Consumer

• Perfect Medical Health (1830 HK) is a recovery play for HK/China beauty trading at 11.8x PE FY23, with a dividend yield of 8.5% (assuming a 100% payout).
• With net cash (including investments) of 565 mn HKD ( > 10% of market cap ), the company is primed for M&A in an environment where restrictions have weakened competitors.
• The chairman’s recent buying of shares ( representing a 0.41% stake ) and the company share repurchase ( representing 0.08%)  indicate the company’s confidence in its prospects. 

• Giordano International (709 HK)’s 1H22 net profit is expected to be in the range of HK$91-101 million, which represents YoY growth of 52-68%. Interims will be out in early August.
• The clear sign of a retail recovery diminishes the prospect of the Cheng family’s low-ball offer of HK$1.88 per share hitting the 50%+ minimum acceptance threshold.
• The offer price has not been declared final suggesting that the Cheng family retains some room to test shareholder appetite with an improved offer.   

• With OP up by 32.1% YoY, 1QFY23 was the first genuine sign of the realisation of synergies from the Speedway acquisition.
• There could be more good news on the horizon as various news outlets have reported that the sale of Sogo Seibu is moving closer.
• Yet we are neutral on Seven & I Holdings (3382 JP) in the short-term. We think investors needs to see the true colours of synergies for shares to break ¥6,100.

• At this point, Lotte Confectionery and Miwon Specialty Chemical are currently within less than a 5% increase in market cap to beat the buffer rule.
• Three constituents are out of the buffer zone: Cheil Worldwide, HDC Hyundai Development, and Boryung Pharmaceutical. Hanall Biopharma, Samyang Holdings, and Hyundai Home Shopping sit on the buffer zone borderline.
• We should target Samyang Holdings and Hyundai Home Shopping for a short position against Lotte Confectionery and Miwon Specialty Chemical.

• Investors should ignore the news around restructuring….it’s nice but basically irrelevant
• The long-term valuation proposition is driven by the core convenience store businesses in the US and Japan
• Unlike Walmart, we think 7&I should have a good quarter in the US and beat analyst expectations for Q1

• SOCAR (403550 KS) is looking to raise up to US$159m in its upcoming Korea IPO. 
• While SoCar seeks to be an all-in-one mobility solution provider, the bulk of its revenues still come from its car sharing segment. 
• The car sharing market remains highly competitive with existing players that are already profitable. In this note, we will undertake a peer comparison of SoCar vs its listed peers

• Weilong Delicious is a is a leading spicy snack food company in China with a market share of 6.2% and ranked first among all spicy snack food enterprises in China.
• The company’s application for a HKEx IPO has been approved and plans to raise proceeds of about US$500m.
• Our analysis on the company’s financials reveal that its top line growth is slowing down while margins have come under pressure. We discuss the details below.

• After the close of trading yesterday, Giordano International (709 HK)  announced a positive  profit alert
• Giordano expects an interim net profit of HK$91mn-HK$101mn, a 52%-68% increase over the corresponding period.
• The Cheng family’s HK$1.88/share Offer was low-balled from the onset. Substantial shareholder David Webb agrees. This deal is dead without a bump.

• Same-store sales were 643.8% vs. June 2021 (1648.4% for May), 115.9% vs. June 2020 (684.1% for May), and 84.7% vs. June 2019 (83.2% for May)
• Compared to June 2021, the guest count was 601.0% (1591.9% for May), and the average check was 107.1% (103.5% for May)
• The number of stores at the end of June was 617 (flat MoM). The number of company-owned stores was 386 (flat MoM)

• This model seeks companies that are potentially “overearning”, defined as companies with unusually high margins relative to their own history or relative to the industry. 
• The reasons for the margin increases are sometimes unsustainable or fraudulent. The  critical judgement involves to what extent unsustainable margins are embedded in a company’s forecasts and/or the stock’s valuation. 
• These shorts tend to have moderate to higher betas, higher valuations due to recent strong results and good short responses to subsequently disappointing earnings.

• One of Japan’s largest internet companies, Rakuten Inc (4755 JP) applied to list its consolidated subsidiary, Rakuten Bank (EBANKZ JP) on the Tokyo Stock Exchange on the 4th of July.
• With steady customer account growth mostly assured through leveraging Rakuten’s eco-system with more than 36.0m monthly active users, Rakuten Bank is likely to be valued at over ¥500bn.
• Thus, we think the Rakuten Bank IPO could change Rakuten’s fortunes and help the share price bounce back from a 10-year low level.

