Consumer

• For this September reshuffle, fewer factors affected price impact, so outlier chances were low. Biggest price moves typically occur 30 days before the effective date, especially during LARGE↔MID transitions.
• Early positioning for this reshuffle paid off. Past trends suggest price action fades before the effective date, so consider exiting positions by tomorrow or early next week.
• Small→Mid migrants historically show weak price impacts, with no clear correlation observed in this September reshuffle either. I’m avoiding those plays targeting the effective date for now.

• Back on the 7 Dec 2023, Xingda International (1899 HK)  announced a partial Offer from a consortium comprising management at HK$1.88/share.
• The consortium, at the time, held 45%, with the objective to hold >50.01% at the close of the Offer. The final % was 50.42%. 
• The consortium was then free to take their stake up to 75%. However the shareholder structure has materially changed in 2024. Xingda is suspended (again) pursuant to the Takeovers Code.

• Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• Significant changes in substantial shareholders have occurred since the previous partial offer closed on 10 March 2023, which could be the catalyst for an offer. 
• Management is likely reloading a partial offer to exercise statutory control and bypass the 2% creeper rule. The partial offer price could be around HK$1.60-1.70 per share. 

• Sona Blw Precision Forgings Lt (SONACOMS IN) is looking to raise INR24bn (US$286m) from its qualified institutional placement (QIP).
• The capital raising is well flagged having gone through rounds of board approvals, and having been well covered by various media outlets as well.
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• The Born Korea is getting ready to complete its IPO in Korea in November. The total IPO offering is expected to range from 69 billion won to 84 billion won. 
• Based on the bankers’ valuation, the expected market cap of the company ranges from 357 billion won to 419 billion won. 
• The Born Korea was founded by Baek Jong-Won, the most famous celebrity chef in Korea. 

• Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
• Midea Group Co Ltd A (000333 CH)  has a diversified product portfolio,  well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
• Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

• Toyota Kirloskar, Toyota Motor‘s 89%-owned India JV, recorded a 65% rise in revenues and 240% jump in profits to around USD575 million in FY2024 following 48% increase in units sold.
• The company has continued to maintain its strong growth momentum in FY2025 YTD, with wholesale volumes up 36% YoY.
• Successful launch of rebadged Suzuki models, ramped-up production and customer-friendly initiatives have supported Toyota’s accelerated volume growth in India.

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.

• Samvardhana Motherson International Ltd
• West China Cement
• Yuexiu Property

• In the second quarter, Urban Outfitters reported a 6% increase in total sales, reaching $1.4 billion, propelled by strong performance in its retail and wholesale segments.
• Specifically, the Anthropologie and Free People brands exhibited high single-digit retail segment comps, which nicely offset the decline at Urban Outfitters.
• Additionally, the Nuuly segment achieved significant growth with a 55% rise in average active subscribers compared to the previous year.

• We are reiterating our Buy rating and $20 price target for Lands’ End and raising our FY24 and FY25 projections after the company registered another strong upside quarter in 2Q FY24 (July) and provided further compelling evidence the focus on innovation and newness to drive higher overall top and bottom line returns is fully on track and setting up for strong near and longer term upside.
• We believe there remain multiple key catalysts at Lands’ End, from: 1) shifts in customer base to a younger, more fashion driven buyer; 2) European top line and margin expansion 3) new online marketplaces, with Nordstrom just coming online; 4) material expansion of the licensing effort, with a new domestic license for wholesale apparel, outerwear and swimwear; and 5) market share gains in the B2B business.
• When combined with a disciplined management team focused on efficiencies and operations, we view the best as still ahead for LE and reiterate our Buy rating and $20 price target.

• Today, the Nikkei Index Committee decided to delete Nippon Paper (3863) for low liquidity, and DIC (4631) for sector over-representation, and added Nomura Research Institute (4307) and Ryohin Keikaku (7453).
• The only auto-delete was Nippon Paper. The DIC delete was “discretionary.” But they could have done a third. Why did they not do a third change? I do not know.
• The whole shebang should be ¥350-375bn a side. At current price, Fast Retailing is set for another capping (selling) event in March 2025. And there is one shoo-in then too.

