Consumer

• On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
• That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
• The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September. 

• According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again. 
• WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E.  Since 2016, the company has had an average PE of 11x. 
• The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited. 

• Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits. 
• Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%. 
• We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x. 

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. Medco Energi
2. NagaCorp Ltd
3. China Vanke
4. Lippo Malls Indonesia Retail Trust
5. Tata Motors Ltd

and more…

OPAP’s management is successfully executing its strategy of growing the core brands and customer interactions online and offline, as evidenced by increasing online exposure and revitalising growth in its mature retail core activities, while maintaining its leading corporate and social responsibility (CSR) credentials. Its exclusive licences in the majority of its activities enable high levels of profitability, cash generation and shareholder returns. We see attractive upside to our DCF-based valuation of €17.9/share, with the added appeal of a prospective dividend yield of 10.7%.

• Previous price increases by WD-40 Company (WDFC) led to the Company reporting a year over year increase in quarterly revenue, but with those prices increases being lapped in fiscal 2024
• WDFC was able to reduce its inventory level in the quarter, but unit volume growth remains elusive. Higher operating expenses are expected to prevent earnings growth in fiscal 2024
• WDFC reported fiscal fourth quarter sales of $140.5 million compared to $141.7 million achieved in fiscal third quarter.

• ZJLD Group (6979 HK) raised US$676m in its Hong Kong IPO in April 2023. Its six-month lockup will expire on 26th Oct 2023.
• ZJLD is a Chinese liquor company producing baijiu. As per F&S, the firm ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• On 19 October, Kolmar Korea announced that it will conduct a merger share swap with Yonwoo early next year to make it into a 100% wholly owned subsidiary.
• We believe the merger share swap agreement between Kolmar Korea and Yonwoo is likely to have positive impact on both Kolmar Korea and Yonwoo.
• After this share swap is completed, Yonwoo will be delisted. This merger is aimed at improving the inefficient governance structure caused by duplicate listings and improve management efficiency.

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
• Sands China

• Yesterday, Anta Sports Products (2020 HK) held its Investor Day in Beijing. They talked about Descente Ltd (8114 JP) and their plans. 
• The presentation made by the Descente China Chairman talked about the evolution of performance and the target for 2026, suggesting higher profit now and growth going forward than market expectations. 
• None of this changes my outlook for why Itochu Corp (8001 JP) is buying Descente shares in the market. And the stock is going up.

• Macau’s mass GGR in 3Q23, including slots, was down just 6.7% on 3Q19 levels, but up 11.1% quarter-on-quarter.
• The shifting regulatory sands across the gaming landscape has resulted in VIP baccarat revenue accounting for 24% of GGR in 3Q23, down from 43.8% in 3Q19, and 64.6% in 3Q13.
• All concessionaires have been impacted by the collapse of the junket industry. But those who relied less on VIP flow have fared better on a comparative basis.

• Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-September. There are a few companies with significant float changes from end-March and/or end-June.
• The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
• We find 9 stocks where there could be inflows with passive trackers needing to buy over 1 day of ADV on most stocks.

• Our long held strong conviction on  LVS has not faltered despite its chronically undervalued.
• Monthly gross gaming win trends do not reflect sagging China economy.
• Imminent 3Q23  earnings release may well  hold upside surprises. We sense a beat.

• Sariguna Primatirta (CLEO IJ) is a differentiated bottled water player in Indonesia producing pure water using nano-technology, with around 5% market share but with significant upside given low penetration. 
• The company has established a long-term growth record over the past six years and booked +14.9% sales growth and +23.2% net profit growth, driven by increased demand and new products.
• CLEO continues to expand its manufacturing and distribution to cover more areas of the country. It also has an increasingly sustainable edge and valuations are reasonable relative to growth. 

