Consumer

• After raising guidance yet again in 1QFY23 through stronger than expected performance in the overseas business, Seven & I is scheduled to release Q2 results on 6th October 2022.
• We are optimistic that 2QFY23 could provide the platform for Seven & I to break the ¥6,100 level, at which the share-price has been stuck for the first 9-months 2022.
• This is because, we are seeing a significant improvement in Seven & I’s domestic performance while, North America is carrying the growth momentum that been there since the Speedway-acquisition.

• The Porsche IPO is expected to be the second largest IPO ever in Germany. Total proceeds from the IPO will be 18.1 billion to 19.5 billion euros.
• The IPO price range is from 76.50 euros to 82.50 euros per share, which suggests a valuation of 70 billion to 75 billion euros.
• After the IPO, Volkswagen will have an extraordinary shareholders meeting in December to propose to pay 49% of total proceeds to shareholders in early 2023 as a special dividend.

In our next Webinar, we welcome Analyst Soo Young Kim , who will take us through the ESG risks present in South Korea and her analysis based on negative ESG incidents. 

The webinar will be hosted on Wednesday, 21 September 2022, 17:00 SGT/HKT.

Soo Young is the Head of ESG Intelligence at Who’s Good, Asia’s first AI-driven ESG Insight Provider. Using AI technologies and public data, Who’s Good provides objective and up-to-date corporate ESG insights on Asian companies.

• The value accretion that will occur by unlocking treasury shares will be more significant than Hyundai Dept. The treasury shares account for 10.64%, compared with 6.61% for Hyundai Dept.
• Neither Holdco nor Opco will likely remain in the KOSPI 200 after relisting. So we cannot expect PASSIVE inflow at the time of relisting.
• A tender will likely follow. However, neither is available for shorting. So, we should use Opco’s overheated price adjustment as an exit timing for our positions aimed at value accretion.

• Etsy recently launched the Etsy Purchase Protection program where buyers will get a total refund for purchases they make on Etsy.com in cases that do not match the item description, never arrive, or arrive damaged.
• This new program aims at making shopping on the website more worry-free.
• The purchase Protection Program of Etsy will complement the company’s brand efforts in improving customer support, maintaining integrity in its marketplace as a destination for special and unique items, and increasing trust signals over the user experience.

• Best Buy delivered a decent result this quarter surpassing Wall Street expectations on all counts.
• Best Buy is also viewing more interest in the sales events such as tax-free events, prime day, and other events that are geared at an exceptional value.
• Best Buy also opened new outlet stores, finished store remodels, and started to implement newly signed deals with healthcare companies.

• Church & Dwight has recently been in the news for its acquisition of the Hero Might Patch brand.
• In the last quarter, Church & Dwight increased consumption in 11 of the 17 categories in which they participate, in some cases on top of significant increases in consumption from the previous year.
• One of their acquisitions, Therabreath, had a great quarter with 33% consumption growth.

• Under Armour’s brand strength helped the company deliver an all-around beat while navigating the present environment.
• The company’s financial performance has been decent as its wholesale revenue increased while the eCommerce revenue and direct-to-consumer revenue decreased.
• The company is planning to launch a new footwear platform, Kevin, that can change the landscape of athletic footwear.

• The recent decline in crude oil has resulted in optimism WDFC’s gross margin would improve. There is a delay before WDFC sees a benefit/impact from the price of oil
• We continue to maintain our viewpoint of WDFC experiencing slower demand for its products from consumers and retailers holding back on orders
• WDFC’s exposure to international markets could negatively impact sales due to the strong US Dollar

• During the current rebidding process for the six Macau concessions, a seventh “surprise guest”filed a bid. Opinion of their chances are mixed at best.
• Genting has tended to overreach over time in other markets.
• Macau operators already face daunting recovery odds ahead that will impose strains on cash and debt refis at higher rates.

• This is an equity spinoff where the existing shareholders receive shares in the spun-off company. But this creates two LISTED companies. In such a case, there won’t be appraisal rights.
• PASSIVE’s selling flow towards the trade suspension tends to be offset by ACTIVE’s buying flow aiming for value accretion. So, developing a timely entry/exit between these opposing flows is critical.
• Holdco’s 30% rule dynamic generally, in relative terms, leads to an increase in the value of Opco’s stake and a decline in the value of Holdco’s stake.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Leapmotor (2007699D HK) and Onewo Space-Tech (ONEWO HK) will launch US$1.0bn and US$0.8bn HKEx IPOs this week, respectively. WCP (WCP KS) is bookbuilding a US$692m KRX IPO
• Event-Driven developments –Link Administration (LNK AU), Ramsay Health Care (RHC AU), Giordano International (709 HK), Xiamen International Port H (3378 HK), Frasers Hospitality Trust (FHT SP), 21Vianet Group (VNET US)

• The battle for online food sales continues to heat up, with Rakuten and Amazon squaring up to challenge for supremacy. 
• Although Amazon has signed two of the largest names, Life and Valor, Rakuten is quickly catching up, last month adding Comodi-Iida to existing members, Seiyu, Beisia and Inageya.
• Other supermarket chains are already preparing to sign-up with Rakuten. 

