Consumer

• We discuss the end of the mandatory lock-up periods for 40 stocks in Korea in August 2023, among which 2 are in KOSPI and 38 are in KOSDAQ.
• These 40 stocks on average could be subject to further selling pressures in August and could underperform relative to the market. 
• Among these 40 stocks, the top five market cap stocks include HK inno.N, PhilEnergy, CJ CGV Co Ltd, Sure Soft Tech, and CanariaBio.

• Sula Vineyards (SULA IN) is one of the leading wine producers in India.  
• Focus on premiumization, market leadership, and industry prospects are attractive. 
• However, high working capital, recent resignations, and customer concentration along with market’s high valuations make it a watch-list candidate.

• Cisarua Mountain Dairy (CMRY IJ) remains one of the most interesting and dynamic staple players in Indonesia, with a leading position in yoghurt and growing strength in consumer foods. 
• CMRY continues to achieve strong top-line growth of +21% in 1H2023, with consumer foods driving growth and 50% of sales but we expect dairy to see better performance in 2H2023. 
• Cisarua Mountain Dairy (CMRY IJ) continues to invest in marketing through digital channels, including TikTok. Valuations remain attractive relative to its growth prospects, with more than 20% 3-year EPS CAGR.

• Domestic investment managers are expected to show a higher percentage in favor of shareholder proposals, but life insurances still face a high hurdle in voting in favor of shareholder proposals.
• It is relatively easy to decide for or against a proposal based on quantitative criteria such as the level of ROE or whether there are zero female directors.
• Few institutional investors adequately disclose the reasons for approval or disapproval of individual proposals. Disclosure of reasons for approval or disapproval is required for company proposals that are controversial.

• Oriental Watch (398 HK) cycled into favorable comps for April-June 2023 owing to COVID-related closures in China in 2022 for the same period. 
• Another favorable data point was the Emperor Watch & Jewellery (887 HK) positive profit alert for H1 FY23 ( Jan-Jun 2023), where the company guided >100% net profit growth. 
• Oriental Watch (398 HK) trades at 6.9x FY24e, with more than 50% of the market cap in cash and a ~100% payout ratio resulting in a 14% dividend yield. 

• Cinema XXI raised around US$150m in its Indonesia IPO, after pricing at the bottom-end.
• Cinema XXI is a premium theatrical exhibition, F&B and experience company. It is the largest cinema chain operator in Indonesia.
• We have looked at the company’s past performance and undertaken a peer comparison and valuation in our earlier notes. In this note, we talk about the trading dynamics.

• SCG Decor PCL (SCGD TB) is looking to raise at least US$100m in its upcoming Thailand IPO.
• SCG Decor (SCGD) is Siam Cement Group’s core company in the decor surfaces and bathroom business.
• Primarily operating via its subsidiaries, the firm is a manufacturer of floor and wall tiles domestically and abroad, including ASEAN markets such as Vietnam, the Philippines and Indonesia.

• Key indicators suggest the SPDR® Portfolio High Yield Bond ETF might benefit from price returns in the coming quarters.
• Investors will soon “down credit” and “down duration” amid receding market risk premiums coupled with an improving U.S. current account, we say.
• Today’s analysis covers the SPDR® Portfolio High Yield Bond ETF (NYSEARCA:SPHY), which is a U.S.-centric high-yield corporate bond exchange-traded fund, or ETF, managed by State Street Global Advisors.

• For the month of July 2023, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$2.2bn.
• The average premium for the new deals announced (or first discussed) in July was 40%. The average YTD is 36%.
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• Prosus looks to continue to cut its stake in Tencent by 2-3% every year to fund its open-ended share buyback program.
• Evidence would suggest that the buyback is set to continue at a relatively steady pace for the foreseeable future, which should support the discount to NAV going forward.
• The simplification of the shareholding structure, to remove the cross-holding, could sustainably reduce Prosus’ discount to NAV by roughly 10%.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
• Event-Driven developments – Eoflow (294090 KS), Dali Foods Group (3799 HK), L’Occitane (973 HK), Toshiba Corp (6502 JP), Pacific Current (PAC AU), Estia Health (EHE AU). 

