Consumer

• On 23rd Dec 2021, Tencent declared a special interim dividend in the form of a distribution in specie of 457.326m Class A ordinary shares of JD.com.
• While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is happened on 25th Mar 2022.
• In this note, we talk about the updates since our last note and the actual number of shares in CCASS.

• With the BOJ being forced to step in to hold 10 year rates under 0.25% today the yen is under increasing pressure. 
• There are naturally a variety of stocks which are likely to benefit from this multi-decade breakout of the yen dollar. 
• Mazda is one of the best plays here in our view and we lay out the rather simple case below.

• JD.com Inc. (9618 HK) shares from the Tencent (700 HK) in-specie dividend settled on 25 March. That has increased the number of CCASS shares and the Hong Kong free float.
• Given the large trading volumes in JD.com Inc. (9618 HK) on 25 March and 28 March, we expect most of the forced selling from the ADR allotment is done.
• There will be selling in JD.com Inc. (9618 HK) from active investors and the overhang from the Prosus (PRX NA) holding. Buying from HSI/HSCEI trackers in June could help a bit.

• Share price sell-off is overdone as the prospect of the war worsening is less likely.
• Channel checks have shown that EV sales remain upbeat despite the war.
• The long-term prospect to participate in the growing EV industry through battery housing and body parts remain intact. 

• Shanghai Jin Jiang Capital Company Limited (2006 HK)’s privatisation offer from Jin Jiang International Holding is HK$3.10 per H share. The pre-condition was fulfilled on 28 March.  
• The key conditions for the delisting will be approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.  
• At last close and for a May end effective date (composite document despatched on 1 April), the gross and annualised spread to the offer is 4.7% and 32.1%, respectively.

• Yum China Holdings, Inc (YUMC US) board has expanded share repurchase program by $1bn to total $2.4bn amid the tougher operating environment due to Omicron outbreak.
• Omicron outbreak spread widely in March across China, Yum China saw its March first 2-week SSSG is down 20% year-over-year and 1Q22 operating profit will likely be down 40-50% year-over-year. 
• We continue to think Yum China is the best-run restaurant chain in China. It has resilient business model to navigate through pandemic. Risk/reward is more compelling to own Yum China.

• With over 80% of the averaging in the review period complete, we see 15 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• 11 of the 15 changes are high/medium probability and it will take large moves over the rest of the review period for these stocks to drop out of the list.
• Four potential inclusions have more than 3 days of ADV to buy from passives, while nine potential deletions have more than 3 days of ADV to sell from passives.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only). 
• This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Sezzle Inc (SZL AU)
• Lowest gross spreads CIMIC Group Ltd (CIM AU), Z Energy Ltd (ZEL NZ), China Logistics Property Holdings (1589 HK), Virtus Health (VRT AU), Mapletree North Asia Commercial Trust (MAGIC SP)     

• There is a strong recovery in Shangri-La Asia (69 HK) in 2H21 as its losses narrowed 36.4% HoH and by 57.5% YoY – hotels and investment properties are primary drivers.
• 1Q22 momentum is solid with occupancy outside of Hong Kong and mainland China saw good YoY rebound. In FY21, room rates in France, Australia and UK have surpassed 2018 levels.
• Refinancing for FY22 has almost completed, implying minimal liquidity risks. Trading at 76% discount to adjusted NAV of HK$25.44, the stock is way too cheap.

• JD.com (9618) HK denotes formidable resistance  at 260 that will induce a downside re test toward the low zone. 
• High sell volumes on the decline followed by weak buy volumes on the recent rise makes for a vulnerable rise with risk of a hard giveback.
• Low re test/new low sets up a buy for a rally to 310/350 in Q3/Q4. Bullish macro A-B-C pullback sequence stands out.

• The Perth commission report found Crown Resorts (CWN AU) not suitable to operate Crown Perth but did not call for the gaming licence to be revoked.
• The key conditions precedent for the Blackstone deal are shareholder, gaming regulatory and FIRB approval. The scheme meeting is targeted to be held before the end of June 2022.
• At the last close price of A$12.58, the gross and annualised spread for a 30 June implementation is 4.1% and 16.94%, respectively. 

