN MK) was listed on the Bursa Malaysia Exchange on 19th May 2023. Both promoters and Gano Global (KV Asia Capital), will come off lockup soon.
• DXN Holdings (DXN) is a global health-oriented and wellness direct selling company.
• Demand for the IPO was lukewarm and the shares had a turbulent debut. Aside from its weak momentum, liquidity on the stock is weak as well. 

• Since mid-October, spreads have generally widened across our European liquid universe of ordinary and preferred shares (8 have tightened, 10 widened, 1 at same level).
• Recommended trades long preferred / short ordinary shares: Media-for-Europe, Sixt, Volkswagen (still the most interesting situation), Grifols, Atlas Copco.
• Recommended trades long ordinary / short preferred shares: Fuchs, SSAB Svenska Stal.

Dentsu’s Q323 trading update describes demanding trading conditions with continuing spending constraint from customers in technology and finance, and ongoing delays to larger digital transformation projects. Full year organic revenue guidance is revised to -5% (from 0% to -2%), with an operating margin of 13.5%, depressed by one-off factors from 15.0%. The outlook is improving, albeit patchily, and initiatives to streamline the business and structure it more effectively to meet client needs should benefit the operating margin in FY24 and beyond.

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.

• Lenovo
• Melco Resorts & Entertainment
• SJM Holdings
• Wynn Macau Ltd

• DCM Holdings (3050 JP) and Keiyo Co Ltd (8168 JP) and Aeon Co Ltd (8267 JP) signed capital and business tie-up agreements 30+yrs ago. Recently, DCM bought Keiyo.
• Aeon got some money from this and has decided to put that money back into DCM shares.
• That changes both the current dynamics and future shareholder structure. And that leads to interesting questions about the outcome.

• Our review of the  three stocks here reveals considerable run room ahead as revenue  recovery in Asia gaming is  outpacing  forecasts.
• These companies  have proven   resilient after taking big hits during covid crisis.
• Balance sheets are stronger, revenue  rising, margins  improved–much of  this not as yet  reflected in valuations.

• ZEEKR, a fast-growing premium BEV maker, filed its F-1 last week. The company is going public through an IPO and offering ADSs of a Cayman Islands holding company.
• In 2022, Geely agreed to spin off ZEEKR and list its EV maker in Asia/the U.S. The company has raised ~$1.6B and was backed by Geely and top-tier investors.
• Geely Auto will hold 50%+ of the voting power upon completing an IPO. ZEEKR’s last round was a $750M Series A in February 2023 at a $13B post-money valuation. 

• Taste Gourmet (8371 HK) reported Q2 profits 25% over our expectations at 30 mn HKD (81% YoY), led by net margin expansion to 11.2% (vs. our expectation of 8.8%)
• The net cash of 133 mn HKD represents around 27% of market capitalization, which is used to increase the restaurant count in HK from 42 to 48 QoQ.
• The company declared a 5.5 cent interim dividend (Vs. 4.8 cents last year). We believe they can declare a 12.5/13 cent dividend for FY24 (March-End)

• Some of Japan’s big apparel firms are making a comeback, and only some of the recent growth is coming from department stores.
• Most of the revival is thanks to direct sales through e-commerce and stores, and the increasingly seamless links between them.
• Onward Holdings is one of the leaders in this renaissance and is delivering the same profits as it used to with 30% higher sales.

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.

• SJM Holdings

• A group of shareholders are looking to raise US$444m by trimming their respective stakes in Ajinomoto Co (2802 JP) via an extended secondary follow-on.
• While the selldown doesn’t seem particularly well flagged, it won’t be a very large one to digest at just eight days of three month ADV. 
• In a bid to cushion the selldown, Ajinomoto plans to buyback its stock to the tune of 10m shares, which would amount to 80% of the base shares on offer. 

• Amara Holdings (AMA SP) has disclosed a voluntary unconditional offer from Dymon Asia and the Albert Teo Family at S$0.60 per share, a 30.4% premium to the last close price. 
• On 17 June, Amara received a written notification from Mr Albert Teo Hock Chuan (CEO) and Ms Susan Teo Geok Tin (Company Secretary) that they are mulling an offer. 
• The offer price is final. The offer is attractive and marginally below the ten-year high. Hitting the 90% compulsory acquisition threshold implies a minority acceptance rate of 79.3%.

• ZEEKR, 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.
• In this note, we talk about the not-so-positive aspects of the deal.

• Haier Smart Home (6690 HK) is less exposed to China’s real estate market than one would have thought. Despite poor property industry, HSH still generated 12.9% earnings growth in 3Q23.
• We are delighted to see further margin pick-up in 2Q23-3Q23, thanks to digitalisation and better efficiency. We believe such a trend can be sustained over the next 12-18 months. 
• More innovative products will drive market share, and better margin can support a 13% 3-year earnings CAGR. ROE is high at 17-8% despite net cash (8.8% of share price).   