• Emperador Inc (EMP PM) is pre-marketing a secondary listing on the SGX IPO by raising US$300-500 million, according to press reports. 
• Emperador has established a track record of decent revenue growth, profitability and cash generation over the years. 
• While the fundamentals are solid the valuation looks full in comparison to peers and historical trading ranges. 

• Oriental Selection achieves high-speed user growth through bilingual livestreaming, thanks to Douyin’s  algorithmic recommendation mechanism before 6/18 ecommerce, after 6/18 the increase in the follower numbers & GMV dropped sharply.
• The unit price of the product is below average, due to the focus on produce and books, Agricultural livestreaming has always been a difficult to grow category
• 10%-15% Commission  is lower than industry average, and subsequent supply chain control and 1st party products have lower margins.

• Amazon announced a partnership with TKWY’s Grubhub where Amazon Prime members will get one year free of Grubhub+ membership.
• Amazon has the option to take a 2% stake in Grubhub which could grow to 15% depending on performance conditions.
• Deal is a direct shot at DoorDash’s Dashpass subscription program, which is 30% of DASH’s customers and accounts for ~50%? of GOV… expect a price cut to stave off churn.

• Allied Blenders and Distillers (ABD) is looking to raise about US$250m in its upcoming India IPO. The deal will be run by ISec, Axis, JM Fin, Kotak and Equirus.
• ABD is the largest Indian-owned Indian-made foreign liquor (IMFL) company and the third largest IMFL company in India, in terms of annual sales volumes between FY14 and FY21.
• It had a market share of 8.2% in the IMFL market by sales volumes in FY21. Its products are retailed at over 64,000 outlets in India.

• Same-store sales were 108.6% vs. June 2021 (113.6% for May), 101.5% vs. June 2020 (128.0% for May), and 98.9% vs. June 2019 (102.4% for May)
• The company ran a Sanrio Characters campaign in June. The prizes featuring popular characters such as “Cinnamoroll” seem to have been well received by the customers
• The number of stores at the end of June was 516 in Japan (+2 MoM), 37 in the U.S. (flat MoM), and 46 in Taiwan (+1 MoM). The total number of stores was 599 (+3 MoM)

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• Weak deliveries tracked my cautious estimate, but fell near the low end of rapidly declining market consensus as investors grapple with Tesla’s struggles;
• I expect weak sales in China and Europe, the world’s largest EV markets, likely accounted for most of the sizable drop versus the past two quarters;
• The biggest question for investors: is Tesla stabilizing or will it continue to fall behind more robust competitors. 

• Elon Musk suddenly admitted Tesla is burning billions at its Austin & Berlin plants.
• This happened to come just as he likely saw Q2 becoming “super bad,” as I had warned, since plunging China sales mean Tesla can’t mask big losses as usual.
• Tesla’s problems are bigger than second quarter woes—and they’re not going away anytime soon.

• Kirin Holdings (2503 JP) announced yesterday that it will transfer its stake in the Myanmar business (51% of share capital) to its JV partner MEHL, via a share buyback of ¥22.4bn.
• Having disposed most of the other underperforming assets during 2018-21, the Myanmar business was the main issue holding back Kirin’s share price performance.
• With the Myanmar issue resolved better than anticipated, it seems like the right time for Kirin to get a move on.

• The near term impact of ONDC on OFD platforms like Zomato & Swiggy is limited, longer term they will have to move from platform to a network centric model.
• An external shock will be required to drive faster ONDC adaption as we have seen in the case of UPI.
• Logistics companies especially the ones with express capabilities are likely beneficiaries in case ONDC scales up rapidly. 

• 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, net inflow over the past week was ~US$1.5bn, split US$0.4bn for Shanghai and US$1.2bn for Shenzhen.
• He largest inflows were into Geely Auto (175 HK), Li Auto (2015 HK), and HKEX (388 HK). The largest outflow was in China Mobile (941 HK) and CCB (939 HK).

• J Front reported strong Q1 numbers with OP recovering to +¥7.5b from red ink a year ago
• The company is reaping the benefits of restructuring and better cost control
• A recovery in domestic consumption and the opening of borders will drive further appreciation in the share price

• Broad global MSCI equity indexes (ACWI,ACWI ex-U.S.,EAFE, and EM) remain bearish with YTD downtrends intact. Until these indexes reverse downtrends, we are bearish and view bounces as bear market rallies.
• Major non-U.S. countries appear to be much further along in the bottoming process, a potential sign that U.S. indexes could take a back seat once global equities finally bottom.
• Indexes that have not made a new low since March: Nikkei 225, TOPIX, TOPIX Small, Hang Seng, Europe’s EURO STOXX 50, and China’s MSCI China (MCHI-US) and China Internet (KWEB-US).

