Consumer

• On Friday 13 September, the Ministry of Finance of Japan released revisions to the list (Japanese, English) of company classifications under the Foreign Exchange and Foreign Trade Act (FEFTA)
• It appears 72 names were newly upgraded to “Core” (“3”), 21 newly listed companies (since the last list in Nov 2021) were labeled “3”, and six lost their Type3 designation. 
• Seven & I Holdings (3382 JP) saw breathless news articles Friday suggesting a foreign takeover became more difficult. Not really. 

• Midea Group(000333 CH)  has increased the shares on offer in Hong Kong by 15% to 565.9 million shares, priced at the top end of the range at HKD54.8 per share.
• With strong investor interest, the company may exercise an over allotment option that could take the deal size to USD 4.6 billion.
• Midea’s Hong Kong pricing reflects a nearly 21% discount to its A-share closing price, compared to the average 33% discount for dual-listed companies between Hong Kong and Shanghai or Shenzhen.

• For the reasons why Midea is eager to IPO in HK, investors shouldn’t just look at the surface of its glory, but delve into the “real motives” behind capital operations.
• The policy of subsidizing the trade-in of home appliances belongs to “early overdraft of demand” and is unsustainable. Valuation logic for the performance increment brought by such policy is P/B.
• If Midea cannot achieve the expected breakthroughs in To B business or internationalization in 2025-2026 to hedge against the weak domestic business, Midea’s performance/valuation in following years would inevitable decline.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, Midea Group Co Ltd A (000333 CH) hogged much of the limelight this week, although Bajaj Housing Finance (BHF IN) created some history as well. 
• We covered the Nextdc Ltd (NXT AU) and Terumo Corp (4543 JP) placements and looked at the possible deals in Trial Holdings (5882 JP) and Via Technologies (2388 TT).

• Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
• Temu, (owned by PDD US), and Shein might need to rethink their US strategies if a new rule stops overseas shipments of tariffed products from bypassing US customs duty.
• Singapore passed a groundbreaking law last week to protect gig workers. Other countries may follow suit and this could adversely impact margins. Take note: Meituan (3690 HK) , Zomato (ZOMATO IN)

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We update recent results for Philippines names and Uchi Technologies (UCHI MK), which recently declared earnings.

• Biden Administration rule would make “de minimis” items subject to tariffs
• Besides adding to landed cost of those items, reporting requirements would rise
• In addition, US/EU governments launch probes of SHEIN/Temu product safety

• I tally 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Six new deals: Hotel Property (HPI AU), Guotai (1788 HK)/Haitong  (6837 HK), Joban Kosan (9675 JP), Dyna Mac (DMHL SP), Korea Zinc (010130 KS)/Young Poong Precision (036560 KS), Hulic (3003 JP).
• Key updates took place on Namoi Cotton Co Operative (NAM AU), Seven & I Holdings (3382 JP), Fuji Soft (9749 JP), Descente (8114 JP), & Silverlake Axis (SILV SP).

• Alibaba Group Holding (9988 HK) was (finally) included in the Shanghai/Shenzhen-HK Connect programs; on the same day a Cayman court uplifted a BABA dissenter’s merger price by 659%.
• MBK has teamed up with Young Poong (000670 KS) to secure control of Korea Zinc (010130 KS) via Partial Tender Offers for Korea Zinc and Young Poong Precision (036560 KS)
• Like all long-dated arbs, Shinko Electric (6967 JP) is really about buying dips, then lightening up when it gets tighter, as long as the opinion about eventual result/path is unchanged.

• 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: Midea Group Co Ltd A (000333 CH) upsized H Share listing, Terumo Corp (4543 JP) placement.
• Event-Driven developments: Haitong Securities Co Ltd (H) (6837 HK)/Guotai Junan Securities (2611 HK), Seven & I Holdings (3382 JP), Raysum Co Ltd (8890 JP), Dyna Mac Holdings (DMHL SP).      

• Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. But SOUTHBOUND gross volumes way up.
• AH Premia rose slightly as HK-listed shares outperformed mainland share indices. The HK/mainland spread is consistently better than H/A performance. It’s not clear why. This week no exception.
• This week will see limited H/A action because of the long Mid-Autumn Festival. Hopes are high for non-durables purchases this month. Maybe even homes. But I am skeptical…

• Rather than lowering the minimum investment amount, attention is focused on whether the essence of the issue is whether the long-standing unit share system can be abolished.
• This system, which doesn’t grant voting rights to shareholders who don’t hold more than certain number shares, has led companies to turn inward-looking by making AGMs skeleton and accelerating cross-shareholdings.
• With corporate racketeer, who triggered the introduction of this system, gone and the reduction of cross-shareholdings beginning, shareholder units that can exercise voting rights for open AGMs should be reexamined.