• On 17 October, Autonation Inc (AN US) also withdrew its proposal for Pendragon PLC (PDG LN). Lithia’s deal is likely to obtain shareholder’s approval, for lack of a better offer.
• Holding on would mean receiving 24.5p and staying in a small cap SaaS, whose shares are implicitly valued at 6.5p, instead of the 10.9p that Pendragon claims it is worth.
• Readacross: Hedin, AutoNation, or someone else, could take a closer look at Vertu Motors (VTU LN).

• In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the December 2023 Rebalance.
• Dechra Pharmaceuticals (DPH LN) and Network International Holdings (NETW LN) are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.
• Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.

• Xtep International (1368 HK) announced yesterday strong retail sales of high-teens growth in 3Q23.
• Though the growth was at the expense of slightly higher overall discounts of 25-30% off during the quarter.
• I prefer Anta over Xtep given higher visibility in Anta’s bottom line, as Xtep’s growth continues to be of lesser quality than Anta’s. 

• Anta Sports Products (2020 HK) achieved a decent 3Q23 with sales performance of major brands outperformed. With a low comparison base, 4Q23 sales will be even more impressive. 
• Indications are that sales for the Golden Week are satisfactory and “double-11” sales are optimistic. The acquisition of MAIA ACTIVE will further add to its product portfolio.
• Amer’s IPO is another catalyst and reports are that this has been filed in the US. Anta Sports’ stake may be valued at US$4bn, almost 12% of its market cap.

• Freshippo opened its first high-end supermarket, Premier, in Shanghai in September.
• We believe it is a good idea to take business from independent stores and small store chains.
• However, we do not believe those foreigner-oriented foods will be popular.

• HDFC Bank (HDFCB IN) is the largest buy (XSOE) – estimated flow $44m. Grupo Financiero Banorte SAB d (GFNORTEO MF) is the 2nd largest buy – estimated flow $40m.
• Wistron Corp (3231 TT) is the largest sell – estimated flow $68m. POSCO Holdings (005490 KS) is the 2nd largest sell – estimated flow $59m.
• Our estimate for the total value of new constituent buys is $1.38bn. We expect deletions to the value of $1.41bn to be sold down across the 3 funds.

• Shakey’s Pizza (PIZZA PM) is set to declare its Q3 2023 result in the 2nd week of November. We expect revenue/earnings growth of 41%YoY/44%YoY. 
• Q4 is the seasonally highest growth quarter, where the company makes 40% of its annual profits. A strong Q1-Q3 sets up a solid end to the year. 
• We believe the company will easily be able to meet or beat its guidance of 30% revenue and profit growth for FY23. Stock trades at 13x/9.8x PE FY23e/24e.

• The Keepers Holdings (KEEPR PM) is set to declare Q3 2023 earnings in the 2nd week of November. We expect the company to report a 9%/18% YoY revenue/net profit growth.
• We expect a steady improvement in Bodegas W&H and operations and overall gross profit margins to remain stable at 26-27%. 
• The stock is cheap at 7.7x/6.6x FY23e/24e with a 5.1%/5.9% dividend yield and 10% of the market capitalization in cash. 

• Schaeffler (SHA GR) offers €91.00/share for Vitesco Technologies Group (VTSC GR), in cash, 20% premium to 3-month VWAP, 3.3x EV/Fwd EBITDA. There is no minimum acceptance rate.
• Later Schaeffler will unify its share classes (current voting ratio 3.01) to use them as currency for Vitesco shareholders not accepting the cash offer (essentially the parent company of Schaeffler).
• Vitesco shareholders are being generously rewarded (my fair value estimate is #€74/share), I believe most will tender. Spread is 1.04%/3.70% (gross/annualised, assuming settlement by 31 January). I’d buy below €90/share.

• Seijo Ishii is Japan’s leading premium supermarket chain with some 200 stores and is being prepped for an IPO by its owner, Lawson. 
• After strong growth during Covid, sales have now flattened and the company’s large import business has suffered from higher costs due to the weak Yen and global crises.
• To maintain its market position, it is reducing imports of packaged goods and increasing volumes of imported, high-end raw materials – and then manufacturing products itself.