• Oasis Corp is the market leader of organic foods online sales in Korea. 
• Oasis Corp generated sales of 356.9 billion won (up 49.6% YoY) and an operating margin of 1.6% in 2021. From 2017 to 2021, Oasis Corp’s sales increased by 45.9% CAGR.
• Oasis Corp has been consistently profitable unlike its competitors such as Kurly, Coupang, and SSG.com.

• Askul posted Q4 results that were largely in-line and issued FY23 targets that are robust for revenue growth (+6%) but accompanied by upfront investment
• Management also announced it would prepare subsidiary AlphaPurchase for a public listing although the timing has not been determined
• The miss on profitability guidance is not ideal but the acceleration of top-line growth is attractive

• Ohsho Food Service (9936, the company) disclosed monthly data for its company-owned stores in June (on a preliminary basis)
• All-store sales of 6.609bn yen (109.0% vs. June 2021) were the record high for June.
• In June, the company opened one new store (one company-owned store) and closed one store (one franchised store)

• Notwithstanding bright spots and positive long-term outlook, the ESG gold rush has created an acute state of chaos. Regulatory flux. Rampant greenwashing. ESG litigation. Elon and S&P.
• The silver lining? New ESG-related investing opportunities emerging from all the chaos; stocks poised to benefit, regardless of who else wins or losses. The new shovel-sellers, as it were.
• One large opportunity is driven by new greenhouse gas (GHG) reporting regulations, specifcally leading GHG emissions software-as-a-service (SaaS) and platform-as-a-service (PaaS) stocks.

• PT Nippon Indosari Corpindo (ROTI IJ) recently announced that it will launch two new product lines away from bread including Sari Roti chocolate spread and UHT Milk. 
• Investment in these products will be relatively small but it will increase the visibility of Sari Roti brands on the shelves of modern retail adding to its bread and cakes. 
• Wheat prices have stabilised recently but ROTI may consider raising prices further after assessing June performance. 2Q2022 performance has been stronger than expected post-Lebaran, as demand improved with greater mobility.

• SOCAR (403550 KS) is looking to raise up to US$159m in its upcoming Korea IPO.
• SoCar is a Korean car sharing business which aims to become an all-in-one mobility solutions provider beyond car sharing, with approximately 80% domestic market share in the car sharing space.
• As of May 2022, SoCar has over 8m subscribers and over 10m SoCar app downloads. However, the firm remains loss-making with no signs of being profitable in the near/medium term.

• Zomato (ZOMATO IN) ‘s announcement to acquire Blinkit (BCPL) for all-stock deal worth INR 44.5 bn has rattled the market price of the stock in the trading sessions that followed.
• While the management focuses on the cost synergies and the bigger picture, the acquisition has left several doubts, including the valuation and cash burning nature of Blinkit.
• More importantly, it is the corporate governance that should be looked at, especially since this is an indirect RPT, as mentioned in our earlier report Zomato’s Investments Game: Stain on Governance.

• De-SPACs have wiped off a combined $150 billion in market capitalization since the height the bubble back in February 2021.
• One company that has bucked the trend of the Downward Spiral in valuations is Bowlero.
• Bowlero certainly has a lot of qualities that separate it from most De-SPACs.

• Ryohin Keikaku (Muji) slashed its earnings guidance for FY8/22 by 32%
• The retailer is facing a number of headwinds, only some of which are industry wide
• We remain bearish as Muji lacks the pricing power to push through higher input costs

• Nio Inc. was targeted by Grizzly Research and accused of likely using an unconsolidated related party to exaggerate revenue and profitability. This unconsolidated related party was named as Wuhan Weineng.
• As per the report, Weineng had helped Nio inflate revenue and net income by approx. 10% and 95% respectively in 9M2021, and FY2021 earnings beat by at least 60%.
• In this insight, we take a look some of the allegations and have assessed the merits of the claims by Grizzly Research.

• As the mismatch between short-term assets and liabilities expands, GOME is raising HK$776.5m at HK$0.40 per-share, which is a 12.1% discount to the closing price on 27th June 2022.
• This is clearly insufficient to pay down GOME Retail Holdings (493 HK)‘s RMB 40.0bn short term debt and accounts payable obligations falling due in the next 12 months.
• With the omni-channel transformation taking longer than expected to turn around performance, the company might find it difficult to refinance the debt and maintain the supply chain as usual.