• Back in mid-June, hotel and investment property play Amara Holdings (AMA SP) gained 38% over three consecutive days on news of a possible Offer from its controlling shareholders.
• The Teo family controls ~51% of shares out. No price was mentioned. This development was discussed in Amara Holdings Gains On Possible Offer.
• After shares were halted on the 10th November, Amara has now announced a best-and-final unconditional cash Offer at S$0.60/share, a chunky 53.8% to undisturbed and a lifetime high.

• Takashimaya saw a strong increase in sales in 1H2023, helping profit rise to record levels with much of the growth coming from clothing and expects similar for the full year. 
• Unlike many rivals, the department store is not at all sanguine about the prospects for continued growth in luxury sales and the inbound tourist market – calling it a bubble.
• It is instead emphasising profit growth over higher sales by targeting locals through store upgrades and better cost performance clothing – while also closing stores that are no longer viable.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess PureGym’s ESG as “Adequate”, in line with its Social and Governance scores. The company has a “Weak” score for the Environmental pillar. Controversies are “Immaterial”, but Disclosure is “Weak”.
• PureGym is the second-largest gym and fitness operator in Europe by number of gyms

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Tele Columbus’ ESG as “Adequate”, in line with its Social and Governance scores. The company has a “Strong” score for the Environmental pillar. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Tele Columbus (TC) is Germany’s third-largest cable operator, offering cable TV, broadband Internet and fixed-line telephony services.

• This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
• Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
• What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).

• Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
• At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024. 
• Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.

• Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up. 
• The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price. 
• Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose. 

• Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
• Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
• Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.

• On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
• Preceding my comments on Takara 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%.

• This article discusses the potential inclusions and exclusions of KOSPI200 rebalance inDecember 2023 (especially those that are highlighted by the locals).
• Stocks that are expected to be added to the KOSPI200 index include Posco DX, HD Hyundai Electric, Sam-A Aluminum, TCC Steel, and Dentium. 
• Stocks that are expected to be excluded in the KOSPI200 index Include Zinus, Handsome, Cuckoo Homesys, Taekwang Industrial, and Hyundai Home Shopping.

• KT&G announced a new shareholder return policy worth 2.8 trillion won (including dividend payout of 1.8 trillion won and treasury shares purchase/cancellation of 1.0 trillion won) over next three years.
• In addition, the company plans to cancel about 7.5% of the company’s existing treasury shares which represents about 142 billion won (1.2% of outstanding shares). 
• Although this 2.8 trillion won in shareholder return policy is large, the company could have announced even larger shareholder return policy, including cancellation of its entire treasury shares. 

• Zeekr, 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.
• In this note, we talk about the positive aspects of the deal.

• China Feihe (6186 HK) saw major derating (from around 20x PE to the current high-single-digit PE) coupled with sizable earnings drop (-28% yoy in 2022/-25% yoy in 1H23) since 2022. 
• The investment thesis or trade thesis here is a play on the rise of new born babies in 2024, the year of the dragon in China. 
• The margin of safety here is also high given a 7% forward dividend yield (Feihe has pledged to increase dividend payout ratio going forward).

• Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November). 
• 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 66.67% ownership ratio.
• Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium. 

• IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s offer of JPY812 per share, an 18.5% and 16.0% premium to the undisturbed (9 November) and last close price, respectively. 
• 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 23.48% ownership ratio.
• Despite the modest premium, the offer represents a high five-year share price. The minimum acceptance condition requires a 41.3% minority acceptance rate. 

• ASICS reports solid Q3 results, featuring a 14.5% rise in net sales, 31% rise in operating profit, improved gross margin, and digital growth.
• ASICS revises FY23 outlook with increased sales and operating profit. New OP guidance of Y52b is inline with consensus
• Market to focus on new Mid-Term Plan (end-Nov). Valuation at 16x forecast EBIT still a discount to average 18x multiple.

• A Fund named Mirai Creation Fund, investing in five “fields” “vital to the future” (“intelligent technologies”, robotics, hydrogen-economy, electrification, and “new materials”) will buy out casting/forging mainstay IJTT. 
• The look and feel of this fund screams “lead me to the future”, so of course, the buy-out is being done with 26% equity, 74% debt. Levered is good.
• That’s to buy at 0.46x PBR. Equity check is 12% of net assets. The Board says “yes” because it will lead to “improvement of corporate value”. Unfortunately, not for shareholders. 

• Li Auto’s revenue increased by 271% YoY and vehicle deliveries increased by 296% YoY in 3Q23.
• NIO will dismiss 10% of its employees and even 20% in some departments.
• We do not believe Alibaba will take over the whole Best Inc.