• Astra International (ASII IJ) released a solid set of numbers in 1H2023, with growth across most of its divisions from autos to heavy equipment, and infrastructure.
• 1H2023 was marked by a series of acquisitions across growth areas of the Indonesian economy including nickel, digital health, data centres, and classifieds.
• Astra International remains our top proxy pick for exposure to Indonesia, with recent acquisitions making the company all the relevant in new areas of growth.

• Back on the 27 June, Dali Foods Group (3799 HK), announced a privatisation Offer by way of a Scheme from its founder/chairman/CEO Xu Shihui.
• The cancellation price, which has been declared final, was HK$3.75/share, a decent 37.87% premium to undisturbed.
• The Scheme Doc is now out. The Scheme Meeting is the 23 August. Xu and concert parties control 88.89%, therefore a blocking stake is 1.11% of shares out. 

• Kenvue (KVUE US) reported 5% YoY revenue growth to $4B in 2Q23, driven by continued demand of self-care portfolio, mainly consisting of cough, cold, and allergy, and pain care products.
• The company has guided for 4.5–5.5% revenue growth and EPS of $1.26–1.31 for 2023. Kenvue has declared a cash dividend of $0.20 for 3Q23.  
• J&J is offering its shareholders the option to exchange shares for Kenvue’s at a 7% discount. The exchange offer is scheduled to close on August 18, 2023.

• Our 1H23 revenue estimate is 8.7% lower than consensus, and we expect 1H23 NPM at breakeven vs. consensus at 5%。
• Mainly because teahouse brands in China had suffered the intensified competition from the price war in Coffee industry.
• We maintain the stock as BUY rating as the margin improvement process is gradual showing effect, while we lower TP by US$2 to US$9.3 to reflect the intensified competition pressure.

• Archer-Daniels-Midland delivered a mixed result in the recent quarter, with revenues below market expectations, but it surpassed the analyst consensus in earnings.
• The company reported second-quarter adjusted earnings per share of $1.89 and an adjusted segment operating profit of $1.6 billion.
• ADM’s team expects continued strength in Brazil’s origination, solid biofuel demand, and resilient food demand, leading them to raise their earnings expectations for 2023.

• We see decidedly mixed signals in Chinese outbound tourism numbers from June
• Meanwhile, the modest pace of the recovery in domestic air traffic continued last month
• What to look for in Q2/H1 earnings results over the next several weeks

• Coca-Cola delivered an all-around beat in the most recent quarter results.
• Despite geopolitical tensions and the elevation in global inflation, Coca-Cola delivered 11% organic revenue growth.
• Plant-based beverages, value-added dairy, and juice have delivered double-digit top-line growth and also gained both volume share and volume.

• Kimberly-Clark delivered mixed results for the previous quarter, with revenues below analyst expectations but managed an earnings beat.
• The company delivered strong organic growth across all segments.
• Significant progress was made on margin recovery, leading to increased adjusted gross margin, operating profit, and earnings per share.

• The changes to the LQ45/IDX30 were announced last week and will be implemented Monday. The PSE also announced that there would be no changes for the PCOMP INDEX in August.
• There are a bunch of review cutoffs on Monday, most notably for the Nikkei 225 (NKY INDEX), STAR50 INDEX, the NIFTY family of indices and the KRX New Deal indices.
• There were inflows to China focused ETFs and outflows from Taiwan and Korea focused ETFs during the week.

• Dali Foods Group (3799 HK)‘s scheme document is out with the court meeting scheduled for 23 August. The IFA considers the HK$3.75 per share offer to be fair and reasonable. 
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• Sector sentiment has modestly weakened. This looks done. At the last close and for the 8 September payment, the gross and annualised spread is 3.6% and 34.8%, respectively.

• US Mutual Fund exposure in Ford Motor Company hits all-time lows with just 11 out of 295 funds holding a position.
• Ford Motor Company is now the 6th most widely held Auto stock after Tesla, General Motors, Rivian Automotive, Harley Davidson and Oshkosh Corp.
• Ford tops the list of unloved companies in the US, with the vast majority of active managers expecting Ford to underperform.