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.

• Lippo Malls Indonesia Retail Trust
• Tata Motors ADR

• CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
• The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
• Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

• In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one. 
• They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
• Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

• Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
• This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
• This is a possibly deceptive index add. I’d be quite careful. 

• Iconic Indonesian mass-market department store retailer Ramayana Lestari Sentosa (RALS IJ) has struggled with sluggish growth this year, especially over Lebaran but management remains confident in some recovery in 2H2023.
• The company embarked on transformation pre-pandemic but COVID put a brake on this change and forced a number of stores to close and resurrection has begun again but slowly.
• Ramayana is taking a conservative approach this year, opting not to expand its store network as anticipates weakened purchasing power but pre-election spending could provide a boost. Valuations are attractive.

• Market expectation for FY23/24 earnings of Sa Sa International Hldgs (178 HK) is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.
• Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months. 
• Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained. 

• As outlined in previous reports, Aeon has been working hard to streamline its vast retail empire but also rethinking the fundamentals of retailing for each major format it operates.
• The results are now coming through with a big increase in operating profits in 1H2023, up 23% on last year.
• There is real momentum now, and the new online supermarket business is central to its ambitions to create the first true national FMCG business.

• Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Kokusai Electric (6525 JP) managed to get strong support, even though we remain somewhat unconvinved. 
• In the placement space,  we looked at the upcoming lockups for Rakuten Bank (5838 JP) and Zomato (ZOMATO IN), along with the Ingenia Communities (INA AU) placement.

• Shareholders have approved United Malt Group Ltd (UMG AU)‘s acquisition by Malteries Soufflet and UMG is expected to stop trading after the close on 17 October. 
• United Malt Group Ltd (UMG AU) will be replaced by Light & Wonder (LNW AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
• This is a surprise and there is unlikely to be a lot of pre-positioning on Light & Wonder (LNW AU). Buy Light & Wonder (LNW US) during US hours.

• Seven & I Holdings (3382 JP)‘s FQ2 OP exceeded consensus by ¥2.0bn (1.3%), but with FH2 revenue guidance lowered by ¥95bn, the overall outlook appears discouraging.
• The company’s shares fell by 5%, underperforming Topix by 3.8%, indicating investor concern about US growth and departing from activist proposals despite a ¥2.0bn earnings outperformance.
• If overseas investors who supported ValueAct’s proposals begin to exit, Seven & I could face substantial downside risks in the near term.

• Anta Sports Products (2020 HK) announced a set of strong 3Q23 operating data yesterday after market close.
• Both Anta and Fila brands performed well in a challenging macro environment in China in 3Q23, with 3Q22 being a high base. 
• Another bright spot is that other brands outside of Anta and Fila grew 45-50% yoy in 3Q23, with Descente up 40-45% yoy and Kolon up 65-70% yoy.

• In yesterday’s trading session, Naspers and Prosus followed the market lower leading up to and after the US CPI print (headline worse than expected, core inline). 
• Naspers and Prosus closed 1.4% and 1.9% lower, reducing Naspers’ discount to Prosus’ market value to its narrowest level since Prosus listed. The discount closed at 10.4% (currently 10.9%).
• Naspers has outperformed Prosus by 2.2% during the last 3 trading days. 

• The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
• The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
• In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS). 

• Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
• At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
• If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell. 

• 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.
• Softbank then sold a part of its stake in Aug 2023, the rest of its stake will come out of lockup soon.
• In this note, we will talk about the lock-up dynamics and recent updates.

• Tesla Inc. will have to sell a record number of cars in the fourth quarter to reach its goal for the year after third-quarter deliveries declined.
• The electric-car maker produced 430,488 vehicles in the third quarter, down 10% from the second, and delivered 435,059 units, down 6.7%, Tesla said Monday.
• The drop in deliveries resulted from production stoppages at its factory in Fremont, California. Tesla CEO Elon Musk said in July that production facilities would be closed at various times in the third quarter to perform plant upgrades.