• 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 five names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Wuliangye Yibin, Foxconn Industrial, and BYD. Nets are still smaller.
• Last week, NORTHBOUND returned to net OUTflow after the previous week saw the first net buy in 3mos. This week saw RMB 7.95bn of net NORTHBOUND selling.

• The New and Better (10 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.
• HUGE underperformance of Hs vs As across the board. A horrible week and it is not clear why. I doubt it was the short-selling warning or increase in haircuts.
• SOUTHBOUND was a net buy and NORTHBOUND a net sell and the largest net SB flows on H/A pairs were the high-div SOEs.

• With the review period complete, we expect one change for the STAR50 INDEX in December if the index committee continues to use a 6-month minimum listing history.
• With net inflows to mainland China ETFs over the last few months, passive trackers will need to trade between 9-25 days of ADV on the potential add and delete.
• SMIC (688981 CH) will be capped and there will be reverse funding flows on the index constituents. One-way turnover is estimated at 1.8% resulting in a one-way trade of CNY2,580m.

• 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 – 111 Inc (YI US), Eoflow (294090 KS), Benesse Holdings (9783 JP), Hollysys Automation Technologies (HOLI US), Irc Ltd (1029 HK), IJTT Co., Ltd. (7315 JP). 
• Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), Tietto Minerals Ltd (TIE AU), Chindata Group (CD US). 

• Sheng Siong (SSG SP) continues to maintain steady, low, single-digit growth in revenue and flat profitability despite a challenging environment. 
• Inflation trends reversing due to lower power costs in 2024, and an improvement in its product mix could lead to increased low double-digit profitability (10-11% YoY). 
• Trading at 18.5x/17.6x FY23e/24e PE and 3.9% dividend yield, the stock remains on our watchlist if a correction leads to a favorable entry point.

• Wolters Kluwer is executing on the second year of its strategic plan, with bold steps taken during the past few months
• The business model is solid, with recurring revenues totaling 80% of the group’s total revenues. 
• Management is positive about the pipeline, the retention rates, and the promising net promoter scores seen in H2; the key element for determining revenue growth in 2024

• Benesse Holdings (9783 JP) has recommended an EQT-backed pre-conditional MBO offer of JPY2,600 per share, a 45.1% and 36.3% premium to the undisturbed price and last close, respectively.
• The pre-conditions primarily relate to Japanese and Chinese approvals, which can be waived. Chinese SAMR approval should be forthcoming as education is not a geopolitical fraught sector.
• The offer is long-dated and opens in early February 2024. While not a knockout bid, the offer is fair in the context of Benesse’s muted outlook. 

• The Korean Financial Services Commission and the Financial Supervisory Service held a press briefing, unveiling the comprehensive prohibition of short selling from the 6th November, until June 30th next year.
• Recco or Ascendant for Hollysys (HOLI US)? Ascendant could easily get >50% of shares out, and spill the board. Recco, with no shares held, looks to have a weaker hand. 
• Sankyo (6417 JP) is cheap. It will never trade at 20x expected PER because of the nature of the business; right now, on an ex-cash basis, it trades 1.6x ex-cash PER.

• Shidax Corp (4837 JP) has recommended an MBO tender offer of JPY800 per share, a 10.3% premium to the undisturbed price (9 November).
• After the settlement of the tender offer, Oisix ra daichi (3182 JP) will acquire a 66.0% stake in the offeror by way of third-party allotment at the tender offer price.
• Despite the skinny premium, the offer is just shy of the ten-year share price high. The minimum acceptance condition requires a 12.5% minority acceptance rate.

• Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
• It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
• I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something. 

• 13mos ago I wrote about Shidax Corp (4837 JP) which an interesting restructuring past and a refreshing governance outlook going forward in Shidax Outlook May Change – Better Governance Matters. 
• The stock was up 25% in that period to yesterday. Today, a Nikkei article mid-day suggests the Shida family will launch an MBO. Stock popped. Earnings out after the close.
• The article suggests a take-private MBO with Oisix ra daichi (3182 JP) again supporting the deal. 30 minutes ago Shidax responded saying an offer was put forth at ¥800/share.

• Eclat Textile Company (1476 TT) is a vertically integrated textile company, with around 20% net profit margin, similar to Shenzhou Intl Group Holdings (2313 HK).
• The company just reported 3Q23 results, with sales down 26% yoy and net profit down 28% yoy.  Starting the next quarter 4Q23, the company is expected to return to growth.
• The company now trades at 23x 2024E earnings.  I believe the valuation is reasonable as growth returns, and there are potential upside catalysts. 

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. Softbank Group
2. Sunny Optical Technology Group
3. Seazen (Formerly Future Land)
4. Melco Resorts & Entertainment
5. Yanlord Land

and more…