• The coming week has the implementation of the NIFTY indices at the close on 30 March and the Nikkei 225 (NKY INDEX) implementation at the close on 1 April.
• 31 March is the review cut-off date for the June rebalance of the Hang Seng indices. We expect one change to the HSCEI/HSTECH and few adds to the HSI.
• There were large inflows to the Ishares Core Msci Emerging (IEMG US), iShares MSCI Emerging Markets (EEM US) and KraneShares CSI China Internet ETF (KWEB US) ETFs during the week.

• There are 40 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal. 
• One new deal this week: INFRONEER Holdings (5076 JP) taking over the rest of a boring, old construction company Toyo Construction (1890 JP).
• Key updates took place for: Link (LNK AU), Uniti  (UWL AU), Mapletree Commercial (MCT SP) /Mapletree North (MAGIC SP), Singapore Press (SPH SP),  DTAC TB / TRUE TB

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Placements were back with a bang this week with multiple blocks across the region. All eyes will be on JD.com Inc. (9618 HK) in the coming week.
• Farm Fresh Berhad (FF MY)‘s IPO got off to a good start, while Hong Kong IPOs continue to be lackluster.

• We do not expect there will be huge selling in JD.com Inc. (9618 HK) immediately. However, there will be an overhang on the stock in the near to medium term.
• JD.com could drop in the next few days as the ADR allotment is sold in the market. Shorts that have been built up could soak up some of the flow.
• The big worry is the US$4bn of JD.com stock that Prosus will receive. It is likely they will look to sell and use the cash to buy back their own stock.

• Buying 13.5% below Morrison & Co’s Offer terms last week for Aussie broadband player Uniti Group Ltd (UWL AU) was the right call as a new (indicative, non-binding) proposal emerges.
• Macquarie Asset Management’s Real Assets division and Public Sector Pension Investment Board are offering to acquire Uniti for $5.00/share, via a Scheme of Arrangement, an 11% premium to Morrison’s tilt. 
• The Board of Uniti is currently considering the new proposal.  Morrison’s four-week exclusivity period kicked off last Friday. 

• The Connect consortium will offer A$5.00 cash per share, an 11.1% premium to the Morrison & Co indicative offer of A$4.50.
• Brookfield has joined Morrison & Co as joint bidders. This development suggests another round of bids for Uniti Group Ltd (UWL AU).
• The A$5m fee to break the Morrison/Brookfield exclusivity pales in comparison to Connect consortium’s A$340m premium to the Morrison/Brookfield offer. Expect Connect consortium to secure due diligence access. 

• Yamaha Motor (7272 JP) announced a short-term buyback. 3 months, 3%. It isn’t huge but it helps with the TOPIX FFW changes to come in two weeks. 
• It also helps with the extra overhang from last year’s selldown and the significant cross-holding overhang which exists. 
• But the shares are very inexpensive vs peers when one looks at consensus forward earnings and EBIT, and better growth is expected too.

• ACommerce Group (ACOM TB) is looking to raise about US$200m in its upcoming Thailand IPO.
• Acommerce is an ecommerce enabler providing end-to-end and ala carte ecommerce solutions for brands in Southeast Asia (SEA). 
• Acommerce has been a key beneficiary of COVID, however, has been recording unexpectedly weak margins, suggesting that it does a lot of logistical heavy lifting. 

• JD.com Inc. (9618 HK) has been able to sustain its relative market share gains, in Chinese online retail sales, over the past two years, despite increased competitive pressure.
• Recent weakness in its margin progression trajectory has cast doubts on its ability to realise its potential for long-term margin expansion.
• With net cash at 31% of its market cap, relative valuation levels seem attractive.

• The Perth Casino Royal Commission has found Crown Resorts (CWN AU)‘s casino in Perth, Western Australia, is “not suitable” to hold a gaming licence.
• This follows the findings in New South Wales and Victoria that two of Crown Resort’s other subsidiaries were either not suitable to be granted a casino license or not suitable.
• As with the recently announced AUSTRAC proceedings, Blackstone would have been well prepared for this latest development.