• On 16 September, Hyundai Dept Store and Hyundai Greenfood announced that they will complete equity spin-offs to create holding companies structures.
• It appears that the real reason these companies are trying to set up these structures maybe to raise the control by the major shareholders including Ji-Seon Chung and Kyo-Seon Chung.
• The spin-off ratio between the two companies is 23.24% for Hyundai Department Store Holdings and 76.76% for Hyundai Department Store. 

• Farm Fresh Berhad (FF MY) was listed on the Bursa Malaysia Exchange on 22nd March, 2022. 
• Farm Fresh Berhad is a dairy group that covers the entire value chain, from farming and manufacturing to distributing its various dairy products and plant-based products.
• Both management and Agrifood Resources (Khazanah), which had sold earlier, will come off lockup soon.

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, the net inflow over the past week was ~US$0.33bn, split (+US$0.16bn) for Shanghai and (+US$0.17bn) for Shenzhen.
• The largest inflows were into Tencent (700 HK) and China Mobile (941 HK). The largest outflows were in Hang Seng H Share Index ETF (2828 HK) and Geely (175 HK).

• Golfzon Commerce is getting ready to complete its IPO in Korea in October. The total offering amount is from 80.2 billion won to 99.8 billion won. 
• The expected market cap of the IPO is from 323 billion won to 336 billion won. The book building for the institutional investors starts on 11 October. 
• Golfzon Commerce operates Golfzon Market (a leading golf shop chain in Korea) and Golping (golf related e-commerce site). 

• In a surprise move, Genting Bhd (GENT MK) – or Genting Malaysia (GENM MK) – has joined the six incumbents in bidding for new casino licences in Macau.
• The bidding process follows Macau’s record low monthly gaming revenue in July after casinos were closed for 12 days in response to a Covid outbreak.
• Casinos have re-opened, yet there is little to cheer about as business remains muted. The six winners are expected to be announced by the end of November or early December.

• Jubilant Foodworks (JUBI IN) is India’s largest food service company. In hindsight, CEO’s exit in March 2022 under a high inflationary environment was just “NOISE”.
• Industry drivers are favourable, JUBI’s renewed focus on growth, additional brands and a new CEO, all put JUBI back on track to deliver robust growth. 
• Currently trading at 68.5x NTM, JUBI is available at a 22% discount compared to it’s 3Y mean, considering the growth prospects discussed below, this discount is attractive.

• After the market close today, S.M.Entertainment announced that its Chairman Lee Soo Man will end the contract with Like Planning, a contents producing company owned by Lee Soo Man.
• We estimate that S.M.Entertainment has paid more than 160 billion won to Like Planning in the past 10 years.
• By ending the relationship between Chairman Lee Soo Man and Like Planning, this should have a major positive impact on S.M.Entertainment shares in the coming weeks. 

• Japan’s number one skin cleansing balm, DUO seems to be in big trouble with monthly sales volume falling by almost 40% over the last 12 months.
• However, Premier Anti-Aging (4934 JP) is making progress with the development of other brands to reduce its dependence on DUO.
• Despite the depressed margins in the near-term, we are quite positive about Premier Anti-Aging’s medium-long term outlook with new brands like CANADEL and clayance showing promising signs for the future.

• Activist Dan Loeb recently backed down from his request that Disney spin out ESPN…something we thought was foolish, and glad is off the table. 
• Disney is still trapped by the “rock and the hard place” choice of trading higher margin cable subscribers for lower margin (higher churning) streaming subs.
• Bob Chapek is a poor choice for Disney CEO…not alot of good options. This company is strategically boxed in. Parks’s overearning will dissipate, will be a good short next year. 

• While 90% of the companies listed on the prime market translate some documents into English, very few companies listed on other markets translate their disclosure documents into English.
• There is a mismatch between the documents that prime market listed companies translate into English and the documents that overseas institutional investors require to be translated into English.
• Few companies with high foreign ownerships have translated their annual securities reports, convocation notices (business reports) and corporate governance reports into English, which overseas investors need to translate into English.

