Consumer

• 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…

• The revenue growth rate rose to 14% in 1Q24, compared to the past four stagnant quarters.
• All businesses continued to improve their margins, so that the general operating margin rose to 19% in 1Q24 versus 12% in 1Q23.
• We believe the re-organization is successful and the stock price is overly impacted. Buy.

• In this insight, we lay out the thesis that LG H&H is likely to be one of the biggest beneficiaries of the return of Chinese group tours to Korea. 
• LG H&H consistently generated more than 1 trillion won in operating profit from 2018 to 2021.
• We expect LG H&H to generate 1 trillion won or more in operating profit in 2024 and 2025, which would be 20-25%+ higher than current consensus estimates in this period. 

• Beenos revealed a ¥300m buyback plan in 2QFY23 and recently declared a ¥500m buyback in 3QFY23. This incremental buybacks is likely to continue due to disposal of incubator investments.
• The cash balance of 34% of total assets and over 49% of market cap, supports the ongoing buyback trend even if incubator divestments take longer than expected.
• Hence, we expect Beenos Inc (3328 JP)’s Holdco discount to move closer to the 20% mark, potentially resulting in a 75% upside in the short term.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Country Garden Holdings Co
• Sino-Ocean Service
• Wynn Macau Ltd

• Taste Gourmet (8371 HK) reported its Q1 FY24 with revenues up 47% YoY and core profits up 349% YoY.  We believe that the company will report stronger revenues in Q2.
• The restaurant count increased from 39 to 42 by the end of Q1 FY24 for HK. As of the latest date, the company has 46 restaurants in HK. 
• The company also had 126.5 mn HKD of net cash at the end of Q1 FY24 (vs 118 mn HKD in FY23), almost 20% of the current market capitalization. 

• The number of companies that announced their intention to move to Standard Market has increased to 48, while most of 268 transitional companies are expected to move to Standard Market.
• Companies that cannot meet Prime Market listing criteria in 2026 can also move to Standard Market by undergoing examination, so they don’t need to announce their move in a hurry.
• Prime Market has slimmed down from TSE 1st Section by 600 companies, but it will remain market where many companies with market capitalization of about 50 billion yen are listed. 

• Colgate-Palmolive Company delivered a solid result and managed an all-around beat in the last quarter.
• The company produced a decent performance in terms of organic sales growth.
• In addition to increasing its gross margin, Colgate-Palmolive also increased its operating margin.

• Church & Dwight Co. delivered a strong result and managed an all-around beat last quarter.
• In Q2, the laundry business performed well dollar and unit share, Church & Dwight ended the quarter as the fastest-growing laundry detergent, liquid detergent, unit dosage detergent, and aroma booster manufacturer.
• ARM & HAMMER Liquid Laundry detergent increased its share by 90 basis points.

• LKQ delivered mixed results for the previous quarter, with revenues well below Wall Street’s expectations but managed an earnings beat.
• Despite the headwinds from various macroeconomic conditions, the company’s core segments demonstrated resilience, showcasing the strength of its business model and operational excellence initiatives.
• The North American and European segments collectively accounted for around 90% of the total component EBITDA, reflecting the success of LKQ’s diversification strategy.

• OR delivered a 2Q23 NP of Bt2.76bn (-58% YoY, -7% QoQ), in line with our projection of Bt2.77bn.
• The core profit marked at Bt2.56bn in 2Q23 (-59% YoY, -15.5% QoQ).
• Its core earnings were pressured on a YoY basis by the mobility business, whose gross margin per liter narrowed to Bt0.96/liter in 2Q23 (vs. the high base of Bt1.61/liter in 2Q22).

• According to Bloomberg, L’Occitane (973 HK) is set to receive a HK$35 per share privatisation offer from Reinold Geiger, the Chairman and the largest shareholder.
• The rumoured price is attractive and represents an all-time high share price. Therefore, Acatis KVG, the shareholder with a blocking stake, would be supportive.
• The rumoured price implies multiples at a discount to peer multiples, which explains Mr Geiger’s ambitions for a possible European listing to secure higher valuation multiples. 

• In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days. 
• The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.
• Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.

• In late 2018, there were reports that French beauty retailer L’Occitane (973 HK) had drawn interest from Advent International. That rumour came to naught. 
• Similarly, late last month, L’Occitane clarified media reports that it had not received any Offer or proposal. 
• After going into a trading halt this morning, reportedly (Reuters) Chairman Reinold Geiger has been discussing a possible offer of ~HK$35 for each L’Occitane share he doesn’t already own.

