Consumer

• The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
• The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
• Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.

• The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
• Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
• The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Mankind Pharma delivered some joy to the Indian equity markets over the past week.
• There were no major placements over the past week but there were some lockup expiries.

• Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.
• Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.
• TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.

• AmoreG has been closely moving relative to Amorepacific Corp (090430 KS) over the past few months, but starting from mid-April, it rapidly entered a downward diversion phase.
• It appears to have experienced greater sensitivity towards the recent tensions in Sino-Korean relations, possibly due to its higher price correlation with the Chinese market.
• The issue lies in the timing of entry aimed at reversion, and there may be one upcoming passive inflow event that we should pay attention to in this regard.

• JD reported 1Q23 revenue in-line vs. cons., while non-GAAP net income beat cons and our est. 99% and 74%, respectively.   
• It’s early to say whether JD is getting out of the puddle, as (1) revenue grew just 1.4% YoY in 1Q23,  (2) the effect of its management change remains uncertain.
• We maintain SELL, but raise JD’s 2023 non-GAAP net margin from prior 3.2% to 3.34%, and raise TP to US$ 30.  

• JDHealth (JDH) reported C1Q23 top line and non-IFRS operating profit 56% and 78% of our C1H23 estimates. 
• We now take a more positive view on JDH’s ability to at manage the issue at certain periods and certain areas;
• We raise TP from HK$44 to HK$57 and rating to BUY. Possible risks include renewed margin pressure from prescription drugs

• Cotti Coffee has become a head-to-head competitor of Mixue’s Lucky Cup, and to a lesser degree, Luckin. 
• But what is behind Cotti’s agenda, in our view, is its founder Charles Lu’s aspiration to return to Luckin;
• The biggest obstacle for Charles to repeat the playbook of Steve Jobs is Chinese security regulator’s refusal, so far, to allow franchised chain to list

• Our 2023 outlook remains unchanged as we continue to expect broad-based consolidation with $93 capping upside on MSCI ACWI (ACWI-US), while important downside targets are $86, $84, and $75-77.
• We still recommend tactical overweight to defensives including gold miners and MSCI ACWI Staples, Health Care, and Utilities, given ACWI-US remains near the top of our expected 2023 trading range.
• We are now starting to see broad-based improvement, particularly in Japan and India, but also in Taiwan and South Korea. Most of today’s buy recommendations are cyclicals in these countries.

• There are no constituent changes for the Hang Seng Tech Index (HSTECH INDEX) in June but there are some free float changes and a bunch of capping changes.
• Estimated one-way turnover is 3.2% leading to a one-way trade of HK$3bn (US$384m). There are 3 stocks with over 1 day of ADV to trade.
• Trip.com (9961 HK) has over 1x ADV to buy from Hang Seng Tech Index (HSTECH) trackers. The stock is also an add to the Hong Kong Hang Seng Index (HSI).

• Hilton Worldwide Holdings delivered an all-around beat in its latest result as travel demand has remained robust, continuing the pattern seen in the back half of last year.
• This resulted in both the company’s top and bottom line results closing the quarter above the high end of the management guidance.
• The quarter’s leisure trends continued to be strong, with RevPAR outperforming the previous quarter’s performance.

• Nikkei has started a market consultation on amendments to the methodology of the Nikkei 225 (NKY INDEX) focusing on the stepwise addition of lower liquidity stocks and on technical listings.
• Stocks that have relatively low ADTV compared to the expected index weight will be added at half the originally planned PAF with the full PAF implemented at the next review.
• If the proposed changes are implemented, some of the potential inclusions in September will be added at half their PAF with the increase to full PAF coming in March 2024.

• JD replaces its CEO, Mr. L Xu, with the former CFO, Ms. S. Xu.
• As we expect, the revenue growth slowed down and the operating margin improved in 1Q23.
• We believe the stock has an upside of 92% for 2024.

• Li Auto reported solid 1Q23 performance, with top line in line with cons/our est., and non-GAAP net margin beating cons/our estimate by 4.0/2.7ppt. 
• We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7) and channel expansion; 
• 2) margin upside due to improved opex efficiency. Our TP implies 2.8x PS.

• CPNG reported C1Q23 top-line, EBITDA, and non-GAAP net income in-line, 8.1%, and (3.7%) vs. our est., and 3.1%, 8.2%, and in-line vs. cons., respectively. 
• We estimate CPNG’s penetration of its 3P marketplace fulfilment (FLC) rose 6ppts~ YoY to 20%~ in 1Q23. 
• We maintain our BUY rating and raise our TP to US$21.

