Consumer

• Outbound daily traffic during the long holiday down -15% vs 2019, and short of expectations
• Total domestic trips up 4% vs 2019, but average daily trips -9% & average daily spending -4%
• Ten months in, the pace of China’s 2023 tourism recovery remains disappointingly sluggish

• The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
• The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
• Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US). 

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
• The index changes for the December 2023 rebalance will be announced in mid-November (17 Nov) and implemented in early-December (with effect from 4 Dec).
• Although the Hang Seng index has a highly subjective constituent selection process and index changes are somewhat unpredictable, we will continue sharing our thoughts for each quarterly review.

• Aeon Co Ltd (8267 JP) and Inageya Co Ltd (8182 JP) agreed in late April to prepare a plan so Aeon would buy 51% this year.
• They would combine Inageya with 53+%-owned United Super Markets (3222 JP) aiming for a ¥1trln sales supermarket chain in Kanto. That is due end- calendar 2024.
• There is a partial offer to buy 33+% of Inageya at a small premium, and inadequate price before merging next year. Cross-holders determine pro-ration.

• In this insight, we provide the major changes in NPS’ stakes in 25 Korean companies in 3Q 2023.
• In 3Q 2023, NPS reduced its stakes in the IT, construction, and contents related stocks. On the other hand, NPS increased its stakes in China’s re-opening and cosmetics related stocks.
• Five Korean cosmetics stocks that NPS net purchased in 3Q 2023 are up on average 12.8% from end of June 2023 to as of 6 October 2023. 

• Aeon Co Ltd (8267 JP) has announced a partial tender offer for Inageya Co Ltd (8182 JP) to make it a consolidated subsidiary. Aeon flagged this intention on 25 April.
• The tender offer is for a maximum of 15.7 million shares (33.78% ownership ratio) at JPY1,610, a 23.2% premium to the undisturbed price. There is no minimum acceptance condition. 
• The offer price is reasonable. Longer-term, Aeon aims to make Inageya a wholly-owned subsidiary of United Super Markets (3222 JP) by November 2024.

• Selamat Sempurna remains one of the most interesting industrial players in Indonesia, as an auto and heavy equipment components manufacturer, leading the replacement filter market, and exporting to 100 countries. 
• The company booked growth in sales in 1H2023, despite coming from a high post-COVID base, with margins improving due to lower raw material input prices, without any price rises.
• Selamat Sempurna (SMSM IJ) remains confident in the outlook for the rest of the year and expects sales growth to pick up in 2024 to around +15%. Valuations are attractive.

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. AAC Technologies Holdings
2. Vedanta Resources
3. China Vanke
4. JSW Infrastructure
5. Medco Energi

and more…

• During the recent quarter, McCormick showcased mediocre performance with below-par revenues and on-par earnings.
• In terms of highlights, the company reported constant currency sales growth and noted an improvement in volume performance, excluding China, throughout the year.
• In the Flavor Solutions segment, McCormick continued its exceptional growth momentum, with the third quarter marking its tenth consecutive quarter of double-digit constant currency sales growth.

• Wayfair Inc. exceeded analyst expectations in terms of revenue as well as earnings.
• With net revenue down 3% year-over-year in Q2 compared to a category that continues to be down 10% to 20% for widely-tracked estimates like credit card and email receipt data, Wayfair significantly outperformed the competition.
• Total adjusted EBITDA for the quarter was $128 million due to the revenue strength and significant expense reductions they have made across their entire P&L.

• Fast Retail Full-Year Expectations: Anticipate strong FY results, but potential FY8/24 guidance headwinds include weather impacts and yen weakness.
• Management Guidance Risks: The key risk would seem to be China outlook; Japan/Europe’s heatwave impact on fall season; potential for gross margin pressures.
• Valuation: Despite growth prospects, concerns over cyclicality and valuation relative to peers persist.