• The Couche-Tard “friendly bid” raises more questions than it answers: Is it real? What does CT really want? Can it afford it? Will the Japanese government let it through?
• We remain sceptical about a bid – if it happens – succeeding. Either way, Seven & Eleven Japan looks to be the much better retailer.
• It has been selling 25-40% more than competitors in the world’s toughest CVS market and looks set to extract more value in Japan/overseas than anyone else could so why sell?

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
• In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
• In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

• Sony launches Soneium, a blockchain platform developed with Startale Labs, as a Layer 2 Ethereum solution to enhance transaction speed and scalability.
• Soneium aims to bridge Web2 and Web3, leveraging Sony’s vast intellectual property in entertainment and technology for broad consumer adoption.
• Backed by Sony’s resources, Soneium focuses on user-friendly blockchain technology, offering financial and technical support through its Soneium Spark incubation program.

• A group of minority investors started to go activist on Hojeon (111110 KS), demanding that the company increase its treasury share buybacks/cancellations, dividends, and cut CEO’s salary.
• This coalition of minority investors has threatened to sell their shares to a competitor (Hansae) if the company does not abide by their demands.
• Hojeon has attractive valuations and are trading at low multiples. It had P/E of 5x, EV/EBITDA of 3.4x, and P/B of 0.5x in 2023.

• The Sep24 Nikkei 225 Review Results are out, discussed in Sep24 Nikkei 225 Review Results:  A Slightly Baffling 2 IN, 2 OUT. 
• That lets us move to Mar25 Nikkei 225 Rebal predictions. For the moment, I see 2 IN and 2 OUT, again. 
• And at the moment, another Fast Retailing capping exercise looks likely, for roughly US$3bn a side to trade.

• The iShares A50 China (2823 HK) and CSOP China A50 (2822 HK) ETFs will rebalance their holdings at the close on 20 September.
• China National Nuclear Power (601985 CH) and Huaneng Lancang River Hydropow (600025) will replace China Tourism Group Duty Free (601888 CH) and Yihai Kerry Arawana (300999 CH) in the ETFs.
• Passive trackers are estimated to buy between 0.3-0.5 days of ADV in the adds and sell between 0.4-1.1 days of ADV in the deletes.

• Hyundai Motor India reported an 8% decline in monthly dispatch volumes ahead of India’s festive season, coinciding with a sharp increase in shipments by competitors in the SUV space.
• Mahindra & Mahindra (MM IN) , Toyota Kirloskar Motor ( Toyota Motor (7203 JP) JV), and Kia Corp (000270 KS) each posted high double-digit volume growth in August.
• Overall, India’s domestic Passenger Vehicle sales growth for the April-August period has slowed year-on-year after two years of strong post-COVID momentum.

• China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) share price on downtrend due to negative sentiment, increased competition, and Chinese being more frugal in their consumption  
• 2024 and 2025 consensus earnings declined by -2%/-17%, but CTG will deliver +16% YoY earnings growth in 2025. CTG remains a growths stock, a fact we think many investors forget!  
• We revise our target price to CNY71.3 pegged to 18.5x FY25 PE (1.5 standard deviation below mean). We think the share price decline is overdone and ignores its strong fundamentals.  

• Dollar General’s shares have plummeted after the company slashed its sales and profit forecasts for the full year, highlighting the financial struggles of its lower-income customers.
• The retailer, which primarily serves rural areas, now expects fiscal 2024 same-store sales growth of 1.0% to 1.6%, down from its previous forecast of 2% to 2.7%.
• Earnings per share are projected to be between $5.50 and $6.20, significantly lower than the prior estimate of $6.80 to $7.55.

• In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP) . The market dropped. But that was the opportunity.
• On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.” It’s up 21.5% since (the day after). Peers are down 15-20%. 
• The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There’s LOTS of cash left. 

• Simply Wall Street published an article on Aug 20, 2024, suggesting the fair value of Nextage was ¥1,772 or 16% below the previous day’s closing price.
• Yet, on the Simply Wall Street website’s stock page for Nextage, updated on August 26, they calculate the fair value at ¥5,726, or 189% above the close on Aug 19.
• Both cannot be right. Here’s an interesting window into how markets mis-price stocks.

• Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years 
• Chart analysis is to compliment our recent report Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play published yesterday
• Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. 