• Shiyue Daotian (1892269D CH) is looking to raise about US$200m in its upcoming HK IPO. 
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products. 
• Shiyue Daotian’s largest revenue contributor is its rice products segment. However, the company experienced declining ASPs over the track record period while production and sales volume growth fell.

• Stock price increases only at the “TSE’s request” are anticipatory, and conversely, the gap with JPX Prime 150 Index components, which attract the attention of overseas investors, may widen.
• “TSE’s Request” effect is that TSE has changed the game by making it easier to compare managers of different companies according to P/B, thereby increasing managers’ awareness of stock prices.
• Just as all companies worked to “conserve energy” and become more competitive during the oil crisis, many companies’ stock valuations will rise in environment where managers must change their mindset.

• In 2022, Heineken delivered strong profit growth despite the challenging market environment, driven by volume recovery post pandemic, premiumization, pricing, and cost savings
• Heineken keeps working on improving and building its business for the long-term as it invests behind its brands
• We believe Heineken’s new, more balanced approach to driving shareholder value is likely to yield a period of accelerated organic and margin growth that deserves a higher-than-peer valuation

• China granted a six-month grace period for carmakers and dealers to sell off as many as 2 million new vehicles that will be out of compliance with new emission standards taking effect July 1.
• The move is intended to ease pressure on the auto market amid slowing sales and a brutal price war.
• The government said it will allow sales of vehicles produced under the old pollution standards to continue until Dec. 31, though automakers will have to apply more stringent requirements to newly built autos starting July 1.

• Vedant Fashions (MANYAVAR IN) , (VFL) had recently debuted on the bourse in 2022. 
• The company has grown to be one of the largest brands in the wedding/celebration apparel industry, boasting a network of 595 stores and 300+ franchises as of March 2022.
• When it comes to the forensics, there are slight grey areas observed with respect to the accounting complications. The insight also highlights key governance takeaways.

• Chinese electric-car giant BYD Co. got a green light from regulators to take over a bankrupt online insurance unit of the scandal-plagued conglomerate Tomorrow Holding Co. Ltd. with plans to turn it into an auto insurance provider.
• The China Banking and Insurance Regulatory Commission (CBIRC) said Tuesday that it approved BYD’s 100% acquisition of E An Property & Casualty Insurance Co. Ltd.
• Chinese authorities seized the company three years ago.

• Panasonic reported a 13% increase in sales and a 4% increase in net profit for fiscal 2023, driven by strong performance in its lifestyle, automotive, and connect segments.
• Panasonic expects to beat Street consensus operating profit forecasts, reflecting the recovery of auto demand and recognition of tax credits for its battery production
• Panasonic is a key beneficiary of continued expansion of EV market. Stock cheap at 8x EV/EBIT vs historical average of 11x

• Beenos Inc (3328 JP), despite missing earnings and offering smaller-than-expected buybacks, is potentially a deeply undervalued investment.
• Beenos holds 38% of its market-cap in cash 14% in GoTo shares 72% in VC investments and 9% in investment securities, which amounts to over 133% of its current market-cap.
• Distributing these excess assets to investors could potentially generate more than 100% upside.

• KG Mobility belongs to the Consumer Discretionary sector, and if we consider its market cap on April 28th, it comfortably qualifies for inclusion in KOSPI 200 in the upcoming review.
• Although the KOSPI 200 eligibility rules do not explicitly prohibit a stock based on such short trading periods, there is a chance that KRX might exercise its discretionary provision (6.1.2).
• There is another significant event approaching us. As per current market cap levels, there is a high chance of KG Mobility being included in the KRX Auto Index in September.

NagaCorp (3918 HK – US$3.5 billion) is a Hong Kong-listed casino operator based in Cambodia’s capital city of Phnom Penh.

Its two “NagaWorld” casinos with 480 gaming tables and 3,700 slot machines, and hotels with 2,700 rooms and related commercial properties.

What makes NagaWorld unique is that it has a monopoly on running casinos in a 200km radius of Phnom Penh, lasting until 2045.

• Guoquan Food (Shanghai) (1786512D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
• Guoquan Food (Shanghai) is a home meal solutions provider in China.
• Offering a wide variety of home meal solutions products under its Guoquan Shihui (鍋圈食匯) brand, the firm had a total of 755 SKUs as of Dec 22. 

