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• 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), Symbio Holdings (SYM AU), ENM Holdings (128 HK), Eoflow (294090 KS), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), Costa Group.
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), Yaizu Suisankagaku Industry (2812 JP), Kenedix Retail REIT (3453 JP), Penguin International (PBS SP). 

• As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
• Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
• Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

• This is the Brand Spanking New and Improved and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see H/A relationships easily. 
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations. 
• We hope this new version serves readers even better. Improvements this week due to popular demand, and updated format. Further feedback is welcome/appreciated. 

• Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
• The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk. 
• The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote. 

• The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK). 
• Neither of these two are a surprise. Neither are hugely impactful. 
• There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

• Fu Shou Yuan (1448 HK) has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.
• Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.
• A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&As are added drivers to earnings prospects.

• The TSE listing rules that include numerical targets for female board members are limited to prime market listed companies, so the majority of listed companies are not covered.
• The “priority policy” on diversity is not budgeted or legislated. In the absence of underlying legislation, it is left to companies to decide how seriously they will implement it.
• Regarding “30% or more female board members by 2030,” if companies want to achieve this goal, they’ll have to rely on female outside board members to make up the numbers.

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 Hongqiao
• Gajah Tunggal

• It is an indisputable fact that JD Health’s revenue growth has slowed down. The core reason is the industry beta brought by mobile Internet demographic dividend/COVID-19 dividend has faded away.
• JD Health’s performance could be under pressure in 2H23. If revenue growth continues to show a downward trend, whether the current profit margin/profitability can be maintained is a question mark.
• JD health is facing four major dilemmas, including both business and policy aspects. Long-term valuation outlook for JD Health is not optimistic. We advise investors to re-evaluate the Company. 

• There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
• We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
• Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

• Last year, I wrote about Joyful Honda (3191 JP)‘s implementation of a ¥2.5bn ToSTNeT-3 into Accelerated Share Repurchase. It was the first such transaction I knew of in Japan.
• This year, they have just announced another for nearly twice the size. It is worth looking at the details and comparing the stock vs Peers.
• It is also worth understanding exactly what the incentives are for whom and how that impacts the path. And who might respond to it.

• As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
• BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
• Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

• Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
• The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
• For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US). 

Dentsu experienced difficult trading conditions in its first half, with US client hesitancy, poor Chinese macro conditions and a one-off hit from a problematic project in the DACH region, compounded by demanding comparatives. These ease in H223, and trading should also benefit from one-off events like the Rugby World Cup, as well as the contribution from Tag, consolidated from 1 July. FY23 guidance is now for organic net revenue growth of 0% to -2% (was 1–2%) and a 17.0% operating margin (was 17.5%). With the inclusion of Tag, operational cost savings and lower interest following debt restructuring, guidance for EPS is unchanged. We have updated our forecasts to reflect this, with a knock-on into FY24. The valuation remains well below peers and long-term average metrics.

• McDonald’s Corporation delivered an all-around beat in the previous quarter.
• The second quarter was yet another example of their continually strong success, driven by their execution and guided by their Accelerating the Arches strategy.
• McDonald’s continued its outstanding success in Q2 by reaching global comparable sales of 11.7% and double-digit comparable sales in each of its sectors.

• The relationship between % of female managers and P/B doesn’t appear to be as strong as the significant correlation found between % of female directors and the value creation indices
• Currently, companies in business categories where women have greater opportunities to play active roles (new business models) are appointing female employees to management positions, and such  companies have higher P/Bs.
• Since the gender wage gap is attributed to % of female managers, unless a company has significant opportunities for women to play active roles, the gender wage gap is large.

• [cue Tom Hardy gif saying “That’s Bait”]. But yes, this story has a backstory to the Japanese underworld, and while the original sin may have been minor, it’s everything.
• The firm was raided, the CEO resigned, a govt authority “recommended” Sanei get rid of Mr Koike’s influence, banks got antsy, employee morale dropped. Sanei needed a saviour.
• Koike-San asked Open House (3288 JP) to buy his shares. They agreed to take over the company. It’s basically a done deal with a possible twist.

• About a week ago, it was announced that Chairman’s elder daughter Min-Jung Suh will take a long one year leave of absence.
• Chairman Suh is very dissatisfied with the company’s results in the past three years and wants to shake up the company to improve its operations, in our view. 
• Our base case NAV valuation of Amorepacific Group (002790 KS) is 39,611 won, which is 29% higher than current price.

• NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
• Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
• The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.

• Chongqing Brewery Co A (600132 CH) announced a impressive earnings beat last night, with net profit up 24% yoy in 2Q23.  Stock is limit up (10%) today.
• The results confirm the premiumization thesis of the China beer sector is in tact.
• Buy China Resources Beer Holdings (291 HK); take advantage of the overall H-share market weakness and unfounded fear on deflation.   

• JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.
• Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.
• There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.

• We attended the Shakey’s Pizza (PIZZA PM) conference call for H1 FY23. Management was upbeat and guided 30% top/bottom line growth for FY23 ( up from 20% in Q1 FY23)
• The company reported its highest-ever quarterly systemwide sales of 4.6 bn pesos ( up 29% YoY) due to network expansion, dine-in recovery, and, to a certain extent, price hikes.
• Trading at a 12.9x/9.9x FY23e/24e PE, the stock is cheap, and growth of 20% CAGR over the next 3-4 years is not being factored in. 

• JD reported 2Q results that were slightly better than the street expected.
• But the set of results did little to alleviate our concerns about the structural challenges JD need to combat.
• We still don’t think JD represents a viable investment case due to its lack of growth catalysts (vs. PDD) and attractive valuation (vs. Alibaba). We would stay on the sideline.

• The main business line, home appliance began to grow by two digits.
• Logistics revenue continued to grow strongly by 51% YoY and can still break even.
• The operating profit rose to RMB7.3 bn in 2Q23 versus RMB3.8 bn in 2Q22.

• JDHealth (JDH) reported C1H23 top line, non-IFRS operating profit and IFRS net income 9.3%, 17% and 162% above our estimates. 
• We believe that with years of tightening NDRL and the recent hardline anti-corruption campaign, 
• More and more pharmaceuticals and patients are looking for alternative channels, which bodes well for JDH in the long run; We raise TP from HK$57 to HK$65 and reiterate BUY

• Sanei Architecture Planning (3228 JP) has recommended Open House (3288 JP)’s tender offer of JPY2,025 per share, an 18.0% premium to the undisturbed price (15 August).
• The transaction is required to facilitate the exit of Mr Koike, the largest shareholder, and satisfy Article 27 of the Tokyo Metropolitan Organized Crime Exclusion Ordinance.
• Irrevocables represent a 64.21% ownership ratio, and the lower limit requires a 6.9% minority acceptance rate. The offer is a reasonable solution to the current predicament. 

• GoTo Gojek Tokopedia (GOTO IJ) released results for 2Q2023, which reflected a slower growth environment exacerbated by lower incentive spend but some significant progress towards its profitability goals for 2023.
• The company continues to focus on maintaining high-quality users but with an increasing focus on more affordable offerings to expand its demographic reach with the potential to double its users.
• GoTo is undergoing a full assessment across all divisions, with a focus on improving synergies, with new strategies for growth to be revealed next quarter.

• Q1 2024 results proved that the long trade into numbers was crowded, with the share price falling 10% on the day, despite strong results
• Richemont is in an excellent position to capture future growth coupled with very high profitability
• Investment thesis intact: Cartier and Van Cleef keep gaining market share in a branded fine jewellery category that remains one of the most fundamentally attractive places to be

• TME reported in-line results with continued divergence in its two major businesses: Online music increased by 48% YoY, while social entertainment declined by 25% YoY.
• We expect these trends to continue, with online music benefiting from price increases and social entertainment facing ongoing challenges from competition, regulations, and macro influences.
• Recently, Douyin has been advancing the integration of its large entertainment division. We anticipate that this will pose pressure on TME. Remain SELL and cut TP to US$ 5.7.

• TSE market capitalization of has doubled since 1990 and the number of companies has doubled, while TOPIX is 20% lower than its 1989 high. Money went mainly to IPOs.
• P/B, TSE’s expectation for stock price appreciation, had high correlation with TOPIX, 0.84 from 1999-2019. However, it correlated negatively for 4 years from 2020 with other factors having significant impact.
• Correlation between TOPIX and nominal GDP is 0.94 for 2020-2023, showing higher correlation. Expectations of higher nominal profits caused by transition from deflation to inflation are behind the stock rally.

• Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
• Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
• We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.