• BrainBees Solutions (FIRSTCRY IN) reported marginal decline in 1QFY2025 revenues and GMV (India operations) versus previous quarter, though both were up 17% YoY; fell short of market expectations.
• Key operating metrics for India business too were soft with Average Order Value slipping both on a QoQ and YoY basis, impacting GMV growth and segment margins.
• With 0% promoter holding, nearly 30%-50% shares could possibly start trading post lock-in expiry and this could test the stock’s resilience. Softbank Group(9984 JP), the biggest stake holder, owns 19.99%.

• Midea Group Co Ltd A (000333 CH) aims to raise up to US$3bn in its H-share listing, as per media reports.
• 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 company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premiums.

• Estimated take rate up vs year ago and vs Q124, and EBITA margin turned +ive
• However, revenue growth in core China market slowed considerably in Q224
• Cash Flow and Liquidity both appear ample, little pressure to raise new funds

• Monthly deliveries recovered to the 2023 level in the three months – June, July, and August 2024.
• Li Auto’s deliveries growth outperformed the China NEV market size in July.
• We set the price target at US$26.90, which is 38% above the market price.

• We are slowly building out a high-conviction coverage of ideas for the mid and small-caps in the Philippines.
• We set criteria for high ROCE, reasonable growth (10-15% YoY), strong balance sheets, and reasonable capital allocation (dividend yields), all ingredients for being multi-baggers.
• We like Ginebra San Miguel (GSMI PM), The Keepers Holdings (KEEPR PM), and DigiPlus Interactive (PLUS PM). We are building our library and will cover more names in the future. 

• The latest financial results from Las Vegas Sands reflect a company navigating a complex landscape with both successes and ongoing challenges.
• The corporation, which is heavily invested in both Macao and Singapore, is experiencing different dynamics in these markets.
• These factors present a balanced view of the company’s performance and ongoing strategies.

• Deckers Brands delivered a commendable performance in the first quarter of fiscal 2025, with a commendable revenue growth of 22% reaching $825 million.
• This surge in revenue is significantly supported by the enhanced gross margin, which impressively improved to 56.9%, accompanied by a robust 87% increase in diluted earnings per share to $4.52, compared to the same period last year.
• 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.

• The last two reviews have been announced on the second business day of the month of the review. The one before that on the third business day.
• The review could be announced today or tomorrow. Wednesday would seem to be “late.”
• There are still questions about implementation – thus “care” in previous insights. Here I explore the possibilities/probabilities/issues around the edges. And a Dark Horse which may be lighter than thought.

• Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
• 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 company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.   
• Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies. 
• The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified. 

• Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.  
• The new framework could lead to mechanical entry and exit of stocks in the F&O segment with minimal intervention from SEBI.
• The introduction of some large cap stocks in the F&O segment could lead to their inclusion in the NIFTY Index, SENSEX Index and other local indices.

• Eid Parry India (EID IN) A Murugappa Group Company setting stage for transformation from cyclical sugar business to more stable consumer and high margin business. 
• The company has diversified into the non-sweetener segment and is emphasizing an asset-light model to drive further expansion.
• Eid Parry India (EID IN) is also the holding company of Coromandel International (CRIN IN), which holds substantial intrinsic value.

• The market has lingering concern about substantial slowdown in PDD’s growth and has been pricing in the outlook for most part of the year.
• 2Q results did signal imminent growth deceleration, and management’s blunt yet honest comments about the pressure on margin further stoke fears.
• We regard 1/3 market cap wipe-out after the results as over-reaction. While risks have been reflected to large extent, we do not expect a meaningful re-rating until 2H25.

• First Pacific Co (142 HK) is a Southeast Asian conglomerate that has been handicapped by its listing in the Hong Kong market over the last several years.
• As Southeast Asian markets (Indonesia and Philippines) begin to re-rate on the back of a more accommodating Fed policy, First Pacific is beginning to participate in the uptrend.
• Metro Pacific Investments Corp (MPIC), the second largest piece of the company’s NAV has been active in acquiring more infrastructure assets since being privatized last year.

• Recent media reports on declining passenger vehicle (PV) sales in India for August are based on wholesale data and reflect expected weakness due to high dealer inventory levels.
• Hyundai Motor India (1342Z IN)‘s  dispatches dropped by 8% in August, yet the company remains strong in the SUV segment, with the Creta, launched in January 2024, driving growth.
• Outlook for the passenger vehicle segment is cautiously optimistic, supported by monsoon impact, festive season, new product launches, but challenges like heavy rainfall, high inventory levels, and economic uncertainties persist.