• After pitching a A$13/share NBIO on the 15 May, TPG has now inked a Scheme Implementation agreement with InvoCare (IVC AU) at A$12.70/share, inclusive of a A$0.60/share fully franked dividend. 
• This compares to PE-outfit TPG’s A$12.65/share NBIO on the 7 March – which Australia’s leading funeral services provider InvoCare promptly rejected.  
• A comparatively benign flu season, and an expected ~10% decline in 1H23 EBITDA, largely account for InvoCare’s change of heart.

• Invocare Ltd (IVC AU) has entered a SID with TPG at A$12.70 per share, a modest -2.3% discount to the previous non-binding offer of A$13.00 per share.
• The price cut was justified by a trading update which noted a challenging near-term macro-environment and softening in market volumes. The median peers’ share prices have also derated.
• The offer requires shareholder, FIRB and OIO approval. At the last close and for the end of November payment, the gross and annualised spread is 1.8% and 5.7%, respectively. 

• We have been covering UE for five years principally because we were bullish about its intentions to bring its Manila casino business public.
• Our focus has shifted. We see the casino IPO as inevitable but we like the stock now because it has performed well in its core Pachinko and media businesses post-covid. 
• If the Okada casino deal gest past current legal issues it would be a catalyst “bonus” to holders who come into the stock now, on a slight dip.

• CPNG reported C2Q23 top-line, adjusted EBITDA, and GAAP net profit in-line, 45%, and 102% vs. our estimate, and 2%, 27%, and 49% vs. consensus, respectively.
• Product commerce EBITDA margin rose 2ppts QoQ, which offset the 126% QoQ increase to developing offerings losses, which rose due to increased investment in its Taiwan business.
• Given improved product commerce profitability, we raise our TP to US$ 14.4, but maintain SELL to reflect the impact of China e-commerce on CPNG.

• Li Auto reported solid 2Q23 results, with both top line beating cons/our est. by 5.3%/3.6% and GPM of 21.8% beating cons/our est. by 1.1/1.7ppt.
• We reiterate that capacity ramp-up is the key for Q3/Q4 delivery. Q3 sees a temporary capacity bottleneck albeit this is likely to be resolved in Q4.
• We expect the launch of MEGA BEV in 4Q23 to be the next catalyst. We reiterate Li Auto as our top pick and raise TP due to better-than-expected margin outlook.

4imprint’s interim results reflect the narrative at last week’s trading update, being strong underlying demand, an uptick in gross margin as the supply chain bottlenecks ease and strong returns on each dollar of marketing spend. Having upgraded following the update, we have now ‘tidied up’ our modelling for FY23 and FY24. With the buy-in of the legacy defined benefit pension and the accelerated recovery contributions, plus payment of the special dividend, we expect 4imprint to end FY23 with net cash of around $72m. This gives plenty of firepower to support continued growth, helped by a likely project in FY24 to extend the Oshkosh distribution centre. The group is clearly outperforming its market and building (profitable) share.

• In Aug 2022, Zomato completed the acquisition of Blinkit’s outstanding shares via issuing its own shares. These issued shares will come up for lockup release on 10th Aug 2023.
• Zomato is one of two leading food delivery app operators in India. Its acquisition of Blinkit marked its foray into the instant grocery segment.
• In this note, we will talk about the lock-up dynamics and recent updates.

• Fancl released 1QFY24 results last week. While revenue was broadly in line with consensus at ¥27.2bn (consensus ¥26.9bn), OP beat consensus by around 27% to generate an OP of ¥3.2bn.
• While there were certain performance improvements in the flagship brands “FANCL” and “ATTENIR” during FQ1, there are no definitive signs that they are completely out of trouble.
• Meanwhile, it looks like competition has affected Fancl Corp (4921 JP)’s plan to cut advertising costs. Thus, FY24 OP guidance could be under pressure.

• Invocare has entered into a scheme implementation deed with TPG at A$12.7/share. This is higher than the initial offer of A$12.65/share but lower than the revised offer of A$13/share.
• There is an extra A$0.26/share in franking credits for Invocare Ltd (IVC AU) shareholders that can use them.
• Passives will need to sell nearly 11m shares of Invocare Ltd (IVC AU) on the last trading day and there will be an adhoc inclusion to the S&P/ASX 200 Index.

• The main focus will remain on Direct-to-Consumer profitability, but areas such as the recently announced restructuring plan and pricing power in parks & experiences also deserve attention.
• The main focus is on the company’s Direct- to- consumer profitability.
• It has been three months since my latest update on The Walt Disney Company (NYSE:DIS) when I highlighted a number of reasons why the company is finally in a good position to deliver on its bottom line figures.