• Organto has effectively transitioned its business to an asset-light model, growing revenue from $1.5M in 2018 to $49M in 2023E
• OGO now has a diversified platform covering 170 customers using its global supply chain that can provide year-round supply to its customers
• Organto’s management team and board contain various executives that grew SunOpta to >US$1B in sales using a similar business model Organto Foods Inc. (OGO:TSXV) operates as a marketer and distributor of organic and non-GMO fruits and vegetables to end-consumers in Europe.

• ADEA reported first quarter results highlighting the Company’s ability to generate free cash flow from its licensing business as it signed more contract renewals in the period
• After signing ten license agreements in the fourth quarter of 2022, ADEA signed another eight agreements in the first quarter.
• ADEA maintained its full year outlook on all metrics. ADEA is projecting adjusted EBITDA of $262M at midpoint. ADEA is applying its free cash flow to reducing its debt balance

• Last year, fintech-wannabe Marui Group (8252 JP) announced a large buyback as part of its ¥100bn distribution to shareholders in its MTMP, then increased the size
• They repurchased ¥26bn of shares. Today they announced the return of ¥50bn this year including a ¥40bn buyback. And having arrived at their optimal balance sheet structure, a new policy.
• That’s 10% of market cap and 11.6% of shares. And again a delayed start. And as always, shareholder structure matters. In this case a lot.

• 646 listed companies (28.5%) in Korea have modified their articles of incorporation this March to prioritize determining the dividend amount before setting the dividend record date.
• New practices will arise involving the use of single-stock futures for arbitrage trading through baskets among major high-dividend companies whose dates of the dividend records overlap.
• It will be crucial to keep track of the dividend record dates with precision. In this connection, KLCA and KOSDAQCA will create a website monitoring this information.

• The relationship between Value Act and Seven & I Holdings (3382 JP) has become toxic due to Value Act’s opportunistic behaviour after the passing of the Seven & I founder.
• Seven & I and Value Act have been exchanging letters more frequently, with recent ones taking on an angry tone, especially from Seven & I’s side.
• Value Act’s attempt to block the reappointment of experienced directors could cause long-term value disruption, especially if their goal is to pressure a spinoff of the convenience store business.

• Uniqlo is such a mainstay of Japanese retailing, and indeed life, that its dominance seems inevitable and unchanging. 
• Yet it has morphed from a mess of poorly judged acquisitions and failed overseas experiments into Japan’s biggest retail export – and still manages to pull off 20% growth.
• Its latest target of ¥10 trillion in 10 years is far-fetched but its history of persistent determination suggests continued expansion is a certainty.

• It’s barely three weeks since the annual results in April, and now Shakey’s Pizza (PIZZA PM) / The Keepers Holdings (KEEPR PM) will declare their Q1 2023 results mid-May. 
• Both results are expected around the 14th/15th of May, with a confirmation of Shakey’s Pizza (PIZZA PM) holding its post-results call on the 17th of May. 
• We expect stellar Q1 results and good guidance for 2023 for both companies. 

• We believe revenue will grow by 5.6% YoY in 4Q23 and by 9% in FY2023 versus 2.7% in FY2022.
• We also believe operating margin will improve slightly to 8.9% in 4Q23 versus 8.2% in 4Q22.
• We believe the stock has an upside of 63% for March 2024.

• Much market sentiment continues to await more evidence that recovery in Macau can be sustained long term towards reaching baseline 2019 revenue levels.
• MGM China Holdings Ltd. market share tracked under double digits pre-covid but is now poised to rise to low to mid teens going forward.
• We see the shares as undervalued because its ramp ahead starts at a lower base than peers and is poised for significant sequential earnings beats ahead.

• Bikaji Foods (BIKAJI IN), an ethnic snacks company, raised approximately US$107m in its India IPO. The stock was listed on 16th Nov 2022, its six-month lockup will expire soon.
• Bikaji was the third largest ethnic snacks company in India and the second fastest growing company in the Indian organized snacks market in FY22, as per Frost & Sullivan (F&S).
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Disney is scheduled to release its Q2 2023 results later this week.
• A number of factors are pointing to a strong and a better than expected quarter, but long-term problems remain.
• The macroeconomic environment is also supportive for Disney’s Parks, Experiences and Products segment.

• TSE may be trying to dodge criticism that prime market, which includes many illiquid companies, has large gap with the concept of a “market that global investors can invest in.”
• JPX Prime 150 Index is expected to solve the problem of TOPIX buying up companies of low quality and not engaging with companies due to the large number of components.
• Neither index is expected to differ much in performance since they are both market capitalization-weighted indices, but the difference in component stocks compared to TOPIX will provide investment opportunities.