• 1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
• Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
• ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.  

• Despite slower top-line growth, Trip.com posted firmer margins in Q224
• Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
• Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS

• On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP) 
• There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
• The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024. 

• The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
• There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
• The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

• Recap of 1H 24 on two of the largest and most influential EV makers; Tesla (TSLA US) and BYD (1211 HK) .
• BYD performance is superior to Tesla yet it trades at a discount to Tesla, notably 0.2x vs 3x PEG.
• BYD faces tailwinds in North America and the EU, but those are not its main destinations.

• In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in July and August 2024.
• On average, the share buyback announcements by 46 companies represented 2% of outstanding shares.
• Major companies that have announced share buybacks in Korea in the past two months include KT&G, Mirae Asset Securities, and POSCO Holdings. 

• SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
• This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up. 
• SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.

• 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 Kioxia Holdings (6600 JP), Bajaj Housing Finance (BHF IN) and Niva Bupa Health along with Premier Energies.
• Placement were flowing through again this week, mainly across India and Japan.

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.    
• CR Beverage has a product portfolio of 13 brands, including C’estbon, Zhi Ben Qing Run, Mi Shui Series, Holiday Series and Zuo Wei Cha Shi, comprising 56 SKUs.
• The bull case rests on a large TAM, a core business in good health, beverages providing the second growth leg, profitability, and strong cash conversion.

• Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
• Meituan (3690 HK)  reported robust revenue and profit growth amidst  broader struggles in the F&B industry  raises questions on industry dynamics and momentum sustainability.
• Health And Happiness (1112 HK)  faced another quarter of declining revenue and profits, but reported a significant rise in cash generated from operations thanks to improved inventory turnover.

• The tension between the government and Alibaba was eased, as the authorities closed the rectification course on Alibaba.
• Huawei’s total revenue increased by 34% YoY in 1H24, as the smartphone sales surged.
• Kuaishou will provide a subsidy of US$56 million to e-commerce broadcasters.

• I tally 42 – 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: the Taishin Financial Holding (2887 TT) / Shin Kong Financial Holding (2888 TT) merger; and Silverlake Axis (SILV SP)‘s hybrid Offer. 
• Key updates took place on Huafa Property Services (982 HK), Shanghai Henlius (2696 HK),CPMC (906 HK), Seven & I (3382 JP), Shinko Electric (6967 JP), and Arvida (ARV NZ).

• Ace Hardware Indonesia has been rebranded to Aspirasi Hidup Indonesia after the franchise agreement with ACE US was not renewed. Given ACES’s long-standing independence, we see this as an opportunity. 
• The new names for the company will not be the brand names for the stores and Ace Hardware products are a tiny portion of the Indonesian company’s SKUs anyway.
• Concerns over the separation look overblown with ACES seeing a strong YTD performance above guidance with valuations looking attractive after recent share price weakness, with new store rollout ongoing.

• Draconian ‘de minimis’ reform proposal in the US has bipartisan support
• In Q224 results, rampant signs of a Chinese X-border retail slowdown
• Other news: plastics laws, new Amazon threat, SHEIN sustainability initiatives

• New TOPIX still has a large number of stocks and its components aren’t sufficiently liquid. TSE seems to have considered the companies that are under pressure to sell their shares.
• The challenge for companies excluded from TOPIX components should achieve sustainable growth by continuous review of their business portfolios to achieve growth that they could not achieve in the past.
• The company’s performance must be in line with the plan disclosed by the company in response to the TSE’s request. These companies should consider whether they should remain listed.

• Shivam Autotech (SVAT IN) or (SATL) serves OEMs by manufacturing a range of auto components and accessories including transmission gears, transmission shafts, etc.  
• The company’s business performance over the last few years has looked grim with stagnant revenues, declining margins and ballooning losses. Balance sheet has only gotten more fragile.
• Auditor’s comments on material weakness on internal controls, increasing receivables, balance sheet ALM mismatch are few red herrings to look out for.