• Xinyi Glass Holdings (868 HK)‘s stable auto glass business is often overlooked, making up 39% of the company’s gross profit in 1H23.
• Given the current valuation of 7x 2023E PE and 1.3x 2023E PB, the risk reward is skewed to the upside, and downside is protected with the stable auto glass business. 
• The company’s management has been aggressively increasing stake in the company in the last 2 months, gobbling up 11 million shares.

• Boustead Plantations (BPLANT MK) shares have been on a rollercoaster ride. As Kuala Lumpur Kepong (KLK MK) pulls its offer, LTAT has emerged as an unlikely white knight. 
• LTAT aims to launch a general offer at RM1.55 per share, in line with KLK’s aborted MGO price. The government will backstop LTAT’s funding for the offer. 
• LTAT is vague on approvals and timing. Regulatory approvals should be a formality as LTAT is the Armed Forces pension fund. At the last close, the gross spread was 10.7%. 

• Factory shutdowns for “updates” doesn’t explain Tesla’s huge Q3 miss on deliveries.
• Why? Because bloated excess inventory was enough to cover the 20k “miss” some 3-5x. 
• A better explanation: Tesla’s accelerating demand erosion, which I have been tracking since last year in every major market.

Smiths News’ recent trading update highlights continued growth in adjusted operating profit, which is anticipated to be at least in line with market expectations of £38.3m (Edison: £38.1m). This represents a marginal increase of 0.5% year-on-year, despite the substantial inflationary impacts seen in the past two years. We expect additional publisher contract renewals to be secured in the next year, which should further bolster the company’s cash-generative business model and underpin the sustainability of the business in the long term. Our forecasts are unchanged, as is our valuation of 89p/share, which represents substantial upside.

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.

• AAC Technologies Holdings
• Tata Motors ADR

• What you need to know: • Organto announced that it has expanded into Asia with an international retailer and plans to grow this market over the coming years • OGO also announced that it plans to expand into North America in late 2023 (initially with the U.S. ).
• This includes its plans to expand into North America, expansion into Asia, increasing its debt facilities, and consolidating its common shares.
• North America Expansion This morning, Organto announced that it plans to expand its platform into North America, initially the U.S. market.

• ADEA revised its full year outlook after electing to sue long-time customer Shaw Communications for breach of contract
• Shaw was acquired by Rogers Communications (RCI). ADEA claims Shaw is no longer paying ADEA even though the two companies had signed a license renewal in 2019
• We are reducing our 2023 revenue forecast to approximately $387.7 million with operating income of $250.8 million

• CJ Corp’s share price declined sharply by 10.7% to reach 80,200 won on 4 October. CJ Olive Young is the number one health & beauty store chain in Korea. 
• According to local media, CJ Olive Young is in danger of being fined large amounts of money by the Fair Trade Commission (FTC).
• It appears likely that CJ Corp’s share price could fall further close to the five year low end of the trading range (60,000 won) in the next several weeks.

• Rakuten Group (4755 JP)‘s shares plummeted 80% in 8 years, reaching ¥500 in June 2023 due to ¥1.3 trillion mobile business losses.
• Expecting a positive shift as Rakuten Mobile approaches platinum band access and subscribers poised for exponential growth following the KDDI agreement.
• We are expecting Rakuten Mobile to turn profitable next year, while the consensus is projecting an operating loss of around ¥200bn for the business.

• The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). Pendragon PLC (PDG LN)‘s shares are trading just below, at 35.2p.
• It is now the turn of either Hedin or AutoNation to raise their offers. 32p/share seems a fair value for the standalone business. Synergies could be worth up to 10.54p/share.
• Assuming a bidder distributes 60% of synergies to Pendragon shareholders, a potential offer price of 38.3p/share, in cash, 8% above Lithia’s offer, could still be value enhancing.

• Soybeans are crushed into soy oil and soymeal. The crush represents the Gross Processing Margin of Soybean.
• The crush has been increasingly affected by the price of soy oil compared to soymeal. Ample meal supply suppresses its prices.
• Meanwhile, soy oil prices are buoyed by supply concerns in the US as it is increasingly used to produce biodiesel.