• Maintain HOLD with lower TP of MYR0.80
• A disappointing quarter
• Improved topline growth dragged by higher opex
• Cut FY22-FY24 earnings estimates

MNHB’s 1QFY22 results were below our and consensus expectations due to higher-than-expected operational expenses related to its CU store expansion. Going forward, topline growth should see strong momentum in tandem with relaxed movement restrictions but start-up losses from its new CU stores may hinder group earnings recovery. Hence, we lower our FY22-FY24E earnings estimates by 17%-80%. Rolling forward our valuation base year to FY23, our TP is lowered to MYR0.80 (pegged on an updated normalised mean PER of 29x vs. 32x previously).

• Luxury Italian yacht maker Ferretti Group plans to raise US$248.4m at a market capitalisation of US$1.1bn and a post-money EV of US$807m at the midpoint of the IPO price range.
• Ferretti’s revenues suffered with COVID-19 and ongoing issues such as the Ukraine-Russia war and China-US trade tensions would only put further pressure on the company.
• We think Ferretti’s shares are fairly valued at the indicative IPO price range given the current volatility in the market, political turmoil and lack of investor confidence.

• A week ago, HRL Morrison made a non-binding, preliminary and highly conditional offer for Uniti Group Ltd (UWL AU) at A$4.5/share in cash, subject to due diligence and other conditions.
• Uniti Group Ltd (UWL AU) traded up 10.7% today to A$4.67/share on high volumes and trading was halted an hour before market close.
• News reports indicate that Macquarie Asset Management and PSP Investments are likely to make an offer at A$5/share. Expect an announcement in the next 24 hours.

• As widely expected From Software’s Elden Ring title has proved a smash success selling 12m units within its first 17 days. 
• That puts the game in rare territory and establishes the Kadokawa subsidiary as one of the premier global developers. 
• There is also some potential for live services here which could add to the appeal for Sony.

• On 23rd Dec 2021, Tencent declared a special interim dividend in the form of a distribution in specie of 457.326m Class A ordinary shares of JD.com.
• While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.
• In this note, we talk about the updates since our last note and have a closer look at Prosus and its possible motivation/intention with its JD.com stake.

• WISE Tour is another fast-growing theme index in Korea with an AUM of ₩0.23T. The next rebalancing will be on April 15. So, the rebalancing trading is on April 14.
• Although the flow size of this ETF rebalancing is not substantial, it seems clear that the flow/price (direction) correlation is at a level we should pay attention to.
• Those expected to receive a meaningful flow impact at this point are: (LONG) Hana Tour, GKL, & Yong Pyong Resort / (SHORT) Hanjin KAL, Ananti, & SK Rent A Car

• Ruchi Soya Industries (RSI IN) is looking to raise up to US$560m via a follow-on public offer.
• The deal is almost akin to a relisting, as the free float was just at 1% prior to this deal. 
• Given the tight float, instead of discussing its track record , we will discuss the timeline of events leading up to the deal, past performance and undertake a peer comparison/valuation. 

• The Italian luxury yacht maker, Ferretti SpA (FER IM) , has filed for an IPO on the Hong Kong Stock Exchange and plans to raise net proceeds of around US$272m.
• The company previously filed for an IPO in Milan in 2019 targeting a market value of around EUR1.8bn (US$1.2bn), which was scrapped claiming a “weak market”.
• Ferretti’s revenues suffered with COVID-19 and ongoing issues such as the Ukraine-Russia war and China-US trade tensions would only put further pressure on the company.

• On 23 March, it was announced that Lotte Confectionery (280360 KS) (market cap of 744 billion won) will merge with Lotte Food (002270 KS) (market cap of 395 billion won).
• We believe this merger will have a positive impact on the shares of Lotte Confectionery and Lotte Food.
• Lotte Confectionery and Lotte Food are not currently included in the KOSPI200. There will be a growing likelihood that the combined entity could be included in the KOSPI200 index. 

• Topday, Singapore Press Holdings (SPH SP) shareholders met in an EGM and a Scheme Meeting to approve the takeover of SPH and distribution of SPH REIT (SPHREIT SP) units.
• Shareholders passed resolutions at both meetings, meaning the Cuscaden Peak Pte acquisition is approved. 
• This means we move to next steps, which is choosing the Consideration, and possible MGO Chain Offer on SPH REIT (SPHREIT SP). 