• Revenue increased by 9.6% YoY to JPY1.5bn, with operating profit up 7.6% YoY to JPY300mn.
• EC business revenue rose 8.6% YoY to JPY866mn, while segment profit decreased 2.7% YoY to JPY299mn.
• Financial business revenue grew 11.0% YoY to JPY658mn, with segment profit down 44.7% YoY to JPY183mn.

• LI Auto (LI) reported C2Q24 top line, non-GAAP operating profit and GAAP net income 5.0%, (5.2%) and (20%) vs. our estimates, and in-line, 53% and 6.8% vs. consensus.
• We believe the market has oversold the company.But in our view,the key question is LI’s next product entry under the backdrop of Xiaomi consolidating its position in the EV sector. 
• We believe LI should continue to explore its “family car” brand niche in entering the sedan market. If so, volume and margin can co-exist.

• 2Q-2024 results is within ours and consensus expectations. Competition is tough, but LiAuto managed to remain profitable   
• Management is boosting R&D expenditure and boost spending on  expanding number of charging stations, all for the benefit of its customers. 
• Our fair value of USD25 implies 16x FY25 PE – average for auto growth stock. A bargain with 3-year CAGR of 38%, net cash, and churns high free cash flow.

• It is far from common for a stock to be up 4% after missing the revenue guide for the quarter and slashing the full-year revenue guide for the year.
• That’s exactly what happened with Lululemon today which should tell you the kind of sentiment going into the earnings!
• The crux of the bear thesis on Lulu usually circles around their US business. 

• Meituan reported C2Q24 revenue 1.4%/2.3% higher than our estimate/consensus and adjusted net income 17%/28% higher than our estimate/consensus, thanks to lower rider cost and less subsidies to users;
• Although poor economy has plunged Meituan’s merchant base to the loss-making zone, we expect Meituan’s take rate to persist as take-out order represents incremental revenue to offset merchants’ fixed cost.
• We reiterate BUY rating and raise TP to HK$165/share. Catalysts are reduced competition, expansion of Pinhaofan, and overseas expansion.

• Smartworks Coworking Spaces Ltd (1742134D IN) is looking to raise about US$120m in its upcoming India IPO. The deal will be run by Kotak, JM Fin, IIFL and Bob Caps.
• Smartworks Coworking Spaces Limited (SCSL) is an office experience and managed campus platform. 
• It focuses on leasing entire/ large, bare shell properties in prime locations from landlords and transforms them into fully serviced, aesthetically pleasing and tech-enabled campuses with daily-life and aspirational amenities.

• Total revenue increased by 26% in 2Q24, as sales volume grew strongly after March.
• We believe the operating margin will be stable due to the ability of battery production.
• We also believe the tariff penalty from Europe is not a concern in the long run, as BYD’s products have expanded to 77 countries.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 indices in the December 2024 index rebal event.
• We see four expected ADDs/DELs for BSE 100 and six expected ADDs/DELs for BSE 200.
• The BSE 100 handling rules for names without futures and options (F&O) sometimes punish companies that have enjoyed good share price rallies and Zomato could fall into such a trap.

• Since there was no difference in IR Disclosures between companies that increased valuations over past year and those that didn’t, it’s clear that improvement IR Disclosures alone won’t raise valuations.
• Since many companies with large market capitalizations have high foreign ownership, overseas investor engagement has had a positive impact on their high return on capital.
• TSE’s support for companies with small market capitalizations is a type of engagement that encourages companies whose engagement doesn’t reach them to think about their management strategies.

Health and Happiness International’s (H&H) H1/24 results were in line with expectations. The company reported weaker earnings and margins from its main Baby Nutrition & Care (BNC) business in Mainland China, amid structural industry challenges stemming from low birth rates in the country. That said, the weakness in BNC was partly offset by growth in the Adult Nutrition & Care (ANC) and Pet Nutrition & Care (PNC) segments. We note that ANC is now H&H’s largest revenue contributor, eclipsing BNC’s numbers. Going forward, we expect the company to continue expanding the ANC and PNC segments in Mainland China and beyond, while seeking to contain the revenue decline at BNC and maintain stable margins for the segment.

H&H has reduced inventory days and generated a small working-capital inflow, which led to positive FCF generation and net debt reduction. The company has adequate liquidity, following its successful refinancing activities in July.