• Tesla faces stiffer competition in 2H 2022 as chip supplies at rivals recover faster than expected. This will put pricing pressure on Tesla amid rising costs. 
• Cash could be tight in 2H 2022 as Tesla ramps up 2 new factories. There is a distinct possibility of Tesla resorting to equity financing.
• If the drop in Q2 earnings doesn’t return to high growth again from Q3, Tesla could finally see its valuation fall down to earth. Its premium has already shrunk.  

• Weilong Delicious Global (WDG HK) has refiled its PHIP with an aim to raise US$500 million, half of its previous ambition to raise US$1 billion. 
• We have previously discussed the IPO in Weilong Delicious IPO Initiation: Tasty Bite and Weilong Delicious IPO: Mixed Update. 
• The PHIP which discloses the 2021 results and recent developments point to reducing growth rates and cost pressures. We would pass on the IPO.

• Ardent Leisure Group Ltd (ALG AU)‘s shareholders have approved Dave & Buster’S Entertainment, Inc (PLAY US) acquisition of Main Event business. Ardent will receive A$670.3 million.
• Shareholders will receive a total return of A$0.95 through capital return (A$0.46) and unfranked special dividends (A$0.49) on 13 July. 
• Precedent transactions and peer multiples suggest that the remaining business is worth A$0.23-0.30, implying a 16%-21% upside to the last close. The remaining business would be attractive to private equity. 

• Our checks suggest Hitachi Home & Life Solutions India Ltd (JCHAC IN) has lost market share this season. 
• Market share loss has come on the back of poor product quality due to focus on costs and competition, which is irreparable in spite of the strong dealer network. 
• Poor capital allocation, high receivables and low-profit margins, all warrant attention. 

• The legal tussle between promoters of Dish TV India (DITV IN) and Yes Bank (YES IN) has again entered into the limelight.
• The promoters of Dish TV, after repeatedly attempting to block Yes Bank from voting, have been left in the dark by the Bombay High Court’s verdict. 
• However, Mr. Goel still continues to sit on the board which irked several investors. This indicates that the story is not over and there are still some grey areas.

• In SOCAR’s IPO, the early investors’ post-listing flow direction draws the market’s attention as much as the valuation issue.
• Even this pricing level is high enough to infer that these VCs will be tempted to consider exiting after listing. A significant level of short-term overhang risk is inevitable.
• Then, we need to factor in the Lotte factor, which will likely expand its stake after listing to secure management rights for Socar.

• Pinterest co-founder/CEO Ben Silbermann is replaced by Google exec Bill Ready.
• Ready is a payments industry veteran and is perfectly suited to drive commerce adoption at Pinterest. 
• Unique pay package incentivizes Ready to succesfully pivot the business. 

• Liquidity shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements. 
• Liquidity shorts have built-in catalysts, have moderate to higher betas,  and can have strong down moves if a crisis develops.  They can go bankrupt, pushing the stock price near zero.
• Today we are flagging Carvana, Exact Sciences, Inspire Med, Freshpet, Enviva .

• Li Auto Inc. (LI US) has announced an ATM offering to sell US$2.0 billion of ADS. The offering appears to be timed to take advantage of the share price rally.
• Li Auto (2015 HK)‘s strong balance sheet and cash generation do not necessitate the need for the offering. The impending launch of the Li L9 underpins its prospects. 
• However, with the recent rally, the shares are at best fully valued at the last close. We prefer remaining on the sidelines for now. 

• Tasmanian salmon producer Tassal (TGR AU) has rejected Canadian aquaculture play Cooke Inc’s $4.85/share offer – its third proposal and a 42.2% premium to the undisturbed price.
• Cooke commenced buying shares in Tassal around ten days ago and has built a 5.4% stake. 
• Tassal considers the Offer does not reflect the fundamental value of the business and has determined not to engage with Cooke.

• MINISO Group Holdings (MNSO US) rallied more than 70% this month before receiving approval for a $100m placement on the Hong Kong Stock Exchange yesterday (27th June 2022).
• The company has no requirement for extra cash and this Hong Kong listing is mostly a precautionary measure against a potential delisting of Chinese companies from US markets.
• Overall, we are positive about this placement on account of momentum, reasonableness of current valuation and positive reception of what we would regard as an intention to accelerate expansion.

• Rakuten’s stake in Goto is worth ¥13bn and the IPO of the latter in April and the subsequent value re-rating could provide some (very) modest offset to operating losses
• Our forecasts remain unchanged from our mid-month update although we would flag up potential electricity resale upside for Rakuten and the sector from utility resale 
• We have lowered our price target to ¥1,000 from ¥1,150 but uncertainty over the timing of a Bank listing, mobile recovery and return to profitability keep us cautious

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.