• To narrow the gender wage gap for all workers, reducing non-regular female workers, who make up the majority, is a possible solution, but changing this structure will not be easy.
• Many companies recognize that the low ratio of female managers (about 10% among listed companies) is behind the gender wage gap among regular workers.
• However, many companies aren’t taking immediate actions because they believe that % of female managers will increase as the age of newly hired female full-time hires in recent years increases.

• Teenage Mutant Ninja Turtles: Mutant Mayhem had a smash opening grossing over 50M USD at the box office in its first week of operation.
• The box office success de-risks the upside potential for Playmates Toys as successful movies have a high likelihood of driving toy sales.
• Paramount+ launching the new TMNT-inspired series will also drive Ninja Turtles’ revival even more.

• According to various public news sources, Brazil’s Suzano SA, the world’s largest pulp maker, and a few private equity players may participate in the bidding for Vinda International (3331 HK).
• Note that the controlling shareholder Essity is looking to potentially dispose its stake, announced in April this year. 
• Two major drivers of share price – pulp price and competition – likely have reached the bottom and could improve in 2H23. 

• Yakult Honsha (2267 JP)‘s OP fell short of market expectations by ¥500 million in 1QFY24, leading to a 15% drop in the company’s share price.
• With the post earnings price reaction, Yakult’s FY+2 PE has fallen to its lowest level since before the global financial crisis, currently standing at around 18.7x.
• We think this price reaction is unwarranted as the fundamentals haven’t changed. Thus, creates an opportunity for short-term gains by staying bullish on the stock.

• SHEIN announced it wants a role in reforming US de minimis import regulations
• A tightening of de minimis threshholds could undermine SHEIN (and Temu) in the US
• The de minimis issue highlights SHEIN’s and Temu’s lack of political allies in the US

• Triumph-Bajaj midsize bike melds the expertise of Triumph Motorcycles and Bajaj Auto Ltd (BJAUT IN)  for top-tier quality, targeting the midsize market with dual-brand prowess.
• Triumph-Bajaj sparks fervour with strong inquiries and bookings in tier-two and tier-one locations, though supply constraints present challenges.
• Triumph stands out targeting the 30+ age group seeking premium leisure riding, employing exclusive dealerships and unique pricing to enhance ownership experience.

• Managers/Executives should receive compensation that is appropriate to increase corporate value and stock price, and executive compensation should be tied to the realization of corporate value and stock price growth.
• Not many companies have been able to increase their corporate value by hiring global talent on their boards like Hitachi, MUFG, Mitsui & Company, and Daikin.
• Currently, the relationship between executive compensation and corporate value is inconsistent. The optimal proportion of variable compensation and the acquisition/utilization of global human resources to strengthen competitiveness will be key.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Samvardhana Motherson’s (SM) ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Weak”.
• The score is based on the ESG reporting of parent Motherson Group (encompassing ultimate parents Samvardhana Motherson International Limited and Motherson Sumi Systems Limited), which reports ESG on a consolidated level without providing meaningful details at the SM level.

• Tractor Supply Company’s results were a major disappointment as the company failed to meet Wall Street’s revenue and earnings expectations.
• Consumer spending continues spending in favor of services and they continue pulling back on discretionary purchases.
• On the real estate front, TSCO opened seventeen new Tractor supply stores in the quarter and 3 Petsense by Tractor supply stores.

• International Housewares Retail (1373 HK) reported weaker than expected numbers, with revenues down 3% YoY and profits down 18% YoY for FY23 (down 10%/42% for H2 FY23).
• The cause for the decline was the roll-off in COVID-related subsidies worth 30 mn HKD and weak revenues in Q4 FY23 owing to a surge in outbound travel.
• The company declared a 10-cent final dividend ( Full Year: 22 cents). Post the correction in share price, it represents an 8.3% dividend yield. 

• Yaizu Suisankagaku Industry (2812 JP)/YSK has recommended J-STAR’s tender offer of JPY1,137 per share, a 35.0% premium to the undisturbed price (4 August).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
• YSK is cash rich, and the offer is below book value. The tender offer is a reasonable alternative in challenging trading conditions that have slashed operating margin targets. 

• The Hang Seng Index (HSI) closed down last week (CC=-1), briefly touching OVERSOLD territory, it may close higher this week. 
• The HSI trend pattern currently identified with the Market Reversal Matrix (MRM) is quite bullish, on average.
• Support levels to go LONG are between 19367 (Q2/Median) and Q3 at 19021.