• We are reiterating our Buy rating, $20 price target and projections with Lands’ End announcing 2QFY24 (July) results before the open on Thursday.
• We believe Lands’ End management, under CEO Andrew McLean has continued to refocus the company on driving higher returns via lower discounting, fashion and product newness and innovation, reduced overall inventories and licensing non-core categories and relationships.
• When combined with an increased emphasis on core winning categories such as swimwear and women’s bottoms in 2Q and shifting to outerwear in 2H, we believe Lands’ End is well positioned to drive near and longer term upside, and register returns we believe investors will find compelling.

• I first wrote my Deep Dive on Dollar General back in August 2023.
• While I wasn’t initially excited about owning a piece of the company despite the stock being down 40% from peak then, I changed my mind when the stock went down another ~25% following 2Q’23 earnings.
• After today’s dismal earnings, the stock went down almost another 30% since 2Q’23 earnings. 

• We are reiterating our Buy rating and $41 price target for BBW and materially raising our projections after the company reported record 2Q results which beat Street expectations on both the top and bottom line, as Build-A-Bear stores registered solid results, while the high margin Commercial and International Franchising segment began their expected material ramp a little earlier (and with greater impact) than we projected.
• Further, management continued to aggressively return capital to shareholders, purchasing 5% of BBW shares outstanding in FY24.
• With an early Halloween driving strong initial 3Q results, we believe management reiterating FY24 guidance for top line growth in low to mid single digits and low singled digit pre-tax income could prove conservative, and we reiterate our Buy rating and $41 price target for BBW.

• PG&E Corporation shared the results of its performance for the second quarter of 2024, demonstrating steady progress across various fronts.
• The company, known for supplying electricity and natural gas throughout California, reported core earnings per share of $0.31, culminating in a first-half total of $0.69.
• This performance aligns with the reaffirmed 2024 earnings guidance of $1.33 to $1.37 per share, signifying an increase of at least 10% from the previous year.

• We are lowering our projections and price target for GUESS?, but reiterating our Buy rating, after the company reported inline 2Q results, but lowered FY25 top and bottom line guidance, as the company continues to invest in marketing and infrastructure for their recently completed rag and bone acquisition and the launch of Guess Jeans, while the domestic store operations remain under pressure.
• While we fully understand and agree with the potential of the material opportunities for rag and bone and Guess Jeans to leverage the company’s global and licensing infrastructure in the longer term, we believe investor frustration in the near term will be a key theme.
• That said, with the GES dividend yield of approximately 6% and with our belief the upside potential of both rag and bone and Guess Jeans will become increasingly apparent relatively quickly, we are maintaining our Buy rating, even after lowering our FY25 projections below management guidance.

• Hyundai’s TSR target is 35%+ (dividends plus buybacks), up 10 percentage points from previous years. They’ve also set a new annual dividend of ₩10,000, paid evenly quarterly.
• Hyundai’s Value-Up targets may not fully meet market expectations, but the key is the timing. By aligning early with government policies, Hyundai has reduced risks and secured investment flow.
• Hyundai plans a pref-skewed buyback, likely continuing this approach as retiring preferred shares first may boost ROE.

• 7&I Holdings is reviewing a confidential acquisition proposal from $ATD, highlighting significant potential for value creation through strategic refocusing on its core convenience store business
• ValueAct Capital previously criticized 7&I as an “unfocused holding company,” urging a focus on core assets, estimating a potential value of ¥4,200 per share.
• Our valuation suggests 7&I could reach ¥3,700 per share, driven by the repricing of its overseas CVS business; $ATD will need a strong offer.

• Despite a negative share price reaction following its 1Q2025 earnings report, Alibaba Group Holding (9988 HK) seems to have entered an earnings upgrade cycle due to improved profitability expectations.
• Despite recent share price pressure, due to negative industry readthroughs from peers, Alibaba Group’s near-term momentum indicators are displaying bullish signals.
• Alibaba Group trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.

• HM Sampoerna (HMSP IJ) has been announced as a deletion from the Large cap of the Global Index at the September 2024 review.
• The reason for the security’s removal is due to a change of listing from an eligible to an ineligible exchange segment of the Indonesian Stock Exchange (IDX).
• Forecasted passive fund supply is ~$24.6m and ~11.9 ADV at the close of 20 September 2024. The significant ADV is because of the security’s low free float.