• GoTo is laser-focused on shifting the needle towards a semblance of profitability and likely with renewed vigour with a new management team in place. 
• 2Q2023 results will likely reflect a slower headline GMV but should show an improvement in take rates and contribution margin. More colour on recent initiatives would be welcomed by investors.
• GoTo has launched a standalone GoPay app which should help to boost its off-platform usage and has the potential to nurture more collaboration with Bank Jago.

• Amorepacific Corp (090430 KS) is likely to be one of the biggest beneficiaries of the return of Chinese group tours in Korea.
• Now that the Chinese government is allowing group tours to South Korea, this will likely lead to a sharp improvement in the company’s sales and profits in 2023-2024.
• We expect the consensus to raise sales estimates of Amorepacific Corp by about 3-5%+ and operating profit estimates by 20-30%+ in 2023 and 2024. 

• The Keepers Holdings (KEEPR PM) conference call was upbeat, with the guidance of improved results from Bodegas W&H and sequential seasonal improvement from H12023 to H2 2023.
• Unrealized gross profits of 203 mn pesos ( H1 gross profit 1.8 bn pesos) due to in-transit goods from Bodegas W&H should provide an upside to margins in H2 2023. 
• Trading at 8.54x/7.1x PE FY23e/24e and net cash with a dividend yield of 4.6%/5.3% FY23e/24e, a monopoly position in imported spirit distribution (>70% Mkt share), a name worth exploring. 

• GoTo Gojek Tokopedia Tbk PT (GOTO IJ) reported 2Q2023 results. Gross revenue increased 5.6% YoY to IDR5.83trn while adj. EBITDA losses further narrowed down to IDR1.21trn vs IDR4.3trn in 2Q2022.
• The company’s cost discipline measures have helped cut down on losses but growth rates have seen huge declines over the last few quarters.
• Demand for food delivery has declined in Indonesia while entry of TikToK Shop has posed significant threat on Tokopedia, Shopee and other e-commerce platforms in the country.

• Home Product Center (HMPRO TB) is a play on improving Thailand consumer sentiment driven by easing inflation, formation of new Thai government, and continued return of tourists.
• The company is expected to open 10 new stores in 2023, a major pick up in growth from only 1.7% sales CAGR in 2017-2023. 
• Strong track record of management in execution and reputation. Valuation also reasonable. 

• Brands delivered mixed results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• The company produced same-store sales growth of 9% and unit growth of 6% for the quarter, with KFC setting the standard with a remarkable system sales growth on the back of Yum’s industry-leading development momentum, standout marketing initiatives, and pertinent new product layers like the introduction of original recipe hand-breaded chicken nuggets in the U.S.
• Taco Bell’s global system sales increased for the quarter, driven by unit expansion and same-store sales growth as the management continued elevating the brand and launching digital initiatives.

• SOCAR (403550 KS) was listed on 22nd Aug 2022, where it raised US$78m in its Korea IPO. Its one-year lockup will expire on 21st Aug 2023. 
• SoCar is a Korean car sharing business aiming to become an all-in-one mobility solutions provider, with approximately 83% domestic market share in the car sharing space as of 1H23. 
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• CVS Health Corporation exceeded the revenue and earnings expectations of Wall Street, achieving key milestones in its strategy to deliver superior health experiences.
• The acquisitions of Signify Health and Oak Street Health have strengthened its position in value-based care, and efforts to connect these assets with CVS Health’s existing offerings are expected to accelerate growth.
• We give CVS Health Corporation a ‘Buy’ rating with a revised target price.

• The Kraft Heinz Company delivered a mixed result in the recent quarter, with revenues below market expectations but managed to surpass the analyst consensus regarding earnings.
• Although price gaps remained wider than what the Kraft Heinz management would have liked throughout the quarter, the company still managed to deliver mid-single-digit top-line growth that was within the team’s expectations.
• Their strategies started to work, producing better outcomes throughout the quarter, creating momentum for the second half of the year.

• Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
• Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
• The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

• Companies enjoy the benefits of going public, as a larger market capitalization expands their financing and makes it easier to acquire other companies, without capital raising through equity issuance.
• In a market economy, cash returned to shareholders through share buybacks etc is rationally allocated by investing it in companies that need more funds or are worthy of investment.
• Companies should successfully communicate their strategies for expanding corporate value and how to use cash to do so. More such companies will lead to the expansion of Tokyo market.

• Procter & Gamble surpassed the revenue and earnings expectations of Wall Street.
• Growth was widespread across the company’s segments, with organic sales increasing in all ten product categories.
• Fabric Care, Home Care, and Hair Care increased by high single digits, while Skin and Personal Care, Baby Care, Family Care, and Grooming increased by mid-singles.