• Pinduoduo (PDD US) shares dropped 6.1% yesterday following the 4Q21 results as the company’s revenue fell short of the consensus estimate by 8.9%.
• Pinduoduo’s OP improved 223% QoQ to RMB 6.9bn (consensus RMB 3.2bn) through pushing back sales and marketing investments. However, it affected the company’s user growth as MAUs declined by 8.0m.
• Consensus is yet to factor in the impact on user growth through reduced marketing spend, which makes further downside to Pinduoduo shares possible.

• British American Tobacco is one of the leading tobacco companies in the world. They operate in 180 countries around the world, and have 12% of market share in the industry (2nd most)
• Along with their biggest rival, Toronto-Dominion, Royal Bank of Canada is one of my favorite stocks. 
• Larger military budgets around the world means more revenue for defense contractors like Raytheon

• We updated our earnings forecast for AB Hotel (6565, the company) and raised our target price to 1,600 yen from 1,400 yen. We reiterate our Buy rating.
• On January 31, the company announced 1-3Q (Apr-Dec) FY3/22 OP of 667m yen (+757.0% YoY; OPM 14.1%), 74% progress toward the company’s full-year guidance of 900m yen
• We raised our OP forecasts from 681m yen to 929m yen (+1,995.4% YoY; OPM 14.7%) for FY3/22, 1.355bn yen to 1.495bn yen (OPM 21.2%) for FY3/23

• Maintain BUY rating with a TP of Bt8.30, based on DCF (WACC of 9.8% and Terminal Growth of 3.5%), implying 25.9xPE’23. We see attractive play on reopening, upon the progress 
• Its 4Q21 net loss was at Bt46m, which continued for 7 consecutive quarters, attributed mainly to its operation below EBIT breakeven level.
• SPA’s 2021 net loss was at  Bt287m, pressured by weak revenue growth, which drop 61%YoY upon brief closure of spas and massages in Jan 21 and end of Apr-Sep 21.

• We updated our earnings forecast for Tosho (8920, the company) and maintained our target price at 2,300 yen. We reiterate our Buy rating.
• On February 3, the company announced 1-3Q (Apr-Dec) FY3/22 OP of 1.616bn yen (+55.0% YoY; OPM 10.6%)
• We changed our OP forecasts from 2.464bn yen to 4.403bn yen (+307.7% YoY; OPM 16.2%) for FY3/22, 4.466bn yen to 2.732bn yen (OPM 12.6%) for FY3/23

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.

• Evergrande
• Ronshine China Holdings
• Sunac China Holdings
• Zhenro Properties

• The recent decline in Carlsberg’s share price do not seem to fully reflect the upcoming decline in Return on Capital’s results.
• The company underperforming its major peers, including asset impairments, lower volumes, sales and margins will likely overshadow this year’s results, according to the company.
• The past few years have been particularly hard for beer brewers. Pandemic lockdowns had a devastating impact on on-trade channels and now cost-push inflation is squeezing margins.

• WISE Media Contents rebalances every quarter in January, April, July, and October. The effective date for the upcoming rebalancing is April 15.
• The gap between the rebalancing weight change estimations based on the float-adjusted market caps and the actual implementation of the ETF operator (TIGER) is not significant.
• Following stocks are worth paying attention: (Short) Jyp Entertainment, S.M.Entertainment, Studio Dragon, Jcontentree, and SBS Contents Hub / (Long) CJ ENM, DearU, D&C Media, Genie Music, and IHQ

• PDD’s total revenue growth was low 4Q21, as the company gave up on direct sales.
• However, we believe the revenue growth will bounce back in 2023.
• PDD cut sales and marketing expense, so we believe operating margin will improve in following two years.

• Farm Fresh Berhad (FF MY) raised around US$239m in its Malaysia IPO. 
• In our view, the firm’s stronger margins and better growth potential warrants a premium to its other domestic peers.
• In this note, we will talk about the updates since then and the trading dynamics.

• Ferretti, a leading yacht builder based in Italy, started book building to raise up to USD 302m via a Hong Kong listing.
• In our previous note, we looked at the company’s key product segments, operating metrics, financials, and industry. We also compared the company with a close peer.
• In this note, we provide an update for the book building. We will run the deal through our ECM framework and provide an update on the deal.