• PDD Holdings (PDD US) shares fell 28% on Monday after a 3% revenue miss, with shares dropping an additional 4% yesterday.
• The results themselves weren’t bad enough to justify such a sharp price reaction.
• However, management’s comments on slower growth and a potential drop in profits triggered a significant sell-off.

• On 28 August, Hyundai Motor announced its Corporate Value Up policies, including a minimum dividend per share this year targeting 10,000 won per share for common shares. 
• Hyundai Motor plans to implement a shareholder return policy based on a total shareholder return (TSR) of 35% or more from 2025 to 2027.
• Hyundai Motor’s Corporate Value Up plan of providing TSR of 35% or more from 2025 to 2027 is certainly better than what it provided in the past three years (26%). 

• July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
• Domestic air travel demand also showed modest Y/Y improvement in July 
• We still like Trip.com on improving profitability, BUY with US$55 target

• PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus. 
• We believe PDD’s upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas. 
• Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China’s e-commerce sector.

• TCOM reported C2Q24 revenue in-line with our est./cons., non-GAAP operating income also in-line with our est./cons., and non-GAAP net income beat our est./cons. by 18%/40%,mainly due to rising equity income
• Robust int’l growth offset weakness in domestic. With services possibly included in the government consume subsidy in C2H24/1H25 and Rmb’s appreciation.
• We feel it is time to buy TCOM again, TP to US$50 from US$42.

• The stock has declined for three years and a half, from HK$460 to HK$100.
• Revenue grew by 21% YoY and the operating margin improved significantly in 2Q24.
• We conclude the stock has an upside of 131% and a price target of HK$237. Buy.

• Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP) 
• The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
• The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.

• Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders. 
• In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
• The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

• PDD Holdings (PDD US) stock price nosedived 28.5% yesterday wiping away more than USD55 billion in market cap following Management’s call with investors.
• During the call, the management guided towards weakening profits in the next quarters and stated that high revenue growth was unsustainable in the long term.
• Investors however seemed to be spooked not by negative guidance on profitability/growth but by comments on impact of non-business factors and need to adapt to changing times etc.

• On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.  
• The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate. 
• 3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.  

• In 2Q24, total revenue increased by 14% YoY and hotel booking revenue increased by 20%.
• We believe the company has been riding on the recovery of the travel market and will see historical high quarter in 3Q24.
• We also believe the stock still has an upside of 18% after one day’s surge.

• Last night, the price snapshot was taken for the JSE September rebalance. The rebalance is scheduled to take place during the closing auction on Friday the 20th of September.
• PPH is expected to enter the Top 40 with AMS falling out. No changes are expected for the FINI, FINDI, INDI or RESI.
• There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).

• 1H24, Nongfu’s revenue growth rate fell to 8% YoY, because Wahaha launched a propaganda against Nongfu.
• We believe the revenue growth will rise in 2H24 and 2025, as it seems that the public do not like the way Wahaha use.
• We set an upside of 26% and a price target at HK$38 for the end of 2025.

• ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.
• Stella International (1836 HK) will increase its dividends and buybacks after positive earnings surprise. AIA Group Ltd (1299 HK) saw a surge in new policies from mainlanders in HK.
• Lufax Holding (6623 HK) reported an earnings miss with declining loan volume. Yancoal Australia (3668 HK) reported a decline of 57% in earnings which was below analysts’ estimates.

• LG Electronics has already picked the bankers for the Indian IPO. JP Morgan and Morgan Stanley are on board as the lead underwriters, along with two unnamed local Indian banks.
• LGEIL is aiming to submit the Draft Red Herring Prospectus (DRHP) to India’s SEBI by the fourth quarter of this year.
• LG Electronics plans to raise about USD 700 million by selling around 25% of its stake in a secondary offering.

• Overseas investors tend to invest in companies with larger market capitalization and higher profitability, and companies with higher foreign shareholdings have significantly better values in corporate governance.
• Hitachi has been one of the most successful companies in this area, probably due to its intermittent reforms in profitability and corporate governance through engagement with overseas investors.
• Few companies, like Hitachi, achieved sustainable growth by continuous business portfolio review. This has led to high stock price volatility for many companies that cannot enter the sustainable growth phase.