• GameStop, a major player in the video game retail industry, revealed a complex scenario in its latest earnings presentation for the fourth quarter and full year 2022.
• The company’s leadership highlighted substantial shifts in strategies aimed at improving profitability and creating sustainable long-term growth.
• From a financial perspective, GameStop reported a net income of $48.2 million for the quarter, compared to a considerable net loss of $147.5 million in the same quarter of the previous year.

• Toll Brothers, a prominent homebuilder, showcased an optimistic third quarter for the 2024 fiscal year, reflecting growth and stability despite varied market conditions.
• In this quarter, the company reported record home sale revenues of $2.72 billion, demonstrating a strong performance with the delivery of 2,814 homes at an average price of $968,000.
• The adjusted gross margin significantly outperformed projections, reaching 28.8%, aided by operational efficiencies and a favorable mix of home sales.

• Sumber Alfaria Trijaya (AMRT IJ) booked a solid set of 1H2024 results despite a seasonally slower quarter with margins holding up well and market share improving versus competition.
• Outlet expansion for Alfamart is running ahead of guidance, with Alfamidi growing in line and a more measured expansion for Lawson, as it beds down last year’s aggressive rollout. 
• Outside Java is seeing the strongest growth in sales and the focus on expansion of DCs and stores plus Alfamart is increasing the number of chillers. Valuations reflecting growth prospects.

• Committed to profitability improvement – Resorttrust is a timeshare resort hotel operator, offering exclusive, high-quality services to resort hotel membership owners in Japan.
• Successful unit price hikes on the back of outstanding customer loyalty in the hotel business and operational efficiency optimization in membership-based medical services, the profitability is set to improve throughout the current medium-term plan (FY3/23- FY3/28).
• With a healthy balance sheet, Resorttrust is poised to accelerate growth through facility development. 

• Petco Health + Wellness (WOOF) has captured the attention of retail investors once again, thanks to none other than meme stock influencer “Roaring Kitty,” a.k.a. Keith Gill.
• After the pet care company reported disappointing second-quarter earnings, its stock initially dipped but then surged almost 35% following an online post.
• Despite the exuberance in social media circles, Petco’s fundamentals paint a more mixed picture.

• Back in August 2017, Xingxuan Technology, a privately held Cayman Islands company operating in the online food delivery space in China, was transferred by way of a statutory merger. 
• The buyer was Alibaba Group (9988 HK)-backed Rajax, the key seller, Baidu (9888 HK). The dissenter, having paid US$125mn for its shares, was offered cash/scrip worth an estimated US$42mn.
• The dissenter considered terms low-balled. The judge agreed. The uplift? 659%.

• Raymond Lifestyle (RAYMONDL IN) recently demerged from Raymond Limited.  Since Raymond Limited was part of various indexes, Raymond Lifestyle was not. Index Fund selling led to a correction.
• The correction made Raymond Lifestyle a special situation value bet.
• The cherry on the cake is strong management guidance and a foray into the untapped non branded and unorganized apparel segment

• Rakuten is a Japanese conglomerate with a diverse portfolio of businesses, including e-commerce, finance, travel, and mobile telephony.
• Founded during the late nineties global Internet boom, Rakuten has become a ubiquitous brand in Japan.
• The loyalty point system has become a key feature of Rakuten’s business model, connecting its various services together.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.
• In CR Beverage IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on core business’ pricing pressure, a slow pace of revenue diversification, a sizeable pre-IPO dividend, and margin and FCF generation below its key peer. 

• Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
• Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
• The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

• Comparing the number of Japanese companies in top 50 global market capitalization and Japan’s GDP as percentage of world’s GDP in 1989, it’s clear that economy and companies didn’t grow.
• Without more Japanese companies that have an edge in profitability, a key focus for long-term global investors, it will not be possible to put long-term investment money into Japanese equities.
• It is assumed that BoJ’s policy of inducing the yen to depreciate through ultra-monetary easing may have in part spoiled company managers and caused them to neglect their corporate efforts.