• We last wrote on this relatively small Japanese cosmetics company in September 2021 suggesting that it could be worth keeping an eye on given its cheaper valuation compared to peers.
• Premier Anti-Aging (4934 JP) shares are down 80% from the peak, mostly because it was sold-off alongside the low quality names in Mothers.
• It seems early to turn outright bullish on Premier Anti-Aging yet. However, if you are short other unprofitable names in Mothers, we think Premier Anti-Aging is a sensible long hedge.

• Demand for ASICS running shoes remains strong. That should become clear as factories reach full capacity and shipping problems recede.
• Profit margins will expand due to less discounting and an improved channel mix. 
• We turn bullish following a 30% decline from 52-week high. The stock is now trading at undemanding multiples versus peers.  

• HUL, the largest FMCG player in India, was formed by merging three subsidiaries of Unilever in 1956.
• HUL’s portfolio of products covers a wide spectrum including soaps, detergents, skin creams, shampoos, toothpastes, tea, coffee, packaged foods and branded atta
• Powerful brands and an envious distribution network are its primary strengths

• The major trend, witnessed over the past two years, has been the continued loss of relative market share by Alibaba, and the continued market share gains by JD.com.
• Alibaba has been able to steadily grow its active user base, on its Chinese retail platforms, by above 10%y/y since at least 2019, off an extremely high base.
• Short-Term growth expectations seem relatively conservative, with limited risk for a further negative surprise.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only). 
• This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Uniti Group Ltd (UWL AU)
• The lowest gross spreads are CIMIC Group Ltd (CIM AU), Virtus Health (VRT AU), China Logistics Property Holdings (1589 HK), Z Energy Ltd (ZEL NZ), Singapore Press Holdings (SPH SP) 

• WISE Secondary Cell rebalances every quarter in January, April, July, and October. The effective date for the upcoming rebalancing is April 15.
• The flow impact/price correlation of small/mid-caps is shown to be at a meaningful level. Therefore, we may need to design long/short basket trading setups focusing on these small/mid-caps.
• The following five stocks are expected to have a significant level of flow impact at this point: SKC, Soulbrain, Youlchon Chemical, Posco Chemical, and LG Energy Solution.

• We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the potential additions/deletion candidates. 
• These top 10 potential inclusions are up on average 10.8% YTD, outperforming KOSPI which is down 9.1% YTD.
• Among the potential inclusions, Ildong Pharm, Meritz F&M Insurance, Hana Tour, Dongwon Systems, and Lotte Rental have been materially outperforming the market in the past three months. 

• Matahari Department Store’s results marked a turning point in terms of profitability, and this year will see the company back in expansion mode, with a new strategy in place.
• Management is pushing hard to entrench its position in existing categories as well as pushing into new ones, with an omnichannel approach and new partnerships in place. 
• Matahari Department Store has the potential for a re-rating as it regains its place on the winning podium amongst Indonesian retailers in very reasonable valuations.

• KRX Autos rebalances once a year in September. The effective date of the upcoming rebalancing is September 9.
• The market cap difference between the top three stocks and the rest of the stocks is significant. So, the passive impact of the non-capped constituents is substantial.
• Accordingly, this index rebalancing is well worth a preemptive position build-up. At this point, notable stocks from a flow perspective are Hanon Systems, Kumho Tire, and Halla Holdings.

• We have been bullish on the broad Philippine gaming market because it has moved ahead dealing with covid. It is Asia’s second most robust gaming market.
• The company’s Solaire resort at Manila’s Entertainment Zone just reported increases in mass revenue sector indicating that recovery is well underway. 
• 4Q21 and total 2021 results do not include South Korea property due to lockdowns. But once reopened, it will be accretive to forward earnings.

• According to our channel checks, the new smaller compact feature stores (of 20k-25k sqft) enjoy significantly better revenue/sqft (of ~1.5x) v/s the existing bigger stores (of 40k-50k sqft).
• Management targets to double revenue over the next 3-4 years backed by: its strategy of adding 10-12% new stores annually, its initiative to revive SSSG to high single or double digit on improved new store productivity and focus on private labels, strong growth in the Beauty segment and ecommerce initiatives.
• However, our revenue estimates are nearly 40% below the management.