• GoTo Gojek Tokopedia may see a stabilisation of the declines in GTV that it has experienced over the last 2Qs, with some of the platform’s new initiatives gaining traction.
• The closure of TikTok Shop should be positive at the margin for Tokopedia but it has also rolled back its platform fee, which has had a positive impact on growth.
• New initiatives include GoRide Transit, GoCorp, GoTo PLUS, and the GoPay app, with the latter seeing strong take-up. 3Q2023 results should reveal more details on initiatives. All-time low seems unjustified.

• Price consciousness remains high among most Japanese consumers at present, a boost to low-cost apparel retailers.
• Shimamura, which has posted three straight years of growth But when price is the main driver, competition from the likes of Shein and Temu becomes a growing problem.
• So even Shimamura is trying to add value through branding, collaborations and Shein-like supply chains and the outlook is promising, suggesting significant upward gains for the stock.

• Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China. 
• The Asia segment, which is primarily restaurants in China, nearly doubled operating profit in FY23 (year ending August) from pre-COVID FY19.
• The company is trading at 27x FY24E PE, with more than 80% expected growth in operating profit in FY24. 

• Levi Strauss & Co. delivered a mixed set of results for the quarter, with revenues well below analyst expectations but managed earnings beat.
• Despite facing headwinds, reported revenues remained steady compared to the previous year and decreased by 2% on a constant currency basis.
• Their Brands segment, consisting of Dockers and Beyond Yoga, is performing impressively, generating nearly $0.5 billion in annual revenue.

• PDD Holdings Inc. delivered a solid result and managed an all-around beat in the quarter.
• The company experienced a substantial 66% year-on-year increase in revenue, signaling a growing trust in its products and services.
• This surge in consumer confidence has led to increased demand across various product categories, a testament to the company’s continued success.

• Sonos, Inc. delivered an all-around beat in the previous quarter.
• The company reported $373.4 million in sales, up 23% sequentially and approximately flat year over year in both reported and constant currency terms.
• This growth was fueled by a full quarter of projected price increases, decreased component costs, and a favorable mix.

• Kia is set to make a comeback, while the exclusion of Posco Future M is on the horizon.
• The screening date is set for November 30th, and the effective date is December 18th, which means the ETF rebalancing will take place on December 15th.
• The exposure period to the market is relatively short, so it’s essential to acknowledge the limited accumulation of learning effects. This suggests we can anticipate a notably substantial price impact.

• Ryohin Keikaku (7453 JP) will announce FQ4 results on October 13th; we expect earnings to beat consensus by ¥2-3bn, potentially boosting stock performance.
• FY24 OP guidance at around ¥55bn could be a catalyst for significant upside potential in the short term.
• The current share price of approximately ¥1,800 per share supports an annual OP of roughly ¥30bn, indicating nearly 100% upside potential with FY24 guidance.

• In just five years, India’s electric-vehicle sector has surged, positioning the country to become the world’s largest EV market by 2030.
• In addition to their cost and environmental advantages, EVs also enjoy tax benefits in India. However, despite having 3 million EVs on the road, the country hasn’t established standardized charging protocols for these vehicles.
• With that in mind, Raptee said it is the first Indian EV startup to opt for the Combined Charging System Type 2 connectors, or CCS2. By integrating both AC and high-power DC charging, the system expedites the charging process, particularly at Level 3 charging stations.

• PAGD successfully narrowed net loss. It seems that the Company doesn’t mind “sacrificing” revenue scale, which could be considered “a necessary price” to pay for the transition to 2B model.
• PAGD mainly rely on Ping An Group channels to acquire B-end and F-end users, but based on our calculation, PAGD would encounter an obvious growth ceiling at certain revenue scale.
• Although PAGD could achieve breakeven by divesting businesses with low strategic synergies and effective cost control, the Company’s long-term growth potential and prospects remain uncertain, leading to discounted valuation.  

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Marfrig’s ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Strong”.