• Mondelez International managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• The company managed double-digit organic net revenue growth across each area, good pricing execution, decent profit dollar growth, and carried out considerable brand investments.
• We give Mondelez International a ‘Hold’ rating with a revised target price.

• Ford Motor delivered an all-around beat in the previous quarter.
• With over $47 billion in liquidity at the end of the quarter, Ford Motor has sufficient funds for future investments.
• We give Ford Motor Company a ‘Hold’ rating with a revised target price.

• The delivery market is booming, set to hit a whopping $1 trillion by 2030. And right in the middle of this rush is Serve Robotics.
• Fresh from a new deal with Uber Eats, Serve Robotics has made headlines, revealing plans to go public via a SPAC merger.
• The company’s big plan is to shake up the delivery game by blending AI, robotics, and autonomy

• Cocoa Market Started Collapsing Run-ups in commodity markets tend to be slow but steady but meltdowns on the other hand fast and sharp – a bit comparable with equity markets but definitely more volatile.
• Especially Parabolic advances, like the one in cocoa futures, often end with a sweeping reversal.
• Fortunately, the soybean complex is one we covered intensively during this year.

• This is the Brand Spanking New and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see the relationships easily. We used to do it. 
• We decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations. 
• We hope this new version serves readers even better. Feedback is actively solicited to see if we can improve it from here. 

• In response to media speculation, L’Occitane (973 HK) has clarified that Reinold Geiger, the Chairman and the largest shareholder, is contemplating a possible transaction through a voluntary general offer.
• However, the rumoured offer of HK$35 per share is false. Mr Geiger has confirmed that the potential offer price would be no less than HK$26.00 per share.
• The floor price of HK$26 is light and needs a bump (towards HK$30), particularly if Mr Geiger wants 95% of voting rights to exercise the right of compulsory acquisition (squeeze-out).

• Paradise is one of the largest foreigners only casino operators in Korea which should benefit from the end of the ban of Chinese group tours to Korea.
• However, Paradise will face additional competition from the opening of the new Inspire Entertainment Resort in Incheon which is expected to open by the end of 2023. 
• Paradise is likely to benefit from a combination of higher earnings and valuation multiples in the coming months. 

• This is a quick profile of one of the many Japanese stocks that have caught my interest and are in my cheap Japanese basket.
• I’ll be doing more frequent short write ups on names in this basket over the coming months.
• Sapporo Clinical Laboratory is a $24m market cap operator of retail pharmacies and clinical testing facilities across Hokkaido, Japan. 

• Bukalapak continues to demonstrate the effectiveness of circular nature of its business model in 2Q2023, with demand from its O2O business fueling growth in its marketplace, creating a flywheel effect.
• Although TPV growth slowed slightly in 2Q2023, revenues saw much stronger growth, especially its marketplace business, which booked much higher take-rates driven by its specialty verticals, including gaming and gadgets.
• Bukalapak will continue to benefit from expanding take rates as specialty, such as AlloFresh feed in more SKUs and new verticals gain traction. Valuations remain attractive on 0.85x FY2023E EV/Sales.

• Ford Motor Company’s recent selloff likely provides a lucrative entry point.
• Ford’s robust second quarter earnings paired with a positive output gap in the U.S. speaks volumes.
• Ford possesses high-quality characteristics, lending it the latitude to blossom as credit spreads recede.

• Modest profit growth and slow ROE growth are expected this year, and sustained TOPIX appreciation in the future will depend on increases in ROE and ROE+DOE.
• Lower OP Margin is the reason for the lack of ROE growth in FY3/2023. OP Margin and ROE are expected to have difficulty rebounding from this year’s profit forecast.
• Looking at the results of DOE, Total Dividends Paid and Dividend Payout for FY3/2023, which have not improved, there is still a lot of room for shareholder returns.

• Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.
• We expect the consensus to raise the company’s sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period. 
• Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78. 

• Li Ning (2331 HK) reported today a headline beat on 1H23 results, with sales up 13% yoy and net profit down 3% yoy.
• Both numbers are around 5% better than the already low market expectations. 
• However, a closer look at the results shows that the quality of the beat is low. 

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

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. Country Garden Holdings Co
2. Longfor Properties
3. Sino-Ocean Group
4. China SCE
5. Sunny Optical Technology Group

and more…