• AutoZone delivered an all-around beat in the most recent quarterly result.
• The company achieved a total sales growth of 7.4% for the fiscal year, accompanied by a 12.9% increase in earnings per share.
• Additionally, the company has introduced new reporting metrics to provide enhanced visibility, including same-store sales results for domestic, international, and total company operations.

• CALB Group (3931 HK) raised around US$1.2bn in its Hong Kong IPO in Oct 2022. The lockup on its pre-IPO shareholders will expire tomorrow.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products in China.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

Greggs continues to generate premium sales growth through a combination of volume, including market share gains as distribution increases, and price growth. The strength of underlying trading in Q323 is highlighted by management’s confirmation of consensus FY23 PBT expectations despite the addition of new costs for expanding the company’s delivery offer to a second platform and a slight delay in some store openings from the end of the year into FY24.

• Ralph Lauren managed an all-around beat in the last quarter delivering a strong performance that highlights the resilience of its strategy and the adaptability of its teams in a dynamic global environment.
• The quarter witnessed positive revenue growth that surpassed guidance, marking a return to gross margin expansion while effectively managing peak raw material costs.
• The company’s commitment to cost discipline enabled a 100 basis point expansion in adjusted operating margin, reaching 13.7%, resulting in a 9% increase in operating profit.

• Columbia Sportswear Company delivered an all-around beat in the most recent quarterly result.
• Columbia Sportswear’s expectations were essentially met as the gross margin increased by 140 basis points.
• In the quarter, net sales for the Columbia brand grew 11%.

• We believe the undertone in the market is bullish, Large Caps are “out of flavour” and hence an L/S (Long/Short) strategy with INDA/SMIN could be an interesting pair to track. 
• We visited a BYD (1211 HK) showroom in Western India gathering hints of the defensive strategy in India. 
• Other names discussed include Asian Paints (APNT IN), CE Info Systems (MapmyIndia) (1052633Z IN) and Ebix (EBIX US).  

• Topsports International Holdin (6110 HK) is a pure-play on Nike and Adidas retail sales in China, as it is a leading retail partner of Nike and Adidas in China.
• Nike’s Greater China sales grew 12% yoy during the most recent quarter.  During the earnings call, Nike management was bullish on the prospects of the China business.
• The company currently trades at 13x forward PE, with a forward dividend yielf of 7%. 

• In the first table, we provide a list of 56 stocks (2.2% of total) which have dividend yields of 7% or more. 
• The second table is a list of stocks with dividend yields of 7% or more and they are ranked in terms of market cap. 
• These 25 stocks have an average dividend yield of 9.1%. The second table has 12 financials related stocks, representing 48% of total. 

• Doosan Robotics has the potential to rise up to ₩104,000 on the listing date. The market cap would reach ₩6.74T, which fulfills the criteria for KOSPI 200 fast entry
• Based on this calculation, Zinus had the lowest average daily market cap during the previous rebalancing screening period. Therefore, Zinus will be excluded due to the inclusion of Doosan Robotics.
• KOSPI 200 passive trackers will need to conduct rebalancing trading reflecting this ad-hoc change on the closing price of November 9th.

• Beijing UBOX Online Technology (1741985D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Beijing UBOX Online Technology (UBOX) is an unmanned retail operator (vending machine) in China.
• We had looked at its past performance earlier. In this note, we look at the updates from its recently filed PHIP. 

• As discussed in last week’s Compass (9/26/23), we continue to believe the odds of a deeper pullback to SPX 4165-4200/the 200-day MA have increased 
• Our reasoning continues to be due to the major breakouts in the U.S. dollar (DXY) and Treasury yields (10- and 30-year), coupled with a handful of Sectors/indexes breaking below supports.
• We are also monitoring 1-year uptrends on the S&P 500 and Russell 2000 (IWM), currently at 4240 and $173. Flirting with breakdowns below these levels today. Buys in retail/energy shippers

• After going ex-dividend in June, Water Oasis (1161 HK) corrected and has remained rangebound at the 1.35-1.45 HKD/levels due to negative sentiment on HK/China.
• We expect FY23 results to be reported in late November/early December. We expect an increase of 19%/85%  in Revenue/PAT with a 16-cent dividend for FY23 (11.4% dividend yield).
• Stock trades at 7.6x/6.2x PE FY23e/24e, a dividend yield of 11.4%/14% FY23e/24e with 25% of the market capitalization in cash. 