• GTX reported better than expected second quarter results with improvement in the overall marketplace for light-weight vehicle production.
• GTX reported sales of $1.0 billion compared to our forecast of $982 million. The higher revenue figure resulted in GTX generating adjusted EBITDA of $170 million
• Current business conditions remain supportive of GTX operating at an efficient manner to generate optimal operating margin resulting in greater free cash flow

• Pointerra Ltd (ASX:3DP) provides a powerful cloud-based solution (Pointerra3D) for managing, visualising, analysing, using, and sharing massive 3D point clouds and datasets.
• Pointerra3D is a proprietary digital twin SaaS platform which delivers predictive digital insights and definitive answers to complex physical asset management questions.
• The Pointerra3D suite of solutions spans target sectors including survey and mapping; architecture, engineering and construction (AEC); utilities; transport; resources and defence and intelligence. Pointerra has announced that it, together with its US engineer, procure and construct (EPC) partners, have been chosen by existing customer US energy giant Entergy (NYSE:ETR) for its 10- year, US$15b grid resilience CAPEX programme. 

• Employee motivation is reflected in the fact that employee salaries have barely increased in 10 years (employee engagement in Japan has been 5% for four consecutive years).
• First, employee salaries must be increased. Even during deflation, the consumption tax has been raised twice in the past decade, and the national burden rate has also increased.
• When introducing employee stock compensation plan, it will be necessary to make sure that the plan is not only designed to supplement employee pay, but also to increase employee engagement.

• Unilever had a decent performance in the recent quarterly result with revenues above Wall Street expectations.
• Its strong performance in the first half of 2023 resulted from increased investment in its brands and the creation of new capabilities.
• In Beauty & Wellbeing and Personal Care, the company observed a decent balance between price and volume.

• At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions: 
• Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
• In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.

• Genda Inc (9166 JP) raised around US$100m in its Japan IPO.
• Genda develops and operates amusement facilities in Japan, primarily operating under its Genda GiGO Entertainment subsidiary.
• In this note we will talk about the trading dynamics.

• VW’s long-term software dilemma caused delays of new EV model launch. Thus, leveraging established software capability of Xpeng could help VW catch up and shorten its R&D cycle.
• We see two benefits for Xpeng: 1) a new revenue stream from tech licensing and potential reduction of supply chain costs; 2) VW’s endorsement  could help Xpeng’s overseas expansion.
• We think the potential of Xpeng’s high-margin tech licensing being opened to more VW models and other OEMs. Our TP implies 2.5x 2024PS

• Multi Bintang Indonesia (MLBI IJ) delivered a steady Q2 2023 with revenues up 16.6% YoY and profits up 32% YoY, aided by revenue growth on alcoholic beverages of 20% YoY. 
• EBITDA margins expanded to 50% in Q2 2023 from 45% in Q1 2023 but remained flat YoY. We expect margins to continue expanding in subsequent quarters as revenues grow seasonally.
• Trading at 15.8x/13x FY23e/24e PE, with a 6.3%/7.7% dividend yield, we believe this is an excellent play on tourism recovery in Indonesia. 

• Unless 10% male/female of lawmakers, is changed, the quota system cannot be expected to be introduced. It’s not easy to replace male incumbents who have vested interests with female candidates.
• Gender wage gap relies on the low number of female managers, but there’s no sense of acceleration in the government’s goal of achieving 30% of female managers by 2030.
• The gender gap in higher education is affecting female managers and the gender wage gap. It’s important to solve this fundamental problem by providing equal higher educational opportunities through scholarships.

• The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for Lookers PLC (LOOK LN) by 8%, to 130p/share (46.6% premium).
• The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).
• Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. 

Tata Motors Limited (TML) has reported stronger Q1/23-24 results than expected, thanks to Jaguar Land Rover’s (JLR) impressive performance. Specifically, this business delivered much higher sales volumes, revenue, profits and FCF. In addition, better selling prices and lower raw material costs drove exceptional improvement in profitability. The financial risk profile continued to strengthen, with lower net debt and higher earnings. Liquidity remains sound.

We expect the company to continue performing well for the rest of the year. JLR’s performance in the prior year was constrained by the semiconductor supply shortage, which continues to ease. JLR also demonstrated that demand for its products is still strong. The order book remains high, providing visibility on demand. In addition, we anticipate that JLR’s re-organisation with three separate brands will enhance brand image. We see Range Rover moving up to the luxury segment from the premium segment, with an increase in selling prices and higher margins. We believe that the financial risk profile of the group and JLR will continue improving.