• Starbucks Corp. plans to open 3,000 stores in China in the next three years, bringing the total to 9,000 locations and pushing China past the U.S. as the coffee giant’s biggest market by 2025.
• China is currently Starbucks’ second-largest market, with 16% of global stores and accounting for 7% of total revenue in the 2022 second quarter.
• The company aims to double its China revenue by 2025.

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

• Askul Corp (2678 JP) posted the best revenue growth in six quarters as both B2B and consumer product sales accelerated
• The corresponding operating income decline of 10% is less welcome but that includes a front-loading of planned growth investments and full year guidance of 1% growth is unchanged
• We are tagging this insight as bearish as headlines of a 10% OP decline might not be as well received as the top-line story 

• Eva Precision Industrial Holdings (838 HK) is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3% dividend yield (30% payout ratio).
• H1 2022 was groundbreaking for the company as it commenced strategic cooperation with  BYD (1211 HK) on products and bagged orders from Huwaei and Tesla, with more coming in H2.
• There is additional room for buybacks as the stock price is < 2HKD and the company only completed 3-4% of its 200 mn HKD buyback.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website. 
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute. 
• Stocks mentioned below include Smoore (6969 HK), Zhongsheng Group (881 HK), and Perennial Energy Holdings Ltd (2798 HK). These insights may also flag those companies where shares have been pledged.

• The Korea NPS released the yearly report for 2021 last week, which is attached at the bottom of this post. Yes, for this, an English version is available.
• The NPS also releases a status report every month that contains limited data. Based on the annual and monthly status reports, we can infer the allocation breakdown and flow trends.
• Through this post, let’s look at the shareholding changes and flow trends with the release of this annual report. Please note that this post does not make any investment recommendations.

• The offeror and acceptances reached 46.04%, just short of the 50% minimum acceptance condition. The offeror has decided to let the Giordano International (709 HK) offer lapse.
• The offer fell short of the 50% threshold as the Cheng family mistakenly assumed that shareholders behind Halycon’s stake were friendly shares, which would support the offer.
• The downside will be muted as the shares are trading in line with the 1-year average forward P/E, minorities thought the offer was low, and David Webb is a buyer.

• Shiseido’s acquisition of Drunk Elephant for a valuation of $845m was perceived positively, hoping that Shiseido could use Drunk Elephant’s digital marketing expertise to restructure its North America business.
• Rather than emulating Drunk Elephant like digital marketing to the company’s other brands, Shiseido has been trying to accommodate all its brands including Drunk Elephant into a hybrid marketing strategy.
• This seems to have killed Drunk Elephant’s appeal to its customers. Thus, Shiseido Company (4911 JP) could be facing a massive $845m write-off over the next few years.

• Utter carnage in arb-world this week, as Frasers Hospitality Trust (FHT SP) fails, Link Administration (LNK AU) and Ramsay Health (RHC AU) are potentially next, and now Giordano (709 HK).
• 46.04%. That’s the only number that matters, which represents the total shares owned by the Cheng family plus shares tendered. 
• The Chengs are restricted from launching another Offer for 12 months. Giordano will be sold off today, however, this is a buy if it retraces to around the undisturbed levels.

• In light of low acceptances and a cold statement from the independent bid committee, Teniralc increased the offer by 7.7% to SEK 70/share (same as IPO, 17.2x EV/EBITDA).
• The increased offer is final, represents a 72% premium and has been unanimously recommended. The acceptance period now runs until 22 September.
• As of 12 September closing share price, gross spread is 4.2%, an interesting level, in my view, considering settlement will take place “on or about 30 September”. Reiterate Long CARY SS.

• The inclusion of the requirement to use e-voting platforms in the Corporate Governance Code has led to increasing number of companies using e-voting platforms.
• The number of participating companies has increased from 1,540 in March to 1,737 in August. Of the companies participating in e-voting platform, 92% are listed companies in the prime market.
• It is only to be hoped that in the future, companies will focus on improving communication between shareholders and management at general shareholders’ meetings.

• Less than halfway through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, and 7 stocks moving from SmallCap to MidCap and vice versa.
• There are a bunch of stocks that are close to the cutoff ranks and there will be more change as we move deeper into the review period.
• Over the last 6months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward. Given the large divergence, there will be a pullback at some point.