• Costco delivered an all-around beat in the most recent quarterly result.
• The company reported net income for the 17-week fourth quarter came in at $2.16 billion or $4.86 per diluted share compared to $1.868 billion or $4.20 per diluted share in the 16-week fourth quarter last year.
• In terms of sales, net sales for the 17-week fourth quarter were $77.43 billion, an increase of 9.4% from $70.76 billion in the 16-week fourth quarter last year.

• Luyuan Group, a pioneer in the e-bike industry in China, set terms for an upcoming IPO. The company offers ~106.7M shares at the expected price range of HK$6.00 to HK$8.00.
• The IPO price range implies a market cap of roughly HK$3B at the midpoint. Cornerstone investors have agreed to subscribe and purchase ~71% of the Offer Shares.
• Shares will begin trading on the HKSE next week. I believe the IPO will be priced at the low end of the range as e-bikes sales have slowed in Asia. 

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
• JSW Infrastructure
• NagaCorp Ltd
• Vedanta Resources

• On the 24 August, Kuala Lumpur Kepong (KLK MK) entered an agreement with Boustead Holdings (BHB), Boustead Plantations (BPLANT MK)‘s largest shareholder, to acquire a 33% plus 1 share stake.
• Upon the completion of the agreement, KLK – together with BHB and LTAT – would make a Mandatory Offer for BPlant. The Offer Price would be RM1.55/share, a lifetime high
• It all looked pretty straightforward. However the BHB/LTAT agreement has twice been delayed. This may still get done. But there remain a number of political kinks to be ironed out. 

• Boustead Plantations (BPLANT MK) shares are down 16%, resulting in proprietary day trading and intraday short selling being suspended. The transaction is mired in political debate. 
• The bull case is that Kuala Lumpur Kepong (KLK MK) continues on-market purchases and the opposition will compromise, paving the way for deal completion. Timing is the key risk. 
• The bear case is a deal break. The downside is limited as the government will need another buyer, the shares trade below the undisturbed price, and the undemanding valuation. 

• In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in August and September 2023.
• We provide a list of 18 stocks in the Korean stock market that have announced share buyback programs in August and September 2023.
• The top three market cap stocks that have announced share repurchases include Celltrion Inc (068270 KS), Celltrion Healthcare (091990 KS), and KT&G Corporation (033780 KS). 

• GTX is scheduled to report third quarter results on October 24, 2023, as the Company continues to make strides in expanding its product offering
• The third quarter results should serve as a catalyst since the Company was expected to repurchase shares and reduce its debt balance during the period
• The impact from the ongoing strike in North America is likely to have minimal impact to GTX if it were to continue for an extended period of time

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.

• Medco Energi
• Tata Motors ADR

• This is the 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 data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• Please play with nifty interactive tables+charts. We welcome feedback. This 4-day week saw RMB 17.5bn+ of net selling. Back to the trenches!

• Market consensus estimates for Q3 deliveries have been falling so hard and fast they now approach my formerly well below market estimate. 
• Sentiment, however, remains largely optimistic as analysts attribute the weakness to factory shutdowns for “updates”. We’ll see.
• Tesla is expected to report results before the market opens on Monday.

• Pal Group posted record sales in FY2022 partly because fashion retail recovered but mostly because of it has a huge hit on its hands: variety store 3Coins.
• Cheap variety stores have always been popular and are becoming even more so as prices rise and people spend more on the home.
• 3Coins has doubled sales in 2 years but expects continued strong growth going forward. With fashion sales also improving, Pal Group is one of few solid bets in lifestyle retailing.