• DICK’S Sporting Goods’ second quarter 2024 earnings showcased a compelling financial performance, emphasizing its robust strategies and execution capacities.
• The sporting goods retailer reported an encouraging 7.8% increase in sales compared to the previous year, reaching nearly $3.5 billion.
• This result reflects not only an enhancement of average sales tickets but also an uptick in transaction volumes, signaling strengthened consumer engagement and market share.

• Casey’s General Stores wrapped up its first quarter of fiscal year 2025 with a positive outlook on its operations, financials, and strategic direction.
• Led by CEO Darren Rebelez and CFO Stephen Bramlage, the company’s performance reflected a strong start to the fiscal year with notable progress in both store operations and financial metrics.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Hormel Foods Corporation reported a robust performance in its third quarter of fiscal 2024, exhibiting a mixture of strengths across various segments and some challenges, particularly in the retail andinternational sectors.
• Starting with the positives, Hormel continued to witness healthy performance across its key retail brands.
• Brands such as Hormel Black Label Bacon, SPAM luncheon meats, and Skippy peanut butter exhibited strong growth, emphasizing successful consumer engagement and brand strength.

• Dollar Tree, a prominent American chain of discount variety stores, recently conducted its second quarter 2024 earnings call, providing varied insights into its current financial health and future expectations.
• The discussion, led by Chief Operating Officer Mike Creedon in place of CEO Rick who is currently unwell, highlighted both the company’s challenges and areas of robust performance despite a demanding macroeconomic environment.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
• We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
• Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

• Hanwha Galleria’s tender offer, led by Kim Dong-sun, closed today with a subscription rate just over 80%, according to the local brokerage after market close.
• Retail investors in small caps like Hanwha Galleria often skip tender offers, hoping for price gains. Kim Dong-sun may try to buy the remaining 10-15% soon, possibly via open-market buys.
• Watch for signs that Kim Dong-sun might go for a second tender to take Galleria private. He might be aiming to avoid taxes and boost his stake’s value.

• Puig Brands (PUIG SM) will be added in SXXP and SXXE at the close of 20 September 2024. Forecasted demand is ~1.6m shares, ~$36m and ~2.7 ADV.
• The security is at risk of failing the fcap threshold hence inclusion in November 2024 due to a recent price drop and a substantial portion of shares outstanding being unlisted.
• The company closely exceeds the minimum public voting rights and its inclusion is expected in December 2024. Forecasted demand is ~4.5m shares, ~$101m and ~7.5 ADV.

• In this insight, we compare the IPO valuation of The Born Korea (475560 KS) versus the recent M&A valuation of Compose Coffee by Jollibee Foods (JFC PM).
• Using the recent M&A multiples of Compose Coffee by Jollibee Foods suggests an attractive upside to The Born Korea (relative to the IPO price range).
• No other listed company in Korea has a restaurant business model that is consistently profitable, with strong balance sheet, and solid sales growth as The Born Korea. 

• Activist investor, Oasis Management, recently disclosed that they had taken a significant 6.3% stake in the company
• I suspect that Oasis don’t need to be overly aggressive with this one. Given the fundamental outlook, we see the financial model delivering double digit earnings growth
• After a strong Q1 report, we expect an upward revision to guidance. The stock is cheap at <11x earnings. We see over 30% upside

• The tender offer period for Hanwha Galleria ended on 11 September. Its share price closed down 7.4% but still up 8.2% from its price prior to the tender offer announcement.
• The local media accounts mentioned today that about 80-90% of the shares targeted in this tender offer have been filled.
• If 90% of the tender offer is successful, Kim Dong-Sun’s stake in the company will rise from 2.3% to 18.1%.

• Trial Holdings (5882 JP) raised around US$259m in Mar 2024. Its IPO lockup is set to expire soon.
• TH operates a network of retail stores in Japan that offer one-stop shopping under its everyday low price (EDLP) model.
• In this note, we will talk about the lockup dynamics and possible placement.

• Despite Seven & I Holdings (3382 JP)‘s rejection, Alimentation Couche-Tard (ATD CN) remains prepared to enter collaborative and friendly discussions to focus on finding greater value for 7&i shareholders. 
• Couche-Tard’s options are to return with a revised offer, go hostile or walk away. Couche-Tard will likely test the Board’s resolve by returning with a higher offer.
• The Board’s options are to go through the motions (appointing IFAs), conduct a market check or launch a more aggressive action plan to placate restive shareholders. 

• We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares. 
• We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
• Pricing of this offering is expected to be completed on 13 September and listing on 17 September. 

