Consumer

• Nitori dominates in home decor and furniture but now wants to become a top 10 fashion retailer through its N+ chain targeting older women. 
• It will raise the rate of new stores to 30 a year and then to up to 100 a year as it reaches scale. 
• Will it be the Uniqlo for the middle-aged? If so it could own a chunk of a segment worth an estimated ¥2.5 trillion.

The Europe HY Trade Book for December 2022 includes high-conviction trade ideas drawn from our European HY coverage universe, along with relative-value scatter plots and tables by industry.

• “VTuber” (Virtual Youtuber) animated influencer company Anycolor (5032 JP) was listed on 8 June 2022 at ¥1530. The stock popped 214% on Day1.It is up another 60% since then.
• Today Anycolor reported Q2 earnings (result, presentation) and revised its full-year forecast to 30 April. Revenues will be +7-18% vs forecast, OP +18-39%, NP +15-39%. Price is 43x forecast EPS.
• The company also announced it is preparing a Section Transfer application, but gave little more info. So we dig into what THAT means.

• Back on the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
• Pre-Conditions concern three sales and purchase agreements, all of which Yashili shareholders voted through on the 16 August.
• From a regulatory standpoint, various conditions attached to Dumex China remain outstanding. But the wording in the most recent monthly update suggests the process is getting to the pointy end.

• Premier Anti-Aging (4934 JP) shares rose 6.1% today following a massive earnings miss and a substantial downgrade to FY23 guidance.
• This is perhaps due to low liquidity and depressed prices as the share price dropped more than 85% since July last year.
• We think there’s more downside to the stock, especially with DUO about to hit the bottom of the barrel and CANADEL and Clayence struggling to maintain growth momentum.

• We think Sa Sa International Hldgs (178 HK)‘s risk-return payoff still look favourable even after the recent rally, which rides on the expectations of HK-mainland China border opening.  
• Assuming net profit returns to 70% of pre-pandemic level in FY25, and applying a peak PER of 25x over 2011-2018, its share price still has 63% upside.
• Release of pent-up demand, stabilisation of gross margin trend, improved cost dynamics and manageable financial position are all positive factors for Sa Sa. 

• Results for Q2 were better than we expected as B2B sales growth remained robust whilst cost savings on the consumer side boosted margins
• A rather robust decline in revenue for Lohaco is the only negative that stands out but this was partially anticipated whilst the corresponding cost savings are a boon
• An 11% increase in operating profit for Q2 offsets weakness from the previous report and puts the company on track to meet guidance for full-year growth

• Lotte Shopping is a deep value stock poised for a turnaround. 
• Lotte Shopping has clear turnaround catalysts, cheap valuations, and a solid technical setup. 
• Perhaps the most important catalysts for Lotte Shopping include getting rid of the most restrictions/social distancing measures related to COVID-19 which have been in place in the past three years.

• MGM’s two Macau properties were moving toward increased market share pre-pandemic and should resume as market recovers in 2023. Stock movement supports this thesis.
• Company’s parent company’s strong balance sheet assures liquidity through to the post pandemic recovery cycle expected to begin by 1Q23.
• Stock has nearly tripled in last several weeks buoyed by renewed concession and slowly improving travel ban easing.

• Since mid-November, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening (10 have widened, 9 tightened).
• Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Ericsson, Handelsbanken, SSAB Svenska Stal.
• Trade recommendations long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

• Digital Entertainment Asset (DEA), operator of the PlayMining NFT gaming platform, announced that it had raised a US$10 million investment from Los Angeles-based LDA Capital
• DEA manages intellectual property (IP) monetisation for content creators and operates the PlayMining platform
• The funding was meant to further accelerate its business and market expansion and to help optimise the development of PlayMining.

• Filtering for governance and management comfort, we believe these names are best positioned and deserve attention to participate in Bangladesh’s transition.
• Olympic Industries (OLYMPI BD) is a domestic consumption story currently getting impacted by a margin compression.
• Square Textiles (SQTT BD) , Bashundhara Paper Mills (BPML BD) , the first is a pure export play, while the later is a play on domestic markets as well as exports.

• Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied. 
• The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
• The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

• The SPX, $IWM, $QQQ continue to have trouble breaking above their 200-day MAs and YTD downtrends, while the DJIA has been unable to sustain a breakout above 34,280.
• With that said, all four of these indexes are consolidating within tight ranges just below the aforementioned resistance levels, building energy for the eventual breakdown or breakout.
• We still recommend shifting exposure to defensives (Staples,Utilities,Health Care) and/or taking profits following this rally, but we cannot rule out potential for major upside breakouts. We discuss specific levels below.