• We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.
• While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.
• Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.  

• Ford Motor Co. said Monday it was suspending construction of its $3.5 billion electric-vehicle (EV) battery plant in the U.S. midwestern state of Michigan, where it had planned to manufacture batteries using technology licensed from Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ -0.31%).

• “We’re pausing work and limiting spending on construction on the Marshall project until we’re confident about our ability to competitively operate the plant,” Ford spokesperson T.R. Reid said in a statement emailed to Caixin.

• “There are a number of considerations. We haven’t been specific about what they are, nor made any final decision about the planned investment there,” Reid said.

• There were a few rebalances implemented last week, notably the Nikkei 225 (NKY INDEX) and the NIFTY family of indices. Plus an ad hoc Philippines Stock Exchange PCOMP INDEX rebalance.
• Nickel Asia (NIKL PM) will replace UnionBank of the Philippines (UBP PM) in the Philippines Stock Exchange PCOMP INDEX in a surprise move at the close on 3 October.
• There were outflows from iShares MSCI Japan ETF (EWJ US), Tracker Fund of Hong Kong (2800 HK) and iShares MSCI Emerging Markets (EEM US) during the week.

• VF Corporation delivered a mixed result in the past quarter, with revenues above anticipations, but it failed to surpass the analyst consensus in terms of earnings.
• While their on-time performance and in-stock percentages were both back in line with their expectations, lead times concluded the quarter at typical levels.
• Vans experienced a 22% decline in the quarter and was significantly impacted by the brand’s expected 40% decline in wholesale sales in the Americas.

• Best Buy delivered a positive result and managed an all-around beat last quarter.
• While absorbing more significant incentive compensation costs than Best Buy saw last year, the company managed to maintain level SG&A costs.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP) 
• This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
• There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great. 

• Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading. 
• Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
• Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade. 

• Matahari Department Store (LPPF IJ) is the key player in the department store space in Indonesia with a significant transformation well underway to drive future growth and profitability.
• The company had a slightly disappointing Lebaran performance given some seasonal disparities but continues to make significant progress in revamping its merchandise mix, with a strong omnichannel yielding results. 
• Matahari Department Store (LPPF IJ) looks exceptionally cheap on 4.0x FY2024E PER, and with a dividend yield of 20.0% and with earnings expected to rebound in 2024E.

• Helped by the share in the incremental IPL media rights value, RPSG Venture’s (RPSGV) revenue from the sports business revenue jumped to INR 590cr+ in Q1FY24 vs INR 300cr+ YoY.
• Losses in the FMCG business narrowed to INR 63cr vs INR 90cr YoY and INR 70cr QoQ. FMCG revenues continue to be at around INR 400cr+ annualized run-rate.
• RPSGV’s BPO business, Firstsource Solutions (FSOL IN) saw stabilization in de-growth and margins. Margins expanded by 375bp during Q1FY24.

• Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
• The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
• For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.

• Keiyo Co Ltd (8168 JP) has recommended DCM Holdings (3050 JP)’s tender offer of JPY1,300 per share, a 58.3% premium to the undisturbed price (29 September).
• 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 35.68% ownership ratio.
• Irrevocables represent a 0.88% ownership ratio. The minimum acceptance condition (lower limit) requires a 50.4% minority acceptance rate, which is achievable as the offer price represents a ten-year high.

• Shiyue Daotian (1892269D CH) is looking to raise up to US$108m in its Hong Kong IPO, after downsizing from an earlier reported float of US$200m.
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
• In our previous notes, we covered the company’s performance. In this note, we will cover the firm’s PHIP updates and share our thoughts on valuation.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Victoria’s ESG as “Weak”, in line with its Environmental, Social and Governance scores. Controversies are “Material” and Disclosure is “Weak”.
• Victoria PLC designs, manufactures and distributes flooring products across the UK, Continental Europe and Australia.