• Ferrari NV (RACE IM) has been a steady compounder of earnings growing operating profits at 14% CAGR and sales volumes at 6% CAGR over the last 20 years. 
• The company has expanded EBITDA margins from 25% in 2014 to 35% in 2022 and is expected to increase by another 300 bps in FY23 to 38%, as per guidance. 
• At 41x/35x FY23e/FY24e, we conceded it is a tad expensive, but we would look at investing in this company over the long term.

• Nissin Foods Holdings (2897 JP) to report FQ4 results on May 10th with ¥158.5bn revenue and ¥8.1bn operating profit expected according to revised Feb 2023 guidance.
• Consensus predicts Nissin Foods’ operating profit to be ¥6.6bn from a revenue of ¥167.8bn, which is lower than the company’s latest annual guidance.
• Meanwhile, a higher FQ4 operating profit of ¥10.5bn is expected based on our analysis, exceeding consensus by 59%.

• Last year saw the consolidation of several supermarket chains in Shikoku and Chugoku by Aeon, creating Japan’s largest supermarket group. 
• Now, Aeon has now announced that it will expand its existing stake in Inageya, rolling the company into USMH and creating another, even larger food operation and Japan’s biggest yet.
• Aeon is looking for dominance in Tokyo and may seek more acquisitions but rivals are unlikely to give it a free hand nor say no to acquisitions of their own.

• We expect CPNG to report C1Q23 top-line and non-GAAP net income 2.0% and 4.8% vs. consensus, respectively. 
• AliExpress became S. Korea’s most downloaded app after increasing spending, but product overlap with Coupang is limited, while other S. Korean competitors recorded declining MAU, in our understanding.
• South Korean economic indicators, including CPI and retail data, point towards a recovery. We maintain our BUY rating and US$19 TP.

• It was a successful quarter for Chipotle Mexican Grill, reporting an all-around beat.
• The company’s quarterly sales were $2.4 billion and it retained about 80% of digital sales and has recovered almost 80% of in-restaurant sales.
• We give Chipotle Mexican Grill a ‘Hold’ rating with a revised target price.

• Tesla had a mixed quarter and failed to meet the high revenue expectations of Wall Street.
• Although automotive operating margin and gross margin both fell sequentially, the company delivered an earnings beat.
• In terms of the Cybertruck, Tesla continues to construct Alpha models of the Cybertruck on its pilot line for testing.

• There is only one new listing as a potential inclusion to the HSCI in June. If added to the HSCI, it will also be added to Southbound Stock Connect.
• There are 18 potential inclusions and 19 potential deletions for the HSCI in September. There are a few close adds and there could be another 5 deletions on Prolonged Suspension.
• A lot of the potential deletions have large Southbound holdings. With all the stocks becoming sell-only, there could be unwinding of some positions over the next couple of months.

• With two weeks left to the cutoff, there could be 5 changes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in June.
• Apart from the adds/deletes, there will also be capping and funding flows that will lead to an estimated one-way turnover of 13.5% and a one-way trade of US$886m.
• There are 9 stocks with at least 5 days ADV to trade from passive trackers and another 12 stocks that have at least 1 day ADV to trade.

• Chinese authorities have begun to ban public opinion against non-state-owned companies.
• These actions were the opposite to what the authorities did in past years.
• We believe the authorities need non-state-owned companies to bail the unemployed young people out of the weak job market.

• Back on the 23 December, Skyworth Group (751 HK) announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  
• On the 28 March, terms were bumped to $5.00/share. Independent shareholders approved the whitewash waiver on the 5 May.
• The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the final proration to be higher. 

• While the listing criteria aren’t consistent with the initial concept of the prime market, “investment targets for global investors,” “transitional” companies that don’t meet those listing criteria are allowed listing.
• Delisting through TOB or MBO will lead to the metabolism of listed companies and maintain the quality of the TSE as an “investment target for global investors” market.
• It is not about bringing “transitional” companies into compliance with the listing criteria of the prime market, but about modifying the listing criteria to the original concept of the market.

• Japan Tobacco’s 1Q23 performance exceeded consensus expectations, with revenue and OP surpassing by 5.3% and 12.3%, respectively.
• Consensus expected no volume growth for Japan Tobacco in declining combustible tobacco market; targeted mid-single digit constant currency revenue growth via pricing.
• Higher cigarette prices are expected to contribute to Japan Tobacco (2914 JP)‘s OP growth, which we anticipate will exceed its historical peak levels in the next few years.