• We expect Li Auto to report 2Q23 top line and GPM 2.3%/in line vs. cons. We think Li Auto’s share gain in Q1/Q2 reflects market consolidation.
• Our channel check found its weekly order intake remains robust at ~10k. We expect the capacity ramp-up to lead to Q3 delivery of ~100k, 12% vs. cons. 
• We reiterate Li Auto as our top pick, due to 1)  strong model cycle (L9/L8/L7) and channel expansion; 2) margin upside. Li’s MEGA BEV could be the next catalyst.

• We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &store expansion.  
• We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.
• Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.

• The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
• Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
• There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.

• The Hershey Company delivered mixed results for the previous quarter, with revenues well below analyst expectations but managed earnings beat.
• The categories continued performing pretty well, with consumer demand for every great-tasting snack staying quite buoyant across the globe.
• Advertisements, as well as related consumer marketing expenses, increased.

• Keurig Dr Pepper delivered a solid result and managed an all-around beat in the last quarter.
• The consolidated results of the quarter were quite healthy, with strong revenue momentum and sequentially accelerating EPS and income growth.
• In the CSD category, Dr Pepper gained market share, strengthened by the success of Strawberries and Cream and the continued momentum of Dr Pepper Zero Sugar.

• Royal Caribbean managed to exceed analyst expectations in terms of revenue as well as earnings.
• During the quarter, the company delivered an increase in the number of vacations and saw good guest satisfaction scores.
• For Royal Caribbean Cruises, new hardware has been quite a great differentiator enabling it to attract new customers into its vacation ecosystem and drive quality demand.

• In our prior insight Ferrari: Classic Fisher Company, Almost Perfect Score on The Fisher 15 Framework, we talked about Ferrari N.V. (RACE US) being a classic Fisher company.
• Q2 2023 (a quarter with 14% revenue growth/34% profit growth) showed the execution runway (order book/product mix) is tremendous, and over the long term, value can be created.
• In the short term, though, trading at 46x/40x FY23e/FY24e despite upping its guidance, there could be a case to queue up for a more favorable entry price. 

• Global equities are under some pressure after Fitch downgraded the United States’ credit rating to AA+ from AAA.
• We expect that this is a normal 3%-6% pullback to the 50-day MA or major $93 support level on the MSCI ACWI iShares MSCI ACWI ETF (ACWI US) .
• $TNX is below 4.1%-4.3% and DXY remains in an 8-month downtrend; as long as this remains true, we’d buy on a pullback to the 50-day MA and/or $93 on ACWI-US

• With that out of the way, let’s dive into Taste Gourmet, a catering group listed in the secondary market (or GEM board) of the Hong Kong Stock Exchange.
• Catering is usually a business with little moat, characterised by low barriers to entry. 
• While some brands are widely recognizable, humans generally want to devour something different each day, therefore it is an everyday struggle for restaurants to stand out among competition.

• Toyota Motor Corp., the world’s biggest car seller, has announced plans to consolidate its research and development (R&D) resources in China and ramp up its focus on electric vehicles (EVs), as it attempts to revive stalling sales in the highly competitive market.
• The Japanese automaker said on Monday it would change the name of its largest R&D facility in China from Toyota Motor Engineering & Manufacturing (China) Co. Ltd. to Intelligent ElectroMobility R&D Center by TOYOTA (China) Co. Ltd., and consolidate engineers from its three China ventures into the newly named facility based in Changshu, Jiangsu province.
• Among other plans, it would also strengthen local development of electrified vehicles (EVs) including battery, hybrid and plug-in hybrid models and accelerate the development of an electric powertrain with its two biggest suppliers, Denso Corp. and Aisin Corp., the company said.

• The percentage of stockholdings by individuals will continue rising. Their tendency to buy-on-decline will continue to serve as a cushion in times of falling stocks as well as voting behavior.
• Now that the BOJ’s ETF purchases have subsided, an increase in trust bank stock holdings is not expected. A limited increase in pension assets is also expected.
• The reduction in cross-shareholdings has reduced the shareholding ratio of corporations to 19.6%. Meanwhile, corporations repurchased total of 5,790.7 billion yen in FY2022, indicating that share repurchases have taken root.

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. Vedanta Resources
3. China Jinmao Holdings
4. Geely Auto
5. First Pacific Co

and more…

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Oriflame’s ESG as “Adequate”, in line with its “Adequate” Social and Governance scores. The company has a “Strong” score for the Environmental pillar. Controversies are “Immaterial” and Disclosure is “Strong”.
• Oriflame is a global beauty direct seller that markets its products through 3.1 mn members across 60 countries.