• In the annals of foreign buyers of Japanese tourism-related real estate assets, there have been a few good examples, and several disasters. Yesterday, we got a new suitor for assets. 
• Fortress SPV Ontario GK will attempt to buy out Fukushima-based Joban Kosan (9675 JP) through a double Tender Offer. 
• There is a history here of a bump on an MBO on an associated company. That may have caused it to trade at a premium on Day 1. It’s unrelated.

• LG Electronics’s India business IPO could be valued above USD 7 billion, exceeding market expectations, driven by its dominant position in India’s growing home appliances market and strong sector valuations.
• Favourable market conditions and robust sector growth make now an ideal time for LG Electronics (066570 KS) to launch its India IPO, securing high investor interest and compelling valuations.
• In a recent interview, LG Electronics(066570 KS)  CEO William Cho mentioned that an Indian market debut is one of several options being considered to revitalise the company’s consumer electronics business.

• Itochu’s Textile division continues to execute the directive from its CEO to expand reach and coverage in the fashion and lifestyle sectors, with sports one of the major target categories.
• It will completely absorb Descente as part of this plan, meaning the brand is likely to become one of the largest in the portfolio.
• The ongoing tender offer will likely succeed giving Itochu a bargain and investors no stake in the future.

• Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
• The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
• As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively. 

• NIO Motors (NIO) reported C2Q24 top line, non-GAAP operating loss and GAAP net loss in-line, narrower and narrower vs. our estimate, and in-line, narrower and in-line vs. consensus. 
• The brightest spot of the result is gross margin due to both vehicle and service gross margin improvements. 
• We keep rating at SELL and raise TP to US$1 to reflect better OPEX control.

• If a company seeks immediate effects to improve capital profitability, it’ll return cash to shareholders because it’ll be years before the company can recoup it by making more investments now.
• Even companies that have increased valuations by raising their capital profitability can improve it by reducing their cash on hand and policy shareholdings, which are still too large.
• Companies with low capital profitability and low valuations have to gain investor confidence through quarterly earnings disclosures by demonstrating that their disclosed goals are achievable.

• Market consensus is unrealistic as it expects China Tourism Group Duty Free (1880 HK) to record 32.1% YoY and 14.6% HoH earnings growth in 2H24. More downgrade risk ahead.
• Average per-customer duty-free sales in Hainan dropped by 19.2% YoY in Jul, indicating the negative wealth effect and deteriorating middle-class spending appetite.
• Overseas duty-free sales to Chinese residents surged by almost 50% YoY in Aug, implying a diversion effect which is also detrimental. 

• Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
• We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views. 
• Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

• Late last week, the Nikkei reported Seven & I Holdings (3382 JP) would send a letter to Couche-Tard saying they reviewed ACT’s Proposal and deemed it “inadequate.” Indeed it was.
• 7&i then published the Board’s letter, saying 7&i remained open to discussions but ACT’s Offer “grossly undervalued” 7&i’s intrinsic value and lacked in other areas. ACT responded with a “letter.”
• But ACT’s “letter” was a press release aimed not at 7&i but the public. 7&i released a terse response today. ACT is the suitor. It needs to act like it.

• Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the deal background in our previous notes. In this note, we talk about valuations.

• Midea Group Co Ltd A (000333 CH)  is offering 492.1 million shares in Hong Kong, priced between HKD52 and HKD54.8 per share.The valuation looks attractive.
• Nearly one-third of the Hong Kong share offering has already been subscribed by cornerstone investors.
• Midea’s strong market share in home appliances, consistent revenue growth, margin expansion, and appealing return ratios make a compelling investment case.

• Last Friday, Seven & I Holdings (3382 JP) issued a response to Alimentation Couche-Tard (ATD CN)’s non-binding acquisition proposal.
• At $14.86 per share, Seven & I’s special committee stated that the offer significantly undervalues the company.
• The response also highlighted that the proposal fails to address the numerous and substantial regulatory challenges the transaction would encounter from U.S. competition authorities.

• As things stand, Trent Ltd (TRENT IN) could replace Bajaj Finserv (BJFIN IN) in the S&P BSE SENSEX Index (SENSEX INDEX) at the close on 20 December.
• Addition to the F&O list could see Zomato (ZOMATO IN) added to the index instead. That could then result in two changes to the S&P BSE SENSEX Index in December.
• Trent Ltd (TRENT IN) is also an inclusion to the NIFTY Index (NIFTY INDEX) later this month and the pool of shares available for active investors is getting smaller.