• DPC Dash (1405 HK) is the exclusive master franchisee of Domino’s Pizza in mainland China, Hong Kong and Macau with around 546 stores as of 9M2022.
• With Domino’s trailing Pizza Hut in the Chinese market, we think DPC Dash doesn’t deserve to trade on par with other leading Domino’s Master Franchisees around the world.
• Therefore, we see an opportunity to make money on the short side, once the IPO is completed.

• Weilong Delicious Global (9985 HK) has priced its IPO at HK$10.56 per share, slightly above the bottom of the IPO price range of HK$10.4-11.4 per share.
• The company’s HK offering was oversubscribed by 10.53x while the international offering was oversubscribed by 2.6x.
• Even at the above price, Weilong’s IPO is still at a significant premium to domestic as well as international peers.

• This is our first report on Wynn Resorts, a well-known operator of casinos and resorts across the globe.
• The company observed strength throughout the casino, with record gross gaming revenue and record hotel revenue, driven by strength in both ADR and occupancy on the nongaming side.
• In addition, Wynn is progressing with the planning for Wynn Marjan, their integrated resort in the United Arab Emirates.

• Wynn Resorts is a renowned operator of casinos and resorts across the world.
• Wynn’s management observed strength throughout the casino, with record gross gaming revenue and record hotel revenue, driven by strength in both ADR and occupancy on the nongaming side.
• In addition, Wynn is progressing with the planning for Wynn Marjan, their integrated resort in the United Arab Emirates.

• On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
• There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK. 
• Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

• Woolworths Ltd (WOW AU) plans to raise around US$438m via selling 5.5% of Endeavour Group (EDV AU).
• Endeavour Group was demerged from Woolworths in Jun 2021 and it runs the drinks and hospitality business of Woolworths.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Sula Vineyards (1332009D IN) has currently come up with its IPO. The ~INR 9.6 bn IPO comprises offer for sale and has a price band of INR 340-357 per share.
• The company is a market leader with a market share crossing 50% in a relatively nascent INR 13.45 bn domestic 100% grape wine market.
• Key forensic takeaways that one should consider is high litigation liabilities, emphasis on related party transactions, irrational dividends and absurd trend of line items.

• As the year draws to a close, we took time to assess the effectiveness of our high-conviction calls made during the past two years.
• With further dividend hikes looking increasingly possible, our 2022 high-conviction call, Japan Tobacco (2914 JP) has more room to run this year.
• However, it’s probably the right time to take profits from our 2021 high-conviction trade, Seven & I Holdings (3382 JP) as the US gas-stations profitability maxed-out in the last quarter.

• 4Q22 retail sales was negatively affected by the covid restrictions
• Sales growth is expected to recover in 1Q23 with China’s nationwide loosening policy.
• Long term growth is intact with continued upgrades of brands, products and channels

• Weilong Delicious Global (WDG), a spicy snack food company in China, raised around US$130m in its Hong Kong IPO.
• According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
• We have covered various aspects of the deal in our previous notes. In this note we will talk about the demand and trading dynamics.

• Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
• The changes could lead to an increase in the index weighting for Li Auto (2015 HK) and the inclusion of XPeng (9868 HK) at the March rebalance.
• The improved rankings for the Secondary and Dual Primary listings will lead to other changes to the index in March.

• Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
• The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
• There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

• Sula Vineyards is looking to raise around US$117m in its upcoming India IPO.
• Sula Vineyards (SV) distributes wines under a bouquet of brands. In addition to its flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia”. 
• We have looked at various aspects of the deal in our previous notes. In this note, we will talk about recent updates and valuations.

• This week, digital car-sharing platform Getaround made the headlines as the latest De-SPAC casualty to crash and burn on its stock market debut.
• After initially announcing plans to go public through a merger with interPrivate II Acquisition Corp in a deal valuing the combined company at $1.2 billion in May 2022, the company saw a decline of 65% on its debut.
• Essentially, at its current valuation, the market thinks that Getaround is worth a little more than the cash generated from its SPAC deal and less than half of the total cash it has raised to date.

• This is our first report on AutoZone, one of the largest distributors of automotive replacement parts and accessories in the U.S.
• The company had a strong fourth quarter, and managed an all-around beat.
• However, its domestic, commercial sales made up 30% of its domestic auto parts sales.

• Starbucks have launched a Web3 loyalty program called Odyssey.
• Members can engage in ‘journeys’, a series of activities, such as playing interactive games or taking on fun challenges to deepen their knowledge of coffee and Starbucks.
• They will be rewarded with a digital collectable ‘journey stamp’ — and yep, you guessed it — they’re NFTs.