• O’Reilly Automotive managed to exceed the revenue as well as earnings expectations of Wall Street driven by strength in consumption and a robust increase of 16% in diluted earnings per share.
• Strength in the ticket count comps, particularly in the company’s professional business was a great contributor to the outperformance.
• We give O’Reilly Automotive a ‘Hold’ rating with a revised target price.

• 2Q23 revenue of $37.6 million was above consensus of $36.4 million.

• The challenging advertising market conditions have continued but EPS of $0.09 was significantly ahead of consensus of a loss of $0.01.

• The company (which has no debt) has more than $73 million in cash and reaffirmed its full-year guidance.

• On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
• Preceding my comments on Takara are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years. 
• If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
• Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders. 

Melco Resorts (MLCO)’s H1/23 results were soft, mainly as its Macau properties underperformed in Q1. That said, the company regained some market share in Q2, as GGR from its Macau properties climbed 43% q-o-q. Q2/23 mass market GGR reached 84% of the Q2/19 level, albeit still marginally below the industry figure of 86%. We expect MLCO’s mass market GGR in Macau to continue improving going forward, supported by the opening of Studio City Phase 2.

In our view, the main credit concern is the company’s aggressive stance towards shareholder returns. This is evidenced by MLCO’s small share repurchases throughout the COVID-19 pandemic (between FY 2020 and FY 2022), despite its severely deteriorated balance sheet. Moreover, the company has a history of providing cash support to parent Melco International.

• Comcast Corporation delivered an all-around beat in the most recent quarterly result.
• Total revenue increased, driven by ongoing operating leverage at the company’s high-margin Connectivity & Platforms business as well as significant growth at studios and theme parks.
• Residential connectivity revenue increased with growth in domestic broadband, wireless revenue, and international connectivity.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Country Garden Holdings Co
• MGM China Holdings
• Vedanta Resources

Greggs’ H123 results showed continued strong revenue growth, indicating good progress across the majority of its multi-year initiatives to drive revenue growth. Profitability continued to be hampered by input cost inflation as well as investment in the cost base to drive the expected revenue growth. A more favourable outlook for underlying cost inflation in FY23 than previously should be welcomed. We have slightly increased our estimates to reflect the strong growth in H123 and higher interest rates on cash deposits.

• Country Garden Services (6098 HK) announced a profit warning for 1H23 last night, expecting sales to increase by 3-4% yoy and net profit to see a 0-10% drop yoy.
• The company also announced the intention to repurchase up to 10% of total shares outstanding. 
• Share price up +18% following the profit warning and share buyback announcement – a good read-across for the rest of the sector that will report interim results later this month. 

• Luckin Coffee reported 2Q23 revenue beat our est. by 7.5%, and non-GAAP NI beat our estimate by 84.1%. 
• The top-line beat is driven by stronger product sold on average store sales, the bottom-line beat is driven by economies of scale and less than estimated sales promotion.  
• We maintain the stock as BUY rating and raise TP by US$5.5 to US$43/ADS (27x PE in 2023) to factor in the outlook of sustainable margin improvement.

• Hanwha Galleria (452260 KS) is the 23rd company in our Korea Small Cap Gems series. 
• Hanwha Galleria is a spun-off company from Hanwha Solution. Hanwha Galleria’s shares have declined 39% since being relisted on 31 May 2023. 
• Hanwha Galleria is a deep value stock with undervalued real estate assets. Chairman’s son is also buying aggressively and there is a big catalyst for Five Guys launch in Korea. 

• Cash generation through the subsidiaries’ IPOs will only buy time, and investors are likely to focus on when Rakuten will move to solve the problems in its cell phone business.
• In recent years, TSE’s market reorganization has focused attention on parent-subsidiary listings, and there’ve been moves to convert listed subsidiaries into wholly owned subsidiaries or sell subsidiaries to other companies.
• For Rakuten, subsidiary IPOs are an essential means of raising cash, but TSE’s recognition of the governance issues involved in parent-subsidiary listings raises questions about Rakuten’s two parent-subsidiary listings.

• We estimate Taste Gourmet (8371 HK) to deliver 39% YoY revenue growth and about 13% YoY profit growth (adj 350% YoY) for Q1 FY24e, to be declared on August 10th.
• The company is expected to go ex-dividend on the 4th of August and pay out a 5.2-HK cent final dividend by the 24th of August for FY23.  
• Trading at 6x FY24e PE /20% of the market capitalization in cash and a 9-10% dividend yield ( based on a 50-60% payout ratio) represents a great investment opportunity.