• ETF flows showed subdued activity during the week although the Southbound Connect platform had a minor outflow.
• Great Wall Motor (2333 HK) and China Feihe (6186 HK) both had positive news sentiment helping their share prices rally on better earnings announcements.
• New World Development (17 HK) announced a major asset impairment write-down sending its stock to historic lows.  China Tourism Group Duty Free (1880 HK) disappointed on 2Q24 sales and profits.

• P N Gadgil Jewellers (1742652D IN) is looking to raise up to US$132m in its India IPO.
• P N Gadgil Jewellers (PNGJ) is an Indian organized jewellery player. Its product offerings include traditional as well as modern and functional jewellery designs, in gold, diamond, silver and platinum.
• Previously, we talked about the company’s historical performance. In this note, we provide a summary of its RHP updates and share our quick thoughts on peer comparison and valuation.

• Nongfu Spring (9633 HK)‘s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.
• The derating is largely due to the negative media portrayal of the company’s Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24. 
• Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy. 

• After Dollar General’s (DG) disastrous earnings couple of weeks ago, I was quite concerned about their prospects in the near-term.

• However, a week later after digesting through Dollar Tree (DLTR) as well as DG management’s explanation in the Goldman Sachs Retailing Conference, I have updated some of my thoughts about DG…in the positive direction.

• Nonetheless, I have decided to abide by my decision not to inject more capital to DG, but to increase my notional exposure to DG via long-dated call options. 

• Hankook & Company is unexpectedly entering Autos, the only large-cap inclusion, likely getting a significant weight and facing a massive flow impact.
• Like BBIG, this single-day flow event driven by one or two ETFs means smaller front-running impact, but names like Hankook & Company could see early positioning due to massive flows.
• I’ll position in big impact names two days before the ETF rebalance trading. I’ll then go long on a basket of those with over 0.5x ADTV at Wednesday’s close.

• The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
• Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
• Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

• China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
• However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
• Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.

• SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
• ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small. 
• This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).

• Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
• AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
• It is not clear what impetus there might be for better H performance.

• Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
• Hyundai Motor India’s August dispatch volumes were down 8% versus previous year – mostly due to sluggish demand for hatchback segment amd intense competition in the SUV segment.
• Toyota Motor (7203 JP) is on a fast track in India recording high double digit volume growth thanks mainly to successful launch of rebadged Suzuki models.

• We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
• We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
• Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out – they have had positive inflections in their earnings/dividend payouts and capital allocation.

• JNBY Design Ltd (3306 HK) is successful in capturing China’s niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
• Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
• Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we looked at Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN), which are two relatively large listings coming up. 
• Placement were flowing through again this week, across the region.

• The most significant reason for decreasing parent-subsidiary listings is the presence of overseas investors who have long pointed out the problems with this issue. This TSE’s request will support them.
• The issue of parent-subsidiary listing is whether the listed parent should incorporate the profitability of equity-method affiliate/listed subsidiary to enhance its profitability, or effectively use its assets by divesting them.
• If extending to equity-method affiliates, there are many companies that haven’t made progress in reviewing their business portfolios, and this is where the fundamental issue of ROE not increasing lies.

• 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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) IPO.
• Event-Driven developments: Fuji Soft Inc (9749 JP), Pasco Corp (9232 JP), Seven & I Holdings (3382 JP), Xingda International (1899 HK), CPMC Holdings (906 HK), Psc Insurance (PSI AU). 

• According to our valuation analysis, it suggests an implied price of 34,365 won, which is 27% higher than the high end of the IPO price range.
• We estimate The Born Korea to generate sales of 467.7 billion won (up 13.1% YoY) and operating profit of 31.4 billion won (up 22.8% YoY) in 2024.
• We believe a premium to comps’ valuation is appropriate for The Born Korea mainly due to its higher sales growth, higher ROE, stronger balance sheet, and higher profit margins.

• I tally 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals were discussed this week: Offers for Virgin Money UK Plc (VUK AU) and PSC Insurance (PSI AU).
• Key updates took place on Rex Minerals (RXM AU), Namoi Cotton (NAM AU), CPMC (906 HK), China TCM (570 HK), Seven & I (3382 JP), and Fuji Soft (9749 JP) . 

• The ADDs/DELs for the ASX index family for the September 2024 index rebal event were announced after market close on Friday 6th September 2024.
• In this insight, we take a final look at the flow expectations for each of these index changes.
• We have also highlighted certain names with noticeable movements in short interest.