• AutoZone is one of the largest players in the distribution of automotive replacement parts and accessories in the U.S.
• The company has been delivering a decent set of results in recent times after the impact of the pandemic has gone down.
• However, its domestic, commercial sales make up 30% of its domestic auto parts sales.

• Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
• Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
• There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

• The ESOP’s 3.5% stake will be released on January 27. Considering the extremely tight flow situation, this is by no means small. 3.48% is 20 times the recent ADTV.
• NPS will likely move toward a minimum stake of 6% again for LG Energy, irrespective of LG Energy’s current valuation, despite its recent selling.
• We should consider the possibility that NPS will contrarily utilize this ESOP lockup release, and we should also design a contrarian position for this lockup release.

• In last month’s insight, we noted that Melco was poised for an upside as it was among the most seriously undervalued stock in the sector. 
• Despite continuing covid travel ban related losses in 3Q22 earnings release, we saw an upside coming in near term catalysts.
• Improving performance by 1Q23 will turn sentiment even stronger as the bull case materializes due to positives now poised in place.

• Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~12% discount to NAV, just outside its narrowest post-Covid.
• A key catalyst for the recent narrowing was JCNC’s inclusion in the SIMSCI Index at the end of last month.
• JCNC is expensive here – relative to historical values –  and from an implied stub perspective.

• Despite a softening global demand backdrop, Yue Yuen Industrial (551 HK), a global leader in the manufacture of athletic/outdoor and casual footwear, recently recorded its best 9M results since 2017.
• Yue Yuen’s shares have only just recovered from a 20-year low.
• From both a historical perspective and relative to peers, Yue Yuen is undemanding here. 

• Yue Yuen is essentially a large traditional manufacturing company, which once benefitted from China’s cheap labor and has brilliant history. But challenges seem inevitable as labor costs gradually increase.
• Despite 22Q1-Q3 solid performance, in the environment of high inventory of brand customers and downward pressure on global economy, the order visibility of Yue Yuen in 22Q4/23Q1 could be low.
• Either domestic demand or external demand, the overall situation may not be optimistic. Yue Yuen’s valuation is basically lower than its peers. However, we still recommend investors to remain vigilant.

• Dish TV India (DITV IN) has been under the limelight for quite a while. ever since the legal tussle with shareholders.
• The last six months have seen several events happening at the corporate governance level; the trials of churn in board and the required shareholders approvals has troubled the company.
• Even though there have been monumental changes in the board such as resignation of Mr.Goel, the battle with the shareholders is still far from the finale.

• While it’s natural for a rational investor to disagree with a company that cannot generate a return commensurate with the risk, the existence of cross-shareholdings in Japanese companies complicates matters.
• The benefit of listing is raising capital on favorable terms by trading shares at a value greater than shareholders’ equity, but there are not many Japanese companies trading at premium.
• Going private is one option for companies that are unable to find growth investment opportunities and accumulate cash on their balance sheets. In this regard, Japanese equities are of interest.

• I-Tail, an OEM in the wet pet food category, raised around US$600m in its Thailand IPO. It is a subsidiary of Thai Union Group (TU TB).
• As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
• In our previous notes, we have looked at the company’s past performance, undertaken a peer comparison and spoken about valuation. In this note, we will talk about the trading dynamics

• Food & Life (3563 JP), best known for its affordable conveyor belt Sushi restaurant chain Sushiro, is looking to break out after dropping more than 60% in the last year.
• This breakout coincides with Sushiro’s overseas growth as the segment revenue and OP grew 27% and 108% QoQ respectively in the previous quarter.
• Given its tendency hit the headlines, mostly for the wrong reasons, risks rewards aren’t that great. Multiples have downside potential with Sushiro’s profitability falling towards peers.

• I-Tail (ITC TB) priced its IPO at THB32 per share, the top-end of the price range, to raise gross proceeds of THB21,120m (US$608m). The shares will start trading tomorrow.
• We previously discussed the IPO  I-Tail Corporation IPO: The Bull Case, I-Tail Corporation IPO: The Bear Case, I-Tail Corporation IPO: A Strong 3Q Results Update, I-Tail Corporation IPO: Valuation Insights. 
• Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

• Gross margin is under pressure throughout 2022 but will recover in 2023
• Brands have been focusing on destocking and the inventory levels trend down
• Capacity is expected to grow by 10% to low teens y/y in 2023

• Parent Wynn Resorts Ltd’s. REIT deal for its Boston property,  proceeds of US$1.7b rings its balance sheet cash to US$4.4b.
• 3Q22 results earnings miss entirely due to China zero covid policy that could begin to ease earlier than anticipated by the market.
• At a P/E (ttm) of 8.44 the stock is yet to reflect a more positive tone  of its strengthened balance sheet, 6.1% stake in the parent bought by an activist.