• Back on the 10th March, Thai Beverage (THBEV SP) launched a Delisting Offer for 79.66%-held Oishi Group (OISHI TB), at THB 59/share, a 26.9% premium to last close. 
• This two-step Offer required a shareholder vote followed by a tendering process. Yesterday (the 3rd May), Oishi shareholders approved the Delisting Offer. 
• The tendering period may kick off around this time next month, with an expected payment late August. 

• DXN Holdings (2080694D MK) is looking to raise around US$159m in its Malaysia IPO.
• DXN Holdings (DXN) is a global health-oriented and wellness direct selling company.
• In this note, we will undertake a peer comparison, discuss our earnings assumptions, and share our thoughts on valuation.

For our next Corporate Webinar, we are glad to welcome NFC Indonesia’s Group Head of Corporate Finance & Strategy, Stanley Tijandra.

In the upcoming webinar, Stanley will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 09 May 2023, 17:00 SGT.

About NFC Indonesia

PT NFC Indonesia Tbk (IDX: NFCX), a subsidiary of PT M Cash Integrasi Tbk (IDX: MCAS), is a digital customer experience company that offers a complete suite of services aimed at assisting the retail industry in improving customer engagement and competitiveness, in Indonesia’s growing economic biosphere, through its five main initiatives: Digital Product Aggregator, Digital Cloud Advertising, Content & Entertainment, Digital Wholesale, and Clean Energy.

• Luckin Coffee 1Q23 revenue beat is due to higher-than-expected store expansion, while SSSG is in-line with our estimate. 
• The normalized of RMB9.9 per cup campaign is expected to generate minor impact on Luckin Coffee’s profitability. 
• We maintain the stock as BUY and maintain TP at US$41.

• According to Chosun, KRX plans to list the single-stock futures of all constituents of KOSPI 200 and KOSDAQ 150 within 2-3 years.
• This information comes from a KRX official, who directly confirmed it. As Chosun is the most well-established news outlet in Korea, the credibility of this article is quite high.
• We should consider screening those with a high proportion of short-selling positions and devising a positioning strategy in conjunction with the new listing event of single stock futures in July.

• DXN Holdings (2080694D MK) is looking to raise around US$159m in its Malaysia IPO.
• DXN Holdings (DXN) is a global health-oriented and wellness direct selling company.
• In our previous note, we looked at the company’s past performance. In this note, we take a look at the company’s updated financials.

• Beenos Inc (3328 JP) is currently one of the cheapest stocks in the Japanese e-commerce sector with a consensus FY+2 EV/OP of 4.5x with an OP CAGR of around 130%.
• In addition, the relatively cheap-looking valuation multiple excludes the current valuation of Beenos’ incubation program investments.
• We think Beenos can sell its stake in GoTo in the short-term to conduct a big share buyback as the management thinks that Beenos is unfairly valued by the market.

• Mitra Adiperkasa (MAPI IJ) 1Q2023 numbers reflected a strong start to the New Year, with vibrant sales growth, improved profitability, and growth across all segments.
• The company maintained the momentum behind its omnichannel strategy with online sales making up 8.1% of total sales despite more offline activity as COVID restrictions were dropped.
• Mitra Adiperkasa continues to expand its footprint both in Indonesia and with selective brands in South-East Asia, most recently in the Philippines. Valuations are attractive versus historical levels.

• Minth’s stock price has been weak in the past year but its improving fundamentals started to reflect in the results in 2H22. 
• 2023 revenue growth will be supported by the overseas auto market recovery and fast-growing battery housing business. 
• Minth’s valuation is near historical low and is at a discount to its peers

• Oishi Group PCL (OISHI TB)’s shareholders overwhelmingly approved Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share. The approval was expected as ThaiBev was allowed to vote.
• The offer is attractive compared to historical share prices, multiples and the IFA’s fair value of THB53.48-56.42 per share. 
• The delisting now requires SET approval. At the last close and for an end of July completion, the gross and annualised spread is 2.2% and 9.4%, respectively.

• As for “liquidity,” one of the problems of TSE market restructuring, if the selection criteria for TOPIX components are raised, fewer companies will be forced to cling to prime market.
• Regarding “engagement” challenge, a solution is reducing the number of TOPIX components, since low fees and many portfolio companies of passive funds prevent investment managers from devoting resources to engagements.
• Regarding “sustainable growth” challenge, inflation would be a catalyst for learning from history, where an environment that forced all companies to change caused a change in the mindset of managers.