• Shidax Corp (4837 JP) is under offer for a partial tender by Oisix ra daichi (3182 JP). Unison Capital is expected to tender their shares.  
• Unison may not want to go against the board but a direct transfer (i.e. not tender offer) is still possible. 
• Some Independent Board Members have suggested the company buy Unison’s shares back. This might work BUT the end game is still the same. 

• The stock price of Mitsubishi Motors has been driven by exposure to the weak Japanese yen and the sharp recovery in ASEAN auto sales 
• The valuation at 1x book is now at a premium versus the sector and its historical average
• We believe that the 2H could be an uphill battle against rising petrol prices and weakening consumer confidence in the core markets

• After beating the Q4 consensus OP by more than 26%, Pan Pacific International Holdings (7532 JP)’s share price has bounced back towards the mid-point of its long-term trend channel.
• With inbound demand set to return to further boost PPIH’s profitability, we are expecting additional upside to consensus FY23 OP, which is based on conservative company guidance.
• Based on the FY+1 consensus OP to share price trend, our annual run-rate OP estimate of ¥160bn suggests that there could be an additional 50% upside to Pan Pacific International.

• The reason for this criticism is that the performance of mutual funds with ESG investing in their names have not differed from or underperformed stock market indices.
• The FSA report indicates that some investment management companies that manage mutual funds with ESG names do not have sufficient specialized ESG departments and professionals.
• Nissay Asset Management’s guidelines seem reasonable. How to reflect them in investment performance in the future is a very difficult and key issue.

We view Health and Happiness International (H&H) as “Medium Risk” on the LARA scale. The company has a sound business profile, with stable branded products in the Baby Nutrition and Care​ (BNC) and Adult Nutrition and Care (ANC) markets. The acquisition of Zesty Paws in 2021 allowed H&H to expand into the Pet Nutrition and Care ​(PNC) business. The company’s strong distribution channels support cross-border and e-commerce sales strategies. That said, the positive factors are balanced by the risk of entering new markets and selling new products, along with the fragmented and competitive Chinese market. We like H&H’s solid business fundamentals, strong market positions and healthy financial profile. In particular, it has a sound liquidity profile and steady CFO.

We note that the acquisition has impacted H&H’s financial profile and weakened its leverage metrics. That said, PNC is part of the company’s sustainable growth plan. We expect it to work on deleveraging in the near term, in order to maintain a healthy credit profile.

The USD bondholders suffer material structural subordination. The issuing entity is a Cayman Islands company with no operating assets, and the PRC operating subsidiaries do not guarantee the USD notes. The level of priority creditors is high at the Australian subsidiary. Bondholders would have very limited access to assets in a liquidation scenario.

Our Credit Bias on H&H is “Stable”, given the company’s solid business fundamentals, strong market positions and moderate financial profile. The ANC and PNC segments are expected to deliver stronger performance, while BNC should continue facing challenges. As a result, ANC and PNC will likely be H&H’s key growth segments, offsetting the competitive BNC business. The company aims to expand into other business segments and markets outside China, in order to compensate for muted growth in the country.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

• TUEM disclosed a new financing round underscoring the financial distress the business has been under since reporting March quarter financials.
• TUEM is raising $35 million in convertible debt financing. The debt is convertible at a material discount to TUEM’s closing price prior to the news
• TUEM requested a financial viability exception from NASDAQ to bypass a shareholder vote asserts the turmoil the business has been under in recent months

• Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
• The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
• So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.

• We believe the market may have missed the important acquisition of 3D printing firm, SLM Solutions
• The 3D printing market is expected to grow rapidly driven by industrial applications that require accurate products and rapid time to market
• We believe the acquisition is a good fit for Nikon and that the realization of synergies could see SLM making a meaningful profit contribution

• There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
• The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
• Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Leapmotor (2007699D HK), Onewo Space-Tech (ONEWO HK) and CALB (CALBLZ CH) are pre-marketing a US$1.5 billion, US$2.0 billion and US$2.0 billion HKEx IPOs, respectively.
• Event-Driven developments – DTAC/True, Giordano International (709 HK), Link Administration (LNK AU), MyDeal.com.au Ltd (MYD AU), Nitro Software Ltd (NTO AU), Resapp Health (RAP AU), Tyro Payments (TYR AU). 

• The reason why TCFD’s progress is the slowest is that prudent companies are still exploring the minimum line that should be taken by other companies to see how they’re responding.
• The lack of specific numerical targets for ensuring diversity, which are not explicitly stated in the Corporate Governance Code, is the main reason for the slow progress.
• While some formal progress has been made, such as the establishment of nominating/compensation committees, there are many challenges ahead. Scandals have occurred even in companies that have implemented formal standards.