• VinFast (1905332D VN), a Vietnamese EV (electric vehicle) manufacturer and a majority-owned affiliate of Vingroup Jsc (VIC VN), has filed for a US$1.0 billion IPO to list on Nasdaq.
• VinFast is in the middle of a transition from an ICE to a pure-play EV manufacturer. VF 8, its second EV SUV, will be delivered in the US in 4Q22. 
• The key elements of the bull case rest on a credible EV roadmap, speed-to-market, solid consumer interest and models with attractive range-to-price ratios and total cost of ownership.

• VinFast (1905332D VN)  is looking to raise up to US$1bn in its upcoming US IPO.
• VinFast is a full-scale mobility platform focused primarily on designing and manufacturing premium EVs, electric scooters and electric buses.
• In this note, we talk about the not-so-positive aspects of the deal.

• Xingda International (1899 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
• The controlling shareholders – more commonly known as the Five Parties – hold 45.6% of shares out. 
• Two years ago, Xingda sought to spin-off its key operating vehicle. Perhaps the Five Parties are privatising Xingda, then IPOing Xingda Steel Tyre Cord. Or, cashing out their positions.

• Xingda International (1899 HK) disclosed a partial offer from management to acquire a maximum of 80.0 million shares at HK$1.88 per share, a 24.50% premium to the undisturbed price.
• The pre-condition is Executive approval. The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form. 
• The partial offer is an opportunistic foray to seize statutory control as it would not be sufficiently enticing to overcome FIL’s 9.99% blocking stake in a privatisation scheme.

• Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• It is likely that the management, representing 45.60% of ordinary shares (through a five parties agreement), is seeking to privatise Xingda.
• The bid is likely privatisation through a scheme. Due to FIL’s blocking stake, a decent premium is required, such as an offer approaching HK$2.00 (33% premium to the last close).  

• Shimano’s stock has declined by 26% YTD reflecting concerns over an economic recession and sales normalization post pandemic
• We believe that Shimano is a key beneficiary of government policy aimed at decarbonization
• We analyse Shimano’s core value drivers and see at around 23% upside for the stock

• VinFast Auto (1905332D VN)  is looking to raise up to US$1bn in its upcoming US IPO.
• VinFast is a full-scale mobility platform focused primarily on designing and manufacturing premium EVs, electric scooters and electric buses.
• In this note, we talk about the positive aspects of the deal.

• The potential IPO of Anta Sports Products (2020 HK)‘s 52.7% owned Amer Sports is positive in unlocking the latter’s underlying value, though the impact is quite limited.
• Assuming a P/S of 1.8x (30% discount to peers) and 25% enlargement in share capital, we estimate the exercise may bring ~HK$6n of potential pre-tax deemed disposal gain.
• Although Anta Sports may not receive any cash, it can still pay out special dividends given its Rmb12bn net cash, and this will raise FY23 dividend yield to 3.1%.  

• Late night Xingda (1899 HK) announced a partial Offer from a consortium comprising management  – known as the Five parties – at HK$1.88/share – a 24.5% premium to last close. 
• The consortium – widely known as the Five Parties – currently holds 45.6%, and the intention of the Offer is to hold 50.01%, or a controlling stake.
• There is a minimum/maximum number shares to be acquired under the Offer. I’d expect the minimum acceptance condition to be met.

• Kroger announced another quarter of quite strong results powered by its strategy of accelerating with digital and leading with fresh.
• Kroger, along with Albertsons Companies, announces a definitive merger agreement whereby the companies will merge two complementary organizations with deep roots and iconic brands in their local communities.
• It launched its foremost in-app flash sales and also enabled its customers to clip the digital offers from their cart directly.

• Ulta Beauty delivered a good performance in the last quarter with robust revenue growth driving double-digit earnings growth and operating margin expansion.
• The double-digit comp of Ulta Beauty in this quarter was an outcome of growth from its core assortment, compelling newness, and price increases.
• To support guest education and drive discovery, this quarter Ulta Beauty introduced its Skincare We Love All in every store.

• General Mills has significantly outperformed the broader equity market and the consumer staples industry as a whole.
• The share price seems to be running ahead of fundamentals which reduces expected returns going forward.
• The company would also need to dial-up investments in the coming year to secure its strong competitive positioning, according to the company.