• 99 Speed Mart Retail Holdings (99SPD MK) raised around US$530m in its Malaysia IPO. The IPO had been a mix of primary and secondary shares.
• 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia. 
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

• Miniso (MNSO) reported C2Q24 revenue (3.2%)/1.9% vs. our estimate/consensus. Non-GAAP NI (5.6%)/(2.7%) vs. our estimate/consensus. 
• Recent weak economic data in both China and U.S.,along with MNSO’s deceleration in overseas average store sales;
• We cut TP from US$34 to US$24 and maintain BUY.

• Media rife with narrative of booming inbound foreign tourism to China
• But the numbers are well below historical highs, and climbing up from low base
• Chinese tourists, not foreign, determine strength of Chinese tourism recovery

• Ganesha Ecosphere (GNPL IN) is expanding from textiles to FMCG packaging with rPET granules, aiming for a 10-12% market share in the recycled PET market by 2029.
• The shift to high-margin rPET products and expansion into FMCG packaging aligns with regulatory trends and growing demand for sustainable materials.
• GEL’s strategic focus on high-value, sustainable products and robust market position suggests significant growth potential and improved profitability.

• Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
• Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
• In the past five days, Midea’s price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.  

• PDD Holdings, Inc. has shared their financial results for the second quarter of 2024 along with an overview of strategic actions and challenges.
• The company saw substantial revenue growth, with total revenue reaching RMB 97 billion, marking an 86% year-on-year increase.
• This significant growth stems mainly from robust online marketing and transaction services.

• Kangwon Land has received approval to expand its total casino area from 14,512 square metres previously to 20,260 square metres (up 40%). 
• The betting limits in the foreign players only zone will increase significantly from 300,000 won (about US$225) to 300 million won (about US$225,000). This represents a 1000x increase.
• We would argue that there is a high probability of Kangwon Land benefiting not just from higher sales and profits but also from higher valuation multiples. 

• Didi Global Inc. is investing 670 million yuan ($94 million) in an affiliated firm of digital mapping company NavInfo Co. Ltd. (002405.SZ -3.09%) and has moved its team responsible for smart cockpit development to the venture, as the Chinese ride-hailing giant takes another step away from carmaking to streamline its business.
• Beijing-based Didi’s smart transportation arm will take a 16.46% stake in AutoAI (Nanjing) Technologies Co. Ltd., becoming its second-largest shareholder, NavInfo said in a Shenzhen Stock Exchange filing dated Wednesday.
• NavInfo, AutoAI’s largest shareholder, will also invest an additional 100 million yuan in AutoAI, diluting its stake from 30.29% to 27.01%, the filing said.

• While cash on hand is high, many companies have not been able to improve their return on capital, so more companies are expected to announce shareholder returns, including share repurchases.
• The change in awareness of companies can be attributed largely to the changing environment of high foreign ownership and TSE requests.
• Since it takes time to raise the profit margin, and it’s not easy to identify CapEx opportunities, the measures to improve ROE will reduce policy shareholdings and cash on hand.

• Abercrombie & Fitch Co. recently unveiled its results for the second quarter of 2024, divulging key financial metrics and strategic initiatives that might influence investor sentiment.
• The company exceeded prior projections, setting second-quarter records with a robust 21% growth in net sales, reaching $1.1 billion, alongside an impressive operating margin of 15.5%.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Foot Locker Inc.’s second quarter 2024 earnings revealed a mixed yet cautiously optimistic outlook as the company undergoes a significant strategic shift under its Lace Up plan.
• The report highlighted a return to positive sales growth and gross margin improvement, signaling initial success in its efforts to refine market focus and improve operational efficiency.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Kohl’s Corporation’s second quarter 2024 earnings report revealed a mixed financial landscape characterized by both positive developments and persistent challenges.
• While certain strategic initiatives show promising momentum, the overall sales performance during the quarter was below expectations.
• On a positive note, Kohl’s highlighted considerable traction within key growth areas, including their partnered beauty shops with Sephora, home decor, gifting, and impulse purchasing locations.

• Chewy Inc. reported its fiscal Q2 2024 earnings with positive outturns highlighting its ongoing strategic endeavors and financial robustness, which presented a mixed picture of its current operational stance and future potential.
• The company revealed a marginal revenue increase, achieving $2.86 billion, up approximately 3% YoY, driven largely by its Autoship program which accounts for 78% of net sales, illustrating the value and convenience perceived by returning customers.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.