Britvic reported a further sequential, ie quarter-on-quarter, improvement in underlying revenue growth in Q323, albeit against a slightly easier comparator from Q322, with positive price/mix in all geographies and volume growth in all countries except for negative or ‘soft’ volumes in Brazil and France, respectively. After a somewhat wet July, ie post this trading update, in the UK’s peak trading period, it is reassuring that management confirmed FY23 revenue and EBIT will be in line with market expectations. The announced two bolt-on acquisitions are consistent with the strategy of leveraging Britvic’s existing infrastructure into new drinks categories and generating revenue and operational synergies.

• In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
• Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
• There is still a large reverse funding trade, with some large sells. 

• Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
• For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN). 
• The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.

• In Quiddity HSTECH Sep 23 Flow Expectations: Two ADDs/DELs Possible, I discussed my initial flow expectations and potential index changes for the September 2023 Rebalance.
• The suggested (previous insight) SHORT Ping An Healthcare and Technol (1833 HK) is down 10.6% vs the hedge JD Health International (6618 HK) in ~1.5 months. 
• In this insight, I have presented my updated flow expectations and some new trade ideas for the next few weeks.

• Lalatech Holdings filed for an IPO in March. I have tried to come at an IPO valuation for the company using a mix of methodologies: EV/Revenue, EV/GTV and EV/Gross Profit.
• Taking a weighted average of peer group multiples-based valuation methodologies, I arrived at a ~$7B IPO valuation for Lalatech Holdings, including ~$1.65B of cash and cash equivalents.
• From a peer group perspective, I arrived at a fair IPO valuation close to ~$7B, using a ~5x EV/CY22 Revenue, ~0.7x EV/CY22 GTV, and a 10x EV/CY22 Gross Profit multiple. 

• CyberAgent Inc (4751 JP) reported 3QFY09/2023 results today. Revenue decreased 0.2% YoY to ¥171.7n (vs consensus ¥177.8bn) while operating income decreased 86.2% YoY to ¥1.4bn (vs consensus ¥11.0bn).
• The game business has further deteriorated during 3Q with the absence of hit title launches and drop in UMA MUSUME Rankings. Segment reported losses during the quarter.
• CA has opened pre-registrations for two new games, we are not convinced that these could become top performers as the company has not given a hit title since UMA MUSUME.

• We are negative on Feng Tay Enterprise’s share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike combined with unattractive valuations.
• In the next several months, we think there is a higher probability of Feng Tay’s share price underperforming versus Nike.
• Feng Tay Enterprise is one of the largest global OEM/ODM companies that specializes the design and manufacturing of footwear. Nike is one of the largest customers of Feng Tay Enterprise. 

• Netflix delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
• Key second quarter results indicated revenue of $8.19 billion, adjusted earnings per share (EPS) at $3.29, and a surge in subscribers with 5.89 million net additions, all of which are above expectations.
• The shortfall in revenue was counteracted by strong performance in profitability metrics, such as the operating margin and free cash flow, which surpassed expectations.

• PepsiCo delivered an all-around beat in the previous quarter.
• The labor market is generally improving, which has improved how PepsiCo conducts its business.
• Another good news for the company was that PBNA’s margins decreased in the second quarter.

• Las Vegas Sands managed to exceed analyst expectations in terms of revenue as well as earnings.
• With its scale and substantial investment, Las Vegas Sands is well-positioned to benefit from this trend.
• We give Las Vegas Sands Corp. a ‘Hold’ rating with a revised target price.

• IPAR continued to experience momentum in demand in the second quarter with preliminary sales ending up at $309 million compared to our Street high estimate of $283.7 million
• IPAR’s management is taking a conservative approach with sales forecast given the supply chain and sales volatility in certain regions. 
• The strength in second quarter sales was across multiple brands and in both segments

• L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
• The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
• L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples. 

• Shimano reported a 40% drop in operating profit for 2Q and revised down full year guidance
• Bike sales continue to be weak (-19% YoY) in Q2 and 2H outlook is even worse
• We expect the share price to sell-off following the guidance cut. The inventory overhang could take a while to resolve

• The Keepers Holdings (KEEPR PM) declares its Q2 2023 in the second week of August. We expect a 15-20% revenue growth and a similar profit growth. 
• The stock trades at 9.3x/7.9x FY23e/24e, with structural growth drivers arising from rising imported spirit consumption and a monopolistic position with a >70% marketshare by volume.
• With healthy profit growth and a sound balance sheet ( 15% of the market cap in cash), Keepers can pay 50% of profits resulting in a 4.2% FY23e yield. 

• Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
• There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ). 
• There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.

• From 2022 loss in period, MLCO earnings could come in anywhere between a profit of $0.06 to $0.70 indicative of recovery in Macau, Manila and opening of Cyprus.
• Revenue could come in above $1.2b. This is a forerunner of a solid recovery year.
• MLCO has a global vision beyond Asia that makes it attractive at its current price.

• We expect CPNG to report C2Q23 revenue and profit in-line and (31.6%) vs. cons., respectively. CPNG’s profit miss is largely due to rapid expansion in Taiwan…
• …which we estimate it will impact net profit by up to 40% this year.  AliExpress continues its development in South Korea, Temu, is expected to put pressure on Coupang. 
• We maintain SELL on Coupang and revise down this year’s EPS estimate by 16% and cut our TP to US$ 13.7 to reflect the changes on the profit side.

• Omnicom Group delivered a mixed set of results for the previous quarter, with revenues below analyst expectations but managed earnings beat.
• Organic growth for the quarter was impressive and the company’s liquidity is strong while its cash flow supports its principal cash uses, including dividends, purchases, and share repurchases.
• Omnicom made considerable headway on its AI strategy by incorporating generative AI into Omni, their market-leading technology platform, and forming important first-of-their-kind technological partnerships.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Nemak’s ESG as “Adequate”, in line with the Environmental and Social scores. The company has “Strong” Governance. Controversies are “Immaterial” and Disclosure is “Strong”.
• Based in Mexico, Nemak is a global Tier 1 supplier to automotive OEMs. It specialises in aluminium components for powertrain, body and structure applications, as well as electric vehicle components.

• Conagra Brands delivered a mixed set of results in its most recent quarter, with revenues falling short of Wall Street expectations.
• As Conagra made significant headway on its cost-saving initiatives and consequently saw a significant rise in service standards, its supply chain kept becoming better.
• Conagra Brands further expanded its product line by introducing more than 50 new items across its frozen, grocery, and snacking divisions.

• Oisix Ra Daichi is by far Japan’s largest online food retailer, driven by the popularity of its fresh food and meal kit subscription services.
• Despite some backend problems last year, the company expects its system of continual improvement and expansion of new lines of meal kits to bring strong growth in the medium term.
• The development of the online food market should help boost the company’s prospects. Operating margins have worsened considerably but the company hopes to match the previous peak this year.

• There is a possibility that Oriental Land (4661 JP)‘s revenue and OP in 1QFY24 could surpass the consensus estimates by 8% and 21%, respectively.
• However, the outlook for the next three quarters may be different, as consensus appears inflated with annual OP expectations of ¥154.5bn compared to the company’s guidance of ¥122bn.
• We find medium term consensus expectations unrealistic, leading to potential downside for Oriental Land. We expect FY+2 EV/OP to decline from 46x to 20-30x.

• Since my last order filled today, here is my write-up on a special situation in Hong Kong.
• Stock is NVC International holdings (NVC ticker HKG:2222) .
• A Hong Kong nano cap stock. And it is quite illiquid, so beware.  I first learned of it through a Tweet from Writser .

• Selling from the ESOP program in the first quarter could result in an increase in LG Energy Solution (373220 KS)‘s float in local and global indices.
• The largest buying from passive trackers could take place next month with over 3% of the real float needing to be bought.
• Short interest has increased in the last month and short covering could take the stock higher ahead of the passive buying.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Tryt Inc (9164 JP), Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK), Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group IPOs.
• Event-Driven developments – 111 Inc (YI US), Healius (HLS AU), Invocare Ltd (IVC AU), Newcrest Mining (NCM AU), Origin Energy (ORG AU). 

• Aequitas Research 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, the coming week will see Tryt Inc (9164 JP) and Genda Inc (9166 JP) listing, along with Fadu (440110 KS) bookbuild.
• For placements, Japan and India placements continue to flow, while there are no signs of any major Hong Kong activity.